V.R.Venugopal , Mandya V. Assistant Commissioner of Income Tax Circle-2(1), Mysore

ITA 1686/BANG/2018

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 3911 (ITAT-BANGALORE)
• Duration Of Justice: 4 year(s) 1 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-06-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 20-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Opportunity of being heard; Speculation loss
• Section: 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH : BANGALORE BEFORE SHRI N. V. VASUDEVAN, VICE PRESIDENT AND MS. PADMAVATHY S, ACCOUNTANT MEMBER ITA No.1686/Bang/2018 Assessment Year : 2012-13 M/s.V. R. Venugopal, No.11 ‘Emerald Enclave’, Belavadi Hobli, Srirangapatna, Mandya District – 571 606. PAN : AAYPV 2288 H Vs. ACIT, Circle – 2(1), Mysuru. APPELLANTRESPONDENT Assessee by :Shri.Vageesh Hegde,CA Revenue by:Smt. Priyadarshini Baseganni, Addl. CIT(DR)(ITAT), Bengaluru. Date of hearing:23.06.2022 Date of Pronouncement:24.06.2022 O R D E R Per N. V. Vasudevan, Vice President This is an appeal by the assessee against the order dated 29.12.2017 of the CIT(A), Mysore, relating to Assessment Year 2012-13. 2. The assessee is an individual. During the previous year, he carried on the business of sale of land, poultry farming and share trading. For Assessment Year 2012-13, the assessee filed return of income declaring total income of Rs.22,44,490/- besides agricultural income of Rs.21,58,500/-. While computing income from business, the assessee claimed a deduction of Rs.56,32,418/- on account of loss incurred in share trading. The AO addressed a letter to M/s. Sahiram Insight Share Broker ITA No.1686/Bang/2018 Page 2 of 8 Pvt. Ltd., through whom the assessee had done share trading and obtained the details of share trading done by the assessee during the Financial Year 2011-12. On verification of the details, the AO found that the quantum of sale and purchase of shares was Rs.86,65,33,245/- and Rs.86,68,13,078/- respectively and that these transactions have been done without delivery of physical possession and therefore the loss on account of share trading was to be regarded as a speculative loss. The AO observed that many of the transactions of purchase and sale of shares have been done on the same day and therefore the loss on share trading should be regarded as speculative loss and disallowed in computing business income. 3. The AO noticed that the assessee had declared agricultural income of Rs.28,51,500/- in support of which no reliable evidence was found. The AO therefore held that the claim for exemption as agricultural income cannot be allowed. The AO however observed that the assessee possessed large agricultural land and pepper and coffee have been grown in the land. The AO also found that assessee had produced RTC evidence in respect of agricultural land. The AO therefore held that 50% of the income claimed by the assessee as agricultural income had to be regarded as income from business source and this resulted in addition of Rs.10,79,250/- to the total income of the assessee under the head “other sources” 4. In poultry business, assessee claimed that it had entered into an agreement dated 18.7.2005 with M/s. Lotus Farm, whereby Lotus farm agreed to purchase produce from the poultry farm of the assessee. The assessee also had an agreement dated 18.7.2005 with Mrs. Jayalakshmi Prop. M/s. Jagdish Poultry Farm, for contract poultry farming whereby Mrs.Jayalakshmi has to incur all expenses and manage the farm, whereby 65% of the monies received from Lotus Farm will be paid to ITA No.1686/Bang/2018 Page 3 of 8 Mrs.Jayalakshmi. The assessee received a sum of Rs.46,13,923 from Lotus farm and claimed that it paid Rs.36,31,135 to Mrs.Jayalakshmi. The AO held that 65% of the sum receivable from Lotus farm was only Rs.29,99,049 whereas the assessee had shown payment to Mrs.Jayalakshmi of Rs.36,31,135. The AO therefore added a sum of Rs.6,33,085/- out of the income claimed from the poultry business. Besides the above, the AO also disallowed a sum of Rs.1,07,000 being Rs.1 lac towards gram panchayat tax payment and a sum of Rs.7000/- towards license renewal charges for want of evidence of incurring of these expenses. 