HANSOTIYA FINANCIAL SERVICES, MUMBAI V. ITO 4(1)(2), MUMBAI

ITA 1772/MUM/2009

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 2681 (ITAT-MUMBAI)
• Duration Of Justice: 8 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-12-2009
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 18-11-2009
• Assessment Year: 2001-2002
• Appeal Filed On: 18-03-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ANKUR GARG SR
• Keywords: Business income; Speculation loss; Difference of opinion; Reason to believe; Change of opinion
• Section: 143(3); 43(5); 195; 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI. BEFORE SHRI R.V.EASWAR, SENIOR VICE PRESIDENT I.T.A. NO. 1772/MUM/2009 (ASSESSMENT YEAR : 2001-02) HANSOTIYA FINANCIAL SERVICES, 6A, LENTIN CHAMBERS, 3 RD FLOOR, DALAL STREET, MUMBAI-400 023. PAN:AAAFH2658H VS. THE INCOME TAX OFFICER, WARD-4(1)(2),AAYAKAR BHAVAN, MARINE LINES, MUMBAI-400 020. (APPELLANT) (RESPONDENT) APPELLANT BY : MR. MUKESH AGRAWAL RESPONDENT BY : MR. ANKUR GARG, SR.AR O R D E R THIS APPEAL BY THE ASSESSEE RELATES TO THE ASSESSM ENT YEAR 2001-02. THE ASSESSEE IS A PARTNERSHIP FIRM EN GAGED IN THE BUSINESS OF STOCK BROKING AND TRADING IN SHARES, AN D ACTING AS SUB-BROKERS FOR MUTUAL FUNDS AND COMPANIES. 2. THE ASSESSMENT WAS FIRST COMPLETED UNDER SECTION 143(3) OF THE INCOME TAX ACT ON A TOTAL LOSS OF RS.39,50,2 80/- . THIS LOSS WAS LATER FOUND TO BE PARTLY ON ACCOUNT OF TRA NSACTIONS IN WHICH THERE WAS NO DELIVERY OF THE SECURITIES. THE REASON FOR THIS IS STATED TO BE THAT FROM THE DETAILS AVAILABLE ON RECORD IT WAS NOTICED THAT THE ASSESSEE ITSELF HAD STATED IN THE COURSE OF THE ASSESSMENT PROCEEDINGS THAT THE LOSS WAS INCURRED O N MAINLY DELIVERY BASED TRANSACTIONS SUGGESTING THAT SOME P ART OF IT WAS NOT DELIVERY BASED. ON THE BASIS OF THIS REASONING, THE ASSESSING OFFICER ISSUED NOTICE UNDER SECTION 148. IN THE REA SONS RECORDED IT WAS OBSERVED THAT THE LOSS ARISING OUT OF TRANSA CTIONS IN WHICH THERE WAS NO DELIVERY IS A SPECULATION LOSS UNDER SECTION 43(5) OF THE INCOME TAX ACT WHICH CANNOT BE SET OFF AGAINST THE BUSINESS INCOME. IN THE COURSE OF RE-ASSESSMENT PRO CEEDINGS, ITA NO.1772/MUM/09 2 THE ASSESSING OFFICER TOOK THE VIEW THAT THE ENTIRE LOSS OF RS.41,48,603/- MUST BE TREATED AS SPECULATION LOSS IN THE ABSENCE OF ANY DETAILS FURNISHED BY THE ASSESSEE TO PROVE THE DELIVERY OF THE SECURITIES. THIS CONSISTED OF RS.2, 25,734/- WHICH THE ASSESSEE ADMITTED TO BE A SPECULATION LOSS AND THE BALANCE OF RS.39,22,869/- REPRESENTED LOSS FOR WHICH THE AS SESSEE WAS NOT ABLE TO PROVE DELIVERY OF THE SHARES. 3. AGAINST THE DISALLOWANCE OF THE LOSS OF RS.39,22 ,869/- THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A) QUESTION ING BOTH THE JURISDICTION OF THE ASSESSING OFFICER TO REOPEN THE ASSESSMENT AND THE DISALLOWANCE OF THE LOSS ON MERITS. BOTH TH E POINTS WERE DECIDED AGAINST THE ASSESSEE BY THE CIT(A) AND HENC E THE PRESENT APPEAL. 4. THE FIRST CONTENTION OF THE ASSESSEE IS THAT THE REOPENING WAS WITHOUT JURISDICTION AND WAS PROMPTED BY A MER E CHANGE OF OPINION. THE JUDGEMENTS OF THE BOMBAY HIGH COUR T IN ASTEROIDS TRADING VS. DCIT 308 ITR 190 AND ASIAN PA INTS LTD. VS. DCIT 308 ITR 195 WERE RELIED UPON AS ALSO THE O RDER OF THE THIRD MEMBER (DEL) OF THE TRIBUNAL IN ACIT VS. O.P. CHAWLA 114 ITD 69(TM). I AM HOWEVER UNABLE TO ACCEPT THE CONTE NTION. THE ASSESSMENT HAS BEEN REOPENED WITHIN THE PERIOD OF F OUR YEARS FROM THE END OF THE ASSESSMENT YEAR AND THEREFORE T HE PROVISO TO SECTION 147 DOES NOT APPLY AND IT IS NOT NECESSARY FOR THE ASSESSING OFFICER TO PROVE THAT INCOME HAD ESCAPED ASSESSMENT DUE TO THE FAILURE OF THE ASSESSEE TO DISCLOSE FULL Y AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT. THE ON LY QUESTION TO BE CONSIDERED IS WHETHER THERE WAS REASON TO BE LIEVE THAT INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT. TH E ASSESSEE ITSELF HAD STATED IN THE COURSE OF THE ORIGINAL ASS ESSMENT PROCEEDINGS THAT THE LOSS AROSE MAINLY OUT OF DELIV ERY BASED TRANSACTION. NO DETAILS WERE SUBMITTED BY THE ASSES SEE AS TO ITA NO.1772/MUM/09 3 HOW MUCH LOSS WAS ATTRIBUTABLE TO DELIVERY BASED AN D NON- DELIVERY BASED TRANSACTIONS. OBVIOUSLY THE LOSS ARI SING OUT OF NON-DELIVERY BASED TRANSACTION CANNOT BE ALLOWED IN VIEW OF SECTION 43(5) OF THE ACT, EXCEPT AGAINST SPECULATIV E PROFITS. THE ASSESSING OFFICER THEREFORE, HAD REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT. THEREFORE , THE NOTICE ISSUED UNDER SECTION 148 WAS PERFECTLY VALID IN LAW . 5. THE JUDGEMENTS CITED BY THE ASSESSEE BEFORE ME A RE NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE SINCE I N THE PRESENT CASE THERE WAS A FAILURE ON THE PART OF THE ASSESSE E TO SUBSTANTIATE ITS CLAIM THAT THE ENTIRE LOSS WAS RIG HTLY CLAIMED AS A DEDUCTION. IT IS NOT A CASE OF A MERE CHANGE OF OPINION ON EXAMINATION OF THE SAME FACTS. 6. AS REGARDS THE MERITS, NEITHER BEFORE THE ASSES SING OFFICER NOR BEFORE THE CIT(A) DID THE ASSESSEE FURN ISH EVIDENCE TO SHOW THAT THE LOSS AROSE ON ACCOUNT OF DELIVERY BAS ED TRANSACTION. IN FACT, THE ASSESSEE ADMITTED THAT TH E LOSS OF RS.2,25,734/- WAS SPECULATION LOSS AND SO FAR AS TH E BALANCE LOSS OF RS.39,22,869/- IS CONCERNED, AS NOTED IN PA RAGRAPH 7.4 OF THE REASSESSMENT ORDER, DESPITE SEVERAL OPPORTUN ITIES, NO EVIDENCE WAS ADDUCED BY THE ASSESSEE TO JUSTIFY THA T THE LOSS WAS NOT A SPECULATIVE LOSS. EVEN BEFORE ME, NO EVI DENCE WAS ADDUCED TO PROVE DELIVERY OF THE SHARES IN RELATION TO THE AFORESAID AMOUNT. I, THEREFORE, HAVE NO OPTION BUT TO UPHOLD THE DISALLOWANCE OF THE LOSS. 7. ANOTHER GROUND TAKEN BY THE ASSESSEE IS THAT TH E ASSESSING OFFICER ERRED IN DISALLOWING PROPORTIONAT E EXPENSES OF RS.2,51,412/-. THE ASSESSING OFFICER ALLOCATED THIS MUCH OF EXPENSES TOWARDS SPECULATION LOSS AND DISALLOWED TH E SAME. HIS ACTION IS SUPPORTED BY THE JUDGEMENT OF THE BOMBAY HIGH COURT ITA NO.1772/MUM/09 4 IN SIND NATIONAL SUGAR MILLS P.LTD. VS. CIT., (1980 ) 121 ITR 742. RESPECTFULLY FOLLOWING THE JUDGEMENT, I UPHOLD THE DISALLOWANCE. 8. IN THE RESULT, THE APPEAL IS DISMISSED WITH NO O RDER AS TO COSTS. ORDER PRONOUNCED ON THIS 11 TH DAY OF DECEMBER, 2009. SD/- ( R.V.EASWAR ) SENIOR VICE PRESIDENT MUMBAI, DATED 11 TH DECEMBER, 2009. SOMU COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT-4, MUMBAI. 4. THE CIT(A)-IV, MUMBAI 5. THE DR SMC BENCH /TRUE COPY/ BY ORDE R ASSTT. REGISTRAR, I.T.A.T, MUMBAI