Sam Global Securities Ltd, New Delhi V. ITO, New Delhi

ITA 1760/DEL/2009

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 65510 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 4 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-09-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 12-09-2012
• Assessment Year: 2001-2002
• Appeal Filed On: 30-04-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR PRABHA KANT
• Assessee Lawyers: SANAT KAPOR
• Keywords: Depreciation; Opportunity of being heard; Principle of natural justice; Speculation loss; Right to appeal; Revised return
• Section: 139(5)

Judgement Text

ITA NO. 1760/DEL/2009 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G, NEW DELHI BEFORE SHRI I.C. SUDHIR, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER I.T.A. NO. 1760/DEL/2009 A.Y. : 2001-02 SAM GLOBAL SECURITIES LTD., 17, NETAJI SUBHASH MARG, NEW DELHI (PAN : AAFCS1401B) VS. ITO, WARD 7(2), ROOM NO. 305, CR BUILDING, NEW DELHI (APPELLANT ) (APPELLANT ) (APPELLANT ) (APPELLANT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) ASSESSEE BY : SH. SANAT KAPOR, ADV. DEPARTMENT BY : DR. PRABHA KANT, SR. D.R. ORDER ORDER ORDER ORDER PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF THE LD. COMMISSIONER OF INCOME TAX DATED 16/2/2009 AND PE RTAINS TO ASSESSMENT YEAR 2001-02. 2. THE GROUNDS OF APPEAL READ AS UNDER:- 1) THAT THE LD. COMMISSIONER OF INCOME TAX (A) HAS ERRED IN LAW AND ON FACTS IN NOT ALLOWING THE CLAIM OF THE APPELLANT U/S. 10(33) (A) ON ACCOUNT OF DIVIDEND INCOME OF ` 80,48,977/-. THE LD. COMMISSIONER OF INCOME TAX (A) HAS FAILED TO APPRECIATE THAT THE DIVIDEND INCOME IS EXEMPT U/S. 10 OF THE INCOME TAX ACT, 1961 AND THE ITA NO. 1760/DEL/2009 2 ASSESSING OFFICER WAS DUTY BOUND NOT TO TREAT THE SAID DIVIDEND INCOME AS TAXABLE INCOME. 2) THE LD. COMMISSIONER OF INCOME TAX (A) HAS ERRED IN LAW AND ON FACTS IN UPHOLDING THE DISALLOWANCE OF BUSINESS LOSS OF 85,18,854/- BY TREATING THE SAME AS SPECULATION LOSS. 3) THE LD. COMMISSIONER OF INCOME TAX (A) HAS FAILED TO APPRECIATE THAT THE APPELLANT COMPANY IS DEALING IN SHARES AND THEY ALSO HAVE BE BROKERAGE INCOME AND THE LOSS ON SALE PURCHASE OF UNITS IS A BUSINESS LOSS AND THE PROVISIONS OF EXPLANATION TO SECTION 73 ARE NOT APPLICABLE TO THE FACTS OF THE CASE. 3. IN THIS CASE ASSESSEE COMPANY IS ENGAGED IN TH E BUSINESS OF SHARE BROKERAGE AND DEPOSITORY AND HAS SHOWN TOTAL TURNOVER OF ` 7808045/- AS AGAINST THE TOTAL TURNOVER ` 203210/ -. THE ASSESSEE FILED REVISED COMPUTATION OF INCOME WITH THE CONT ENTION THAT ASSESSEE HAS WRONGLY TREATED THE INCOME FROM DIVIDEND FROM UNI TS AMOUNTING TO ` 8048977/- AS TAXABLE INCOME, WHERE AS IT WAS EXEMP TED U/S. 10(33) OF THE I.T. ACT, 1961. LOSS ON SALE OF UNITS AMOUN TING TO ` 8518583/- IS BUSINESS LOSS AS EXPLANATION TO SEC. 73 IS NOT APP LICABLE TO UNITS [APOLLO TYRES VS. C.I.T. (2002) 255 ITR (SC)]. CO NSIDERING THE ABOVE, ASSESSING OFFICER OBSERVED THAT ASSESSEE HAS NOT F ILED ANY REVISED RETURN FOR A.Y. 2001-02 WITHIN THE TIME ALLOWED U/S. U/S. 139(5) OF THE I.T. ACT, 1961 AND THERE IS NO PROVISIONS IN THE I. T. ACT TO REVISE THE COMPUTATION OF INCOME AFTER THE EXPIRY OF SUCH TIME LIMIT. HENCE, ASSESSING OFFICER HELD THAT THE CONTENTION OF THE ASSESSEE COMPANY ITA NO. 1760/DEL/2009 3 CANNOT BE ENTERTAINED AT THIS STAGE. ASSESSIN G OFFICER FURTHER OBSERVED THAT DIVIDEND INCOME OF ` 8725500/- CANNO T BE ALLOWED AS EXEMPT U/S. 10(33) OF THE I.T. ACT, 1961 AND M/S SUN F & C MUTUAL FUND IS NOT IN THE SPECIFIED LIST OF MUTUAL FUND APP ROVED BY SEBI AS PER SECTION 10(23D) OF THE I.T. ACT, INCOME FROM WHICH IS EXEMPT U/S. 10(33) OF THE I.T. ACT. 4. BEFORE THE LD. COMMISSIONER OF INCOME TAX (A) ASS ESSEES APPEAL WAS DECIDED EXPARTE ON THE BASIS OF WRITTEN SUBMISSIONS FILED IN THIS REGARD. THE MATTER WAS TAKEN UP TO ITAT AND THE ITAT HELD AS UNDER:- IT IS ALSO NOTICED THAT WHILE DECIDING GROUND NO. 2 OF ASSESSEES APPEAL DIRECTED AGAINST NON-ALLOWANCE OF DIVIDEND INCOME OF ` 80,45,977/- AS EXEMPT U/S. 10(33 ), THE LEARNED C.I.T.(A) HAS IGNORED THE CERTIFICATE O F REGISTRATION STATING THAT ONLY A FAINT PHOTOCOPY OF THE CERTIFIC ATE IS ATTACHED BUT NOTHING IS LEGIBLE. AFTER CONSIDERING THE ENTIRE FACTS OF THE PRESENT CASE, WE ARE OF THE VIEW THAT THE LEARNED C.I.T.(A) HAS NOT GIVEN EFFECTIVE OPPORTU NITY OF BEING HEARD TO THE ASSESSEE BEFORE DISPOSING OF ITS APPEAL. IN THE CASE OF RADHIKA CHARAN BANERJEE VS. SAMBHALPU R MUNICIPALITY, AIR 1979 ORISSA 69, IT HAS BEEN HELD T HAT A RIGHT OF APPEAL WHEREVER CONFERRED INCLUDES A RIGH T OF BEING AFFORDED AN OPPORTUNITY OF BEING HEARD, IRRESPECTIV E OF THE LANGUAGE CONFIRMING SUCH RIGHT. THIS IS A PART AND PARCEL OF THE PRINCIPLE OF NATURAL JUSTICE. WHERE AN AUTHORIT Y IS REQUIRED TO ACT IN A QUASI-JUDICIAL CAPACITY, IT I S IMPERATIVE TO GIVE THE APPELLANT AN ADEQUATE OPPORTUNITY OF B EING ITA NO. 1760/DEL/2009 4 HEARD BEFORE DECIDING THE APPEAL. THUS, CONSIDER ING THE ENTIRE FACTS OF THE PRESENT CASE, WE THINK IT APP ROPRIATE TO SET ASIDE THE ORDER UNDER APPEAL IN TOTO AND REMAND THE MATTER TO THE C.I.T.(A) WITH A DIRECTION TO DECIDE T HE APPEAL OF THE ASSESSEE AFRESH ON MERITS IN ACCORDANCE WITH LAW AFTER AFFORDING AN OPPORTUNITY OF BEING HEARD TO T HE ASSESSEE. AT THE SAME TIME, WE ALSO DIRECT THE ASS ESSEE TO PRODUCE A LEGIBLE CERTIFIED COPY OF REGISTRATION BE FORE THE C.I.T.(A). FOR STATISTICAL PURPOSES, THE APPEAL IS ALLOWED. 5. IN PURSUANCE OF AFORESAID TRIBUNAL DIRECTIONS, T HE APPEAL WAS HEARD BY THE LD. COMMISSIONER OF INCOME TAX (A). I T WAS SUBMITTED BEFORE THE LD. COMMISSIONER OF INCOME TAX (A) THAT DIV IDEND INCOME OF ` 80,45,977/- WAS EXEMPT U/S. 10(33) ON THE GROUND THAT M/S SUN F & C MUTUAL FUND WAS APPROVED MUTUAL FUND, APPROVED B Y SEBI AS PER SECTION 10(23D) OF THE I.T. ACT. A COPY OF CERTIFIC ATE OF REGISTRATION OF M/S SUN F & C MUTUAL FUND WAS ENCLOSED. IT WAS FURTH ER SUBMITTED THAT LOSS OF ` 8518554/- FROM SALE OF UNITS IS BUSINES S LOSS AND NOT SPECULATIVE LOSS. CONSIDERING THE ABOVE, LD. COMMIS SIONER OF INCOME TAX (A) OBSERVED AS UNDER:- 5. IN VIEW OF THE CERTIFICATE