Shri Mohmadsharaf Nabibhai Mansuri, Mehsana V. The Income tax Officer,Patan Ward-3, Mehsana

ITA 2327/AHD/2012

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 0822 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 9 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-08-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 11-05-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 17-10-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P L KUREEL
• Assessee Lawyers: M K PATEL
• Keywords: Unexplained cash credit; Depreciation; Salary income; Transactions in derivatives; Deemed to accrue or arise in india; Unabsorbed depreciation
• Section: 69C; 143(3); 43(5); 131; 69

Judgement Text

ITA NO . 2327 / AHD/20 1 2 A.Y. 20 08 - 09 PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH, AHMEDABAD BEFORE SHRI PRAMOD KUMAR , ACCOUNTANT MEMBER AND SHRI S.S. GODARA, JUDICIAL MEMBER ITA NO. 2327 / AHD /201 2 ASSESSMENT YEAR : 20 08 - 09 MOHMADASHRAF NABIBHAI MANSURI VS. INCOME TAX OFFICER , NAVI VOHARVAD, PATAN WARD 3, MEHSANA. LALDARWAJA, VISNAGAR 384 315 DISTT. MEHSANA. [PAN A KPPM 4593 H ] (APPELLANT ) (RESPONDENT) A PPELLANT BY : S HRI M.K. PATEL, A.R. RE SPONDENT BY : S HRI P.L. KUREEL, SR. D.R. DATE OF HEARING : 1 1 .0 5 . 20 16 DATE OF PRONOUNCEMENT : 08 . 0 8 .2016 O R D E R PER S.S. GODARA , J.M. TH IS ASSESSEE S APPEAL FOR A SSESSMENT Y EAR 20 08 - 09 , ARISE S FROM ORDER OF THE CIT(A), GANDHINAGAR, AHMEDABAD DATED 20.07.2012 , PASSED IN CASE NO.CI T(A) /GNR/267/2010 - 11 , IN PROCEEDINGS UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . 2. THE ASSESSEE S SOLE SUBSTANTIVE GRIEVANCE CHALLENGES THE CIT ( A ) S ACTION IN DISALLOWING HIM SET OFF OF F&O DERIVATIVE BUSINESS LOSS OF R S .16,06,22 2/ - AGAINST UNDISCLOSED INCOME OF THE IMPUGNED ASSESSMENT YEAR. 3. WE START WITH RELEVANT FACTS OF THE CASE. THIS ASSESSEE IS IN DALALI /COMMISSION BUSINESS. HE FILED RETURN ON 11. 0 3.2010 STATING INCOME OF RS.1,07,910/ - . THE A SSESSING OFFICER TOOK UP S CRUTINY. HE COMPLETED REGULAR ASSESSMENT ON 15.12.2010 INTER ALIA ITA NO . 2327 / AHD/20 1 2 A.Y. 20 08 - 09 PAGE 2 OF 5 ADDING UNEXPLAINED CASH CREDIT DEPOSITED IN THE BANK AMOUNTING TO RS.27,63,78 8 / - AS WELL AS INTEREST ACCRUED THEREUPON OF RS.15,976/ - . 4. THE ASSESSEE PREFERRED APPEAL. HE INTER ALIA PL EADED THAT HE WAS IN DERIVATIVE S TRADING BUSINESS THROUGH M/S . PSJ SECURITIES PVT. LTD. I.E. AN ENTITY REGISTERED WITH THE N ATIONAL S TOCK E XCHANGE FOR F&O BUSINESS. AND THAT HIS DERIVATIVES WERE TRADED IN F ON EXCHANGE IN FUTURE AND OPTION MARKET WITHOUT I NVOLVING ANY ACTUAL DELIVERY. THE ASSESSEE ACCORDINGLY CLAIMED THE SAME T O BE HIS BUSINESS TRANSACTION. HE STATED THAT THE IMPUGNED LOSS OF RS.16,06,222 / - IN THIS DERIVATIVE BUSINESS WAS ALLOWABLE TO BE SET OFF AGAINST THE ABOVE S T ATED UNEXPLAINED CASH C REDIT ADDED IN THE REGULAR ASSESSMENT. THE CIT ( A ) CALLED FOR A REMAND REPORT. THE A SSESSING OFFICER PR OCEEDED WITH THE CONSEQUENTIAL REMAND PROCEEDINGS. THE ASSESSEE FILED HIS P&L ACCOUNT, BALANCE SHEET, M/S PSJ SECURITIES S CONFIRMATION REGARDING F&O D ERIVATIVE IN QUESTION ALONG WITH THE RELEVANT CONTRA ACCOUNT. HE FURTHER DEPOSED IN SECTION 131 STATEMENT THAT THE LOSS IN QUESTION PER T AINED TO THE IMPUGNED ASSESSMENT YEAR ONLY. THE A SSESSING OFFICER SUBMITTED REMAND REPORT. THE CIT(A) THEREAFTER REJE CTS ASSESSEE S SET OFF OF CLAIM OF LOSS IN QUESTION AS UNDER : - 4.7 I HAVE PERUSED THE FACTS OF THE CASE, INCLUDING THE REMAND REPORT AND THE APPELLANT S SUBMISSIONS. FIRST OF ALL, IN THE REJOINDER TO THE REMAND REPORT; THE APPELLANT HAS PUT THE HEADING 'ADD ITIONAL GROUND NO.6 AND REJOINDER'. I T IS BROUGHT ON RECORD THAT NO SUCH ADDITIONAL GROUND HAS BEEN TAKEN OR SOUGHT TO BE TAKEN BEFORE THE UNDERSIGNED. THE FOLLOWING OBSERVATIONS/ DECISIONS ARE MADE AFTER CAREFUL CONSIDERATION OF ALL THE RELEVANT FACTS: A) THE BANK ACCOUNTS WERE NOT DISCLOSED TO THE DEPARTMENT. THERE WERE NO BOOKS OF ACCOUNTS MAINTAINED IN THE REGULAR COURSE OF TRANSACTIONS. THE CASH BOOK AND OTHER ACCOUNTS SUBMITTED IN THE APPELLATE PROCEEDINGS CAN BEST BE ACCEPTED AS CASH FLOW AND DE TAILS OF TRANSACTION MADE SUBSEQUENTLY FOR EXPLAINING THE TRANSACTIONS. B) THE APPELLANT HAVING ACCEPTED THE SOURCE OF THE CASH DEPOSITS AS UNEXPLAINED BY WAY OF OFFERING RS.11 ,80,000 / - IN CASH AS UNDISCLOSED ITA NO . 2327 / AHD/20 1 2 A.Y. 20 08 - 09 PAGE 3 OF 5 INCOME OF CURRENT YEAR (EARLIER TRIED TO BE CLAIMED AS OPENING BALANCE IN HAND). THE UNEXPLAINED CASH AND THE CREDITS BY CHEQUES WERE REPRESENTING THE SOURCE OF DEPOSITS IN THE BANK ACCOUNTS; AFTER CONSIDERING THE WITHDRAWALS FROM THE SAME BANK ACCOUNTS AS THE SOURCE OF SUBSEQUENT CASH DEPOSITS. T HIS AMOUNT I.E. RS. 11,80,000 / - IS REPRESENTING THE UNEXPLAINED DEPOSITS IN THE BANK ACCOUNT AND THE ADDITION WOULD BE OF UNEXPLAINED MONEY NOT RECORDED IN BOOKS OF ACCOUNT AND THEREFORE, TAXABLE U /S. 69 A OF THE IT ACT. C) NEXT ISSUE IS THE UNDER WHAT H EAD, IF ANY, THE UNEXPLAINED CASH ACCEPTED WOULD BE TAXABLE AND CONSEQUENT CLAIM OF SETTING OFF WITH LOSS UNDER DIFFERENT HEADS AND DEPRECIATION. THE CASE IS SQUARELY COVERED BY THE DECISION OF HON'BLE JURISDICTIONAL GUJARAT HIGH COURT IN THE CASE OF FAKI R MOHMED HAJI HASAN 247 ITR 290 . IT HAS BEEN HELD THAT OPENING WORDS OF SECTION 14, 'SAVE AS OTHERWISE PROVIDED BY THIS ACT , CLEARLY LEAVE SCOPE FOR 'DEEMED INCOME' OF NATURE COVERED UNDER SCHEME OF SECTIONS 69, 69A, 69B AND 69C B EING TREATED SEPARATELY, BECAUSE SUCH DEEMED INCOME IS NOT INCOME FROM SALARY, HOUSE PROPERTY, PROFITS AND GAINS OF BUSINESS OR PROFESSION, OR CAPITAL GAINS, NOR IS IT INCOME FROM 'OTHER SOURCES'. IT HAS FURTHER BEEN CONCLUDED THAT SCHEME OF SECTIONS 69, 69A AND 69C SHOWS THAT WHERE NATURE AND SOURCE OF INVESTMENTS OR SOURCE OF ACQUISITION OF MONEY , BULLION, ETC., OWNED BY ASSESSEE ARE NOT EXPLAINED SATISFACTORILY AND SOME ARE NOT RECORDED IN B OOKS OF ACCOUNT OR EXPENDITURE INCURRED IS UNEXPLAINED, THEN SAME MAY BE DEEMED TO BE INCOME OF SUCH ASSESSEE, AND IT WOULD NOT BE POSSIBLE TO CLASSIFY SUCH DEEMED INCOME UNDER ANY OF HEADS MENT IONED IN SECTION 14 AND CONSEQUENTLY, NO QUESTION OF GIVING ANY D EDUCTION UNDER PROVISIONS WHICH CORRESPOND TO SUCH HEADS WOULD AR ISE. THERE FORE, THE INCO ME OF THE APPELLANT ON ACCOUNT OF U NEXPLAINED MONEY IS HELD TO BE DEEMED INCOME, TAXABLE NOT UNDER ANY HEAD BUT AS SUCH UNDER CHAPTER VI, ITSELF. NO SET - OFF OF CARRY FORWARD LOSSES/UNABSORBED DEPRECIATION OR CURRENT YEAR'S LOSSES/ DEPRECIATIO N WOULD BE AVAILABLE TO THE APPELLANT. D) THE TRANSACTIONS WITH OTHER PERSONS (OTHER THAN THE STOCK BROKER) ENTERED BY CHEQUES HAVE BEEN EXPLAINED AND THE AO HAS IN THE REMAND REPORT NOT OBJECTED TO TH E GENUINENESS OF THE SOURCE. N O ADDITION IS THEREFORE, CALLED FOR ON THAT BASIS. E) THE BANK ACCOUNTS WERE PRIMA FACIE USED FOR ENTERING INTO TRANSACTIONS IN THE EQUITY MARKET/FUTURE AND OPTIONS . S HE TRANSACTIONS WERE NOT DISCLOSED AND THE ASSESSEE CLAIMED THAT THESE R ESULTED INTO LOSS. THE AO IN THE REMAND REPORT HAS NOT DISPUTED THESE. THE TRANSACTIONS BEING THROUGH THE RECOGNIZED STOCK EXCHANGE AND BEING OF FUTURE & OPTIONS ARE COVERED IN PROVISO (D) OF SECTION 43(5) AND T HEREFORE, SHALL NOT BE DEEMED TO BE SPECULATI VE TRANSACTIONS AND IS GENERAL BUSINESS LOSS. IN THE LIGHT OF THE ABOVE OBSERVATIONS, TO SUM UP INSTEAD OF THE ADDITIONS MADE BY THE ASSESSING OFFICER; THE FOLLOWING INCOME/LOSS ARE TO BE ASSESSED: ITA NO . 2327 / AHD/20 1 2 A.Y. 20 08 - 09 PAGE 4 OF 5 I) RS. 11,8 0,000/ - REPRESENTING THE UNEXPLAINED DEPOSITS IN THE BANK ACCOUNT I.E. UNEXPLAINED MONEY NOT RECORDED IN BOOKS OF ACCOUNT AND THEREFORE, TAXABLE U/S . 69 A OF THE IT ACT . NO SET OFF AGAINST ANY OTHER INCOME WOULD BE AVAILABLE TO THE APPELLANT AS DECIDED IN PARA (C) ABOVE. II) THE BUSINESS LOSS FROM THE TRANSACTIONS THROUGH THE BANK ACCOUNT IS RS.16, 06 : 222/ - AND WOULD BE ASSESSABLE AS SUCH. H OWEVER , NO LOSS WOULD BE ALLOWED TO BE CARRIED FORWARD TO NEXT YEAR AS THE RETURN FILED IS NOT WITHIN TIME ALLOWED U/S 139(1}. THE AO IS DIRECTED TO GIVE EFFECT TO THIS ORDER ACCORDING TO THE ABOVE DIRECTIONS. THE GROUND OF APPEAL IS DECIDED, ACCORDINGLY. 5. WE HAVE HEARD BOTH THE PARTIES. CASE FILE PERUSED. L EARNED AUTHORISED REPRESENTATIVE STRONGLY ARGUES IN FAVOUR OF ASSESSEE S SET OF F CLAIMS AS OPPOSED B Y THE R EVENUE IN VIEW OF THE CIT(A) S FINDING EXTRACTED AS HEREINABOVE. THERE IS NO DISPUTE THAT THE CIT(A) HAS ALREADY TREATED ASSESSEE S LOSS AS GENERAL BUSINESS LOSS AND NOT A SPECULATIVE ONE. HE RELIES UPON HON BLE JURISDICTIONAL HIGH COURT S DE C ISIO N IN FAKIR MOH MED H AJI HASAN S CASE (SUPRA) TO HOLD THAT THE ABOVE STATED D E EMED INCOME ARIS I NG FROM UNEXPLAINED CASH CREDIT ADDITION IS NOT LIABLE FOR SUCH A SET OFF. WE FIND THAT MUCH WATER HAS FLOWN DOWN THE STREAM SINCE THEN. THE HON BLE JURISDICTION AL H IGH C OURT ITSELF IN TWO LATTER DECISIONS DCIT VS. RADHEY D EVELOPERS INDIA L IMITED ( 2010 ) 329 ITR PAGE 1 ( GUJ ) AND ( 2013 ) 39 TAXMANN.COM 3 ( GUJ ) CIT VS. SHILPA D Y EI NG AND P RINTING MILLS PVT. LTD. DILUTES THE EARLIER VIEW TO CONCLUDE THAT SECTION 14 OF T HE ACT COVERS ALL HEADS OF INCOME. THEIR L ORDSHIPS ARE OF THE OPINION THAT THERE IS NO INCOME LIABLE TO BE ASSESSED BEYOND THE RELEVANT HEADS AS SPECIFIED UNDER SECTION 14 OF THE ACT. IT IS CONCLUDED THAT ANY LOSS DETERMINED IS TO BE ALLOWED TO BE SET OFF AGAINST ANY OTHER HEAD INCLUDING THAT OF UNDISCLOSED INCOME. WE FOLLOW THESE LATTER TWO JUDICIAL PRECEDENTS TO REVERSE THE CIT (A) S REASONING IN PORTION C OF THE LOWER APPELLATE ORDER EXTRACTED HEREINABOVE. ITA NO . 2327 / AHD/20 1 2 A.Y. 20 08 - 09 PAGE 5 OF 5 6. THE CIT(A) S NEXT REASON IN DISALLOWING THE IMPUGNED SET OF F IS THAT ASS ESSEE S RETURN HAS NOT BEEN FILED WITHIN THE TIME PRESCRIBED UNDER SECTION 139(1) OF THE ACT AS HIT BY VIRTU E OF SPECIFIC BAR IN THIS REGARD UNDER SUB - SECTION 3 THEREOF. WE NOTICE THAT SECTION 139(3) DEALS WITH A CASE OF CARRIED FORWARD LOSSES AND NOT THAT OF CURRENT YEAR S LOSS. THIS IS NOT THE REVENUE S CASE T HAT ASSESSEE IS SEEKING TO SET OFF HIS LOSS PERTAINING TO EARLIER ASSESSMENT YEARS. WE OVERRULE CIT(A) S FINDING QUA THIS ASPECT AS WELL IN THESE FACTS AND CIRCUMSTA NCES. 7. THIS ASSESSEE S APPEAL SUCCEEDS. HE IS HELD ENTITLED TO SET OFF THE IMPUGNED LOSSES AS INDICATED HEREINABOVE. 8. IN THE RESULT, THIS ASSESSEE S APPEAL IS ALLOWED . P RONOUNCED IN THE OPEN COURT TODAY ON THE 8 TH DAY OF AUGUST, 2016. SD/ - SD/ - PRAMOD KUMR S.S. GODARA (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) AHMEDABAD, THE 8 TH DAY OF AUGUST, 2016 PBN/* COPIES TO: (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEP ARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD