ITO 12(3)(3), MUMBAI V. DARIUS D. PANDOLE, MUMBAI

ITA 1996/MUM/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75644 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-02-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 13-02-2014
• Assessment Year: 2002-2003
• Appeal Filed On: 26-03-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business expenditure; Speculation loss
• Section: 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH D, MUMBAI BEFORE SHRI SANJAY ARORA, ACCOUNTANT MEMBER AND DR. S.T.M. PAVALAN, JUDICIAL MEMBER ITA NO. 1996/MUM/2012 ASSESSMENT YEAR: 2002-03 ITO 12(3)(3) R. NO. 123, 1 ST FLOOR AAYAKAR BHAVAN MUMBAI-400 020 VS. SHRI DARIUS PANDOLE, 5B, SUNSHINE APARTMENT 156 M.K. ROAD MUMBAI-400 020 (APPELLANT) (RESPONDENT) PERMANENT ACCOUNT NO. :- AAFPP 7571 C ASSESSEE BY : SHRI FARROKH V IRANI REVENUE BY : SHRI SANJEEV JAIN DATE OF HEARING : 13.02.2014 DATE OF PRONOUNCEMENT : 21.02.2014 O R D E R PER DR. S.T.M. PAVALAN, JM: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER OF THE LD.CIT(A)-21, MUMBAI DATED 11.01.2012 FOR THE ASSES SMENT YEAR 2002-03. IN THIS APPEAL THE REVENUE HAS AGITATED THE ACTION OF THE L D.CIT(A) IN QUASHING THE NOTICE ISSUED U/S 148 AND THE REASSESSMENT ORDER PASSED TH EREON. 2. BRIEFLY STATED, THE ASSESSEE FILED RETURN OF INC OME ON 16.10.2002 DECLARING THE INCOME OF RS.29,83,170/- AND THE ASSESSMENT U/S 143 (3) WAS COMPLETED ON 19.12.2003 WHEREIN THE RETURNED INCOME WAS ACCEPTED BY THE AO WITHOUT ANY FURTHER ADDITION/DISALLOWANCE MADE IN THE RETURNED INCOME. THEREAFTER THE AO REOPENED THE ASSESSMENT BY ISSUING A NOTICE U/S 148 OF THE ACT DATED 30.03.2009 ON THE BASIS OF THE FOLLOWING REASONS RECORDED:- THE ASSESSEE IS A FINANCIAL CONSULTANT. IT WAS NOTI CED FROM THE P&L A/C THAT THE ASSESSEE HAS DEBITED THE AMOUNT OF RS.10,64,235 /- TOWARDS LOSS ON SALE OF SHARES AND THE SAME HAS BEEN ALLOWED AS A DEDUCT ION. HOWEVER, AS THE ASSESSEES BUSINESS IS THAT OF FINANCIAL CONSULTANT AND NOT OF TRADING IN SHARES ITA NO. 1996/MUM/2012 SHRI DARIUS PANDOLE ASSESSMENT YEAR: 2002-03 2 NOR THE SHARES ARE HELD AS STOCK IN TRADE, HENCE TH E LOSS ON SALE OF SHARES IS NOT ALLOWABLE AS BUSINESS EXPENDITURE. IT FORMS SPE CULATIONS LOSS AND MERITS DISALLOWANCE AND IT IS TO BE SET OFF AGAINST SPECUL ATION INCOME UNDER THE SAID HEAD AS UNDER:- SPECULATION INCOME RS.67,510/- SPECULATION LOSS RS.10,64,235/- NET SPECULATION LOSS TO BE CARRIED FORWARD RS. 10,03,275/- CONSEQUENT UPON THE REASSESSMENT, THE AO DISALLOWED THE LOSS OF RS.10,84,235/- ON SALE OF SHARES TO BE CARRIED FORWARD ON THE REASON THAT THE SAID LOSS AMOUNTED TO SPECULATION LOSS WHICH WAS NOT ALLOWABLE AS BUSINES S EXPENDITURE. ON APPEAL, THE LD.CIT(A) QUASHED THE NOTICE ISSUED U/S 148 AS BAD IN LAW AND THEREBY QUASHED THE REASSESSMENT ORDER AS THE AO INVALIDLY ASSUMED THE JURISDICTION U/S 147 OF THE ACT. 3. HAVING HEARD BOTH THE SIDES AND PERUSED THE MATE RIAL ON RECORD IT IS PERTINENT TO MENTION THAT DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSEE DULY EXPLAINED THAT THE LOSS ON SALE OF SHARES AT RS.10,64,235/- ( ACTUAL FIGURE RS.10,84,235/-) IS BUSINESS LOSS INCURRED ON TRADING OF SHARES. IT IS ALSO NOTICED THAT ALONG WITH RETURN OF INCOME, THE ASSESSEE HAS ALSO FILED CALCULATION OF PROFIT/LOSS ON SALE OF SHARES. IN THE SAID STATEMENT ENCLOSED WITH RETURN OF INCOME T HE NAME OF SHARES, NUMBER OF SHARES, DATE OF BUYING, PRICE VALUE, DATE OF SALE, NUMBER OF SHARE, SALE PRICE, SALE VALUE AND BOOK PROFIT WERE MENTIONED THEREBY WORKIN G LOSS ON SALE OF SHARES AT RS.10,84,235/-. THE SHARES WERE ONLY OF 12 COMPANIE S WHICH ALSO INCLUDED SHARES PURCHASED IN EARLIER YEARS. THE LD.CIT(A) IN HIS OR DER HAS OBSERVED THAT FROM THIS STATEMENT IT IS EVIDENT THAT THE SHARE TRANSACTIONS ARE DELIVERY BASED TRANSACTIONS. DURING ORIGINAL ASSESSMENT PROCEEDINGS, THE AO DULY EXAMINED THIS ISSUE BY RAISING RELEVANT QUERIES ON NOTICE DATED 07.11.2003 AND 01. 12.2003. IN RESPONSE THE THE ASSESSEE HAS FILED ITS DETAILED SUBMISSIONS. THEREF ORE, IT IS EVIDENT THAT DURING ORIGINAL ASSESSMENT PROCEEDINGS, THE AO DULY EXAMIN ED THIS ISSUE AND CORRECTLY ACCEPTED ASSESSEES CLAIM THAT LOSS ON SALE OF SHAR ES IS ON ACCOUNT OF DELIVERY BASIS TRANSACTIONS AND NOT SPECULATIVE LOSS. THE LD.CIT(A ) HAS FURTHER NOTED THAT IN THE REASONS RECORDED FOR REOPENING OF THE ASSESSMENT, T HE AO HAS MENTIONED THAT SUCH LOSS ON SALE OF SHARES IS SPECULATION LOSS. IN THE REASONS RECORDED, THE AO HAS NOT MENTIONED ANY MATERIAL ON THE BASIS OF WHICH THE AO CONSIDERED THE LOSS ON SALE OF SHARES AS SPECULATION LOSS. SINCE THE LD.CIT(A) HAS CORRECTLY APPRECIATED THE FACTS ITA NO. 1996/MUM/2012 SHRI DARIUS PANDOLE ASSESSMENT YEAR: 2002-03 3 AND LAW, WE CONCUR WITH THE FINDINGS OF THE LD.CIT( A) THAT THERE HAS BEEN NO MATERIAL AVAILABLE WITH THE AO ON THE BASIS OF WHIC H THE AO COULD HAVE FORMED A BELIEF THAT THE LOSS ON SALE OF SHARES OF RS.10,64, 235/- IS A SPECULATIVE LOSS. THEREFORE, WE DO NOT FIND ANY JUSTIFIABLE REASON TO INTERFERE WITH THE FINDINGS OF THE LD.CIT(A) THAT THE REASONS RECORDED BY AO FOR REOPE NING THE ASSESSMENT ARE NOT SUFFICIENT FOR GIVING A VALID JURISDICTION FOR REOP ENING THE ASSESSMENT. CONSIDERING THE FACT THAT THERE HAVE BEEN NO REASONS/FACTS AVAILABL E ON THE BASIS OF WHICH THE AO COULD HAVE FORMED AN OPINION THAT INCOME CHARGED TO TAX HAS ESCAPED ASSESSMENT AND ALSO NOTING THAT THERE IS NO FAILURE ON THE PAR T OF ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS IN THE RETURN OF INCOME, T HE ORDER OF THE LD.CIT(A) QUASHING THE NOTICE ISSUED U/S 148 AND THE REASSESSMENT ORDE R IS UPHELD. 4. IN THE RESULT THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 21 ST DAY OF FEBRUARY 2014. SD/- SD/- (SANJAY ARORA) (DR. S.T.M. PAVALAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 21.02.2014. *SRIVASTAVA COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR D BENCH //TRUE COPY// BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.