OF SEBI REGISTERING SUN F& C MUTUAL FUND WITH THEM, DIVIDEND INCOME OF ` 80,45,977/- IS EXEMPT U/S. 10(35)(A) (AND NOT 10(33) AS CLAIMED BY THE ASSESSEE), THE LOSS OF ` 85,18,584/- FROM SALE OF UNITS IS ALSO TREATED AS BUSINESS LOSS AND NOT SPECULATIVE LOSS SINCE UNITS OF MUTUAL FUNDS IS NOT SHARES AND DOES NOT FALL ITA NO. 1760/DEL/2009 5 IN THE MISCHIEF OF EXPLANATION TO SECTION 73. THE DECISION OF APEX COURT IN APOLLO TYRES LTD. CITED BY ASSESSEE IS NOT RELEVANT AS THAT WAS ABOUT PURCHASE AND SALE OF UNITS OF UTI; IN THE INSTANT CASE IT IS SALE OF UNITS OF A MUTUAL FUND APPROVED BY SEBI. THE COMPUTATION OF INCOME FILED BY THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION ALONGWITH ORIGINAL RETURN WAS AS UNDER:- PROFIT AS PER P&L A/C 7,82,431.01 ADD: DEPRECIATION AS PER COMPANIES ACT 1,59,223.00 9,41,654.01 LESS : DEPRECIATION AS PER INCOME TAX ACT 7,68,743.50 TOTAL INCOME 1,72,910.51 OR SAY 1,72,910.00 TAX DUE @35% 60,518.50 ADD: SURCHARGE 6,051.85 TAX AND SURCHARGE 66,570.35 6. THE REVISED COMPUTATION OF INCOME FILED DURING THE ASSESSMENT YEAR PROCEEDINGS WITHOUT FILING ANY REV ISED RETURN WITHIN THE TIME ALLOWED U/S. 139(5) WAS AS UN DER:- PROFIT AS PER P&L A/C 7,82,431.01 ADD: DEPRECIATION 1,59,223.00 ITA NO. 1760/DEL/2009 6 9,41,654.01 LESS: DIVIDEND EXEMPT 80,45,977.00 DEPN. AS PER I.T. ACT 7,68,743.50 88,14,720.50 LOSS TO BE CARRIED FORWARD 78,73,066.49 7. THE ASSESSING OFFICER DID NOT ENTERTAIN THE CON TENTION OF THE ASSESSEE COMPANY DURING THE ASSESSMENT PROCEEDINGS ON THE GROUND THAT NO REVISED RETURN FO R A.Y. 2001-02 HAD BEEN FILED WITHIN THE TIME ALLOWED U/S. 139(5) OF THE ACT AND THERE WAS NO PROVISION IN THE INCOME TAX ACT TO REVISE THE COMPUTATION OF INCOME AFTER THE EXPIR Y OF SUCH TIME LIMIT. 8. THERE IS NO DISPUTE THAT REVISED COMPUTATION OF INCOME WAS FILED DURING THE ASSESSMENT PROCEEDINGS WITHOUT REVISING THE RETURN OF INCOME WITHIN THE TI ME ALLOWED U/S. 139(5) OF THE ACT. SINCE THE ASSESSE E HAD NOT FILED ANY REVISED RETURN WITHIN THE TIME ALLOWED U/S . 139(5), ANY REVISED COMPUTATION WHICH HAS THE EFFECT OF REVI SING THE RETURN CANNOT BE ENTERTAINED AND ALLOWED BY THE ASS ESSING OFFICER. IT CANNOT BE ALLOWED AT THIS STAGE OF A PPEAL PROCEEDING ALSO BECAUSE THE TIME FOR FILING REVISED RETURN WAS OVER AND THIS CLAIM BEING BELATED CANNOT BE ENTERTAINED. IN SUPPORT THE DECISION OF SUPREME CO URT IN GOETZE INDIA LTD. VS. C.I.T. (2006) 284 ITR 323 IS RELIED UPON WHEREIN THEY HELD THAT THE ASSESSING OFFICER CANNO T ENTERTAIN THE CLAIM FOR DEDUCTION OTHERWISE THAN BY FILING THE REVISED RETURN. THE SET OFF OF DIVIDEND IN COME ITA NO. 1760/DEL/2009 7 AGAINST LOSS ON SALE OF SHARES CANNOT BE ALLOWED AS NO SUCH CLAIM WAS MADE IN THE ORIGINAL COMPUTATION OF INCOME. THE BENEFIT OF TREATING THE DIVIDEND FROM MUTUAL FUN DS AS EXEMPT U/S. 10(35)(A) AND CARRY FORWARD OF THE LOSS OF ` 78,73,066.49 ON SHARES IS NOT BEING AGREED TO AS TH ESE CLAIMS WERE NOT MADE IN THE ORIGINAL RETURN OR BY FIL ING REVISED RETURN WITHIN THE TIME ALLOWED U/S. 139(5). 6. AGAINST THE ABOVE ORDER THE ASSESSEE IS IN APPEA L BEFORE US. 7. WE HAVE HEARD THE RIVAL CONTENTIONS IN LIGHT OF THE MATERIAL PRODUCED AND PRECEDENT RELIED UPON. LD. COUNSEL O F THE ASSESSEE SUBMITTED THAT THE LD. COMMISSIONER OF INCOME TAX (A ) HAS REJECTED THE ASSESSEES CLAIM ON THE GROUND THAT THE CLAIM WE RE NOT MADE IN THE ORIGINAL RETURN, DESPITE FINDING THE ISSUE IN F AOVUR OF THE ASSESSEE IN THE BODY OF THE ORDER DEALT WITH BY HIM. LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAND REQUESTED THAT THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (A) BE AFFIRMED. 8. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS. WE FIND THAT IN THIS CASE TRIBUNAL HAS REMITTED THE MATTER IN THE EA RLIER ROUND TO THE FILE OF THE LD. COMMISSIONER OF INCOME TAX (A) TO CON SIDER THE ISSUE ON MERITS. HOWEVER, LD. COMMISSIONER OF INCOME TAX (A) HAS REJECTED THE ASSESSEES PLEA AT THE THRESHOLD BY PLACING REL IANCE ON THE HONBLE APEX COURT DECISION IN THE CASE OF GOETZE INDIA LTD . VS. C.I.T. 284 ITR 323, WHEREIN IT WAS HELD THAT THE ASSESSING OFFICE R CANNOT ENTERTAIN THE CLAIM FOR DEDUCTION OTHERWISE THAN BY FILING THE REVISED RETURN. ITA NO. 1760/DEL/2009 8 IN THIS REGARD, WE HAVE CAREFULLY CONSIDERED THE IS SUE. WE FIND THAT HONBLE APEX COURT IN THE CASE GOETZE INDIA LTD. V S. C.I.T. (SUPRA), WHILE CONCLUDING HAS REMARKED THAT HOWEVER, WE MAKE IT CLEAR THAT THE ISSUE IN THIS CASE IS LIMITED TO THE POWER OF TH E ASSESSING AUTHORITY AND DOES NOT IMPINGE ON THE POWER OF THE INCOME TAX APPELLATE TRIBUNAL UNDER SECTION 254 OF THE INCOME TAX ACT, 1 961. WE FURTHER FIND THAT HONBLE APEX COURT IN THE CASE OF CIT V S. MR. P. FIRM IN 56 ITR 67 WHEREIN THE BENCH COMPRISED THREE OF THEIR LORDSHIPS HAD EXPOUNDED THAT IF A PARTICULAR INCOME IS NOT TAXABLE UNDER IT ACT, IT CANNOT BE TAXED ON THE BASIS OF ESTOPPEL OF ANY OT HER EQUITABLE DOCTRINE. FURTHER, IF A PARTICULAR INCOME IS NOT E XIGIBLE TO TAX, ASSESSING OFFICER HAS NO POWER TO IMPOSE TAX ON TH E SAID INCOME. WE FURTHER FIND THAT ARTICLE 265 OF THE CONSTITUTION OF INDIA STATES THAT NO TAX CAN BE COLLECTED EXCEPT BY AUTHORITY OF LAW. CBDT CIRCULAR NO. 114 XL-35 OF 1955 DATED 11.4.1955 STATES THAT OFFIC ER OF THE DEPARTMENT MUST NOT TAKE ADVANTAGE OF THE IGNORANCE OF AN ASSESSEE AS TO HIS RIGHTS. 9. IN VIEW OF THE AFORESAID DISCUSSIONS AND PRECED ENTS, WE HOLD THAT THE ASSESSEES CONTENTION DURING ASSESSMENT HAVE TO BE DULY CONSIDERED ON MERITS AND DECIDED ACCORDINGLY. HENC E, IN THE INTEREST OF JUSTICE, WE REMIT THIS ISSUE IN THIS CASE TO THE FILE OF THE ASSESSING ITA NO. 1760/DEL/2009 9 OFFICER. THE ASSESSING OFFICER SHALL CONSIDER THE SAME ON MERITS AND DECIDE ACCORDINGLY. 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSE E STANDS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 21/9/2012. SD/- SD/- [ [[ [I.C. SUDHIR I.C. SUDHIR I.C. SUDHIR I.C. SUDHIR] ]] ] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER DATE 21/9/2012 SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: - -- - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES