M Nageswar Rao, Berhampur V. ITO, Berhampur

ITA 290/CTK/2011

• Counselvise Citation: 29022114 RSA 2011
• Duration Of Justice: 3 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-08-2011
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Assessment Year: 2004-2005
• Appeal Filed On: 19-05-2011
• Court: TRIBUNAL
• Department Lawyers: S C MOHANTY
• Assessee Lawyers: D K SETH
• Keywords: Unexplained investment; Gift; Business income

Judgement Text

IN THE INCME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK BEFORE : SHRI K.K.GUPTA, AM , AND SHRI K.S.S.PRASAD RAO, JM ITA NO. 290/CTK/2011 (ASSESSMENT YEAR 2004 - 05) M.NAGESWAR RAO, PROP. KASHI VISWANATHAN & SONS, COCOANUT MARKET,BERHAMPUR 760 001. P AN: AACHM 7427 G VERSUS INCOME - TAX OFFICER, WARD 2, BERHAMPUR. (APPELLANT) (RESPONDENT) FOR THE APPELLANT: SHRI D.K.SETH, AR FOR THE RESPONDENT SHRI S.C.MOHANTY, DR DATE OF HEARING : 11.08.2011 DATE OF PRONOUNCEMENT : 25.08.2011 ORDER SHRI K.K.GUPTA, AM : THE ASSESSEE IS IN APPEAL AGITATING THE CONFIRMATION PARTLY THE ADDITIONS AND DISALLOWANCES COMPUTED BY THE ASSESSING OFFICER VIDE HIS ORDER DT.31.12.2008 UNDER THE PROVISIONS OF SECTION 143(3)/147 OF THE INCOME - TAX ACT,1961. 2. THE ASSESS EE IS A DEALER IN SPICES AND FILED ITS RETURN OF INCOME ALONG WITH THE CAPITAL ACCOUNT AND BALANCE SHEET WHICH INDICATED RECEIPTS AS GIFTS FROM NON - RESIDENT INDIAN AMOUNTING TO 5,10,000 WHICH WERE CONSIDERED UNEXPLAINED MONEY U/S.69A BY THE ASSESSING OFFICER. THE ASSESSING OFFICER ALSO DISALLOWED CAPITAL LOSS RETURNED BY THE ASSESSEE ON PARTLY ACCEDING TO THE CONTENTION OF THE ASSESSEE THAT THE INCOME FROM THE SALE OF SHARES WA S THE ASSESSEES BUSINESS INCOME. AGGRIEVED, THE ASSESSEE APPEALED BEFORE THE FIRST APPELLATE AUTHORITY WHO CONSIDERED THE RECEIPTS OF GIFT FROM THE NRI AMOUNTING TO 5,10,000 AS APPROPRIATELY BROUGHT TO TAX BY THE ASSESSING OFFICER AS UNEXPLAINED INVESTM ENT U/S.69A ON THE BASIS OF FACTS AND CIRCUMSTANCES WHICH WERE CONSIDERED BY THE ASSESSING AUTHORITIES IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR. THE LEARNED CIT(A) ON THE ISSUE OF CAPITAL GAINS/LOSS CONSIDERED THE CBDT CIRCULAR NO.4/2007 DT.15.6.2007 B Y ITA NO.290/CTK/2011 2 UPHOLDING THE ASSESSING OFFICER TREATING THE NATURE OF TRANSACTION AS BUSINESS IN NATURE, THEREFORE, ASSESSABLE U/S.28 OF THE ACT. BUT HE DISALLOWED THE CAPITAL LOSS AMOUNTING TO 3,86,972 THAT COULD NOT BE SET OFF AGAINST THE BUSINESS INCOME. 3. THE LE ARNED COUNSEL FOR THE ASSESSEE INITIATED HIS ARGUMENTS AND SUBMITTED THAT THE FIRST ISSUE IS SETTLED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE ON IDENTICAL CIRCUMSTANCES WHEN THE TRIBUNAL WAS PLEASED TO HOLD THAT THE RE CEIPT OF DONATION IN FOREIGN EXCHANGE FROM A NRI AND RIGHTLY INVESTED IN THE BANK CANNOT BE SUBJECTED TO ADDITION AS UNEXPLAINED INVESTMENT U/S.69A INSOF AR AS THE ASSESSING AUTHORITIES HA D DOUBTED THE CAPACITY OF THE NRI TO DONATE SUCH AMOUNT. THE DONATION BEING FROM THE SAME SOURCE THEREFORE CANNOT BE IDENTIFIED AS UNEXPLAINED INVESTMENT U/S.69A IN THE IMPUGNED ASSESSMENT YEAR AS WELL. HOWEVER, ON THE SECOND ISSUE, THE LEARNED COUNSEL FOR THE ASSESSEE RELIED ON THE FACTS THAT IT WAS NEVER THE CASE OF THE A SSESSEE TO DISTINGUISH HOLDING OF SHARES EITHER AS FOR TRADING IN SHARE OR AS INVESTMENT IN SHARES . THE AUTHORITIES BELOW THEMSELVES HAVE COMPLICATED THE ISSUE BY PARTLY ACCEPTING THE HOLDING THE SHARES FOR INVESTMENT AND THE REMAINING FOR HOLDING AS CAPIT AL GAINS/LOSS NOT TO BE SET OF AGAINST INCOME IN THE IMPUGNED ASSESSMENT YEARS OTHER INCOME S . HE PRAYED THAT A SUITABLE DIRECTION MAY KINDLY BE GIVEN EITHER WAY SO THAT THE AUTHORITIES ARE BOUND TO THE DIRECTION OF THE CBDT CIRCULAR WHICH ONLY CLARIFIES T HE STAND TO BE TAKEN BY THE ASSESSING AUTHORITIES. 4. THE LEARNED DR DID NOT PUT FORTH ANY CONTROVERTING MATERIAL WITH RESPECT TO THE FIRST ISSUE NAMELY, 5,10,000 BEING DISALLOWED AND ADDED TO THE ASSESSEES INCOME U/S.69A AS COVERED IN FAVOUR OF THE ASSESSEE BY TRIBUNALS ORDER . HOWEVER, ON THE ISSUE OF THE NATURE OF TRANSACTION FROM THE ITA NO.290/CTK/2011 3 SHARES WAS TO BE CONSIDERED AS BROUGHT ON RECORD BY THE ASSESSING AUTHORITIES WHICH HE FULLY SUPPORTED. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. ON OUR CAREFUL CONSIDERATION O F THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE INCLINED TO HOLD THAT THE FIRST ISSUE RELATING TO THE ADDITION U/S.69A AMOUNTING TO 5,10,000 STOOD COVERED IN FAVOUR OF THE ASSESSEE ON IDENTICAL FACTS AND CIRCUMSTANCES WHEN DONATION HAS BEEN IDENTIFIED AND THE AMOUNTS HAVE BEEN RECEIVED IN THE ASSESSEES BANK ACCOUNT DULY ACKNOWLEDGING THAT THE AMOUNT HAS BEEN CREDITED IN THE ASSESSEE S BANK ACCOUNT ON RECEIPT FROM FOREIGN BANKS. THE TRIBUNAL WAS PLEASED TO HOLD THAT IT WAS NOT THE CASE OF THE ASSESSEE TO ESTABLISH THE CREDITWORTHINESS OF THE DONOR INSOFAR AS IN THE EARLIER INNINGS, THE ASSESSEE HAD BEEN ABLE TO ESTABLISH THE IDENTITY, GENUINENESS AND CREDITWORTHINESS OF THE DONER NAMELY THE NRI, WHO HAD PERSONALLY VISITED THE ASSESSING OFFICER AND GAVE STATEMENT ON OATH IN THE EARLIER INNINGS. AS THE LEARNED DR HAS NOT BEEN ABLE TO CONTROVERT THE FACTS TO BE DISTINGUISHED FOR THE IMPU GNED ASSESSMENT YEAR, WE DIRECT THE DELETION OF THE SAID ADDITION OF 5,10,000 AS ISSUE COVERED IN FAVOUR OF THE ASSESSEE ON THE BASIS OF THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2003 - 04 , AS PLACED N RECORD . 6. ON THE SECO ND ISSUE, THE CONTROVERSY BEGAN WITH THE ASSESSING AUTHORITIES COMPLYING TO THE CBDT CIRCULAR WHICH INDICATES THAT THE INTENTION OF THE ASSESSEE TO HOLD SHARES WHETHER FOR INVESTMENT OR TRADING HAS TO BE FOUND ON THE BASIS OF TRANSACTIONS CARRIED OUT BY TH E ASSESSEE AND NOT PARTLY EITHER FOR TRADING OR FOR INVESTMENT WHICH SUITES THE DEPARTMENT TO ENHANCE THE INCOME WHEN THE LOSS I S CLAIMED IS A BUSINESS LOSS. THE LEARNED COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE ASSESSEE HAS NO INTENTION OF ENTERING ITA NO.290/CTK/2011 4 INTO TRADING BUSINESS OF SHARES WHEN HIS MAIN BUSINESS IS IN TRADING OF SPICES THEREFORE HAS TO BE CONSIDERED FOR THE PURPOSE OF COMPUTING ONLY CAPITAL GAINS OR CAPITAL LOSS. THE CAPITAL LOSS IS TO BE CARRIED FORWARD/ADJUSTED AGAINT THE CAPITAL GAIN IN THE SUBSEQUENT YEAR WHICH THE ASSESSING OFFICER IS DIRECTED TO ALLOW. THE ASSESSING OFFICER HAD CONSIDERED THE HOLDING SHARES VIS - - VIS THE BANK ACCOUNT WHICH WAS NOT TO BE CONSIDERED FOR THE PURPOSE OF INTENTION OF THE ASSESSEE AS PER THE CBDT CIRCULAR. TO S ETTLE THE MATTER AT REST, WE DIRECT THE ASSESSING OFFICER TO COMPUTE THE CAPITAL GAIN OR LOSS ON SHARES IN ACCORDANCE WITH THE PROVISIONS OF THE I.T.ACT RELATING TO SUCH ACTIVITIES U/S.45. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. S D/ - S D/ - (K.S .S.PRASAD RAO) JUDICIAL MEMBER (K.K.GUPTA) ACCOUNTANT MEMBER DATE: 25.08.2011 H.K.PADHEE, SENIOR PRIVATE SECRETARY. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT: M.NAGESWAR RAO, PROP. KASHI VISWANATHAN & SONS, COCOANUT MARKET,BERHAMPUR 760 001 2. THE RESPONDENT: INCOME - TAX OFFICER, WARD 2, BERHAMPUR. 3. THE CIT, 4. THE CIT(A), 5. THE DR, CUTTACK 6. GUARD FILE (IN DUPLICATE) TRUE COPY, BY ORDER, SENIOR PRIVATE SECRETARY.