The ITO, Ward-2(4), Ahmedabad V. Shri Govindram L Kabra, Ahmedabad

ITA 1931/AHD/2002

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 0395 (ITAT-AHMEDABAD)
• Duration Of Justice: 7 year(s) 5 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2009
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 23-11-2009
• Assessment Year: 1995-1996
• Appeal Filed On: 07-06-2002
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SHELLEY JINDAL
• Keywords: Business income; Income from undisclosed sources; Opportunity of being heard; Speculation loss; Onus to prove; Speculative transactions; Set aside
• Section: 271(1)(c); 43(5); 208; 263

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL : C BENCH : AHMEDABAD (BEFORE HONBLE SHRI T.K. SHARMA, J.M. & HONBLE SH RI N.S. SAINI, A.M.) I.T.A. NO. 1931/AHD./2002 ASSESSMENT YEAR : 1995-1996 INCOME TAX OFFICER, WARD-2(4), AHMEDABAD -VS. - GOVINDRAM L. KABRA, AHMEDABAD (APPELLANT) (RE SPONDENT) APPELLANT BY : SHRI SHELLEY JINDA L, CIT( D.R.) RESPONDENT BY : SHRI DHIREN SHAH O R D E R PER SHRI T.K. SHARMA, JUDICIAL MEMBER :- THIS APPEAL FILED BY THE REVENUE IS AGAINST THE ORDER DATED 28.03.2002 OF LEARNED COMMISSIONER OF I NCOME TAX (APPEALS) -I, AHMEDABAD FOR THE ASSESSMENT YEAR 1995-96. 2. THE GROUND NO. 1 RAISED IN THIS APPEAL IS AGAINS T DELETING THE ADDITION OF RS.1,57,53,775/- MADE BY THE A.O. ON ACCOUNT OF DIS ALLOWANCE OF LOSS IN SHARE TRADING. 3. THE BRIEF FACTS RELATING TO CONTROVERSY INVOLVED IN THIS GROUND OF APPEAL ARE THAT THE ASSESSEE IS AN INDIVIDUAL DERIVING INCOME FROM SHAR E TRADING, SALARY AND INCOME FROM OTHER SOURCES. FOR THE ASSESSMENT YEAR UNDER APPEAL, HE F ILED THE RETURN OF INCOME DECLARING NET LOSS OF RS.37,48,768/-, WHICH INCLUDES NET LOSS FROM PROPRI ETARY CONCERN M/S. GOVINDRAM L. KABRA RS.44,42,740/-.. THIS PROPRIETARY CONCERN M/S. GOVI NDRAM L. KABRA IS ENGAGED IN PURCHASE AND SALE OF SHARES. IN THIS CONCERN, IN TRADING ACTIVIT Y OF SHARES, THE ASSESSEE HAS DECLARED LOSS OF RS.44.42 LAKHS AFTER CLAIMING THE EXPENSES UNDER VA RIOUS HEADS. IN THE ASSESSMENT ORDER, THE A.O. DISALLOWED THE LOSS OF RS.1,57,53,775/- ALLEGE D TO BE INCURRED BY THE ASSESSEE IN TRADING OF SHARES OF M/S. MADHUR FOOD LTD., FOR WHICH DETAILED REASONS GIVEN IN PARA II.1.5 TO II.1.15 OF HIS ORDER AS UNDER :- II.1.5. ON SCRUTINY OF BROKERS NOTE AND PURCHASE A ND SALES BILL, IT IS NOTICED THAT ASSESSEE HAS INCURRED HUGE LOSS OF RS.1,57,53, 775/- IN THE TRANSACTION OF SHARES OF MADHUR FOOD LTD. THERE IS NO OPENING STOCK OR CLOSING STOCK. ENTIRE 2,34,000 SHARES CLAIMED AS PURCHASE D AND SOLD THROUGH M/S. NADA INVESTMENT PVT. LTD. IN THE PERIOD OF 16 DAYS ONLY. ON THE FACE OF TRANSACTION, APPEARS TO BE DOUBTFUL, AND NON-GENUINE. FURTHER TH ERE ARE OTHER PURCHASES OF SATYAM CEMENT LTD. SHARE AND ASSESSEE HAS INCURRED LOSS OF RS.227315/- BUT THERE 2 IS CLOSING STOCK AT THE END OF YEAR, HENCE THE SAME IS ACCEPTED AS SUCH. IT IS CONTENDED BY THE ASSESSEE THAT THEY HAVE MADE PAYME NT THROUGH CHEQUE AND ALSO RECEIVED PAYMENT THROUGH CHEQUE. THEREFORE IT IS CL AIMED THAT THE TRANSACTIONS ARE RIOT SPECULATIVE AND ARE GENUINE, NO FURTHER SUBMIS SIONS WERE GIVEN BY THE ASSESSEE AND NO OTHER DETAILS ARE FILED. ALTHOUGH IN THE S UBMISSIONS DATED 27.03.1998, THE ASSESSEE HAS CLAIMED THAT HE HAS FURNISHED BOOKS OF ACCOUNTS BUT IT IS TO MENTION HERE THAT NEITHER BOOKS OF ACCOUNT OR ANY_COPY OF A CCOUNTS IS FILED FOR VERIFICATION WHICH WAS ASKED FROM THE ASSESSEE FROM 25-11-1997 TO TILL DATE. THE ONLY DETAILS FURNISHED IS COPIES OF CONTRACT NOTE AND STATEMENT OF SCRIP-WISE WORKING OF PROFIT AND LOSS ON 27-03-1998. 11.1.6. IT MAY ALSO BE MENTIONED HERE THAT IN THE SCRIP OF M/S. MADHUR FOODS, ASSESSEE HAS CLAIMED PURCHASE OF 2,34,000 SHAR ES THROUGH M/S. NADA INVESTMENTS PVT. LTD. SHARES BUT THE BILLS FOR THE SALES OF 199000 SHARES ARE ONLY FILED. THERE IS NO DETAILS ABOUT SALE OF OT HER 35000 SHARES. IN THE CASE OF TRANSACTION OF 10,000 SHARES ASSESSES HAS MADE AN ATTEMPT TO SHOW THE SAME AS SHARES OF MADHUR FOODS LTD. BUT ON VERIF ICATION SAME ARE FOUND TO BE PERTAINING TO M/S. MADHUR MASALA AND NOT MADHUR FOODS LTD. THESE FACTS PROVE THAT THE ASSESSEE IS DELIBERATELY FURNISHIN G WRONG FACTS AND EVIDENCES IN SUPPORT OF HIS CLAIM. FURTHER SCRUTINY OF THE P URCHASE AND SALE BILL FILED SHOWS THAT ALL THE TRANSACTIONS IN THE CASE OF MADH UR FOOD SCRIP IS MADE THROUGH NADA INVESTMENT PVT. LTD AND HUGE LOSS OF RS.1. 58 CRORE IS CLAIMED BY THE ASSESSEE. IT MAY NOT BE OUT OF PLACE TO M ENTION HERE THAT ASSESSEE WAS EARLIER ALSO INVOLVED IN SUCH BOGUS AND NON-GENUINE TRANSAC TIONS THROUGH SAME M/S. NADA INVESTMENTS PVT. LTD. AND THE ASSESSING OFFICER HAS HELD THE TRANSACTIONS IN THE AY. 93-94 AS SPECULATIVE IN THE CASE OF ASSESSEE. FURTHER FROM THE CONTENTS OF BILLS IT CLEARLY EMERGES THAT THE TRANSACTIONS AR E PURELY NON-GENUINE AND SPECULATIVE IN NATURE. IT IS ON RECORDS THAT 2,34,000 SHARES ARE PURCHASE D BETWEEN 3-4-1994 TO 19-4-1994 AT RS. 2,42,27,650/-. 'THE SAME SHARES ARE CLAIMED TO BE SOLD FROM 13.04.1994 TO 22-4-1994 INCURRING LOSS OF RS.1.57 CRORES. THIS PARTICULAR FACT SHOWS THE D ELIVERY WAS NEITHER POSSIBLE AND NOR ANY EVIDENCE IS PRODUCED WHICH SHOWS THAT ACTUAL DELIVERY WAS EVER TAKEN PLACE. THE PURCHASE PRICE OF THE 2 ,34,000 SHARES CORNES TO RS.L03.54/- SHARE. THE AVERAGE SALE PRICE OF THE SHARES DURING THE PERIOD OF SIX DAYS COMES TO RS.36.21 PER SHARE. THIS SHOW THAT FIRSTLY THE TRANSACTION IS NOT AT ALL GENUINE AND ALTERNATIVELY TRANSACTIONS ARE SPECULATIVE IN NATURE AS WAS HELD IN THE EARLIER YEAR. II.1.7. IT MAY BE A USEFUL REFERENCE TO MAKE HERE T HAT THE KABRA BROTHERS GROUP OF CASES WERE BEFORE THE HON'BLE SETTLEMENT COMMISSION FOR AY 90-91 AND AY 91-92. IN THE PAPER BOOK FILED BY THE ASSESSEE BEFORE THE HON'BLE SETTLEMENT COMMISSION IN PAGE 203 & 204 A REFERENCE REGARDING PAYMENT IN CAS OF RS.1,50,00,000/- WAS MADE BY THE ASSESSEE OF KABRA GROUP TO SHRI HASMUKH NADA, MAIN PERSON AND DIRECTOR OF NADA INVESTMENT PVT. LTD. THE FUNDS WER E CLAIMED TO BE ADVANCED FROM 1.4.93 TO 31.3.1994 OUT OF UNACCOUNTED INCOME OFFER ED BEFORE THE SETTLEMENT COMMISSION AND UTILIZATION SHOWN OUT OF RS.5.28 CRO RES, INCOME OFFERED BEFORE THE 3 SETTLEMENT COMMISSION FOR THE EARLIER YEARS. THE KA BRA BROTHERS OF ASSESSEE WERE ASKED TO FURNISH THE DETAILS OF THE APPLICATION OF THE FUNDS SHOWN AS AVAILABLE IN CASH AS ON 1.4.92 BEFORE THE SETTLEMENT COMMISSION ALONGWITH ADVANCES AND DEPOSITS SHOWN IN THE BALANCE SHEET OF THE ASSESSEE AND STATEMENT OF ASSETS AND LIABILITIES AS ON 31.3.92, 31.3.93, 31.3.94 AND 31. 3.95 AFTER OBTAINING APPROVAL FROM DCIT, CR. 1, AHMEDABAD. THE ASSESSEE DESPITE SEVERA L OPPORTUNITIES FROM 9.1.98 TO TILL DATE NOT MADE ANY EFFORT TO FILE THE STATEMENT OF ASSETS AND LIABILITY IN PRESCRIBED FORMULA SHOWING APPLICATION OF AFORESAID FUNDS FROM 1.4.92 TO 31.3.95. THEY HAVE NOT MADE ANY EFFORTS TO DISCLOSE THE APPLICATION OF THE FUNDS ACCORDINGLY IN THE ORDER SHEET DATED 25.3.1998 THE WHOLE PROCEEDINGS W AS RECORDED COPY OF WHICH IS ENCLOSED AS PER ANNEX. B WITH THE ASSESSMENT ORDER. II.1.8. THE ABOVE REFERENCE SHOWS THAT SHRI HASMUKH NADA WAS CLOSELY ASSOCIATED IN THE UNACCOUNTED AND BONUS TRANSACTIONS OF THE AS SESSEE IN THE PAST AND WAS ACCOMMODATING THE BROTHERS OF KABRA GROUP IN THEIR INGENUINE, BOGUS AND SPECULATIVE TRANSACTIONS. THIS FACTS IS CLEARLY NOT ED THE ASSESSMENT ORDER FOR AY 1993-94. II.1.9. COMING TO THE FACTS OF THE CASE IN THE YEAR UNDER REVIEW, IT IS NOTED THAT ALL THE PURCHASE OF MADHUR FOOD SCRIPS ARE CLAIMED TO BE MADE THROUGH M/S. NADA INVESTMENT PVT.LTD. AND SOLD THROUGH HIM. THESE PURCHASES STARTED ON 3-4-94 WAS AT THE AVERAGE RATE OF RS.114.43 PER SHARE AND CLOSED ON 19.4.9 4 AT AVERAGE RATE OF RS.57.74 PER SHARE. TOTAL 234000 SHARES WERE PURCHASED IN 16 DAYS TIME AT TOTAL VALUE OF RS.2,42,27,650/-. THE SALES ARE CLAIMED TO BE STARTED FROM 13.4.1994 AND COMPLETED ON 22-4-199 4 AT THE AVERAGE PRICE OF RS,73.50 PER SHARE TO RS.22.17/- PER SHARE RESPECTI VELY. THIS SHOWS THAT THERE WAS A DOWNWARD TREND OF PRICE OF THE SAID SCRIP, BUT DESPITE THE SAME ASSESSEE HAS CONTINUED PURCHASING THE SHARES EVEN AFTER 13-4-199 4. A CHART SHOWING PURCHASES AND SALES OF SHARES OF MADHUR FOOD LTD IS AS UNDER: - P U R C H A S E DATE OF PURCHASE QUANTITY (NO.) VALUE (RS.) A.V. PR ICE 03.04.1994 46000 5263650 114.43 04.04.1994 30000 3463125 115.44 05.04.1994 46000 5599625 121.73 07.04.1994 35000 4200000 120.10 13.04.1994 9000 632750 70.30 15.04.1994 38000 3276000 86.25 18.04.1994 20000 1215000 60.75 19.04.1994 10000 577500 57.75 SA L E S DATE OF SALE QUANTITY (NO.) VALUE (RS.) A.V. PRICE 13.4.1994 15000 1102500 73.50 15.4.1994 10500 844375 80.41 4 19.4.1994 23000 1202300 52.27 21.4.1994 63500 2078525 32.73 22.4.1994 87000 1928925 22.17 1999000 7156625 BALANCE 35000 1317250 36.21 2,34,000 84,73,825/- LOSS CLAIMED INCURRED RS.1,57,53,775/-. II.1.10. FROM THE ABOVE ANALYSIS IT APPEARS THAT THERE WAS A DOWN WARD TREND IN THE PRICE ALL THROUGH THE PERIOD OF PURCHASE. THE ASSESSEE STARTED ITS SALES FROM 13.4.1994 BUT STILL HE WAS P URCHASING THE SHARES AT THE RATE OF RS.86.25, RS.60.75, AND RS.57.75 EVEN AFTER SALES AT THE AVERAGE RATE OF 73.50 ON 13--4-1994. THE TRANSACTIONS APPARENTLY CANNOT B E THAT OF A PRUDENT INVESTOR. THERE IS ABSOLUTELY NO REASON TO PURCHASE AT THE DOWNWARD TREND MARKET AND WHEN IT WAS APPARENT THAT THERE WAS NOT MUCH R EASON OF SUCH PRICE GOING UP EXPECT TO SPECULATIVE ACTIVITY ON A RELATIVELY UNKNOWN AND NEW SCRIP. II.1.11. IT MAY ALSO BE WORTHWHILE TO MENTION HERE THAT THE SAID M/S.MADHUR FOOD INVESTMENT LTD. WAS NOT FOUND TO BE A COMPANY OF SO UND FUNDAMENTALS AND WAS NOT EVEN FLOATED BY ANY KNOWN OR BIG INDUSTRIAL GROUP A ND IT WAS ONE OF SUCH COMPANIES WHICH CAME TO MARKET IN THE PERIOD OF PRIMARY MARKE T BOOM. THE PUBLIC ISSUE OF THE COMPANY WAS CAME DURING THAT PERIOD ONLY AND THE TR ANSACTIONS CONDUCTED BY THE ASSESSEE CANNOT BE ACCEPTED AT NO STRETCH GENUINE I NVESTMENT TRANSACTION OF A PRUDENT INVESTOR AS SUCH HUGE INVESTMENT IN PURCHAS E OF AN UNKNOWN SCRIP CANNOT BE FOR THE PURPOSE OF EARNING GENUINE INVESTM ENT PROFIT. THE ONLY INTENTION AS IS CLEAR FROM THE TRANSACTIONS WAS NON-GENUINE AND SPECULATIVE THROUGH SRI HASMUKH NADA, WHO WAS ALSO ACCOMMODATING IN THE PAST TO THE ASSESSEE. THE ASSESSEE HAS NOT PRODUCED ANY EVIDENCE IN SUPPORT OF THE CLAIM OF LOSS. NEITHER DISTINCTIVE NUMBER, NOR PROOF OF DELIVERY REGARDING SHARES WERE FURNISHED. ON THE FACTS OF THE CASE IT IS CLEAR THAT DELIVERY IN ALL THE CASES IS JUST IMPOSSIBLE. EVERYBODY CONNECTED WITH THE PURCHASE AND SALES OF SHARES FROM THE SECONDARY MARKET KNOWS. IT VERY WELL THAT SHARES CA NNOT BE DELIVERED ON THE DAY OF PURCHASE ITSELF ARID IT USUALLY TAKES THREE-- FOUR- WEEKS TIME AFTER THE CLOSE OF SETTLEMENT PERIOD DURING WHICH SUCH SHARES ARE PROD UCED EXCEPT IN SPOT TRANSACTION- THE ASSESSEE HAS BROUGHT NOTHING ON RECORD FOR SUCH TRANSACTIONS CARRIED OUT ON SPOT BASIS. HAD THE TRANSACTIONS BEEN ON SPOT BASIS THE PAYMENTS OF THE PURCHASE CONSIDERATION WOULD HAVE BEEN REQUIRED TO BE MADE WITHIN 43 HOURS OF SUCH TRANSACTIONS AS IS NOT IN THE ASSESSEE'S CASE AND I N ANY CASE, THE DISTINCTIVE NUMBER AND OTHER DETAILS ARE NOT FURNISHED. II.1.12. IN ANY CASE, THE ASSESSSEE HAS NOT GI VEN ANY DETAILS INCLUDING DISTINCTIVE NUMBER OF THE SHARES, CERTIFICATE NO., FOLI O NO. TO ESTABLISH ACTUAL DELIVERY HENCE THE TRANSACTION IS PURELY NON-GENUINE AND SPECULATIVE 5 TRANSACTION. THIS FACT BECOMES MANIFEST EV EN FROM THE ASSESSEE'S. SUBMISSION THAT LOSS IS CLAIMED TO CARRY FORWARD AFTER SETTING OFF AGAINST THE INCOME FROM OTHER SHARES TRANSACTIONS CARRIED O UT DURING THE YEAR. THESE FACTS PROVE BEYOND DOUBT THAT THE TRANSACTION AND SALE S THROUGH NADA INVESTMENT PVT. LTD AS REGARDS MADHUR FOODS PVT. LTD. ARE IN THE L EAST SPECULATIVE BUT IN FACT NON-GENUINE. II.1.13. IN VIEW OF AFORESAID FACTS, IT IS H ELD THAT LOSS CLAIMED ON TRANSACTION THROUGH NADA INVESTMENT LTD IS NOT GE NUINE AND SPECULATIVE AND THE TRANSACTIONS WERE CARRIED OUT WITH THE CLEAR INT ENTION OF SETTING OFF THE PROFIT EARNED BY THE ASSESSEE IN THE TRANSACTIONS OF RUPAN GI IMPEX LTD., WHICH IS GROUP CONCERN OF KABRA. IT MAY BE MENTIONED HERE T HAT THE SAID RUPANGI IMPEX LTD. WAS LATER ON INVESTIGATED BY THE SECURITIES AND EXC HANGE BOARD OF INDIA FOR INSIDER TRADING AND LATE TRANSACTIONS OF THE SHARES IN THE STOCK MARKET WERE STOPPED ON DIRECTIONS FROM SEBI. THE ASSESSEES ARE STILL PENDI NG BEFORE THE HON'BLE COURT. THESE FACTS SHOWS THAT WHOLE EXERCISE 4WAS CARRIED OUT BY THE ASSESSEE TO REDUCE PROFIT EARNED IN MADHUR SCRIP INCLUDING ASSESSEES SCRIP OF M/S. RUPANGI IMPEX LTD. THE PROFIT DISCLOSED IN THOSE SCRIPS IS ACCEPTED AS SUCH AS TRADING INCOME BECAUSE THE ASSESSEE HAS ALSO FILED DETAILS TO SOME EXTENT REGARDING DISTINCTIVE NUMBER AND PROOF REGARDING DELIVERY OF THE SHARES AND MOREOVER SHARES WERE IN OPENING STOCK AND ALSO IN THE CLOSING STOCK . IN THE INSTANT CASE OF MADHUR FOODS THE WHOLE TRANSACTIONS WERE CARRIED OUT WIT HIN 16 DAYS AND SQUARED UP TROUGH ONE AND SAME BROKER WHO WAS ALSO FOUND TO BE ACCOMMODATING THE ASSESSES GROUP IN THE PAST IN NON GENUINE AND SPECULATIVE TRANSACTION . 11.1.14. IT CLEARLY EMERGES BEYOND D OUBT THAT THERE WAS NO GENUINE TRADING IN THE SCRIPS OF MADHUR FOOD LTD AN D THE SAME WAS AN EXERCISE FOR REDUCING THE ACTUAL PROFIT EARNED IN VARIOUS SCRIPS WITH THE HELP OF NADA INVESTMENT PVT., LTD, WHO WAS HELPING THE ASSESSEE IN THE PAST ALSO IN SUCH CLAIM OF BOGUS LOSS AS HELD IN AY.93-94. THIS ENTIRE LOSS CLAIM IN THE SCRIP MADHUR FOOD LTD IS HELD TO BE INGENUINE AND BOGUS AND ACCORDINGLY DIS ALLOWED. IT MAY FURTHER BE ADDED THAT FROM THE ENTIRE FACTS IT EMERGES THAT THE P ROFIT EARNED FROM SOURCE FINANCE SERVICE LTD. IS ALSO ON ACCOUNT OF SPECULATIVE TRAN SACTION. SINCE THE ASSESSES HAS OFFERED THE SAME AS INCOME, THE SAME IS TAXED ON PR OTECTIVE BASIS. THE RESULT OF ENTIRE DISCUSSION THAT AMOUNT OF RS. L 5753775/- SH ALL BE DISALLOWED BEING BOGUS LOSS CLAIMED IN THE TRANSACTION OF MADHUR FOOD LTD., WHICH AS PER ALTERNATIVE CONTENTION IN ANY CSE IS SPECULATIVE IN NATURE. II.1.15. IN VIEW OF THE ABOVE, THE LOSS CLAIMED BY THE ASSESSEE MADHUR FOOD IS DISALLOWED AT RS.15,753775 AND ADDED TO THE INCOME OF THE ASSESSEE. AS THE ASSESSEE HAS FILED INACCURATE PARTICULARS OF INCOME PENALTY U/S. 271(1)(C) CLEARLY ATTRACTS AND INITIATED SEPARATELY. 4. ON APPEAL BEFORE THE LEARNED COMMISSIONER OF INC OME TAX(APPEALS), IT WAS CONTENDED THAT VARIOUS FINDINGS GIVEN BY THE A.O. DISALLOWING THE LOSS OF RS.1,57,53,775/- ARE IDENTICAL TO 6 THE FINDING GIVEN IN THE CASE OF ASSESSEES BROTHER SHRI RADHESHYAM L. KABRA FOR THE SAME ASSESSMENT YEAR. IN THE CASE OF ASSESSEES BROTHER SHRI RADHESHYAM L. KABRA, LD. C.I.T.(A) HELD THAT THERE WERE GENUINE TRADING IN SHARES OF M/S. M ADHUR FOOD LTD. AND LOSS WAS HELD TO BE ALLOWABLE BUSINESS LOSS AND SAME IS REQUIRED TO BE SET OFF FROM PROFIT EARNED BY THE ASSESSEE IN OTHER SCRIPTS. THE ISSUE PERTAINING TO TRADING OF S HARES OF M/S. MADHUR FOOD LTD. WAS ALSO EXAMINED BY THE A.O., IN THE REMAND REPORT IN THE CASE OF ASSESSEES BROTHER SHRI RADHESHYAM L. KABRA, FROM WHICH IT CAN BE SEEN THAT THE TRADIN G OF SHARES BY THE ASSESSEE ARE ALMOST SAME DURING THE SAME PERIOD AS IN THE CASE OF ASSESSEES BROTHER SHRI RADHESHYAM L. KABRA. IT WAS ALSO CONTENDED THAT IN THE REMAND REPORT SUBMITTED BY THE A.O. IN THE CASE OF RADHESHYAM L. KABRA, THE A.O. HIMSELF ACCEPTED THE PRICE AT WHICH SHARES WERE PURCHASED AND SOLD. 5. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) DELETED THE ADDITION OF RS.1,57,53,775/- FOLLOWING THE ORDER OF LEARNED COM MISSIONER OF INCOME TAX(APPEALS) IN THE CASE OF ASSESSEES BROTHER SHRI RADHESHYAM L. KABRA . AGGRIEVED BY THIS ORDER OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS), THE REVENUE IS IN APPEAL BEFORE US. 6. AT THE TIME OF HEARING ON BEHALF OF REVENUE SHRI SHELLEY JINDAL APPEARED AND CONTENDED THAT IN THE CASE OF RADHESHYAM L. KABRA, REMAND REP ORT WAS CALLED FROM THE A.O. WHEREAS IN THE CASE OF ASSESSEE, NO SUCH REMAND REPORT WAS CALLED. THE FACTS OF ASSESSEES CASE ARE DIFFERENT THAN IN THE CASE OF ASSESSEES BROTHER SHRI RADHESHYAM L . KABRA. THIS IS EVIDENT FROM THE FACT THAT ON 15.04.1994, THE ASSESSEE HAD PURCHASED 38,000 SHARE S OF M/S. MADHUR FOOD LTD. @ RS.86.25 PER SHARE, WHEREAS ON THE SAME DATE, HE HAD SOLD 10,500 SHARES @ RS.80.41 PER SHARE. THIS CLEARLY INDICATES THAT THE TRANSACTION IS NOT GENUINE. FURT HER, NEITHER BEFORE THE A.O. NOR BEFORE THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS), THE AS SESSEE HAS FURNISHED ANY PROOF/ EVIDENCE IN SUPPORT OF THE CLAIM OF LOSS. NEITHER DISTINCTIV E NUMBER, NOR PROOF OF DELIVERY REGARDING SHARES WERE FURNISHED. THE PURCHASE AND SALES OF SHARES WE RE MADE FROM THE SECONDARY MARKET AND IT IS WELL KNOWN FACT THAT SHARES CANNOT BE DELIVERED ON THE DAY OF PURCHASE ITSELF, WHICH USUALLY TAKES THREE TO FOUR WEEKS TIME AFTER THE CLOSE OF SETTLEM ENT PERIOD DURING WHICH SUCH SHARES ARE PURCHASED EXCEPT IN SPOT TRANSACTION. NEITHER BEFOR E THE A.O. NOR BEFORE THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS), THE ASSESSEE H AS FURNISHED ANY EVIDENCE WHICH INDICATES THAT TRANSACTIONS IN SHARES OF M/S. MADHUR FOODS LT D. WERE CARRIED OUT ON SPOT BASIS. IN CASE, 7 WHERE TRANSACTIONS WERE MADE ON SPOT BASIS, PAYMENT OF THE PURCHASE CONSIDERATION WAS REQUIRED TO BE MADE WITHIN 48 HOURS OF SUCH TRANSACTIONS. TH E LD. D.R. FURTHER POINTED OUT THAT THERE IS NO DETAILS ABOUT SALE OF 35,000 SHARES. IN RESPECT OF TRANSACTION OF 10000 SHARES, ASSESSEE MADE AN ATTEMPT TO SHOW THE SAME AS SHARES OF M/S. MADHUR F OODS LTD. BUT ON VERIFICATION IT WAS FOUND THAT THIS PERTAINED TO M/S. MADHUR MASALA AND NOT M /S. MADHUR FOODS LTD. THIS FACTS CLEARLY SHOW THAT THE ASSESSEE WAS DELIBERATELY FURNISHING WRONG FACTS AND EVIDENCES IN SUPPORT OF HIS CLAIM AND THE LEARNED COMMISSIONER OF INCOME TAX(AP PEALS) WITHOUT APPRECIATING OR EXAMINING THESE REASONING GIVEN BY THE A.O. DELETED THE ADDITION MERELY FOLLOWING THE CASE OF HIS BROTHER NAMELY SHRI RADHESHYAM L. KABRA. FINALL Y THE LD. D.R. SUBMITTED THAT SINCE THERE IS NO EVIDENCE THAT THE ASSESSEE HAS TAKEN DELIVERY OF SHARES OF M/S. MADHUR MASALA, WHATEVER LOSS IS INCURRED IT IS SPECULATIVE IN NATURE AS DEFINED IN SUB-SECTION (5) OF SECTION 43 OF THE INCOME TAX ACT, 1961. THEREFORE, THIS SPECULATIVE LOSS CAN NOT BE ADJUSTED WITH NORMAL PROFIT. THIS ASPECT IS COMPLETELY IGNORED BY THE LEARNED COMMISSIONER O F INCOME TAX(APPEALS) 7. ON THE OTHER HAND, SHRI DHIREN SHAH, LD. COUNSEL OF THE ASSESSEE SUPPORTED THE ORDER OF AUTHORITIES BELOW. HE SUBMITTED THAT IN THE CASE OF ASSESSEES BROTHER, NAMELY SHRI RADHESHYAM L. KABRA, WHERE THE DISALLOWANCE OF RS.36,31,240/- MADE IN TRANSACTION OF SHARES OF M/S. MADHUR FOODS LTD. WAS DELETED BY THE LEARNED COMMIS SIONER OF INCOME TAX(APPEALS) VIDE ORDER DATED 21.03.2002. LD. COUNSEL SUBMITTED THAT THIS DELETION OF ADDITION WAS ACCEPTED BY THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS), WHICH IS EVIDENT FROM THE FACT THAT AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS ) IN THE CASE OF ASSESSEES BROTHER SHRI RADHESHYAM L. KABRA DATED 21.03.2002 FOR THE ASSESS MENT YEAR 1995-96, AN APPEAL WAS FILED, BUT AGAINST THIS DELETION NO GROUND WAS TAKEN. THER EFORE, THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) WAS LEGALLY AND FACTUALLY CORRECT IN D ELETING THE ADDITION OF RS. 1,57,53,775/- MADE ON IDENTICAL FACTS FOLLOWING THE DECISION OF ASSESS EES BROTHER, NAMELY SHRI RADHESHYAM L. KABRA. THEREFORE, THE LD. COUNSEL PLEADED THAT THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS) ON THIS ISSUE BE UPHELD. 8. WE HAVE GIVEN OUR CAREFUL CONSIDERATION TO THE R IVAL SUBMISSIONS MADE BEFORE US AND HAVE PERUSED THE ORDERS OF AUTHORITIES BELOW. IT IS PERTINENT TO NOTE THAT IN THE CASE OF ASSESSEES BROTHER NAMELY SHRI RADHESHYAM L. KABRA, THE LEARNE D COMMISSIONER OF INCOME TAX(APPEALS) 8 CALLED THE REMAND REPORT AS WELL AS FURTHER COMMENT S OF A.O. WHEREAS IN THIS CASE NO SUCH REMAND REPORT WAS CALLED. THE REASONING GIVEN BY TH E A.O. IN THE CASE OF ASSESSEE IS ALSO DIFFERENT THAN IT WAS GIVEN IN THE CASE OF ASSESSEE S BROTHER NAMELY SHRI RADHESHYAM L. KABRA. IN THE CASE OF ASSESSEE, THE A.O. HAS CLEARLY MENTI ONED THAT THE ASSESSEE HAS NOT FURNISHED DETAILS ABOUT SALE OF 35000 SHARES OF M/S. MADHUR FOODS LTD . IN RESPECT OF 10000 SHARES, THE ASSESSEE MADE AN ATTEMPT TO SHOW THE SAME AS THE SHARES OF M /S. MADHUR FOODS LTD. BUT ON VERIFICATION THE, A.O. FOUND THAT THESE PERTAINED TO M/S. MADHUR MASALA AND NOT M/S. MADHUR FOODS LTD. IN THESE CIRCUMSTANCES, IT CANNOT BE SAID THAT THE FAC TS OF ASSESSEE ARE EXACTLY IDENTICAL THAT OF ASSESSEES BROTHER NAMELY SHRI RADHESHYAM L. KABRA. THE LD. D.R. POINTED OUT THAT ATLEAST THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) OUGHT T O HAVE CALLED THE REMAND REPORT AS IT WAS CALLED IN THE CASE OF ASSESSEES BROTHER NAMELY SHR I RADHESHYAM L. KABRA. EVEN IF HE WAS OF THE VIEW THAT THE FACTS OF BOTH THE BROTHERS ARE IDENTI CAL, IN THAT EVENT ALSO, THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) OUGHT TO HAVE C ALLED THE REMAND REPORT FROM THE A.O. FOR HIS COMMENTS WITH REGARD TO CONTENTION OF ASSESSEE WHETHER THE FACTS ARE IDENTICAL OR NOT. IN THE ASSESSMENT YEAR 1994-95, ITAT, C BENCH, AHMEDABAD IN ITA NO. 1930/AHD./2002 VIDE ORDER DATED 31.08.2007 RESTORED THE ISSUE IN RESPECT OF D ISALLOWANCE OF LOSS IN SHARES AMOUNTING TO RS.2,71,687/- TO THE FILE OF A.O. IN THAT ASSESSMEN T YEAR ALSO, THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) DELETED THE ADDITION. THIS DECI SION WAS NOT BROUGHT TO OUR NOTICE EITHER BY THE LD. D.R. OR LD. COUNSEL OF THE ASSESSEE. BE THA T AS IT MAY, SINCE THE A.O. DELETED THE ADITION WITHOUT CALLING THE REMAND REPORT, WE SET ASIDE THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS) AND RESTORE THIS ISSUE TO THE FILE OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS) WITH THE DIRECTION THAT HE SHOULD CALL THE REMAND R EPORT, ASKING THE ASSESSING OFFICER TO SUBMIT IN THE REMAND REPORT WHETHER THE LOSS INCURRED IS SPEC ULATIVE NATURE KEEPING IN VIEW THE PROVISIONS CONTAINED IN SECTION 43(5) OF THE INCOME TAX ACT, 1 961 AND RE-ADJUDICATE THIS ADDITION AFRESH AFTER GIVING OPPORTUNITY OF BEING HEARD TO BOTH THE SIDES. 9. GROUND NO. 2 IS AGAINST DELETING THE ADDITION OF RS.67,603/- MADE ON ACCOUNT OF INTEREST PAYMENT. 10. IN THE ASSESSMENT ORDER, THE A.O. DISALLOWED TH E INTEREST PAID TO THE FOLLOWING PARTIES :- 9 (I) BHARAT OVERSEAS BANK LTD. RS.22,742/- (II) UNITED CO. OPT. BANK LTD. RS.19,204/- (III) NATPUR CO. OPT. BANK LTD. RS.20,322/- (IV) M/S. RIDHI STARCH & CHEM. LTD. RS.4.335/- (V) SHRI SUNDERLAL AGGRAWAL RS.1.000/- FOR MAKING THIS DISALLOWANCE, THE A.O. OBSERVED THA T THERE IS NO EVIDENCE, WHICH SHOWS THAT FUNDS WERE BORROWED FROM BANKS AND OTHER PARTIES WE RE USED FOR THE PURPOSE OF PURCHASE OF SHARES AND FOR BUSINESS REQUIREMENT. APART FROM THI S, THE ASSESSEE HAS ALREADY ADVANCED LOAN TO OTHER PARTIES TO THE EXTENT OF RS.5.54 CRORES AS PE R BALANCE AS ON 31.3.1995. THE ASSESSEES OWN CAPITAL WAS ONLY RS.4.93 CRORES, THEREFORE, THE CON TENTION OF THE ASSESSEE THAT THE UNSECURED LOANS OR FUNDS BORROWED WERE UTILIZED FOR THE PURPOSE OF BUSINESS CANNOT BE ACCEPTABLE. FINALLY, THE A.O. OBSERVED THAT THE ASSESSEE HAS NOT FURNISHED A NY DETAILS AND COPY OF BANK ACCOUNT WHICH SHOWS THAT WHATSOEVER FUNDS BORROWED WERE UTILIZED FOR BUSINESS PURPOSE AND FOR PURCHASE OF SHARES. WITH REGARD TO ONUS, THE A.O. RELIED ON THE DECISION OF THE HON'BLE ORISSA HIGH COURT IN THE CASE OF INDIAN METAL & FERRO ALLOYS VS.-CIT RE PORTED IN 193 ITR 344, WHEREIN THE HON'BLE HIGH COURT HELD AS UNDER :- ONUS TO PROVE THAT INTEREST IS DEDUCTIBLE IS ON AS SESSEE WHERE ASSESSEE WAS BORROWED MONEY AND ALSO ADVANCED MONEY TO SUBSI DIAR4Y, IT WAS FOR THE ASSESSEE TO PROVE THAT MONEY ADVANCED TO SUBSID IARY CAME FROM ITS OWN FUNDS AND NOT FROM BORROWED FUNDS AND WHERE ASS ESSEE COULD NOT SHOW DEDUCTION OF INTEREST WAS RIGHTLY DISALLOWED. APART FROM THE ABOVE, THE A.O. RELIED ON THE FOLLO WING DECISIONS :- (I) PHALTAN SUGAR WORKS LTD. VS.- CWT REPORTED IN 208 ITR 989 (BOM.); (II) CIT VS.- SARAYA SAGAR MILLS (P) LTD. REPORTED IN 2 01 ITR 181 (ALL.); (III) MAROLYA & SONS VS.- CIT REPORTED IN 129 ITR 47 (AL L.); (IV) H.R. SUGAR FACTORY PVT. LTD. VS.- CIT REPORTED IN 187 ITR 361 (ALL.); (V) ACIT VS.- SOBHA SAREES CENTRE REPORTED IN 60 TTJ 2 83 (MAD.); (VI) R. DALMIYA VS.-CIT REPORTED IN 133 ITR 169 (DEL.). 11. ON APPEAL BEFORE THE LEARNED COMMISSIONER OF IN COME TAX(APPEALS), THE ASSESSEE FILED A CHART SHOWING BORROWAL OF FUNDS AND UTILIZATION T HEREOF. IT WAS SUBMITTED THAT ALL THE BORROWED FUNDS WERE UTILIZED FOR THE PURPOSE OF BUSINESS, TH E INTEREST FROM BANKS HAS ALREADY SHOWN, THEREFORE, NO DISALLOWANCE OF INTEREST IS CALLED FO R. 10 12. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) DELETED THE ADDITION ON THE GROUND THAT THE A.O. HAS NOT PROVED THE NEXUS. ACCORDING T O THIS, REVENUE IS IN APPEAL BEFORE US. 13. AT THE TIME OF HEARING, THE LD. D.R. SUBMITTED THAT THE BASIC DETAILS REQUIRED BY THE A.O. WERE NOT FURNISHED, ONUS IS ON THE ASSESSEE, FOR TH E FIRST TIME DETAILS WERE FILED BEFORE THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS). THE LE ARNED COMMISSIONER OF INCOME TAX(APPEALS) WITHOUT AFFORDING AN OPPORTUNITY TO A. O. TO VERIFY THE DETAILS DELETED THE ADDITION. THEREFORE, THE DISALLOWANCE MADE BY THE A.O. BE RES TORED. 14. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSE SSEE SUPPORTED THE ORDER OF AUTHORITIES BELOW. 15. HAVING HEARD BOTH THE SIDES, WE HAVE CAREFULLY GONE THROUGH THE ORDERS OF AUTHORITIES BELOW AND THE MATERIAL PLACED ON RECORD. IN THE ASS ESSMENT ORDER, THE A.O. HAS CLEARLY MENTIONED THAT THE ASSESSEE HAS NOT FURNISHED DETAILS. IT APP EARS THAT THE DETAILS WHICH WERE FURNISHED BEFORE THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS), WE RE ACCEPTED, WITHOUT AFFORDING AN OPPORTUNITY TO A.O. AS PROVIDED IN RULE 46A OF THE INCOME TAX RULES, 1962. WE, THEREFORE, SET ASIDE THE ORDER OF LEARNED COMMISSIONER OF INCOME T AX(APPEALS) AND RESTORE THIS ISSUE TO THE FILE OF A.O. WITH THE DIRECTION THAT THE ASSESSEE S HOULD FURNISH THE COMPLETE DETAILS, WHICH WERE FURNISHED BEFORE THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS), THE A.O. MAY VERIFY THE SAME AND AFTER VERIFICATION RE-ADJUDICATE THIS ADDI TION AFRESH IN ACCORDANCE WITH LAW. 16. THE LAST GROUND OF APPEAL IS AGAINST DELETING T HE ADDITION OF RS.4,72,043/- AS INTEREST ACCRUED ON MERCANTILE BASIS. 17. BRIEF FACTS RELATING TO THE ADDITION ARE THAT D URING THE COURSE OF ASSESSMENT PROCEEDINGS, THE A.O. ASKED THE ASSESSEE TO FURNISH THE DETAILS OF INTEREST ACCRUED FROM M/S. MAHALAXMI METAL INDUSTRY AND SAMIT ENGINEERING. TO THIS QUERY, THE ASSESSEE FURNISHED THE DETAILS INDICATING THAT INTEREST INCOME ON ACCRUAL BASIS IS RS.3,78,980/- A ND RS.93,063/- RESPECTIVELY. THE A.O. TAXED THE INTEREST ACCRUED AMOUNTING TO RS.4,72,043/- [RS .3,78,980/- PLUS RS.93,063/-] IN THE 11 ASSESSMENT YEAR 1995-96 ON THE GROUND THAT TILL ASS ESSMENT YEAR 1991-92, INTEREST INCOME WAS ASSESSED ON ACCRUAL BASIS AS PER METHOD OF ACCOUNTI NG REGULARLY FOLLOWED BY THE ASSESSEE. 18. ON APPEAL IN THE IMPUGNED ORDER, THE LEARNED CO MMISSIONER OF INCOME TAX(APPEALS) DELETED THE ADDITION ON THE GROUND THAT IN THE ASSE SSMENT YEAR 1994-95, IT WAS HELD THAT THE ASSESSEE WAS FOLLOWING CASH BASIS OF ACCOUNTING. BE ING AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US. 19. AT THE TIME OF HEARING ON BEHALF OF REVENUE SHR I SHEELA JINDAL APPEARED AND CONTENDED THAT THE ASSESSEE HAS INVESTED SURPLUS MONEY IN EAR NING INTEREST INCOME, THE INTEREST INCOME IS ASSESSABLE UNDER THE HEAD INCOME FROM BUSINESS AN D NOT UNDER THE HEAD INCOME FROM OTHER SOURCES. IN THIS CASE, THE ASSESSEE HAS HIMSELF DE CLARED THE INTEREST INCOME UNDER THE HEAD INCOME FROM BUSINESS AND NOT UNDER THE HEAD INCO ME FROM OTHER SOURCES. FURTHER, IT IS NOT THE CASE OF THE ASSESSEE THAT SURPLUS MONEY IS INVE STED FOR EARNING INTEREST INCOME FROM AFORESAID TWO PARTIES. FOR BUSINESS INCOME, THE ASSESSEE IS F OLLOWING MERCANTILE SYSTEM OF ACCOUNTING. THEREFORE, WHEN INTEREST INCOME IS DECLARED AND ASS ESSED UNDER THE HEAD INCOME FROM BUSINESS, INTEREST INCOME IS TAXABLE ON ACCRUAL BA SIS. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) COMPLETELY IGNORED THIS ASPECT AND MER ELY FOLLOWED THE ORDER FOR THE ASSESSMENT YEAR 1994-95 FOR DELETING THE ADDITION. IT IS QUITE POSSIBLE THAT IN THE ASSESSMENT YEAR 1994-95, THE APPEAL IS FILED, THEREFORE, THIS ISSUE BE DECID ED ON MERIT. 20. ON THE OTHER HAND, SHRI DHIREN SHAH APPEARING O N BEHALF OF THE ASSESSEE SUPPORTED THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS ). THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT THIS ISSUE IS COVERED BY THE DECISIO N DATED 17.05.2005 OF ITAT, A BENCH, AHMEDABAD IN ASSESSEES OWN CASE IN ITA NO. 819/AHD ./1998 FOR THE ASSESSMENT YEAR 1993-94, WHEREIN THE ORDER PASSED UNDER SECTION 263 WAS CANC ELLED. THEREFORE, THE VIEW TAKEN BY THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) BE UPHE LD. 21. HAVING HEARD BOTH THE SIDES, WE HAVE CAREFULLY GONE THROUGH THE ORDERS OF AUTHORITIES BELOW AND THE MATERIAL PLACED ON RECORD. IT IS PERT INENT TO NOTE THAT FOR DELETING THE ADDITION OF RS.4,72,043/- IN THE ASSESSMENT YEAR UNDER APPEAL, THE LEARNED COMMISSIONER OF INCOME 12 TAX(APPEALS) FOLLOWED THE DECISION FOR THE IMMEDIAT ELY PRECEDING ASSESSMENT YEAR, I.E. ASSESSMENT YEAR 1994-95. AGAINST THE ORDER OF LEARN ED COMMISSIONER OF INCOME TAX(APPEALS) FOR THE ASSESSMENT YEAR 1994-95, REVENUE IS DIRECTE D TO CONSIDER THE INTEREST INCOME OF RS.24,46,904/- IN THE ASSESSMENT YEAR 1994-95, AS A GAINST ASSESSMENT YEAR 1993-94 AS HELD BY THE A.O., REVENUE FILED AN APPEAL BEFORE THE ITAT. THEREAFTER, ITAT, C BENCH, AHMEDABAD IN ASSESSEES OWN CASE IN REVENUES APPEAL BEING ITA N O. 1930/AHD/2002 VIDE ORDER DATED 31.08.2007 RESTORED THIS ISSUE TO THE FILE OF A.O. THEREFORE, IN THE INTEREST OF JUSTICE FOR THIS YEAR ALSO THE CONTROVERSY INVOLVED IN THIS GROUND OF APP EAL IS RESTORED TO THE FILE OF A.O., WHO WILL EXAMINE THE SAME AND RE-ADJUDICATE THE ADDITION OF RS.4,72,043/- AFRESH IN ACCORDANCE WITYH LAW AFTER GIVING OPPORTUNITY OF BEING HEARD TO THE ASSE SSEE. 22. IN THE RESULT, FOR STATISTICAL PURPOSES, THE AP PEAL OF THE DEPARTMENT IS TREATED AS ALLOWED. THE ORDER PRONOUNCED IN THE COURT ON 30.11.2009 SD/- SD/- (N.S. SAINI) (T.K. SHARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 30 / 11 / 2009 COPY OF THE ORDER IS FORWARDED TO : 1) THE ASSESSEE (2) THE DEPARTMENT 3) CIT(A) CONCERNED; (4) CIT CONCERNED, (5) D.R., ITAT, AHMEDABAD. TRUE COPY BY ORDER DEPUTY REGISTRAR, ITAT, AHMEDABAD LAHA/SR.P.S.