JAGAT P. SHAH HUF, MUMBAI V. ASST CIT 14(1), MUMBAI

ITA 2584/MUM/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 7970 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-03-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Assessment Year: 2009-2010
• Appeal Filed On: 06-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M C OM NINGSHEN
• Keywords: Opportunity of being heard; Principle of natural justice; Transactions in derivatives
• Section: 10; 2

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI BEFORE SHRI MAHAVIR SINGH , JM AND SHRI RAJESH KUMAR, AM ./ I.T.A. NO 2584 / MUM/ 201 5 ( / ASSESSMENT YEAR : 20 0 9 - 10 ) JAGAT P SH AH - HUF, 2 ND FLOOR, MEGHDOOT CHS, N S ROAD, MARINE DRIVE, MUMBAI - 400002 / VS. ASSTT. COMMISSIONER OF INCOME TAX - 14( 1 ), 202, 2 ND FLOOR, EARNEST HOUSE, NARIMAN POINT, MUMBAI - 400021 / APPLICANT BY : SHRI RAHUL HAKANI /RESPONDENT BY : SHRI M C OM NINGSHEN / DATE OF HEARING : 1 6.3. 201 7 / DATE OF PRONOUNCEMENT : 21 . 3 .2017 / O R D E R PER RAJESH KUMAR, A. M: THIS IS AN APPEAL FILED BY THE ASSESSEE AND IT IS DIRECT ED AGAINST THE ORDER OF THE LD.CIT(A), MUMBAI, DATED 18.2.2015 FOR THE ASSESSMENT YEAR 20 0 9 - 10 . 2. THE VARIOUS GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE AS UNDER : 1) THE LD. CIT (APPEALS) FELL IN GROSS ERROR OF LAW & FACTS, BY ADOPTING TH E VALUATION OF OPENING STOCK OF CONTRACTS AT A FIGURE DIFFERENT THAN THE VALUATION OF CLOSING STOCK FOR THE IMMEDIATELY PRECEDING YEAR. WITH RESPECT, SUCH VARI ATION RUNS CONTRARY TO THE SETTLED POSITION IN LAW THAT CLOSING STOCK OF THE PREC EDING YEAR FORMS THE OPENIN G STOCK OF THE SUCCEEDING YEAR. 2 ITA NO. 2584 / MUM/ 201 5 2) THE LD. CIT(A) ERRED IN ENHANCING THE ASSESSMENT BY MAKING ADDITION OF RS.66,48,780/ - ON ACCOUNT OF PROFIT ON UNEXPIRED CONTRACTS, ON NOTIONAL BASIS. THE LD. CIT(A) FAILED TO APPRECIATE THAT MERE CANNOT BE ANY 'PROFIT' , MUCH LESS 'INCOME', ON UNEXPIRED DERIVATIVE CONTRACTS HELD BY THE ASSESSEE AT THE BEGINNING OF THE YEAR. 3) THE LD. CIT(A) ERRED IN NOT APPRECIATING THAT THE ADDITION RESULTS INTO TAXING THE SAME INCOME TWICE, SINCE THE INCOME SINCE THE INCOME HAS AL READY BEEN OFFERED FOR TAX IN THE EARLIER PERIOD IN ADDITION TO THIS, THE ASSESSEE HAS ALSO TAKEN FOLLOWING ADDITIONAL GROUNDS WHICH ARE AS UNDER 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL) ERRED IN ENHANCING THE ASSESSMENT WITHOUT GIVING NOT ICE U/S 251 TO THE ASSESSEE THEREBY VIOLATING PRINCIPLE OF NATURAL JUSTICE AND WITHOUT APPRECIATING THAT THE SAID ENHANCEMENT IS BAD IN LAW AND HENCE THE ORDER OF THE CIT(A) MAY BE QUASHED 3. THE LD. AR SUBMITTED BEFORE THE BENCH THAT THE ADDITIONAL GR OUND RAISED BEFORE THE BENCH IS EMANATING OUT OF THE RECORD AVAILABLE BEFORE THE FAA WHO HAS DECIDED THE APPEAL ENHANCING THE ASSESSMENT WITHOUT ISSUING ANY NOTICE TO THE ASSESSEE U/S 251 OF THE ACT THEREBY VIOLATING THE PRINCIPLE OF NATURAL JUSTICE. THE LD. AR SUBMITTED BEFORE US THAT THE ASSESSEE HAS DISCLOSED NET INCOME IN F&O TRANSACTION AMOUNTING TO RS.90,017/ - AND ACCORDING TO THE ASSESSEE UNEXPIRED FUTURE AND OPTION CONTRACT AS ON 1.4.2008 WAS RS.50,93,939/ - WHICH WAS ADDED TO BUSINESS LOS S OF RS.5,82,655/ - THEREBY REDUCING THE SAID LOSS TO BE CARRIED FORWARD. THE AO IN THE REMAND REPORT CHANGED THE VALUATION OF UNEXPIRED CONTRACT AND CAME TO THE CONCLUSION THAT NET PROFIT SHOULD BE CALCULATED AT 3 ITA NO. 2584 / MUM/ 201 5 RS.6,48,780/ - BY WAY OF ENHANCEMENT OR NE T PROFIT SHOULD BE SUSTAINED AT RS.40,89,667/ - INSTEAD OF RS.50,93,939/ - AS MADE BY THE AO WHILE FRAMING THE ORIGINAL ASSESSMENT. THE LD. CIT(A) WITHOUT GIVING ANY NOTICE OF ENHANCEMENT U/S 251 OF THE ACT PASSED AN ORDER ENHANCING THE NET PROFIT TO RS.66,48,780/ - . THE LD. AR SUBMITTED THAT FAA HAS GRAVELY VIOLATED THE PRINCIPLE OF NATURAL JUSTICE AND THE ORDER PASSED BY THE FAA IS BAD IN LAW AND SHOULD BE QUASHED. 4 . ON THE OTHER HAND, T HE LD. DR STRONGLY OBJECTED TO THE ARGUMENT S ADVANCED BY THE LD.AR AND HEAVILY RELIED ON THE ORDERS OF AUTHORITIES BELOW. 5 . WE HAVE HEARD THE ARGUMENTS OF THE PARTIES, PERUSED THE MATERIAL PLACED BEFORE US INCLUDING THE ORDERS OF AUTHORITIES BELOW. WE FIND THAT THE LD.CIT(A) HAS PASSED THE ORDER ON THE BASIS OF R EMAND REPORT OF THE AO ENHANCING THE ASSESSMENT BY TAKING NET PROFIT TO RS. 66,48,780/ - WITHOUT ISSUING ANY SHOW CAUSE NOTICE U/S 251 OF THE ACT TO THE ASSESSEE TO PRESENT ITS CASE IN THE MATTER. IN OUR OPINION, THE LD.CIT(A) SHOULD HAVE GIVEN OPPORTUN ITY TO THE ASSESSEE TO PRESENT HIS CASE WHICH WAS NOT GIVEN AND THEREFORE VIOLATED THE PRINCIPLE OF NATURAL JUSTICE. IN VIEW OF THIS FACTUAL AND LEGAL POSITION, THE ORDER PASSED BY THE FAA WITHOUT GIVING OPPORTUNITY TO THE ASSESSEE IS BAD IN LAW AND CANNO T BE SUSTAINED. WE, THEREFORE, ARE OF THE OPINION THAT THIS IS A FIT CASE FOR RESTORING BACK TO THE FILE OF THE AO BY SETTING ASIDE THE ORDER OF THE LD. CIT(A) TO DECIDE THE 4 ITA NO. 2584 / MUM/ 201 5 SAME AS PER LAW AFTER PROVIDING FAIR AND REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. WE ORDER ACCORDING. 6 . IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 21ST MARCH , 2017 S D SD ( MAHAVIR SINGH ) (RAJESH KUMAR) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED : 21. 3 .2017 SRL,SR.PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F I LE / BY ORDER, T RUE COPY / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI