The ACIT, Circel-2(1), Baroda V. Shri Ketan Bhailalbhai Shah, Baroda

ITA 1795/AHD/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 0122 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 4 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-11-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2006-2007
• Appeal Filed On: 19-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJESH MEENA
• Keywords: Transactions in derivatives

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD .., , !' BEFORE SHRI R.P. TOLANI, JUDICIAL MEMBER AND SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER ./ I.T.A. NO.1795/AHD/2013 ( / ASSESSMENT YEAR : 2006-07) THE ASST.COMMISSIONER OF INCOME TAX CIRCLE-2(1) BARODA / VS. SHRI KETAN BHAILALBHAI SHAH 306, PAYAL COMPLEX SAYAJIGUNJ, BARODA % ./ ./ PAN/GIR NO. :AMXPS 8554 L ( %( / APPELLANT ) .. ( )%( / RESPONDENT ) %(* / APPELLANT BY : SHRI RAJESH MEENA, SR.DR )%(+* / RESPONDENT BY : -NONE- ,+ / DATE OF HEARING 01/11/2016 -./+ / DATE OF PRONOUNCEMENT 03/11/2016 / O R D E R PER PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER : IN THE PRESENT REVENUES APPEAL DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-II BARODA [CIT (A) IN SHORT] DATED 25/03/2013 FOR ASSESSMENT YEAR (AY) 2006-07, THE AO HAS RAISED FOLLOWING GROUND OF APPEAL:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD.CIT(APPEALS) ERRED IN DELETING THE DISALLOWANCE OF 78,90,015/- U/S.40(A)(IA) OF THE ACT WITHOUT APPRECIATING THAT THE ASSESSEE FAILED TO ITA NO. 1795/AH D/2013 ACIT VS. SHRI KETAND BHAILALBHAI SHAH ASST.YEAR 2006-07 - 2 - DEDUCT TAX AT SOURCE ON THE PAYMENT OF COMMISSION A ND BROKERAGE IN VIEW OF PROVISIONS OF SECTION 194H OF THE ACT. 2. THE RELEVANT FACTS CONCERNING THE APPEAL ARE TH AT THE ASSESSEE IS AN INDIVIDUAL AND IS ENGAGED IN THE BUSINESS OF SHARE AND STOCK BROKING. THE RETURN OF INCOME FOR THE RELEVANT AY 2006-07 W AS ASSESSED UNDER S.143(3) R.W.S.147 OF THE INCOME TAX ACT, 1961 (HER EINAFTER REFERRED TO AS 'THE ACT') BY ASSESSMENT ORDER DATED 01/12/2011. THE ASSESSING OFFICER (AO) INTER ALIA INVOKED SECTION 40(A)(IA) OF THE ACT AND MADE DISALLOWANCE OF RS.78,90,015/- IN RESPECT OF EXPEND ITURE INCURRED TOWARDS BROKERAGE/COMMISSION IN RELATION TO TRANSAC TIONS OF SHARES AND SECURITIES OWING TO NO-DEDUCTION OF TDS ON SUCH EXP ENDITURE. BEFORE THE AO, THE ASSESSEE SUBMITTED THAT HE IS ENGAGED I N THE BUSINESS OF STOCK MARKET ARBITRAGE, I.E. BUYING AND SELLING OF SHARES IN CASH SEGMENT OF NSE/BSE AS WELL AS BUYING AND SELLING OF DERIVATIV ES (F&O) IN THE DERIVATIVES SEGMENTS OF NSE. FOR THE ASSESSMENT Y EAR UNDER CONSIDERATION, ASSESSEE HAD CLAIMED BROKERAGE EXPEN SES OF RS.78,90,015/- WHICH WAS DULY ACCEPTED EARLIER IN T HE ORIGINAL ASSESSMENT PROCEEDINGS UNDER S.143(3) OF THE ACT. THIS BROKERAGE WAS PAID TO BROKERS ON PURCHASE AND SALE OF SHARES FROM NSE/BSE MARKETS. IT WAS THE CASE OF THE ASSESSEE BEFORE AO THAT OBLI GATION TO DEDUCT TDS ON COMMISSION/BROKERAGE IS GOVERNED BY S.194H ACT. EXPLANATION TO S.194H EXCLUDES APPLICABILITY OF S.194H ON COMMISSI ON PAID TOWARDS TRANSACTION OF SECURITIES. THUS, THE STATUE DOES N OT REQUIRE THE ASSESSEE TO ITA NO. 1795/AH D/2013 ACIT VS. SHRI KETAND BHAILALBHAI SHAH ASST.YEAR 2006-07 - 3 - DEDUCT TDS ON IMPUGNED PAYMENT. HOWEVER, THE AO DI D NOT FIND MERIT IN THE CONTENTION OF THE ASSESSMENT AND PROCEEDED T O DISALLOW THE EXPENDITURE TOWARDS COMMISSION/BROKERAGE BY INVOKIN G S.40(A)(IA) OF THE ACT AS NOTED ABOVE. 3. THE ASSESSEE CARRIED THE MATTER BEFORE THE CIT(A ) AND ASSAILED THE ACTION OF THE AO BOTH ON INVOKING JURISDICTION UNDE R S.147/148 OF THE ACT AND ALSO IN INVOKING THE PROVISIONS OF SECTION 40(A)(IA) IN DISREGARD OF SECTION 194H OF THE ACT. THE CIT(A) FOUND MERIT IN THE PLEA OF THE ASSESSEE THAT ACTION OF THE AO IN ISSUING NOTICE UN DER S.148 OF THE ACT IS ILLEGAL AND NOT TENABLE IN LAW. ACCORDINGLY, THE R EASSESSMENT PROCEEDINGS WERE HELD BY THE CIT(A) TO BE INVALID A ND UNSUSTAINABLE IN THE LAW. THE CIT(A) ALSO ACCEPTED THE CONTENTION O F THE ASSESSEE ON MERITS AND HELD THAT IN VIEW OF EXPLANATION TO S.19 4H, THE OBLIGATION TO DEDUCT TDS ON TRANSACTIONS OF SHARES AND SECURITIES CANNOT BE FASTENED ON THE ASSESSEE AND THEREFORE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT HAS NO APPLICABILITY IN THE FACTS OF THE CASE OF TH E ASSESSEE. 4. AGGRIEVED BY THE ORDER OF THE CIT(A), THE REVENU E IS IN APPEAL BEFORE THE TRIBUNAL. ITA NO. 1795/AH D/2013 ACIT VS. SHRI KETAND BHAILALBHAI SHAH ASST.YEAR 2006-07 - 4 - 5. THE LD.SR.DR SHRI RAJESH MEENA APPEARED ON BEHAL F OF THE REVENUE AND RELIED ON THE ORDER OF THE AO AND PLEAD ED FOR THE CANCELLATION OF THE RELIEF GRANTED BY THE CIT(A). 6. NONE APPEARED ON BEHALF OF THE ASSESSEE. IT WAS SEEN FROM THE RECORD THAT THE ASSESSEE WAS DULY INFORMED ABOUT TH E DATE OF HEARING. ACCORDING, THE MATTER WAS PROCEEDED EX-PARTE IN THE ABSENCE OF THE ASSESSEE-CONCERNED. 7. WE HAVE HEARD THE LD.DR FOR REVENUE AND PERUSED THE ORDERS OF AO & CIT(A). ON A BARE PERUSAL OF THE GROUND OF AP PEAL RAISED BY THE REVENUE, WE NOTE THAT THE REVENUE HAS MERELY CHALLE NGED THE ACTION OF THE CIT(A) IN DELETING THE IMPUGNED DISALLOWANCE OF RS.78,90,015/- ON MERITS. AS PER REVENUE, THE ASSESSEE OUGHT TO HAV E DEDUCTED TAX AT SOURCE ON PAYMENT OF COMMISSION AND BROKERAGE ON TR ANSACTIONS OF SHARES AND SECURITIES AND FAILUE TO DO SO CALLS FOR DISALLOWANCE UNDER S.40(A)(IA) OF THE TAX. HOWEVER, THE AO IS NOT FOU ND TO BE AGGRIEVED BY THE ACTION OF THE CIT(A) IN HOLDING THAT THE REASSE SSMENT PROCEEDINGS ITSELF ARE INVALID. AS A COROLLARY, ONCE THE ACTIO N OF THE AO IN ISSUING NOTICE UNDER S.148 STANDS INVALIDATED BY THE ORDER OF THE CIT(A), THE JURISDICTION TO RE-ASSESS UNDER S.147 ALSO STAND S AUTOMATICALLY OUSTED. THE RE-ASSESSMENT ORDER IN CONSEQUENCE IS RENDERED NON-EST . ITA NO. 1795/AH D/2013 ACIT VS. SHRI KETAND BHAILALBHAI SHAH ASST.YEAR 2006-07 - 5 - CONSEQUENTLY, GRIEVANCE OF THE REVENUE ON MERITS AS PER GROUND OF APPEAL IS RENDERED INFRUCTUOUS AND DOES NOT CALL F OR ANY ADJUDICATION. 8. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. THIS ORDER PRONOUNCED IN OPEN COURT ON 03 / 1 1 /2016 SD/- SD/- .. () ( ) ( R.P. TOLANI ) ( PR ADIP KUMAR KEDIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 03/ 11 /2016 3..,.../ T.C. NAIR, SR. PS !'#$%$' / COPY OF THE ORDER FORWARDED TO : 1. %( / THE APPELLANT 2. )%( / THE RESPONDENT. 3. 456 7 / CONCERNED CIT 4. 7 ( ) / THE CIT(A)-II, BARODA 5. 89:56 , 56/ , 4 / DR, ITAT, AHMEDABAD 6. :<, / GUARD FILE. / BY ORDER, )8 //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION .. 02.11.16(DICTATION-PAD 11 - PAGES ATTACHED AT THE END OF THIS APPEAL-FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 02.11.16 3. OTHER MEMBER 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S.3.11.16 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 3.11.16 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER