Shiw Narayan Mall, Bhubaneswar V. ACIT, Bhubaneswar

ITA 273/CTK/2010

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 7832 (ITAT-CUTTACK)
• Duration Of Justice: 1 year(s) 11 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-06-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 25-06-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 12-07-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A BHATACHARJEE
• Assessee Lawyers: C R DASD K PARIDA
• Keywords: Business income; Principle of natural justice; Speculation loss
• Section: 143(3); 142(1); 43(5)

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL, CUTTACK BENCH , CUTTACK (BEFORE S/SHRI K.K. GUPTA AM & K.S.S.PRASAD RAO, J M) I.T.A.NO.273 /CTK/2010 ASSESSMENT YEAR: 2006-07 SHIW NARAYAN MALL, PLOT NO.4213, CHINTAMANI ROAD, BHUBANESWAR-751 006 PA NO.AHQPM 0824R VS ACIT, CIRCLE 1(1), BHUBANESWAR APPELLANT RESPONDENT APPELLANT BY: SHRI C.R.DAS/D.K.PARIDA RESPONDENT BY: SHRI A.BHATACHARJEE DATE OF HEARING : 25.6.2012 DATE OF PRONOUNCEMENT: 29.6.2012 ORDER PER K.S.S.PRASAD RAO, JM THIS APPEAL IS FILED BY THE ASSESSEE HAVING BEEN AG GRIEVED BY THE ORDER DATED 30.4.2010 OF THE CIT (A)-I, BHUBANESWAR FOR THE ASS ESSMENT YEAR 2006-07 IN THE CASE OF THE ASSESSEE. THE ASSESSEE HAS RAISED FOLLOWING ISSUES IN HIS GROUNDS OF APPEAL: 1. THAT THE ORDER PASSED BY LD CIT(A) U/S.250 IS A RBITRARY, EXCESSIVE AND BAD IN LAW. 2. THAT THE LD CIT(A) HAS WRONGLY CONFIRMED THE TWO FOLD TREATMENT OF CAPITAL GAIN BY LD AO MAKING THE ADDITION OF RS.15, 54,343 TREATING THE LONG TERM CAPITAL GAIN AS BUSINESS PROFIT AND IN TH E OTHER HAND ACCEPTING THE SHORT TERM CAPITAL GAIN AS SHORT TERM CAPITAL G AIN OF RS.36,81,159. 3. THAT LD CIT(A) HAS WRONGLY CONFIRMED THE DISALLO WANCE OF FUTURE & OPTION TRADING LOSS TO THE TUNE OF RS.44,72,952 TO BE SET OFF AGAINST SHORT TERM CAPITAL GAIN, MADE BY THE AO TREATING TH E AS SPECULATION PROFIT. 4. THAT THE LD AO HAS WRONGLY PASSED THE ORDER TREA TING RS.15,54,343 AND RS.36,81,159 AS BUSINESS PROFIT AND SHORT TERM CAPITAL GAIN RESPECTIVELY RATHER TREATING BOTH GAIN AS SPECULATI ON PROFIT ACCORDING TO I.T.A.NO.273 /CTK/2010 ASSESSMENT YEAR: 2006-07 2 EXPLANATION TO SECTION 73 FURTHER SETTING OFF SPECU LATION LOSS OF RS.44,72,952 AGAINST THE ABOVE CAPITAL GAIN. 2. BOTH THE PARTIES WERE HEARD REGARDING THE ISSUES RAISED IN THE APPEAL AND ITS LEGAL IMPLICATIONS. 3. ON CAREFUL ANALYSIS OF THE ORDER OF THE CIT (A) IN THE LIGHT OF MATERIAL MADE AVAILABLE BEFORE THE TRIBUNAL AS WELL AS RIVAL SUBM ISSIONS OF BOTH PARTIES, THE UNDISPUTED FACTS RELATING TO THESE ISSUES ARE THAT THE ASSESSE E IS ENGAGED IN THE BUSINESS OF SHARE BROKING. HE FILED HIS RETURN OF INCOME FOR THE PER IOD UNDER CONSIDERATION SHOWING TOTAL LOSS OF RS.14,21,004. THIS RETURN WAS ORIGINALLY P ROCESSED UNDER SECTION 143(1) OF THE I.T.ACT, 1961. LATER ON, IT WAS SELECTED FOR SCRUT INY. THE SCRUTINY ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) BY THE AO ON 31.12.2 008 AFTER ISSUING STATUTORY NOTICES UNDER SECTION 143(2) AND 142(1) OF THE ACT AND CONS IDERING THE CONTENTION OF THE ASSESSEE AND MATERIAL PLACED BY THE ASSESSEE, WHERE IN, THE AO ADDED RS.15,54,343 CLAIMED AS LONG TERM CAPITAL GAIN BUT TAKEN AS BUS INESS INCOME OF THE ASSESSEE. SO ALSO THE AO REFUSED TO ALLOW LOSS OF RS.44,72,952 CLAIME D BY THE ASSESSEE ON ACCOUNT OF TRADING IN SHARES AS LOSS UNDER THE HEAD BUSINESS BUT TAKEN AS SPECULATION LOSS BY THE AO. IN THE FIRST APPEAL, LD CIT(A) NEGATED THE CLA IM OF THE ASSESSEE. 4. DURING THE COURSE OF HEARING, LD COUNSEL FOR THE ASSESSEE VEHEMENTLY ARGUED THAT THE ACTION OF THE LOWER AUTHORITIES ARE NOT CO RRECT IN CONSIDERING THE LONG TERM CAPITAL GAIN AS BUSINESS INCOME AND REFUSING TO AL LOW LOSS ON ACCOUNT OF FUTURE & OPTION TRADING AS THE SAME IS ON ACCOUNT OF SPECULA TION LOSS WHEREAS THE ASSESSEE HAS CLAIMED THE SAME AS LONG TERM CAPITAL GAIN AND THE LOSS ON ACCOUNT OF FUTURE AND OPTION TRADING. IN SUPPORT OF HIS CONTENTION, LD A .R. HAS RELIED ON THE DECISION OF ITAT JEYPORE BENCH IN THE CASE OF P.S.KAPUR VS. ACIT, 2 9 SOT 587(JP), WHEREIN, IT WAS HELD THAT SECTION 43(5) OF THE I.T.ACT, 1961 DEALS WITH SPECULATION TRANSACTION, WHEREIN, CLAUSE (D) WAS INSERTED IN THE PROVISO AS PER THE F INANCE BILL 2005 WITH EFFECT FROM 1.4.2006 IS CLARIFICATORY IN NATURE AND, THEREFORE, IT HAS RETROSPECTIVE OPERATION. THEREFORE, LD REPRESENTATIVE SOUGHT FOR SETTING ASI DE THE ORDERS OF LOWER AUTHORITIES AND ALLOWING THE APPEAL OF THE ASSESSEE DIRECTING THE D EPARTMENT TO TREAT THE LONG TERM CAPITAL GAIN AS SUCH AND ALLOW LOSS ON ACCOUNT OF FUTURE & OPTION TRADING. I.T.A.NO.273 /CTK/2010 ASSESSMENT YEAR: 2006-07 3 5. CONTRARY TO THIS, LD D.R. HAS VEHEMENTLY ARGUED SUPPORTING THE ORDERS PASSED BY THE DEPARTMENT AUTHORITIES AND SOUGHT FOR DISMISSAL OF THE APPEAL OF THE ASSESSEE. 6. ON CAREFUL ANALYSIS OF THE ORDERS PASSED BY THE LOWER AUTHORITIES, IT IS SEEN THAT BEFORE REACHING TO THE CONCLUSION ABOUT THE CLAIM M ADE BY THE ASSESSEE AS LONG TERM CAPITAL GAIN AND LOSS ON FUTURE & OPTION TRADING, T HEY HAVE FAILED TO MAKE OUT ANY MATERIAL AS TO WHAT ACTUALLY THE ASSESSEE IS DOING AND AS TO HOW MUCH THE ACTIVITIES IS RELATED TO SHARE BROKING AND HOW MUCH OF HIS BUSINE SS IS RELATED TO SHARE TRADING AND ALSO THE INTENTION OF THE ASSESSEE IN PURCHASING TH E SHARES. THESE ASPECTS ONLY WILL DETERMINE AS TO WHETHER THE INCOME DERIVED BY THE A SSESSEE IN SALE OF THE SHARES IS TO BE TREATED AS BUSINESS INCOME OR LONG TERM CAPITAL GAIN. FOR THIS PURPOSE, THE AUTHORITIES MUST NECESSARILY EXAMINE EACH AND EVERY TRANSACTION OF PURCHASE AND SALE OF SHARES BY THE ASSESSEE DURING THE YEAR UNDER CONSID ERATION AND AFTER SUCH EXAMINATION ONLY, THE CONCLUSION WILL BE ARRIVED AT REGARDING T HE NATURE OF THE INCOME TAXABLE IN THE HANDS OF THE ASSESSEE. AS THERE IS NO SUCH EXAMINA TION DONE BY THE AUTHORITIES BELOW, WE DEEM IT FIT AND APPROPRIATE TO RESTORE THE MATTE R TO THE FILE OF THE AO FOR DENOVO CONSIDERATION OF THESE ISSUES. OF COURSE, THE AO W ILL FOLLOW PRINCIPLE OF NATURAL JUSTICE AND PASS NECESSARY CONSEQUENTIAL ORDER AS PER LAW. 7. IN THE RESULT, APPEAL IS ALLOWED FOR STATISTICAL PURPOSE. SD/- SD/- (K.K.GUPTA) (K.S.S.PRASAD RAO) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 29 TH JUNE, 2012 PARIDA COPY TO : 1. ASSESSEE- SHIW NARAYAN MALL, PLOT NO.4213, CHINT AMANI ROAD, BHUBANESWAR-751 006 2. ASSESSING OFFICER- ACIT, CIRCLE 1(1), BHUBANESWA R 3. CIT, BHUBANESWAR 4. CIT (A), BHUBANESWAR 5. D.R., ITAT, CUTTACK. 6. GUARD FILE. TRUE COPY BY ORDER SR. PVT. SECRETARY I.T.A.NO.273 /CTK/2010 ASSESSMENT YEAR: 2006-07 4