Chandrikaben M.Patel, Vallabh Vidyanagar V. The ACIT.,Anand Circle-, Anand

ITA 266/AHD/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 5552 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 6 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-07-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 15-07-2010
• Assessment Year: 2001-2002
• Appeal Filed On: 23-01-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: D S CHAUDHRY
• Assessee Lawyers: SUNIL H TALATI
• Keywords: Opportunity of being heard; Speculation loss; Set aside; Capital Gains
• Section: 250

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH AHMEDABAD (BEFORE S/SHRI BHAVNESH SAINI, JM AND N. S. SAINI, AM) ITA NO.266/AHD/2008 A. Y.: 2001-02 SMT. CHANDRIKABEN M. PATEL, 401, MILE STONE, OPP. ICY-SPICY RESTAURANT, ANAND VIDYANAGAR ROAD, VALLAB VIDYANAGAR 388 120 VS THE A. C. I. T., ANAND CIRCLE, ANAND. PAN NO. AENPP 3438 G (APPELLANT) (RESPONDENT) APPELLANT BY SHRI SUNIL H. TALATI, AR RESPONDENT BY SHRI D. S. CHAUDHRY, DR O R D E R PER BHAVNESH SAINI: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE CIT(A)-IV, BARODA DATED 24 -10-2007 FOR ASSESSMENT YEAR 2001-02. 2. WE HAVE HEARD LEARNED REPRESENTATIVES OF BOTH THE P ARTIES, PERUSED THE FINDINGS OF THE AUTHORITIES BELOW AND CONSIDERE D THE MATERIAL ON RECORD POINTED OUT BY THE PARTIES. 3. THE LEARNED COUNSEL FOR THE ASSESSEE DID NOT PRE SS GROUNDS NO.1, 2 AND 5 OF THE APPEAL. GROUNDS NO.8, 9 AND 10 OF THE APPEAL ARE GENERAL IN NATURE AND ARE ALSO NOT ARGUED. THEREFORE, THESE GR OUNDS OF APPEAL OF THE ASSESSEE ARE DISMISSED BEING NOT PRESSED. 3. ON GROUNDS NO.3 AND 4, THE ASSESSEE CHALLENGED T HE ORDER OF THE LEARNED CIT(A) IN CONFIRMING THE DISALLOWANCE TO TH E EXTENT OF RS. 17,08,723/- IN RESPECT OF INTEREST EXPENSES CL AIMED BY THE ASSESSEE. THE ASSESSEE CHALLENGED THE DISALLOWANCE OF INTERES T OF RS.28,90,678/- ITA NO. 266/AHD/2008 SMT. CHANDRIKABEN M. PATEL VS ACIT, ANAND CIRCLE 2 ON LOANS TAKEN ON THE GROUND THAT THE AMOUNT OF LOA N TAKEN IS DIVERTED TO GIVING INTEREST FREE ADVANCES TO VARIOUS PERSONS . THE AO HAS ALSO GIVEN DETAILED WORKING FOR DIVERSION OF FUNDS AND DISALLO WANCE OF INTEREST IN THE ASSESSMENT ORDER. THE ASSESSEE HOWEVER, SUBMITTED T HAT INTEREST EXPENSES ARE ALLOWABLE AGAINST INCOME FROM OTHER SO URCES. HENCE, TOTAL EXPENSES SHOULD BE ALLOWED. IT WAS SUBMITTED THAT T HE ASSESSEE HAS USED THE FUNDS FOR VARIOUS ACTIVITIES WHICH ARE RELATED TO EARNING THE INCOME AND HENCE CORRESPONDING INTEREST EXPENSES SHOULD BE ALLOWED. IT WAS FURTHER SUBMITTED THAT THE ASSESSEE HAS UTILIZED TH E FUNDS TO ACQUIRE VARIOUS PROPERTIES WHICH ARE USED FOR THE BUSINESS AND HENCE SHOULD BE TREATED AS USED FOR THE PURPOSE OF BUSINESS AND INT EREST SHOULD BE ALLOWED. THE LEARNED CIT(A) CONSIDERING THE SUBMISS IONS OF THE ASSESSEE RESTRICTED THE ADDITION TO RS.17,08,723/- ON WHICH THE ASSESSEE HAS RAISED GROUNDS NO.3 AND 4 IN THE GROUNDS OF APPEAL. THE FINDINGS OF THE LEARNED CIT(A) IN PARA 6.2, 6.3 AND 6.4 ARE REPRODU CED AS UNDER: 6.2 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE C ASE AND VARIOUS CONTENTIONS AS ADVANCED BY THE APPELLANT. T HE ARGUMENT OF THE APPELLANT THAT INTEREST EXPENSES AR E ALLOWABLE FOR EARNING THE INCOME FROM OTHER SOURCES IS ACCEPTABLE. HOWEVER, IT IS TO BE SEEN WHETHER ALL T HE INTEREST BEARING FUNDS WERE UTILISED FOR EARNING INCOME FROM OTHER SOURCES OR WHETHER THE SAME IS DIVERTED TO OTHER AC TIVITIES, WHERE NO INCOME IS EARNED OR THE INCOME EARNED IS E XEMPT FROM TAX OR IT IS INVESTED FOR PERSONAL ASSET GENER ATION. 6.3. THE APPELLANT ON THE BASIS OF DETAILS FILED, B ASED ON THE WORKING OF THE CIT(A) ORDER FOR A. Y. 1999-2000, IS HAVING HER OWN FUNDS AMOUNTING TO RS.1,56,03,496/-. THE REMAIN ING FUNDS AVAILABLE ARE INTEREST BEARING FUNDS. THE APP ELLANT HAD INVESTED IN SHARES AMOUNTING TO RS.2,56,81,749/-, T HE INCOME OF WHICH IS EXEMPT. THE PROPERTY AT AHMEDABAD COSTS AT RS.7,71,684/- WHICH IS SELF OCCUPIED PROPERTY AND A PERSONAL ASSET AND THEREFORE, NOT ENTITLED TO ALLOWANCE OF E XPENDITURE. SIMILARLY, BOOKING AT NAVRATNA ORGANISATION FOR AN AMOUNT OF RS.9,01,170/- IS ALSO INVESTMENT FOR ACQUIRING PERS ONAL ASSET AND THIS IS NOT FOR ANY BUSINESS PURPOSE, AS THE AP PELLANT IS NOT DOING ANY BUSINESS, FOR WHICH THIS IS TO BE UTI LISED. THE ITA NO. 266/AHD/2008 SMT. CHANDRIKABEN M. PATEL VS ACIT, ANAND CIRCLE 3 BUILDING IN AHMEDABAD FOR OFFICE AT RS.4,75,000/- I S ALSO HELD AS PERSONAL ASSET, AS THE APPELLANT IS NOT DOING AN Y BUSINESS, FOR WHICH THIS BUILDING IS UTILIZED. SIMILARLY, REN TAL INCOME FROM PROPERTY IS ALSO NOT RELATED TO UTILISATION OF THIS BUILDING FOR ITS OWN BUSINESS. THE LAND AND OTHER ASSETS AMOUNTING T O RS.20,13,156/- ARE ALSO PERSONAL ASSETS. THE APPELL ANT HAD MADE INVESTMENT IN LAND AND INCOME THEREFROM IS SHO WN AS CAPITAL GAIN, AS AND WHEN PROPERTY IS SOLD. THE APP ELLANT IS ALSO NOT ENGAGED IN THE BUSINESS OF DEALING IN LAND . THEREFORE, ALL THESE INVESTMENTS ARE HELD AS INVESTMENTS OF PE RSONAL NATURE AND INVESTMENTS FROM WHICH DIVIDEND RECEIVED IS EXEMPT FROM TAX. THE TOTAL OF THE ABOVE INVESTMENTS COMES TO RS.2,98,42,759/-. THE REMAINING INVESTMENT IS HELD AS USED FOR EARNING INCOME FROM OTHER SOURCES FOR THE YEAR ENDING MARCH, 2001 I.E. RS.1,01,77,961/-. 6.4 THUS, IT IS CLEAR THAT THE APPELLANT HAS OWN IN TEREST FREE FUNDS AMOUNTING TO RS.1,56,03,496/- AND THEREFORE, CREDIT CAN BE GIVEN UP TO THIS EXTENT ONLY, IN CALCULATING THE SUMS DIVERTED ON WHICH NO INTEREST HAS BEEN EARNED. FOLL OWING THE DECISION OF HON. ITAT IN THE CASE OF TORRENT FINANC IERS V. ACIT, 73 TTJ 624, THE SET OFF OF ONLY THIS AMOUNT IS TO B E ALLOWED. THE DIFFERENCE AMOUNT OF RS.2,98,42,759/- MINUS RS.1,56,03,406/- = RS.1,42,39,363/- IS CONSIDERED T O BE INVESTMENTS ON WHICH NO INTEREST HAS BEEN CHARGED. THE DISALLOWANCE IS THEREFORE, JUSTIFIED. THE INTEREST @ 12% ON THIS AMOUNT COMES TO RS.17,08,723/-. THEREFORE, DISALLOW ANCE OF INTEREST IS CONFIRMED AT THIS AMOUNT AND THE BALANC E IS DELETED. 4. THE LEARNED COUNSEL FOR THE ASSESSEE DID NOT ARG UE ON THIS GROUND AND SUBMITTED THAT THE LEARNED CIT(A) ON PROPER APP RECIATION OF THE FACTS HAS RIGHTLY ALLOWED PART OF THE RELIEF IN FAVOUR OF THE ASSESSEE. ON CONSIDERATION OF THE ABOVE FACTS AND SUBMISSIONS OF THE LEARNED COUNSEL FOR THE ASSESSEE IN THE LIGHT OF THE FINDINGS GIVEN BY THE LEARNED CIT(A), WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LE ARNED CIY(A) IN GRANTING PART RELIEF TO THE ASSESSEE. NO ERROR IS POINTED OU T IN THE ORDER OF THE LEARNED CIT(A). WE, THEREFORE, DO NOT FIND ANY MERI T IN THESE GROUNDS OF APPEAL OF THE ASSESSEE. SAME ARE ACCORDINGLY DISMIS SED. ITA NO. 266/AHD/2008 SMT. CHANDRIKABEN M. PATEL VS ACIT, ANAND CIRCLE 4 5. ON GROUND NO.6 OF THE APPEAL, THE ASSESSEE CHALL ENGED THE ORDER OF THE LEARNED CIT(A) IN UPHOLDING THE DISALLOWANCE OF LOSS ON SALE OF SHARES BY TREATING THE SAME AS SPECULATION LOSS AND IT IS PRAYED THAT LOSS OF RS.8,13,012/- OUGHT TO HAVE BEEN ALLOWED AS SHORT T ERM CAPITAL LOSS AS CLAIMED. THE ASSESSEE CHALLENGED THE ORDER OF THE A O IN DETERMINING THE SHORT TERM CAPITAL LOSS OF RS.8,13,012/- BEING THE RESULT OF TRANSACTIONS MADE FOR PURCHASE AND SALE OF SHARES IN THIS MATTER AS SPECULATIVE LOSS. THE ASSESSEE SUBMITTED BEFORE THE LEARNED CIT(A) TH AT OBSERVATION OF THE AO IS PARTLY INCORRECT. THE AO HAS BASED HIS CONCLU SION ON ONE EXAMPLE AND HAS NOT CONSIDERED ALL THE 20 SCRIPTS FOR WHICH PURCHASES AND SALES WERE MADE IN THE SHARES. THERE ARE CASES WHERE THE SALE DATE IS AFTER 7 DAYS OF THE PURCHASE WHICH MEANS THAT DELIVERY HAS TO BE TAKEN AFTER PURCHASE AS PER PRACTICE OF THE SHARE MARKET AND TH EREFORE, IF SALE IS MADE AFTER SETTLEMENT DATE THEN IT MUST BE CONSIDER ED AS READY LOSS OR GAIN. THE LEARNED CIT(A) NOTED THAT THE ASSESSEE HA S ADMITTED SPECULATION LOSS TO CERTAIN EXTENT BUT FAILED TO GI VE EVIDENCE FOR THE REMAINING CLAIM WAS IN DEED A SHORT TERM CAPITAL LO SS. ORDER OF THE AO WAS UPHELD AND APPEAL OF THE ASSESSEE WAS DISMISSED . 6. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND SUBMITTED THA T PB -49 TO 78 ON THIS GROUND WERE FILED BEFORE THE LEARNED CIT(A). C ERTIFICATE TO THAT EFFECT IS ALSO GIVEN IN THE PAPER BOOK TO SHOW THAT THE AS SESSEE FILED COMPLETE DETAILS AND MATERIALS BEFORE THE LEARNED CIT(A) ON THIS ISSUE. THE LEARNED COUNSEL FOR THE ASSESSEE, THEREFORE, SUBMITTED THAT THE MATTER ON THIS ISSUE MAY BE REMANDED BACK TO THE FILE OF THE LEARN ED CIT(A) FOR RECONSIDERATION. THE LEARNED DR RELIED UPON THE ORD ER OF THE LEARNED CIT(A). 7. ON CONSIDERATION OF THE RIVAL SUBMISSIONS, WE AR E OF THE VIEW THAT THE MATTER REQUIRES RECONSIDERATION AT THE LEVEL OF THE LEARNED CIT(A). THE ITA NO. 266/AHD/2008 SMT. CHANDRIKABEN M. PATEL VS ACIT, ANAND CIRCLE 5 ASSESSEE HAS FILED SPECIFIC CERTIFICATE IN THE PAPE R BOOK THAT THE DOCUMENTS AND MATERIALS FILED AT PAGES 49 TO 78 ON THIS ISSUE WERE FILED BEFORE THE LEARNED CIT(A). HOWEVER, THE SAME HAS NO T BEEN DISCUSSED IN THE IMPUGNED ORDER. THE LEARNED COUNSEL FOR THE ASS ESSEE WAS, THEREFORE, JUSTIFIED IN SUBMITTING THAT THE MATTER REQUIRES RE CONSIDERATION. MOREOVER, THE ORDER OF THE LEARNED CIT(A) IS VIOLAT IVE OF SECTION 250 (6) OF THE IT ACT BECAUSE NO REASON HAS BEEN MENTIONED IN THE IMPUGNED ORDER ON THIS ISSUE. WE, ACCORDINGLY, SET ASIDE THE ORDER OF THE LEARNED CIT(A) ON THIS ISSUE AND RESTORE THIS GROUND TO THE FILE O F THE LEARNED CIT(A) WITH DIRECTION TO RE-DECIDE THE ABOVE ISSUE AFRESH BY GI VING REASONABLE SUFFICIENT OPPORTUNITY OF BEING HEARD TO THE ASSESS EE AND THE AO. THE LEARNED CIT(A) SHALL PASS REASONED ORDER BY DISCUSS ING THE MATERIAL ON RECORD. THE ASSESSEE IS AT LIBERTY TO ADDUCE FURTHE R ADEQUATE EVIDENCE BEFORE THE LEARNED CIT(A). THE LEARNED CIT(A) SHALL ALSO CALL FOR REMAND REPORT FROM THE AO ON ALL THE MATERIALS ON RECORD A ND FURTHER EVIDENCES IF ANY FILED BY THE ASSESSEE BEFORE HIM. WITH THESE OB SERVATIONS, THIS GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED FOR STA TISTICAL PURPOSES. 8. ON GROUND NO.7, THE ASSESSEE CHALLENGED THE ORDE R OF THE LEARNED CIT(A) IN CONFIRMING THE ACTION OF THE AO IN COMPUT ING SHORT TERM CAPITAL GAIN AT RS.7,09,615/- IN RESPECT OF OFFICE PROPERTI ES AS AGAINST LONG TERM CAPITAL LOSS OF RS.4,55,345/- BY THE ASSESSEE. THE AO MENTIONED THAT SALE OF TWO OFFICE PROPERTIES SITUATED AT KAIVANNA BUILDING HAVE BEEN SOLD AT RS.30,01,090/-. THE AO COMPUTED THE PROFIT AT TE RM LOAN CAPITAL GAINS OF RS.7,09,615/- AGAINST LONG TERM CAPITAL LOSS OF RS.4,55,345/- CLAIMED BY THE ASSESSEE. THE LEARNED CIT(A) FOLLOWING THE A PPELLATE ORDER OF THE LEARNED CIT(A) DATED 24-03-2006 NOTED THAT IT IS HE LD BY THE LEARNED CIT(A) THAT INVESTMENT IN THESE PROPERTIES TO BE FO R THE PURPOSE OF ACQUIRING PERSONAL ASSET AND NOT FOR BUSINESS. THE AO WAS, THEREFORE, JUSTIFIED IN COMPUTING THE INCOME UNDER THE HEAD CA PITAL GAINS. THE ASSESSEE HAS CLAIMED CERTAIN EXPENSES. THE AO HAS Q UANTIFIED THE COST OF ITA NO. 266/AHD/2008 SMT. CHANDRIKABEN M. PATEL VS ACIT, ANAND CIRCLE 6 ACQUISITION OF FLATS IN WHICH NO INTERFERENCE IS RE QUIRED. THE ASSESSEE PLEADED BEFORE THE LEARNED CIT(A) THAT SALE PROCEED S SHOULD BE TREATED UNDER THE HEAD BUSINESS RATHER SHORT TERM CAPITAL G AINS. THE LEARNED COUNSEL FOR THE ASSESSEE DID NOT ARGUE THIS GROUND AND HAS FAILED TO POINT OUT ANY ERROR IN THE ORDER OF THE LEARNED CIT (A). ON THE OTHER HAND, THE LEARNED DR RELIED UPON THE ORDER OF THE LEARNED CIT(A). 9. ON CONSIDERATION OF THE ABOVE FACTS, WE DO NOT F IND ANY INFIRMITY IN THE ORDER OF THE LEARNED CIT(A) IN DISMISSING THIS GROUND OF APPEAL OF THE ASSESSEE. THE LEARNED COUNSEL FOR THE ASSESSEE HAS NOT POINTED OUT ANY ERROR IN THE ORDER OF THE LEARNED CIT(A). WE, THERE FORE, CONFIRM THE SAME AND DISMISS THIS GROUND OF APPEAL OF THE ASSESSEE. 10. NO OTHER POINT IS ARGUED OR PRESSED. 11. AS A RESULT, APPEAL OF THE ASSESSEE IS PARTLY A LLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 23-07-2010. SD/- SD/- (N. S. SAINI) ACCOUNTANT MEMBER (BHAVNESH SAINI) JUDICIAL MEMBER DATE : 23-07-2010 LAKSHMIKANT/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER D Y. REGISTRAR, ITAT, AHMEDABAD