ITO, New Delhi V. Pal Properties (I) Pvt. Ltd., New Delhi

ITA 1600/DEL/2010

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 3314 (ITAT-DELHI)
• Duration Of Justice: 7 year(s) 10 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-03-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 1996-1997
• Appeal Filed On: 09-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAVIKANT GUPTA
• Keywords: Additional evidence; Cost of acquisition; Speculation loss

Judgement Text

1 , INCOME-TAX APPELLATE TRIBUNAL F BENCH, NEW DELHI. , , BEFORE SH.RAJENDRA, ACCOUNTANT ME MBER & SMT.BINA PILLAI,JUDICIAL MEMBER ./I.T.A. NO. 1600/DEL/2010, /ASSESSMENT YEAR:1996-97 ITO WARD 14(1) 209,C R BUILDING,NEW DELHI 110022 VS. PAL PROPERTIES (I)PVT. LTD. H-72,CONNAUGHT PLACE NEW DELHI 110001 PAN:AACP6908K APPELLANT/ RESPONDENT / ! ! ! ! REVENUE BY : SH. RAVIKANT GUPTA -DR ASSESSEE BY : SH.AMIT GOYAL - CA ' '' ' / DATE OF HEARING: 08.03.2018 ' '' ' / DATE OF PRONOUNCEMENT: 08.03.2018. ,1961 ' '' ' 254(1) #$ #$ #$ #$ ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) , / PER RAJENDRA, AM - CHALLENGING THE ORDER DTD.29/01/2010 OF THE CIT(A)- XVII,DELHI,THE ASSESSING OFFICERS(AO) HAS FILED THE PRESENT APPEAL.ASSESSEE-COMPANY,ENGAGED I N THE BUSINESS OF MAKING INVESTMENT IN SHARES AND SECURITIES AND ALSO DEALING IN SHARES FI LED ITS RETURN OF INCOME ON 30/11/1996, DECLARING LOSS OF RS. 2.73 CRORE.THE ORIGINAL ASSES SMENT, U/S.143 (3) OF THE ACT, WAS COMPLETED ON 26/03/1999,DETERMINING ITS INCOME AT RS. 11.66 L AKHS. THE MATTER TRAVELLED UP TO THE TRIBUNAL AND VIDE ITS ORDER,DATED 30/11/2006,IT REMINDED THE MATTER,RELATING TO LOSS AND VALUATION OF SHARES AS WELL AS LOSS ON SALE OF SHARES,BACK TO THE FILE OF THE AO FOR VERIFYING THE GENUINENESS OF THE TRANSACTION.THE TRIBUNAL ALSO DIRECTED THE AO TO AL LOW VALUATION OF CLOSING STOCK OF SHARE AS PER COST/MARKET PRICE WHICHEVER WAS LOWER IN SO FAR AS ASSESSEE WAS DEALING IN SHARES WHICH FORMED PART OF ITS CLOSING STOCK.IT WAS FURTHER OBSERVED T HAT PROFIT/LOSS ARISING ON SALE AND PURCHASE OF SHARES AND SECURITIES HELD AS STOCK IN TRADE WAS TO BE COMPUTED AND ALLOWED AS BUSINESS PROFIT/ LOSS,WHEREAS PROFIT/LOSS ON SALE OF SHARES HELD AS INVESTMENT WAS TO BE ALLOWED AS CAPITAL GAIN/LOSS. 2. WE ARE GIVING BRIEF BACKGROUND OF THE MATTER.DURING THE ORIGINAL ASSESSMENT PROCEEDINGS,THE AO DISALLOWED THE LOSS OF RS. 1.12 CRORE ON SALE OF INVESTMENT HOLDING THAT TRANSACTION WAS NON - GENUINE.HE ALSO OBSERVED THAT LOSS ON SALE OF INVES TMENT WAS CAPITAL LOSS,THAT AS PER THE PROVISIONS OF SECTION 71 OF THE ACT THE SAME COULD NOT BE ADJUSTED AGAINST INCOME UNDER ANY OTHER HEAD. HE ALSO FOUND THAT ASSESSEE HAD CHANGED ITS METHOD OF VALUING THE CLOSING STOCK, THAT 2 EARLIER IT WAS VALUING THE STOCK AT COST PRICE,THAT DURING THE YEAR UNDER CONSIDERATION THE VALUATION WAS MADE ON THE BASIS OF COST LESS MARKET PRICE WHI CHEVER WAS LOWER, THAT IT HAD CLAIMED LOSS OF RS.2,00,85,200/-ON ACCOUNT OF CHANGE IN VALUATION M ETHOD. THE AO ALSO DISALLOWED THE LOSS CLAIMED BY IT. 3. IN PURSUANCE OF THE ORDER OF THE TRIBUNAL,THE AO IN THE FRESH ASSESSMENT PROCEEDINGS, ASSESSED THE INCOME OF THE ASSESSEE, U/S.143 (3)R.W.S.254,ON 26/11/2007 AND COMPUTED THE INCOME AT RS. 41.62 LAKHS.HE ALLOWED THE LOSSES,BUT HELD THAT THE LOSS,ON ACCOUNT OF SALE OF INVESTMENT,HAD TO BE TREATED AS CAPITAL LOSS AND THE BUSINESS LOSS WA S SPECULATIVE LOSS.HE MADE OBSERVATIONS ABOUT CARING FORWARD OF LOSSES. 4. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE PREF ERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY (FAA)AND MADE SUBMISSIONS.IT ALSO RELIED UPON CERTAIN CASE LAWS.IT RAISED ADDITIONAL GROUND BEFORE HIM ABOUT INDEXATION.AFTER CONSIDERIN G THE ASSESSMENT ORDER AND SUBMISSIONS OF THE ASSESSEE,THE FAA HELD THAT THE AO HAD TREATED T HE LOSS OF RS.2,00,85,200/-ON SALE/VALUATION OF STOCK IN TRADE, AS SPECULATIVE LOSS BY INVOKING THE PROVISIONS OF EXPLANATION TO SECTION 73, THAT THE LOSS OF RS.1.12 CRORE WAS TREATED AS CAPITAL LO SS, THAT WHILE COMPUTING CAPITAL LOSS THE AO HAD NOT GIVEN EFFECT TO THE PROVISIONS OF INDEXATION OF COST OF ACQUISITION,THAT THE CAPITAL LOSS WOULD INCREASE TO RS.1.70 CRORE,THAT THE LOSS WOULD NOT B E ENTITLED TO BE SET OFF AGAINST OTHER INCOME OF THE CURRENT YEAR,THAT THE LOSS WOULD NOT BE ENTITLE D TO BE SET OFF AGAINST OTHER INCOME OF THE YEAR UNDER CONSIDERATION,THAT IT WOULD BE CARRIED FORWAR D IN THE SUBSEQUENT YEARS AND WOULD BE ENTITLED FOR SETTING OF AGAINST THE CAPITAL GAIN, T HAT THE AO HAD RIGHTLY DECIDED THE ISSUE ABOUT SETTING OFF AND CARRYING FORWARD. REFERRING TO THE EXPLANATION TO SECTION 73,THE FAA HELD THAT THE EXPLANATION PROVIDED TWO EXCEP -TIONS.HE REFERRED TO THE CASE OF CONCORD COMMERCIA L PRIVATE LTD (95 ITD 117) AND HELD THAT THE PRINCIPAL BUSINESS CARRIED ON BY THE ASSESSEE WAS N OT THAT OF BANKING/GRANTING OF LOANS AND ADVANCES,THAT THE MATTER HAD TO BE EXAMINED WITHIN THE CONTEXT OF THOSE COMPANIES WHOSE GROSS TOTAL INCOME HAD TO BE CONSIDERED.AFTER CONSIDERING THE HEADWISE BIFURCATIONS OF INCOME/ LOSS OF THE ASSESSEE FOR THE YEAR,HE HELD THAT ABSOLUTE FIG URE OF LOSS/INCOME UNDER ANY OF THE HEADS HAD TO BE CONSIDERED. HE RELIED UPON THE CASE OF YUCCA FIN VEST PRIVATE LTD. (101 ITD 403) AND HELD THAT FIGURE UNDER THE HEAD CAPITAL GAINS AND OTHER SOURC ES(RS.44.62 LAKHS+RS.1.70 CRORE=RS.2.15 CRORE)WAS MORE THAN THE FIGURE OF RS. 2.03 CRORE UN DER THE HEAD BUSINESS AND PROFESSION. 3 FINALLY,HE HELD THAT THE ASSESSEE WAS COVERED BY TH E EXCEPTION PROVIDED IN EXPLANATION 73, THAT PROVISIONS OF THE EXPLANATION WERE NOT APPLICABLE T O IT,THAT THE LOSS OF RS. 2, 00,85,200/-ON SALE/VALUATION OF SHARES COULD NOT BE TREATED AS SP ECULATIVE LOSS,THAT SAME WAS TO BE TREATED AS NORMAL BUSINESS LOSS. 5. BEFORE US,THE DEPARTMENTAL REPRESENTATIVE(DR)STATED THAT CLAIM OF INDEXATION WAS NOT MADE BEFORE THE AO OR THE FAA,THAT THE SAME WAS MADE DUR ING THE APPELLATE PROCEEDINGS BY WAY OF AN ADDITIONAL GROUND,THAT THE FAA DID NOT AFFORD ANY O PPORTUNITY TO THE AO TO REBUT THE CLAIM,THAT THE CALCULATION OF INDEXATION WAS NOT MADE AVAILABL E TO THE AO,THAT THE AO HAD RIGHTLY INVOKED THE PROVISIONS OF EXPLANATION TO SECTION 73 OF THE ACT,THAT LOSS SUFFERED BY THE ASSESSEE WAS TO BE ASSESSED AS SPECULATIVE LOSS. THE AUTHORISED REPRESETATIVE(AR)STATED THAT THE AO HAD NOT ALLOWED BENEFIT OF INDEXATION TO THE ASSESSEE WHILE CALCULATING THE CAPITAL LOSS,THAT IT CAME TO KNOW ABOUT THE SAID MISTAKE ONLY AFTER IT RECEIVED THE SET ASIDE ASSESSMENT ORDER,THAT IT HAD FILED A RECTIFICATION APPLICATION U/S.154 OF TH E ACT IN THAT REGARD,THAT THE APPLICATION WAS STILL P ENDING BEFORE THE AO,THAT THE FAA HAD RIGHTLY HELD THAT THE ASSESSEE WAS COVERED BY THE EXCEPTION S OF THE EXPLANATION TO SECTION 73 OF THE ACT. HE FURTHER STATED THAT THERE WAS AN AMENDMENT TO TH E PROVISIONS OF EXPLANATION TO SECTION 73,THAT AMENDED PROVISIONS WERE CLARIFICATORY.HE RELIED UPO N THE CASES OF FIDUCIARY SHARES AND STOCK (P.)LTD.(70 TAXMANN.COM 23),RAIMA EQUITIES PVT.LTD. (8 TMI 735),ATN INTERNATIONAL LIMITED ( 1 TMI 622)AND SPHERE STOCK HOLDINGS PVT.LTD.( 8 TMI 1 124). 6. WE HAVE HEARD THE RIVAL SUBMISSIONS.WE FIND THAT IT IS THE SECOND ROUND OF LITIGATION AND THE AY.INVOLED IS 1995-96,THAT IN THE RETURN,FILED FOR THE YEAR UNDER CONSIDERATION,THE ASSESSEE COMPANY HAD INCLUDED LOSS OF RS. 1.12 CRORE UNDER T HE HEAD SALE OF SHARES HELD AS INVESTMENT AND LOSS OF RS.2,00,85,200/- ON SALE/VALUATION OF S HARES HELD AS STOCK IN-TRADE,THAT BOTH THE LOSSES WERE DISALLOWED IN THE ORIGINAL ASSESSMENT,T HAT DURING THE ORIGINAL ASSESSMENT THE THEN AO WAS OF THE OPINION THAT THE LOSSES WERE NOT GENUINE ,THAT THE TRIBUNAL SENT BACK THE MATTER TO THE FILE OF THE AO FOR FRESH ADJUDICATION,THAT AS PER T HE DIRECTION OF THE TRIBUNAL HE CARRIED OUT A CERTAIN ENQUIRIES,THAT IN THE SET-ASIDE-ASSESSMENT, HE HELD THAT TRANSACTIONS WERE GENUINE AND THE SAME RESULTED INTO THE LOSSES.HOWEVER,WHILE ALLOWIN G THE LOSSES UNDER BOTH THE CATEGORIES,HE HELD THAT THE LOSS OF RS.1.12 CRORE (ON SALE OF INV ESTMENT)WAS CAPITAL LOSS. WITH REGARD TO THE LOSS OF RS.2,00,85,200/-(ON SALE/VALUATION OF STOCK ) AS A BUSINESS LOSS.HE ALSO HELD THAT LOSS ON 4 SALE OF INVESTMENT BEING CAPITAL LOSS WAS NOT ENTIT LED TO BE SET OF AGAINST OTHER INCOME FOR THE YEAR UNDER CONSIDERATION, THAT SAME WAS TO BE CARRI ED FORWARD TO BE SET OFF AGAINST CAPITAL GAIN OF THE SUBSEQUENT YEARS.REGARDING THE BUSINESS LOSS,HE HELD THAT EXPLANATION TO SECTION 73 WAS ATTRACTED,THAT AS PER DEEMING PROVISION OF THE EXPL ANATION THE LOSS WAS TO BE TREATED AS SPECULATIVE LOSS,THAT SAME WAS TO BE SET OFF AGAINS T SPECULATIVE PROFITS ONLY. WE FIND THAT IN THE APPELLATE PROCEEDINGS,THE FAA,W HILE DECIDING THE ADDITIONAL GROUND RAISED BY THE ASSESSEE,HAD HELD THAT THE ASSESSEE WAS ENT ITLED TO BENEFIT OF INDEXATION.IN OUR OPINION, RAISING AN ADDITIONAL GROUND BEFORE THE FAA IS A LE GAL RIGHT OF AN ASSESSEE.IT IS PREROGATIVE OF THE FAA TO ACCEPT OR REJECT THE SAME.IN THE CASE BEFORE US,HE HAD NOT ACCEPTED ANY ADDITIONAL EVIDENCE AS PER RULE 46A OF THE INCOME TAX RULES,19 62 THAT REQUIRES CALLING FOR A REPORT FROM THE AO.A LEGAL ISSUE CAN BE RAISED AT ANY STAGE OF APPE LLATE PROCEEDINGS AND NEW RELIEF CAN BE CLAIMED BEFORE THE APPELLATE AUTHORITIES.WE WOULD L IKE TO REFER TO THE CASE OF PRUTHVI BROKERS AND SHAREHOLDERS LTD.(349 ITR 336)OF THE HONBLE BOMBAY HIGH COURT WHEREIN THE HONBLE COURT HAS HELD AS UNDER: AN ASSESSEE IS ENTITLED TO RAISE NOT MERELY ADDITIO NAL LEGAL SUBMISSIONS BEFORE THE APPELLATE AUTHORITIES BUT IS ALSO ENTITLED TO RAISE ADDITIONA L CLAIMS BEFORE THEM. THE APPELLATE AUTHORITIES HAVE THE DISCRETION TO PERMIT SUCH ADDITIONAL CLAIM S TO BE RAISED. THE APPELLATE AUTHORITIES HAVE JURISDICTION TO DEAL NOT MERELY WITH ADDITIONAL GRO UNDS, WHICH BECAME AVAILABLE ON ACCOUNT OF CHANGE OF CIRCUMSTANCES OR LAW, BUT WITH ADDITIONAL GROUNDS WHICH WERE AVAILABLE WHEN THE RETURN WAS FILED. THE WORDS COULD NOT HAVE BEEN RA ISED MUST BE CONSTRUED LIBERALLY AND NOT STRICTLY. THERE MAY BE SEVERAL FACTORS JUSTIFYING T HE RAISING OF A NEW PLEA IN AN APPEAL AND EACH CASE MUST BE CONSIDERED ON ITS OWN FACTS. THE HONBLE HIGH COURT HAD DELIVERED THE ABOVE JUDG MENT AFTER CONSIDERING THE MATTER OF GOETZE (INDIA)LTD.(284 ITR 323),WHEREIN IT WAS HELD THAT THE AO COULD ACCEPT NEW CLAIM ONLY A NEW RETURN WAS FILED BY AN ASSESSEE.HERE,AS STATED EARLIER,THE CASE IS OF ADDITIONAL GROUND.THE ASSESSEE WAS NOT AWARE AS TO HOW THE CLAIM MADE BY IT WOULD BE TREATED BY THE AO DURING THE SET ASIDE PROCEEDINGS.IT WAS ONLY AFTER RECEIVING THE O RDER,IT CAME TO KNOW THAT LOSS HAS BEEN TREATED AS CAPITAL LOSS.THERE WAS NO CHANCE FOR IT TO CLAIM INDEXATION.IN THESE CIRCUMSTANCES,ONLY REMEDY LEFT WAS TO RAISE AN ADDITIONAL GROUND ON THE FIRST OPPORTUNITY AVAILABLE AND IT DID SO.IN OUR OPINION THE FAA WAS FULLY EMPOWERED TO ADMIT THE AD DITIONAL GROUND AND TO DECIDE THE SAME ON MERITS WITHOUT ASKING FOR COMMENTS/REMAND REPORT OF THE AO.THE ACT PROVIDES THAT WHILE CALCULATING CAPITAL GAINS/LOSSES INDEXATION HAS TO BE ALLOWED.THE AO SHOULD HAVE ALLOWED BENEFIT OF INDEXATION TO THE ASSESSEE,THE MOMENT HE HELD THAT TRANSACTION IN QUESTION WAS CAPITAL 5 LOSS.THE ASSESSEE HAD ALSO FILED AN APPLICATION U/S .154 OF THE ACT IN THAT REGARD.THE AO SHOULD HAVE DEALT IT DISREGARDING THE FILING OF APPEAL.WE ARE OF THE OPINION,THE ORDER OF THE FAA ALLOWING INDEXATION TO THE ASSESSEE WITH REGARD TO THE CAPITAL LOSS DOES NOT NEED ANY INTERFERENCE FROM OUR SIDE.CONFIRMING THE SAME,WE DECIDE FIRST G ROUND OF APPEAL AGAINST THE AO. 6.1. SECOND GROUND DEALS WITH APPLICABILITY OF THE PROVI SIONS OF EXPLANATION TO SECTION 73 OF THE ACT.WE FIND THAT DURING THE APPELLATE PROCEEDINGS,T HE FAA HAD HELD THAT THE ASSESSEE WAS COVERED BY THE EXCEPTIONS MENTIONED IN THE EXPLANAT ION.HE HAD CALCULATED THE FIGURE OF CAPITAL GAINS AND OTHER SOURCES AND HAD COMPARED THE SAME W ITH THE FIGURE OF BUSINESS OR PROFESSIONAL LOSS.IT WAS A SIMPLE ARITHMETIC EXERCISE.AS THE GRO SS FIGURE WAS MORE THAN BUSINESS LOSS FIGURE THE FAA ALLOWED THE CLAIM OF THE ASSESSEE.IN OUR OP INION,THERE IS NO LEGAL OR FACTUAL INFIRMITY IN HIS ORDER.SECONDLY,IN THE CASE LAWS RELIED UPON BY THE ASSESSEE BEFORE US,THE JUDICIAL FORUMS HAVE HELD THAT LOSS IN SHARE TRADING WAS NOT TO TRE ATED AS SPECULATIVE LOSS IN CASE OF AN COMPANY WHOSE PRINCIPAL BUSINESS WAS TRADING IN SHARES AND THAT THE SAID AMENDMENT TO THE EXPLANATION WAS RETROSPECTIVE AND CLARIFICATORY IN NATURE. CONSIDERING THE ABOVE,SECOND GROUN D OF APPEAL IS DECIDED AGAINST THE AO. AS A RESULT,APPEAL FILED BY THE AO STANDS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON : 0 8 .03.2018 . SD/- SD/- (BEENA PILLAI) (RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER NEW DELHI. /DATED : 08 TH MARCH, 2018 . *MEHTA* SR. P.S. / COPY OF THE ORDER FORWARDED TO :- 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR F BENCH, ITAT, NEW DELHI / , , . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR ,/ITAT, NEW DELHI.