5. The AO completed the assessment as follows: Returned Income Rs.22,44,490 Add: As discussed in Para 3 Rs.56,32,480 Add: As discussed in Para 7 Rs. 10,79,250 Add: As discussed in para 9 Rs. 7,42,035 Total Assessed Income Rs. 96,98,255 6. Aggrieved by the aforesaid order of the AO, assessee preferred appeal before the CIT(A). Before the CIT(A), the assessee was represented by Shri. J. R. Manjunatha, FCA. In the grounds of appeal, the assessee challenged all the 3 additions made by the AO in the Order of Assessment. In so far as the action of the AO in treating the loss on account of share trading as speculative loss and thereby disallowing the same as deduction is concerned, the CIT(A) held that the authorized representative conceded that the AO correctly held that the Proft and Loss A/c pertaining to transfer of share without actual delivery amounted to speculative transactions and therefore the AR was not pressing the grounds taken with reference to the ITA No.1686/Bang/2018 Page 4 of 8 addition of RS.56,32,418/- made by the AO. In so far as the action of the AO in treating the agricultural income (50% of the agricultural income) as “income from other sources” is concerned, the CIT(A) observed that books of accounts were test checked and it was found that the assessee did not disclose the verifiable quantities in terms of the weight of the agricultural produce that was claimed to have been sold by the assessee. The CIT(A), thereafter, observed that on discussion, the authorized representative conceded the fact that the assessee did not have records with regard to the verifiable quantity of the agricultural produce sold and therefore there was no perversity with regard to the observations of the AO contained in paragraph 7 of the impugned order. Therefore, the CIT(A) upheld this addition also. In so far as the third addition made by the AO is concerned, the CIT(A) found that the addition was made by the AO on account of lack of reconciliation but the assessee had filed a submission dated 31.03.2015 before the AO giving reconciliation but the AO had passed the Order of Assessment on 30.03.2015. The CIT(A) was of the view that the assessee can file an application under section 154 of the Act and therefore the addition of Rs.6,33,085/- made on account of lack of reconciliation can be rectified by the AO under section 154 of the Act and verification. In so far as the remaining sum of Rs.1,07,000/- added by the AO in the Order of Assessment is concerned, the assessee submitted that the payments to Gram Panchayat in the form of Tax of Rs.1,00,000/- and the Licence Renewal Charge of Rs.7,000/- was evident from the entries in the books of accounts in which cheque Nos. have been recorded. The CIT(A), however, held that though entries were found in the books of accounts, but no cheque numbers were recorded by the assesssee in the books of accounts and therefore the addition of Rs.1,07,000/- was also sustained by the CIT(A). ITA No.1686/Bang/2018 Page 5 of 8 7. Aggrieved by the order of the CIT(A), the assessee has preferred present appeal before the Tribunal. Before the Tribunal, learned Counsel for the assessee filed affidavit to Shri. M. J. Manjunath who appeared before the CIT(A). In the said affidavit, it has been stated as follows: “8. In the appeal proceedings, a personal hearing was fixed by the Hon'ble CIT (A) on 1812-2017 and I appeared before the Hon'ble CIT (A) as a representative of the Appellant, Mr. V R Venugopal. Since, the separate statements of speculative and non-speculative transactions could not be produced before the Learned AO as explained in Paragraph 7 above, I believed that an opportunity would be given to me to produce the same for verification either by way of remand or otherwise deemed fit by the Hon'ble CIT (A). However, hearing was hurriedly concluded by the Hon'ble CIT (A) and I was not clear as to what is written in proceedings sheet and thus, inadvertently signed the proceedings sheet. Since the Assessee had incurred only profits in speculative transactions and losses in non-speculative transactions, certainly there was no occasion for me to concede on the issue of suppression of information pertaining to the speculative losses which goes against all facts of the case. Moreover, at the time of hearing before the Hon'ble CIT (Appeals), the learned AO had completed assessment for the AY 2013-14 and passed order dated 07-03-2016 along with rectification order dated 05-04-2016 by means of which the original disallowance was omitted and non-speculative share transaction loss was allowed as a set-off. The assessee's share trading business consisted of both speculation and non- speculation in AY 2013-14 also, and net resultant loss was out of non-speculative transaction. I could never have decided to concede the issue under the circumstances of the case. 9. The second issue was with regard to an adhoc disallowance of agricultural income disclosed and treating the same as income from other sources. The Learned AO in the Assessment Order, did not accept the entire agricultural income declared by the ITA No.1686/Bang/2018 Page 6 of 8 Assessee and treated 50% of the agricultural income as Income From Other Sources citing reason of non-furnishing of reliable evidence of crops grown and expenses incurred for agricultural operations though the assessee has produced books of account maintained separately, expenditure vouchers, RTC, Certificate of Tehsildar. I believed that the evidences produced were sufficient because in the assessments for the earlier years, the agricultural incomes declared by the Assessee were much higher which was accepted by the Department under scrutiny Sec.143(3) of Income Tax Act, 1961. 10. During the appeal proceedings, the Hon'ble CIT (A) has recorded that the Appellant did not have records with regard to the verifiable quantity of the agricultural produce sold. I presumed that the above statement as recorded by the Hon'ble CIT (A) did not amount to conceding of the issue because Assessee had recorded quantity sold in terms of bags which is usual practice in Coffee trading and Assessee had sufficient records like RTC, Books of Account, Tehsildar's certificates and in assessee's own case, the agricultural income declared in the Return of Income NA accepted by the Department in earlier years in scrutiny assessments. However, hearing was hurriedly concluded by the Hon'ble CIT (A) and I was not clear as to what is written in proceedings sheet and thus, inadvertently, I signed the proceedings sheet. 11. In the circumstances, I humbly submit that the issues in the present appeal were conceded by me and pray before the Hon'ble ITAT to take up the grounds for disposal on merits for consideration in the interest of justice and equity. 8. Learned Counsel for the assessee has also filed application under Rule 29 of the ITAT Rules, 1963, seeking to file the following documents as additional evidence viz., (i) Copy of the Assessment Order for Assessment Year 2013-14 accepting the loss on share transaction as not speculative loss and (ii) also filing evidence of share transactions to show ITA No.1686/Bang/2018 Page 7 of 8 that the loss in question was not speculative loss. In so far as the agricultural income is concerned, the assessee, apart from pointing out that agricultural income declared from Assessment Years 2007-08 to 2010-11 have been accepted by the Revenue when the assessment was completed also sought to file statement showing quantitative details of agricultural produce for the Assessment Year 2012-13 in terms of bags and KGs. Learned Counsel for the assessee also relied on the decision of the ITAT, Madras Bench in the case of R. T. Balasubramaniam Vs. ITO 50 ITD 513 (Madras) and the decision of the Punjab and Haryana High Court in the case of Chhat Mull Aggarwal Vs. CIT 116 ITR 694 (P & H High Court). In the case of R. T. Balasubramaniam (supra), on identical facts where the First Appellate Authority refused to adjudicate on the issues before him on the ground that the authorized representative agreed for the addition relied on several decisions and came to the conclusion that if the admission of the Authorized Representative is erroneous then the assessee has to be regarded as a person aggrieved by the order of the First Appellate Authority and he cannot be denied the right to vindicating his grievance before a higher forum. Similar is a decision rendered by the Punjab and Haryana High Court in the case of Chhat Mull Aggarwal (supra). In the facts and circumstances of the present case, we are convinced that the concession given by the authorized representative before the CIT(A) was erroneous as stated by AR in the affidavit filed before the Tribunal. We therefore set aside the impugned order of the CIT(A) and restore all the issues raised before the CIT(A) for fresh consideration denovo after affording assessee opportunity of being heard. ITA No.1686/Bang/2018 Page 8 of 8 9. In the result, appeal of the assessee is treated as allowed for statistical purposes. Pronounced in the open court on the date mentioned on the caption page. Sd/- (PADMAVATHY S) Sd/- (N.V. VASUDEVAN) Accountant MemberVicePresident Bangalore, Dated: 24.06.2022. /NS/* Copy to: 1.Appellants2.Respondent 3.CIT4.CIT(A) 5.DR 6. Guard file By order Assistant Registrar, ITAT, Bangalore.