M/s. Siddhiramya Investment, Ahmedabad V. The ACIT., Circle-2, Ahmedabad

ITA 2408/AHD/2005

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 0321 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 10 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-10-2009
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 15-09-2009
• Assessment Year: 2000-2001
• Appeal Filed On: 21-11-2005
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NEETA SHAH SENIOR
• Assessee Lawyers: S N DIVATIA
• Keywords: Business income
• Section: 143(3)

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'B' (BEFORE S/SHRI P K BANSAL AND MAHAVIR SINGH) ITA NO.2408/AHD/2005 (ASSESSMENT YEAR: 2000-01) M/S SIDDHIRAMYA INVESTMENT, NR. MASKATI MARKET, KALUPUR, AHMEDABAD V/S THE ASSISTANT COMMISSIONER OF INCOME- TAX, CIRCLE-2, AHMEDABAD (APPELLANT) (RESPONDENT) APPELLANT BY :- SHRI S N DIVATIA, ADVOCATE RESPONDENT BY:- SMT. NEETA SHAH, SENIOR DR O R D E R PER P K BANSAL (ACCOUNTANT MEMBER) : THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT( A) DATED 02- 09-2005, BY TAKING THE FOLLOWING EFFECTIVE GROUNDS OF APPEAL:- THE LD. CIT(A) HAS ERRED IN LAW AND OR ON FACTS IN CONFIRMING THAT: (A) THE LOSS ON SALE OF SHARES OF RS.25,82,903/- AS CAP ITAL LOSS AND AS SUCH CHARGEABLE UNDER HEAD CAPITAL GAIN, (B) INTEREST INCOME OF RS.2,72,295/- WAS CHARGEABLE UND ER THE HEAD INCOME FROM OTHER SOURCES. (C) THE SET OFF OF LOSS ON SALE OF SHARES THE HEAD INV ESTMENT IN THE BALANCE SHEET AS ON 31.3.2000. 2 THE BRIEF FACTS OF THE CASE ARE THAT THE AO HAS OBJECTED TO THE SETTING OFF OF RS.25,85,903/- AGAIN ST THE INTEREST INCOME OF RS.2,72,295/- EARNED BY THE ASSESSEE. THE ASSESSEE 2 INCURRED A LOSS OF RS.26,48,845/- ON THE SALE OF SH ARES SHOWN UNDER THE HEAD INVESTMENT AS PER THE AO. THE ASSE SSEE ALSO GOT INTEREST INCOME AMOUNTING TO RS.2,72,295/-. THE AO TREATED THE LOSS ON THE SALE OF SHARES TO BE THE CAPITAL LOSS A ND, THEREFORE, DENIED THE SET OFF U/S 74 AGAINST THE INTEREST INCO ME OF RS.2,72,295/-. WHEN THE MATTER WENT BEFORE THE CIT( A), THE CIT(A) CONFIRMED THE ORDER OF THE AO. 3 THE LEARNED AR BEFORE US VEHEMENTLY CONTENDED TH AT THE MAIN BUSINESS OF THE ASSESSEE WAS DEALING IN TH E SHARES. THE ASSESSEE WAS REGULARLY SHOWING INCOME FROM THE TRAD ING OF SHARES AS BUSINESS INCOME. THIS FACT IS APPARENT FR OM THE COMPUTATION STATEMENT FOR THE ASSESSMENT YEARS 1996 -97, 1997- 98, 1998-99, 1999-2000 AND 2000-2001. IT WAS ALSO S UBMITTED THAT AUDIT U/S 44AB WAS DULY CARRIED OUT AND THE AS SESSEE HAS GIVEN QUANTITATIVE DETAILS OF THE SHARES. EVEN THE ASSESSEE HAS PREPARED THE TRADING ACCOUNT ALSO. IN THE P&L ACCOU NT ALSO THE INCOME HAS BEEN SHOWN UNDER THE HEAD PROFIT OR LOS S FROM THE TRADING OF THE SHARES. REFERRING TO THE BALANCE-SH EET OF EACH OF THE AFORESAID ASSESSMENT YEARS, IT WAS POINTED OUT THAT IN THE BALANCE-SHEET ALSO THE ASSESSEE HAS SHOWN THE STOCK OF THE SHARES AS CURRENT ASSETS. OUR ATTENTION WAS DRAWN IN THIS REGARD TO PAGES-2, 7, 13, 16, 19A, 20, 26, 31, 32, 36, 41, 46 , 50, 55, 56, 60, 68, 73 AND 74 OF THE PAPER BOOK. REFERRING TO T HE ASSESSMENT YEAR UNDER CONSIDERATION HE POINTED OUT THAT IT IS DUE TO THE COMPUTER PERFORMA THAT THE SHARES HAVE BEEN SHOWN U NDER THE MAIN HEAD INVESTMENT ALTHOUGH THE PROFIT EARNED O N THE SHARES HAS BEEN SHOWN IN THE P&L ACCOUNT AS LOSS FROM THE SHARES AND DEBENTURES AMOUNTING TO RS.25,82,904/-. FOR THIS OU R ATTENTION WAS DRAWN TO PAGES-90-91. FOR THE BALANCE-SHEET, AT TENTION WAS 3 DRAWN TO PAGE-94. WHEN THE BENCH INQUIRED OF THAT P AGE-94 IS MERELY A TRIAL BALANCE AND DOES NOT REPRESENT THE B ALANCE-SHEET, THE LEARNED AR WAS FAIR ENOUGH TO CONCEDE THAT THIS IS A PAPER WHICH WAS FILED BEFORE THE AO ON THE BASIS OF WHICH THE AO HAS REJECTED THE CLAIM OF THE ASSESSEE. THE AUDITOR HAS ALSO AUDITED THIS AS BALANCE-SHEET OF THE ASSESSEE. 4 THE LEARNED DR, ON THE OTHER HAND, SUPPORTED THE ORDER OF THE AO AND POINTED OUT THAT FROM PAGE-94 I T IS APPARENTLY CLEAR THAT DURING THE YEAR THE ASSESSEE HAS SHOWN THE SHARES AS INVESTMENT AND, THEREFORE, THE PROFIT / L OSS ON THE SALE OF SHARES WILL BE REGARDED AS CAPITAL LOSS, AND NOT AS TRADING LOSS. 5 WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS AND, PERUSED THE MATERIAL ON RECORD ALONG WITH THE ORDER OF THE AUTHORITIES BELOW. WE HAVE ALSO VERIFIED THE AUDITE D P&L ACCOUNT ALONG WITH THE STATEMENT OF INCOME FOR THE ASSESSMENT YEARS 1996-97, 1997-98, 1998-99 AND 1999-2000 WHICH ARE AVAILABLE IN THE PAPER BOOK. WE NOTED FROM THE STAT EMENT OF INCOME THAT IN EACH OF THESE YEARS THE ASSESSEE HAS SHOWN THE INCOME FROM THE PURCHASE AND SALE OF SHARES AS BUSI NESS INCOME. THE ASSESSEE HAS ALSO GIVEN QUANTITATIVE DETAILS OF THE SHARES IN THE AUDIT REPORT CARRIED OUT U/S 44AB. THE ASSESSEE HAS ALSO PREPARED THE TRADING ACCOUNT SHOWING THE PURCHASE A ND SALE, OPENING AND CLOSING STOCK OF THE SHARES. DURING THE AY 1996-97 THE SHARES HAVE BEEN SHOWN UNDER THE HEAD CURRENT ASSETS. THE BALANCE-SHEET AND P&L ACCOUNT HAVE DULY BEEN AUDITE D BY BHADRESH & JIGISH ASSOCIATES, CHARTERED ACCOUNTANTS AND DULY SIGNED BY MR. J B SHAH MENTIONING HIS MEMBERSHIP NU MBER. SIMILAR IS THE POSITION DURING AY 1997-98. DURING A Y 1998-99 4 ALSO SIMILAR POSITION EXISTS. WE NOTED THAT DURING THE ASSESSMENT YEAR ENDED ON 31-03-1999 (AY 1999-2000) THE AUDIT U /S 44AB HAS BEEN CARRIED OUT BY M/S NAUTAM R VAKIL & CO., C HARTERED ACCOUNTANTS; MEMBERSHIP NUMBER HAS BEEN MENTIONED I N FORM NO.3CB. P&L ACCOUNT, BALANCE-SHEET, TRADING ACCOUNT HAVE DULY BEEN PREPARED AND AUDITED BY THE CHARTERED ACC OUNTANT MENTIONING HIS MEMBERSHIP NUMBER BUT DURING THE AY 2000-01, WE NOTED THE PECULIAR FACTS. ALTHOUGH THE AUDIT REP ORT HAS BEEN SIGNED BY M/ NAUTAM R VAKIL & CO., THE NAME OF THE PARTNER WHO HAS SIGNED THE AUDIT REPORT ALONG WITH THE MEMB ERSHIP NUMBER, IS NOT VISIBLE. WE NOTED FROM THE PAPER BOO K THAT AT PAGE-94 THERE IS NO BALANCE-SHEET BUT IT IS THE TRI AL BALANCE CONSISTING OF THE BALANCE OF ALL THE ASSETS AND LIA BILITIES, EXPENDITURE AS WELL AS INCOME DEBITED AND CREDITED AT THE END OF THE PREVIOUS YEAR RELEVANT TO THE IMPUGNED ASSESSME NT YEAR. AT PAGE-95 THERE ARE DETAILS OF INVESTMENT ACCOUNT AS ON 31-03-2000 AMOUNTING TO RS.52,64,749/-. THE SAME AMOUNT IS APP EARING AT PAGE-94 UNDER THE HEAD INVESTMENT WITH CODE NO. A 023. DURING THE COURSE OF HEARING, WE ASKED THE LEARNED AR THAT THE PAPER APPEARING AT PAGE-94 IS NOT AUDITED BALANCE-S HEET BUT HE INSISTED THAT THIS IS A PAPER WHICH WE FILED BEFORE THE AUTHORITIES BELOW AS THE BALANCE-SHEET AND THIS HAS DULY BEEN C ERTIFIED BY THE CHARTERED ACCOUNTANT. WE WERE SURPRISED TO SEE HOW A CHARTERED ACCOUNTANT HAS CERTIFIED TRIAL BALANCE AS BALANCE-S HEET. THE TRIAL BALANCE IS A STATEMENT PREPARED AT THE END OF THE Y EAR WHICH CONSISTS OF THE BALANCE SHEET AT THE END OF THE PRE VIOUS YEAR. DEBIT OR CREDIT IS WORKED OUT IN EACH OF THE LEDGER ACCOUNT. IT DOES NOT REPRESENT THE BALANCE-SHEET / STATEMENT-OF -AFFAIRS OF THE ASSESSEE. THE BALANCE-SHEET IS A STATEMENT WHICH DE PICTS THE ASSETS AND LIABILITIES OF AN ASSESSEE AS ON A PARTI CULAR DATE (AS ON 5 THE LAST DAY OF THE PREVIOUS YEAR RELEVANT TO THE A SSESSMENT YEAR). WE ALSO NOTED THAT DURING THE ASSESSMENT YEARS 1996 -97 TO 1999-2000 THE ASSESSEE HAS SHOWN THE INCOME FROM TH E SHARE TRADING AS INCOME FROM BUSINESS AND THIS FACT IS AL SO APPARENT FROM THE RELEVANT AUDITED ACCOUNTS AS SUBMITTED BY THE ASSESSEE. IN EACH OF THESE ASSESSMENT YEARS THE RETURN OF THE ASSESSEE HAS BEEN ACCEPTED U/S 143(3) AND THE REVENUE HAS NOT DI STURBED THE INCOME SHOWN BY THE ASSESSEE UNDER THE HEAD INCOME FROM BUSINESS. THE DISPUTE AROSE ONLY IN THE YEAR UNDER CONSIDERATION FOR WHICH THE RELEVANT AUDITED BALANCE-SHEET HAS NO T BEEN FILED BEFORE US ALTHOUGH THE COPY OF THE TRADING ACCOUNT WAS SUBMITTED AND ALSO THE COPY OF THE AUDIT REPORT WHICH CONTAIN S THE QUANTITATIVE DETAILS OF THE SHARES, WAS ALSO SUBMIT TED. IN OUR OPINION, THE REFLECTION OF ACCOUNT IN THE TRIAL BAL ANCE WILL NOT DETERMINE THE TRUE NATURE WHETHER THE SHARES WERE H ELD BY THE ASSESSEE AS CURRENT ASSETS OR AS INVESTMENT. THE TR UE NATURE OF THE SHARES HELD BY THE ASSESSEE CAN BE DETERMINED ONLY ON THE BASIS OF AUDITED BALANCE-SHEET AND P&L ACCOUNT. EVEN THOU GH WE HAVE DIRECTED THE ASSESSEE TO FURNISH COPY OF THE AUDITE D BALANCE-SHEET BUT THE SAME WAS NOT SUBMITTED BEFORE US. IT IS ONL Y THE COPY OF TRIAL BALANCE WHICH WAS SUBMITTED AS IS AVAILABLE A T PAGE-94 OF THE PAPER BOOK WHICH, IN OUR OPINION, IS MERELY TRI AL BALANCE. THE ASSESSEE HAS DULY GIVEN THE CERTIFICATE THAT TH IS PAPER WAS SUBMITTED BEFORE THE AO. THE CHARTERED ACCOUNTANT H AS ALSO SIGNED THE SAME TRIAL BALANCE AS BALANCE-SHEET AS P ER THE LEARNED AR. WE ALSO NOTED THAT THE AO HAS NOT TREATED THE R ETURN FILED BY THE ASSESSEE AS DEFECTIVE U/S 139(9) IN THE ABSENCE OF BALANCE- SHEET NOT BEING FILED BY THE ASSESSEE. THIS PROVES THAT THE AO HAS ALSO TREATED THE TRIAL BALANCE TO BE THE BALANCE-SH EET OF THE ASSESSEE AS ON 31-03-2000 AND HAS DETERMINED THE TO TAL INCOME 6 ON THE BASIS OF THE SAID TRIAL BALANCE TREATING IT TO BE THE BALANCE- SHEET. IN OUR OPINION, BOTH THE ASSESSEE AS WELL AS CHARTERED ACCOUNTANT WHO HAS CARRIED OUT THE AUDIT U/S 44AB A RE AT DEFAULT AND HAS CARRIED OUT THEIR RESPECTIVE DUTIES NEGLIGE NTLY. IN THE INTEREST OF JUSTICE AND FAIR-PLAY TO BOTH THE PARTI ES, WE SET-ASIDE THE ORDER OF THE CIT(A) AND RESTORE THIS ISSUE TO T HE FILE OF THE AO WITH THE DIRECTION THAT THE AO SHALL RE-FRAME TH E ASSESSMENT AFTER GIVING THE ASSESSEE PROPER AND REASONABLE OPP ORTUNITY IN ACCORDANCE WITH LAW. 6 IN THE RESULT, THE APPEAL IS ALLOWED FOR STATIST ICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 09-10-2009 SD/- SD/- (MAHAVIR SINGH) JUDICIAL MEMBER (P K BANSAL) ACCOUNTANT MEMBER DATE : 09-10-2009 COPY OF THE ORDER FORWARDED TO : 1. M/S SIDDHIRAMYA INVESTMENT, NR. MASKATI MARKET, KALUPUR, AHMEDABAD 2. THE ACIT, CIRCLE-2, AHMEDABAD 3. THE CIT CONCERNED 4. THE CIT(A)-VI, AHMEDABAD 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER DY. R/AR, ITAT, AHMEDABAD