Shivayogi Swamy Arekuppi Hermath , Davangere V. The Income Tax Officer Ward-1(2), Davangere

ITA 2693/BANG/2018

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 0710 (ITAT-BANGALORE)
• Duration Of Justice: 2 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-11-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2015-2016
• Appeal Filed On: 26-09-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P. RENUGADEVI
• Assessee Lawyers: OMAR ABDULLAH
• Keywords: Unexplained expenditure; Opportunity of being heard; Speculation loss; Set aside
• Section: 69C; 22; 20

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC-C BENCH : BANGALORE BEFORE SHRI ARUN KUMAR GARODIA, ACCOUNTANT MEMBER ITA NO. 269 3 /BANG/201 8 ASSESSMENT YEAR : 20 15 - 16 SHRI SHIVAYOGI SWAMY AREKUPPIHEREMATH, C/O. MRUTHUNJAYA NURSING HOME, P J EXTENSION, DAVANGERE. PAN: ABIPH8619P VS. THE INCOME TAX OFFICER, WARD 1 (2), DAVANGERE. APPELLANT RESPONDENT APPELLANT BY : SHRI OMAR ABDULLAH, CA RESPONDENT BY : SMT. P. RENUGA DEVI, JCIT (DR) DATE OF HEARING : 22 . 11 .2018 DATE OF PRONOUNCEMENT : 29 . 11 .2018 O R D E R PER SHRI A.K. GARODIA, ACCOUNTANT MEMBER THIS APPEAL IS FILED BY THE ASSESSEE AND THE SAME I S DIRECTED AGAINST THE ORDER OF LD. CIT (A), DAVANGERE DATED 14.06.2018 FOR ASSESSM ENT YEAR 2015-16. 2. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER. 1. THE ORDER OF THE LEARNED CIT (A) IS OPPOSED TO L AW, FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE ORDER IS PASSED IN HASTE, WITHOUT PROVIDING SUFFICIENT AND REASONABLE OPPORTUNITY OF BEING HEARD. 3. THE ORDER IS PASSED AGAINST THE PRINCIPLES OF NA TURAL JUSTICE AND THUS LIABLE TO BE QUASHED. 4. THE LD. AO ERRED IN TREATING LOSS ARISING ON ACC OUNT OF TRADING IN SECURITIES AMOUNTING TO RS.4,48,724 AS UNEXPLAINED EXPLAINED EXPENDITURE U/S. 69C OF THE IT ACT AND THE LD. CIT( A) ERRED IN CONFIRMING THE SAME. 5. THE LD. AO AND CIT(A) OUGHT TO HAVE APPRECIATED THAT THE INVESTMENTS IN SECURITIES WERE REFLECTED IN THE BOO KS OF ACCOUNTS MAINTAINED BY THE APPELLANT. THE APPELLANT SEEKS THE LEAVE OF THE HON'BLE ITAT T O ADD, ALTER, AMEND OR DELETE ANY OF THE GROUNDS URGED AT THE TIM E OF HEARING. ITA NO. 2693/BANG/2018 PAGE 2 OF 4 3. BRIEF FACTS ARE THAT IT IS NOTED BY THE AO IN TH E ASSESSMENT ORDER THAT AS PER SUMMARY OF THE GAIN / LOSS STATEMENT FOR THE PERIOD FROM 01.04.2014 TO 31.03.2015 RECEIVED FROM THE STOCK BROKER, THE ASSE SSEE HAS INCURRED A LOSS OF RS. 4,48,724.19 WHICH INCLUDED SPECULATION LOSS OF RS. 1,53,558.11, NET REALIZED SHORT TERM LOSS OF RS. 2,72,744.34 AND NET REALISED LONG TERM LOSS OF RS. 22,421.74. THE AO HAS ALSO NOTED IN PARA 3.4 OF THE ASSESSMENT ORDER THAT ON A PERUSAL OF THE DETAILED STATEMENT, IT IS SEEN THAT THE LOSSES WERE INCURRED IN THE EQUITY TRADING ACTI VITIES CARRIED ON IN THE CASH MARKET SEGMENT AND IN THE DERIVATIVES SEGMENT FOR WHICH NO BOOKS OF ACCOUNTS WERE MAINTAINED BY THE ASSESSEE AS A RESUL T OF WHICH THERE WAS NO AUDIT BY THE CHARTERED ACCOUNTANT DESPITE THE FA CT THAT THE TURNOVER IN RESPECT OF THE ABOVE TRANSACTIONS EXCEEDED RS. ONE CRORE DURING THE YEAR. THEREAFTER IN PARA 4 OF THE ASSESSMENT ORDER, THE A O HAS STATED THAT THE ASSESSEE COULD NOT SATISFACTORILY EXPLAIN AS TO WHY THE BOOKS OF ACCOUNTS WERE NOT MAINTAINED AND AS TO WHY THE SAME WAS NOT REFLECTED IN THE RETURN FOR THE RELEVANT ASSESSMENT YEAR 2015-16. HE FURTH ER NOTED THAT FROM THE PERUSAL OF THE FINANCIAL STATEMENTS FURNISHED, IT I S SEEN THAT THE SAID LOSS WAS NOT DEBITED TO THE CAPITAL ACCOUNT THOUGH INVES TMENTS WERE REFLECTED AS AN ASSET. THE AO CAME TO THE CONCLUSION THAT THE E NTIRE LOSS SO INCURRED OF RS. 4,48,724/- IS UNEXPLAINED EXPENDITURE FALLING U /S. 69C OF IT ACT AND THE AO MADE ADDITION OF THE SAME AMOUNT U/S. 69C. BEIN G AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE CIT(A) BUT WITHOUT SUCCESS. NOW THE ASSESSEE IS IN FURTHER APPEAL BEFORE THE TR IBUNAL. 4. IT IS SUBMITTED BY LD. AR OF ASSESSEE THAT IT IS TRUE THAT BOOKS OF ACCOUNTS WERE NOT MAINTAINED BY ASSESSEE IN RESPECT OF SHARE PURCHASES AND SALE TRANSACTIONS. HE FURTHER SUBMITTED THAT THIS IS AL SO TRUE THAT THIS AMOUNT OF LOSS WAS INCURRED IN RESPECT OF SOME SHARE PURCHASE S AND SALES AND SUCH LOSS WAS NOT REDUCED FROM CAPITAL BALANCE SHOWN IN THE BALANCE SHEET. THEREAFTER, HE SUBMITTED THAT THE SAME CANNOT BE CO NSIDERED AS UNEXPLAINED EXPENDITURE U/S. 69C BECAUSE SUCH LOSS HAS TO BE REDUCED FROM THE AMOUNT OF INVESTMENTS IN SHARES SHOWN BY T HE ASSESSEE IN THE BALANCE SHEET AVAILABLE ON PAGE NO. 1 OF THE PAPER BOOK AT RS. 29,25,411.02. HE SUBMITTED THAT IN FACT, THIS AMOU NT OF LOSS HAS TO BE ITA NO. 2693/BANG/2018 PAGE 3 OF 4 REDUCED FROM CAPITAL BALANCE AND FROM THE INVESTMEN T FIGURE SHOWN AT RS. 29,25,411.02 AS SHARES SECURITIES STOCK UNDER THE H EAD INVESTMENTS AND THEREFORE, THE SAME CANNOT BE ADDED BACK U/S. 69C. AT THIS JUNCTURE, THE BENCH WANTED TO SEE THE DETAILS OF SHARES SHOWN IN THE BALANCE SHEET OF RS. 29,25,411.02 SUPPORTED BY DEMAT STATEMENT AND CONTR ACT NOTES OF THE SHARE BROKER FOR SHARE PURCHASE AND SALE TO SEE THAT IN F ACT, THE HOLDING OF SHARES BY THE ASSESSEE ON 31.03.2015 DOES NOT AMOUNT TO RS . 29,25,411.02 AS SHOWN IN THE BALANCE SHEET BY THE ASSESSEE AND THE ACTUAL HOLDING IS AFTER DEDUCTING THE SAID LOSS INCURRED BY THE ASSESSEE OF RS. 4,48,724.19. IN REPLY, HE SUBMITTED THAT THESE DETAILS ARE NOT READ ILY AVAILABLE AND HENCE, THE MATTER MAY BE RESTORED BACK TO THE FILE OF AO F OR FRESH DECISION AFTER EXAMINING THESE DETAILS. THE LD. DR OF REVENUE SUP PORTED THE ORDERS OF AUTHORITIES BELOW. 5. I HAVE CONSIDERED THE RIVAL SUBMISSIONS. FROM T HE AOS OBSERVATION IN THE ASSESSMENT ORDER, IT COMES OUT THAT THE ASSESSEE HA S INCURRED A LOSS OF RS. 4,48,724.19 IN SHARE PURCHASE AND SALE TRANSACTIONS AND THIS LOSS HAS NOT BEEN SHOWN BY ASSESSEE IN THE BALANCE SHEET SUBMITT ED BY THE ASSESSEE BEFORE THE AO BY WAY OF REDUCING THE SAME FROM THE CAPITAL ACCOUNT. AS PER THE BALANCE SHEET BUT IN MY CONSIDERED OPINION, THI S ALONE CANNOT BE A BASIS TO MAKE ADDITION U/S. 69C PARTICULARLY IN VIE W OF THIS EXPLANATION OF ASSESSEE BEFORE ME THAT SUCH LOSS WAS IN FACT REQUI RED TO BE REDUCED FROM THE CAPITAL ACCOUNT SHOWN IN THE LIABILITY SIDE OF THE BALANCE SHEET AND FROM THE INVESTMENTS SHOWN ON ASSETS SIDE OF THE BALANCE SHEET AT RS. 29,25,411.02. BUT THIS CANNOT BE ACCEPTED WITHOUT EXAMINING THE VERACITY OF THIS CLAIM AND THE REQUIRED DETAILS AND EVIDENCE S IN THIS REGARD ARE NOT AVAILABLE IN THE PAPER BOOK FILED BY THE ASSESSEE A ND THERE IS NO COMMENT OF THE LOWER AUTHORITIES ON THIS ASPECT AND THEREFO RE, I FEEL IT PROPER TO RESTORE THE MATTER BACK TO THE FILE OF AO FOR FRESH DECISION AND HENCE, I SET ASIDE THE ORDER OF CIT(A) AND RESTORE THE MATTER BA CK TO THE AO FOR FRESH DECISION WITH THE DIRECTION THAT THE ASSESSEE SHOUL D FURNISH NECESSARY EVIDENCES BEFORE THE AO IN SUPPORT OF THIS CLAIM TH AT THE ACTUAL CLOSING STOCK OF SHARES SHOWN AS INVESTMENTS AS ON 31.03.20 15 DOES NOT AMOUNT TO RS. 29,25,411.02 AND IN FACT, SUCH COST VALUE OF CL OSING STOCK OF SHARES HELD ITA NO. 2693/BANG/2018 PAGE 4 OF 4 BY ASSESSEE AS ON 31.03.2015 IS EQUAL TO THE AMOUNT OF SUCH STOCK SHOWN IN THE BALANCE SHEET AFTER DEDUCTING THE SAID LOSS INCURRED BY ASSESSEE OF RS. 4,48,724.19. IF THE ASSESSEE IS ABLE TO ESTABL ISH THIS CLAIM BY BRINGING NECESSARY EVIDENCES ON RECORD IN THE FORM OF SHARE DEMAT ACCOUNT STATEMENT, CONTRACT NOTES FOR PURCHASES OF SHARES A ND SALES ETC., THEN THE ADDITION MADE BY THE AO U/S. 69C IS NOT JUSTIFIED. THE AO SHOULD PASS NECESSARY ORDER AS PER LAW AS PER ABOVE DISCUSSION AFTER PROVIDING ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE . 6. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MENT IONED ON THE CAPTION PAGE. SD/- (ARUN KUMAR GARODIA) ACCOUNTANT MEMBER BANGALORE, DATED, THE 29 TH NOVEMBER, 2018. /MS/ COPY TO: 1. APPELLANT 4. CIT(A) 2. RESPONDENT 5. DR, ITAT, BANGALORE 3. CIT 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, BANGALORE.