Narayan Prasad Bagaria , Kolkata V. ITO, Ward - 45(2), , Kolkata

ITA 2151/KOL/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 2297 (ITAT-KOLKATA)
• Duration Of Justice: 8 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-06-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 11-06-2019
• Assessment Year: 2011-2012
• Appeal Filed On: 11-10-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ROBIN CHOUDHURY CIT SR DR R
• Assessee Lawyers: M D SHAH
• Keywords: Reopening of assessment; Business income; Salary income; Principle of natural justice; Transactions in derivatives; Additional evidence; Speculation loss; Difference of opinion; Reason to believe; Change of opinion; Reassessment proceedings; Speculative transactions
• Section: 143(3); 43(5); 250; 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA SMC BENCH, KOLKATA [BEFORE SRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER] I.T.A. NO. 2151/KOL/2018 ASSESSMENT YEAR: 2011-12 NARAYAN PRASAD BAGARIA.............APPELLANT C/O D.J. SHAH & CO 2, ELGIN ROAD KOLKATA 700 020 [PAN : ADZPB 2207 Q] INCOME TAX OFFICER, WARD 45(2), KOLKATA..........................................................RESPONDENT APPEARANCES BY: SHRI M.D. SHAH, ADVOCATE, APPEARED ON BEHALF OF THE ASSESSEE. SHRI ROBIN CHOUDHURY, ADDL. CIT SR. D/R, APPEARING ON BEHALF OF THE REVENUE. DATE OF CONCLUDING THE HEARING : JUNE 11 TH , 2019 DATE OF PRONOUNCING THE ORDER : JUNE 21 ST , 2019 O R D E R PER J. SUDHAKAR REDDY :- THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - 13, KOLKATA, (HEREINAFTER THE LD. CIT (A)), PASSED U/S 250 OF THE INCOME TAX ACT, 1961 (THE ACT), DT. 02/07/2018, FOR THE ASSESSMENT YEAR 2011-12. 2. THE ASSESSEE IS AN INDIVIDUAL AND HAS FILED HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2011-12 ON 04/06/2012. THE ASSESSING OFFICER REOPENED THE ASSESSMENT U/S 147 OF THE ACT AND ISSUED A NOTICE U/S 148 OF THE ACT ON 30/08/2013. THE ASSESSEE REQUESTED THAT THE RETURN FILED BY HIM ORIGINALLY ON 04/06/2012 BE TREATED AS A RETURN FILED IN RESPONSE TO THE NOTICE ISSUED U/S 148 OF THE ACT. THEREAFTER HE SOUGHT COPY OF THE REASONS FOR REOPENING. ON RECEIPT OF THE COPY OF THE REASONS OF REOPENING, THE ASSESSEE FILED IS OBJECTIONS. THE ASSESSING OFFICER PASSED AN ORDER U/S 143(3) R.W.S. 147 OF THE ACT ON 28/11/2014 DETERMINING THE GROSS TOTAL INCOME OF THE ASSESSEE AT RS.10,38,660/-. THE ASSESSING OFFICER DISALLOWED THE CLAIM OF RS.7,95,984/- MADE BY THE ASSESSEE ON 2 I.T.A. NO. 2151/KOL/2018 ASSESSMENT YEAR: 2011-12 NARAYAN PRASAD BAGARIA MCX TRANSACTIONS DURING THE FINANCIAL YEAR 2010-11 RELEVANT TO THE ASSESSMENT YEAR 2011-12 ON THE GROUND THAT THE SAME IS SPECULATIVE IN NATURE. 2.1. AGGRIEVED THE ASSESSEE CARRIED THE MATTER IN APPEAL CHALLENGING BOTH THE REOPENING OF ASSESSMENT AND TREATMENT OF THE LOSS AS SPECULATIVE IN NATURE. THE LD. CIT(A) REJECTED BOTH THE CONTENTIONS RAISED BY THE ASSESSEE. 3. AGGRIEVED THE ASSESSEE IS BEFORE ME ON THE FOLLOWING GROUNDS:- 1. FOR THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE APPELLATE ORDER PASSED WAS IN VIOLATION OF PRINCIPALS OF NATURAL JUSTICE HENCE IS BAD IN LAW AND BE QUASHED. 2. FOR THAT THE ORDER PASSED BY THE LEARNED CIT (APPEALS) IS BAD IN LAW AND THEREFORE THE SAME BE REVERSED. 3. FOR THAT IN FACTS AND CIRCUMSTANCES OF THE CASE NO ADDITION WAS MADE ON ACCOUNT OF THE REASON RECORDED U/S 148 OF THE IT ACT 1961. HENCE, THE RE-ASSESSMENT PROCEEDING AND THE ASSESSMENT ORDER BE QUASHED. 4. FOR THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE RE-OPENING U/S 148 OF THE IT ACT 1961 WAS WITHOUT ANY MATERIAL OR VALID WITHOUT REASONS AND THEREFORE THE ENTIRE PROCEEDINGS WERE BAD IN LAW AND THE PROCEEDINGS AND THE ASSESSMENT ORDER BE QUASHED. 5. FOR THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE ENTIRE PROCEEDINGS U/S 148 OF THE ACT WAS WITHOUT JURISDICTION AND THE SAME WAS BAD IN LAW AND PROCEEDINGS AND THE ASSESSMENT ORDER BE QUASHED. 6. FOR THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE ENTIRE PROCEEDINGS U/S 148 OF THE ACT WAS AT THE DICTATE OF THE OTHER OFFICIALS AND WITHOUT INDEPENDENT APPLICATION OF MIND OR SATISFACTION OF THE ASSESSEE. HENCE THE REOPENING WAS WITHOUT JURISDICTION AND THE SAME WAS BAD IN LAW AND THE PROCEEDINGS AND THE ASSESSMENT ORDER BE QUASHED. 7. FOR THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE PROCEEDINGS U/S 148 OF THE ACT WAS A MERELY ON CHANGE OF OPINION AND THEREFORE WITHOUT JURISDICTION AND THE SAME WAS BAD IN LAW AND THE PROCEEDINGS AND THE ASSESSMENT ORDER BE QUASHED. 8. FOR THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD CIT(APPEALS) ERRED IN HOLDING THAT LOSS ON MCX TRANSACTION FOR RS. 7,95,984/ - WAS WRONGLY SET OFF WITH THE INCOME FROM OTHER SOURCES. THIS FINDING OF THE LD. CIT (APPEALS) WAS UNCALLED FOR AND UNWARRANTED AND HENCE THE SAME BE REVERSED. 9. WITHOUT PREJUDICE TO THE ABOVE, THE LOSS OF RS.7,95,984/- BE ALLOWED TO BE SET OFF WITH THE INCOME FROM OTHER HEADS. 3 I.T.A. NO. 2151/KOL/2018 ASSESSMENT YEAR: 2011-12 NARAYAN PRASAD BAGARIA 10. FOR THAT THE LEARNED CIT (APPEALS) ERRED IN CONFIRMING THE INTEREST U/S 234 A/B/C OF THE INCOME TAX ACT, 1961 THE SAME WAS UNJUSTIFIED AND HENCE THE SAME BE DELETED OR RECALCULATED AS PER LAW. 11. THE APPELLANT CRAVES LEAVE TO PRODUCE ADDITIONAL EVIDENCES IN TERMS OF RULE 29 OF THE INCOME TAX (APPELLATE TRIBUNAL) RULES, 1963. 12. THE APPELLANT CRAVES TO PRESS NEW, ADDITIONAL GROUNDS OF APPEAL OR MODIFY, WITHDRAW ANY OF THE ABOVE GROUNDS AT THE TIME OF HEARING OF THE APPEAL. 4. THE LD. COUNSEL FOR THE ASSESSEE REFERRED TO THE REASONS OF REOPENING AND SUBMITTED THAT THE REOPENING IS BAD IN LAW AS THE ASSESSING OFFICER RELIED ON THE ITS DATA AVAILABLE WITH THE DEPARTMENT AND HAS NOT COUNTER CHECKED THE FACT THAT THE ASSESSEE HAS DISCLOSED ALL THESE TRANSACTIONS IN HIS RETURN OF INCOME. HE SUBMITTED THAT IN MCX EXCHANGE, THE NET PROFIT OF THE TRANSACTIONS IS TAKEN AS A TURNOVER AND THIS TURNOVER BEING LESS THAN RS.60,00,000/-, FOR THE WHOLE YEAR, NO AUDIT OF ACCOUNTS NEED TO BE GOT DONE U/S 44AB OF THE ACT. HE FURTHER SUBMITTED THAT THE ASSESSEE HAD DISCLOSED THE NET PROFIT OF THESE TRANSACTIONS UNDER THE HEAD INCOME FROM OTHER SOURCES AND HENCE THERE WAS NO REQUIREMENT OF THE ASSESSEE GETTING ITS ACCOUNTS AUDITED U/S 44AB OF THE ACT. 4.1. IT WAS FURTHER SUBMITTED THAT THE TRANSACTION THAT ARE DONE ON MCX WERE NOTIFIED BY THE BOARD AS TRANSACTIONS WHICH ARE NOT TO CONSIDERED AS SPECULATIVE IN NATURE VIDE CIRCULAR NO. 46 OF 2009 DT. 22/05/2009. HENCE THE REASONS RECORDED IS WRONG AND THE REOPENING HAS TO BE QUASHED. FOR THESE PROPOSITIONS, HE RELIED ON THE JUDGMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF MOHANLAL CHAMPALAL JAIN VS. ITO REPORTED IN [2016] 102 TAXMANN.COM 293 (BOMBAY) . HE FURTHER RELIED ON THE CBDT CIRCULAR AND SUBMITTED THAT THE LOSS IN QUESTION SHOULD BE TREATED AS SPECULATION LOSS AND HENCE THE ADJUSTMENT MADE BY THE ASSESSING OFFICER SHOULD BE DELETED. 5. THE LD. D/R, ON THE OTHER HAND, SUBMITTED THAT THE ASSESSEE HAS DONE HUGE TRANSACTIONS OF RS.220,95,94,410/- IN MCX AND THAT THIS TURNOVER WAS NOT ROUTED THROUGH THE BOOKS OF ACCOUNTS NOR BROUGHT OUT IN THE COMPUTATION OF INCOME. HE SUBMITTED THAT THE ASSESSEE HAS NOT DECLARED ANY INCOME UNDER HEAD INCOME FROM BUSINESS. HE RELIED ON THE ORDER OF THE LD. CIT(A) AND POINTED OUT THAT THE ASSESSEE 4 I.T.A. NO. 2151/KOL/2018 ASSESSMENT YEAR: 2011-12 NARAYAN PRASAD BAGARIA FILED A RETURN IN ITR-2, WHICH IS MEANT FOR INDIVIDUALS HAVING NO BUSINESS INCOME. HE ARGUED THAT THE INCOME FROM THE TRANSACTIONS FROM MCX ARE ASSESSABLE UNDER THE HEAD FROM BUSINESS AND NOT UNDER THE HEAD INCOME FROM OTHER SOURCES, AND THAT THE COMMODITY TRANSACTIONS ARE COVERED UNDER DEFINITION OF SPECULATIVE TRANSACTIONS. HE RELIED ON THE ORDER OF THE LD. CIT(A) FROM PAGE 22 TO 27. 6. HEARD RIVAL CONTENTIONS. ON CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE, PERUSAL OF THE PAPERS ON RECORD, ORDERS OF THE AUTHORITIES BELOW AS WELL AS CASE LAW CITED, I HOLD AS FOLLOWS:- 7. THE REASONS RECORDED FOR REOPENING ARE BROUGHT OUT BY THE LD. CIT(A) AT PAGE 4 & 5 OF HIS ORDER, WHICH IS EXTRACTED FOR READY REFERENCE:- IT REVEALS FROM THE ITS DATA AVAILABLE WITH THE DEPARTMENT THAT THE ABOVE MENTIONED ASSESSEE HAS A MCX TRANSACTION MADE OF RS.220,95,94,410/ - DURING THE YEAR FY 2010-11 BUT THE ASSESSEE HAS NOT BEEN SHOWN ANY BUSINESS INCOME IN HIS RETURN RELEVANT TO THE AY 2011- 12 THAT SHOULD BE SHOWN UNDER THE HEAD OF BUSINESS INCOME / LOSS U/ S 43(5) PROVISO (E) OF THE INCOME TAX ACT, 1961. THE ASSESSEE FILED HIS RETURN FOR THE AY 2011-12 ON 04-06-2012 VIDE ACK. NO. 390875420040612 WHERE HE HAS SHOWN UNDER THE HEAD OF SALARY INCOME IS NIL, UNDER THE HEAD OF HOUSE PROPERTY INCOME IS NIL, UNDER THE HEAD STCG (U/S 111A) RS.18,87,869/- AND STCG OTHERS RS.31,691/- AND UNDER THE HEAD OTHER SOURCE IS RS.3,57,677/- AND HE HAS CLAIMED DEDUCTION AGAINST LOSS & CARRY FORWARD FOR SETTING OFF WITH THE STCG. THE ASSESSEE HAS NOT BEEN SHOWN ANY BUSINESS INCOME IN HIS RETURN DURING THE FY 2010-11 RELEVANT TO THE AY 2011-12. HENCE IT IS REASON TO BELIEVE THAT THE ASSESSEE HAS ESCAPED OF HIS BUSINESS INCOME. THEREFORE THE CASE ID REOPENED U/ S 147 OF THE I.T. ACT, 1961. 8. THE LD. CIT(A) STATES THAT THE ASSESSEE HAS FILED OBJECTIONS AGAINST THE REOPENING VIDE HIS LETTER DT. 12/03/2014. AT PARA 18 & 19 PAGE 12 OF HIS ORDER, THE LD. CIT(A) HELD AS FOLLOWS:- 18. THE ASSESSEE RAISED OBJECTION AGAINST SUCH REOPENING VIDE LETTER DATED 12.03.2014. THE ASSESSEE SUBMITTED THAT AS PER THE INFORMATION SHARED BY THE AO, THE REASONS FOR REOPENING WAS THAT COMMODITY TRANSACTION ENTERED BY THE ASSESSEE ON MCX WAS ALLEGEDLY NOT REFLECTED WHICH HOWEVER IS NOT CORRECT IN VIEW OF THE FACT THAT THE ASSESSEE NEITHER RUNS A BUSINESS NOR MADE A PROFIT BUT INCURRED A LOSS OF RS.7,95,984. THE ASSESSEE ARGUED THAT THE SAME WAS REFLECTED IN THE RETURN AND THUS THERE WAS NO ESCAPEMENT OF INCOME. THERE WAS EVEN NO STATEMENT IN THE REASONS RECORDED' THAT THE ASSESSEE HAD EARNED AN INCOME FROM MCX TRANSACTION. THE ASSESSEE FURTHER ARGUED THAT UNLESS THERE IS A FINDING OR INFORMATION THAT THE ASSESSEE HAD EARNED PROFIT FROM MCX TRANSACTION, THERE CAN BE NO 'REASONS TO 5 I.T.A. NO. 2151/KOL/2018 ASSESSMENT YEAR: 2011-12 NARAYAN PRASAD BAGARIA BELIEVE' THAT THE INCOME HAS ESCAPED ASSESSMENT. REFERRING TO THE DECISION OF THE HON'BLE KOLKATA HIGH COURT IN THE CASE OF BERGER PAINTS LTD VS. ACIT [2004] 266 ITR 462, THE ASSESSEE REQUESTED THE AO TO DEAL WITH THE ISSUE BEFORE PROCEEDING TOWARDS REASSESSMENT. (COPY OF THE 'OBJECTION RAISED' ENCLOSED AT PAGE 9 -10) 19. HOWEVER THE AO DID NOT ADDRESS THE ISSUE I.E. THE VALIDITY OF THE REOPENING BUT DIRECTLY JUMPED ON THE REASSESSMENT PROCEEDINGS BY ASKING THE DETAILS OF MCX TRANSACTIONS VIDE LETTER DATED 31.03.2014 WHICH CAN BE SEEN FROM THE FOLLOWING EXTRACT: 'AS YOU STATED THAT THE ASSESSEE EARNED A LOSS OF RS. 795984 OF THE TRANSACTION WITH MCX DURING THE FY 2010-11 RELATING TO THE AY 2011-12, BUT DOES NOT CLAIM ANY BUSINESS LOSS IN YOUR ITR FOR THE AT 2011-12. MOREOVER, YOUR MCX TRANSACTION DURING THE PERIOD IS RS.220.95 CRORE WHICH IS REFLECTED IN AIR AND IS MUCH MORE THAN THE AMOUNT PRESCRIBE U/ S 44AB OF THE INCOME TAX ACT, 1961 FOR COMPULSORY AUDIT AS THE MCX TRANSACTION IS TREATED AS THE BUSINESS TRANSACTION AS PER SECTION 43(5) PROVISO (D) OF THE INCOME TAX ACT, 1961 . .....YOU ARE REQUESTED TO FURNISH YOUR MCX TRANSACTION LOSS ALONG WITH CERTIFIED CONTRACT NOTES.. 9. THE LD. CIT(A) ANSWERED THE OBJECTIONS RAISED BY THE ASSESSEE AS FOLLOWS:- THE ASSESSEE RAISED OBJECTION AGAINST SUCH REOPENING VIDE LETTER DATED 12.03.2014. THE ASSESSEE SUBMITTED THAT AS PER THE INFORMATION SHARED BY THE AO, THE REASONS FOR REOPENING WAS THAT COMMODITY TRANSACTION ENTERED BY THE ASSESSEE ON MCX WAS ALLEGEDLY NOT REFLECTED WHICH HOWEVER IS NOT CORRECT IN VIEW OF THE FACT THAT THE ASSESSEE NEITHER RUNS A BUSINESS NOR MADE A PROFIT BUT INCURRED A LOSS OF RS.7,95,984. THE ASSESSEE ARGUED THAT THE SAME WAS REFLECTED IN THE RETURN AND THUS THERE WAS NO ESCAPEMENT OF INCOME. THERE WAS EVEN NO STATEMENT IN THE 'REASONS RECORDED' THAT THE ASSESSEE HAD EARNED AN INCOME FROM MCX TRANSACTION. THE ASSESSEE FURTHER ARGUED THAT UNLESS THERE IS A FINDING OR INFORMATION THAT THE ASSESSEE HAD EARNED PROFIT FROM MCX TRANSACTION, THERE CAN BE NO 'REASONS TO BELIEVE' THAT THE INCOME HAS ESCAPED ASSESSMENT. REFERRING TO THE DECISION OF THE HON'BLE KOLKATA HIGH COURT IN THE CASE OF BERGER PAINTS LTD VS. ACIT [2004] 266 ITR 462 , THE ASSESSEE REQUESTED THE ASSESSING OFFICER TO DEAL WITH THE ISSUE BEFORE PROCEEDING TOWARDS REASSESSMENT.' 9.1. FROM THE ABOVE, IT IS CLEAR THAT THE ASSESSING OFFICER HAS NOT FOLLOWED THE PROPOSITIONS OF LAW LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF GKN DRIVESHAFTS (INDIA) LTD. VS. ITO REPORTED IN [2002] 125 TAXMAN 963 (SC) . HE SHOULD HAVE DISPOSED OFF THE OBJECTIONS FILED, BY PASSING A SPEAKING ORDER BEFORE PROCEEDING WITH THE ASSESSMENT. 6 I.T.A. NO. 2151/KOL/2018 ASSESSMENT YEAR: 2011-12 NARAYAN PRASAD BAGARIA 9.2. THE HONBLE BOMBAY HIGH COURT IN THE CASE OF MOHANLAL CHAMPALAL JAIN VS. ITO REPORTED IN [2019] 102 TAXMANN.COM 293 (BOMBAY) UNDER SIMILAR CIRCUMSTANCES HAS HELD AS FOLLOWS:- IT : WHERE ASSESSING OFFICER ISSUED A REOPENING NOTICE ON GROUND THAT ASSESSEE HAD MADE TRANSACTIONS OF HUGE AMOUNT IN NATIONAL/MULTI COMMODITY EXCHANGE BUT HE HAD NOT FILED HIS RETURN OF INCOME AND ASSESSEE FILED AN OBJECTION THAT HE HAD EARNED NO INCOME OUT OF TRADING IN COMMODITY EXCHANGE AND HE HAD ACTUALLY SUFFERED LOSS AND, THEREFORE, HE HAD NOT FILED RETURN OF INCOME, SINCE, ASSESSING OFFICER HAD NOT LOOKED INTO OBJECTIONS RAISED BY ASSESSEE AND PROCEEDED AHEAD, IMPUGNED REASSESSMENT NOTICE WAS UNJUSTIFIED 9.3. THE HONBLE GUJARAT HIGH COURT IN THE CASE OF VISHWANATH ENGINEERS VS. ACIT REPORTED IN [2013] 352 ITR 549 (GUJ.) HELD AS FOLLOWS:- THEREAFTER, ASSESSING OFFICER ISSUED NOTICE UNDER SECTION 148 ON GROUND THAT ASSESSEE WAS ONLY A WORK CONTRACTOR AND, THUS, WAS NOT ENTITLED TO DEDUCTION UNDER SECTION 80-IB - ASSESSEE RAISED OBJECTION TO NOTICE - ASSESSING OFFICER PASSED REASSESSMENT ORDER WITHOUT DISPOSING OF SUCH OBJECTIONS - WHETHER ASSESSING OFFICER ACTED WITHOUT JURISDICTION IN INITIATING PROCEEDINGS FOR REASSESSMENT IN SPITE OF NON-EXISTENCE OF REQUIRED CONDITIONS SPECIFIED UNDER ACT AND, THEREFORE, REASSESSMENT PROCEEDINGS AND CONSEQUENT REASSESSMENT ORDER WERE TO BE QUASHED [EMPHASIS OURS] 10. APPLYING THE PROPOSITIONS OF LAW LAID DOWN IN THESE CASE-LAW TO THE FACTS OF THE CASE ON HAND, WE HOLD THAT THE REOPENING OF THE ASSESSMENT IS BAD IN LAW ON THE GROUND THAT THE ASSESSING OFFICER HAS NOT DISPOSED OFF THE OBJECTIONS FILED BY THE ASSESSEE AGAINST THE REOPENING OF THE ASSESSMENT U/S 147 OF THE ACT. 11. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. KOLKATA, THE 21 ST DAY OF JUNE, 2019. SD/- [ J. SUDHAKAR REDDY] ACCOUNTANT MEMBER DATED : 21.06.2019 {SC SPS} 7 I.T.A. NO. 2151/KOL/2018 ASSESSMENT YEAR: 2011-12 NARAYAN PRASAD BAGARIA COPY OF THE ORDER FORWARDED TO: 1. NARAYAN PRASAD BAGARIA C/O D.J. SHAH & CO 2, ELGIN ROAD KOLKATA 700 020 2. INCOME TAX OFFICER, WARD 45(2), KOLKATA 3. CIT(A)- 4. CIT- , 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER ASSISTANT REGISTRAR ITAT, KOLKATA BENCHES