The ACIT,(OSD)Circle-10, Ahmedabad V. M/s. Shree Narayan Associates, Ahmedabad

ITA 3145/AHD/2011

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 9193 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 3 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-03-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 09-03-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 09-12-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Principle of natural justice; Transactions in derivatives; Corroborative evidences
• Section: 133(6); 43(5)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH (BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER & SHRI KUL BHARAT, JUDICIAL MEMBER) ITA. NO: 3145/AHD/2011 (ASSESSMENT YEAR: 2008-09) ASST. COMMISSIONER OF INCOME-TAX (OSD), CIRCLE- 10, AHMEDABAD V/S SHREE NARAYAN ASSOCIATES, FLAT NO. 8, RAJKRUPA APARTMENTS, OPP. KRISHNA COMPLEX, NAVRANGPURA, AHMEDABAD (APPELLANT) (RESPONDENT) PAN: ABIFS9125K APPELLANT BY : SHRI SOMOGYAN PAL, SR. D.R . RESPONDENT BY : MS. URVASHI SHODHAN, A.R. ( )/ ORDER DATE OF HEARING : 09-03-2016 DATE OF PRONOUNCEMENT : 11 -03-2016 PER N.K. BILLAIYA, ACCOUNTANT MEMBER: 1. THIS APPEAL BY THE REVENUE IS PREFERRED AGAINST THE ORDER OF LD. CIT(A)-XVI, AHMEDABAD DATED 23.09.2011 PERTAINING T O A.Y. 2008-09. ITA NO. 3145 /AHD/2011 . A.Y. 2008-09 2 2. THE SOLE GRIEVANCE OF THE REVENUE RELATES TO THE DI SALLOWANCE OF RS. 1,02,22,686/- MADE ON ACCOUNT OF LOSS CLAIMED IN RE SPECT OF SHARE TRADING ACTIVITY (F&O) INVOKING PROVISIONS OF SECTI ON 43(5) OF THE ACT. 3. THE ASSESSEE IS DEALING IN LAND & SHARE TRADING ACT IVITIES (F&O). THE RETURN FOR THE YEAR WAS FILED ON 29.09.2008 DECLARI NG TOTAL INCOME AT RS. 9,56,230/-. THE RETURN WAS SELECTED FOR SCRUTIN Y ASSESSMENT AND ACCORDINGLY STATUTORY NOTICES WERE ISSUED AND SERVE D UPON THE ASSESSEE. 4. DURING THE COURSE OF THE SCRUTINY ASSESSMENT PROCEE DINGS, THE A.O NOTICED THAT THE ASSESSEE HAS SHOWN LOSS ON SHARE A MOUNTING TO RS. 1,74,91,986/-THROUGH F&O TRADING. THE A.O FURTHER F OUND THAT THE ASSESSEE HAS DONE THE TRANSACTIONS THROUGH TWO BROK ERS NAMELY M/S. MONARCH PROJECT & FINMARKETS LTD. AND G.R. PANDYA S TOCK BROKING LTD. IN ORDER TO EXAMINE THE VERACITY OF THE LOSSES CLAI MED NOTICES U/S. 133(6) OF THE ACT WERE ISSUED TO THE SAID TWO BROKE RS. M/S. MONARCH PROJECT & FINMARKETS LTD. CONFIRMED THE TRANSACTION S. HOWEVER, THE SECOND BROKER G.R. PANDYA STOCK BROKING LTD. STATED THAT THEY DO NOT HAVE ANY CLIENT A/C. BY THE NAME OF SHRI NARAYAN AS SOCIATES (ASSESSEE). THE BROKER ALSO STATED THAT THEY HAVE C LOSED BUSINESS SINCE NOVEMBER, 2002. 5. ON RECEIVING SUCH REPLIES, THE A.O MADE INQUIRIES F ROM THE NATIONAL STOCK EXCHANGE AND THE BOMBAY STOCK EXCHANGE. BOTH THE AUTHORITIES FURNISHED THE REQUIRED DETAILS. THE ASSESSEE WAS AS KED TO EXPLAIN WHY RS. 1,01,43,606/- BEING THE LOSS ON SHARE TRADING F &O SHOULD NOT BE DISALLOWED AND ADDED TO ITS TOTAL INCOME. ASSESSEE FILED A DETAILED ITA NO. 3145 /AHD/2011 . A.Y. 2008-09 3 REPLY DATED 27.12.2010 AND FURNISHED ALL THE NECESS ARY DETAILS SUPPORTED BY RELEVANT DOCUMENTARY EVIDENCES. 6. THE A.O CONSIDERED THE CONTENTIONS OF THE ASSESSEE BUT DID NOT ACCEPT THE SAME. THE A.O WAS OF THE FIRM BELIEF THAT NO TR ANSACTION HAS TAKEN PLACE AT THE STOCK EXCHANGE THROUGH THE BROKER G.R. PANDYA SHARE BROKING LTD. AND ON THE BASIS OF THIS BELIEF LOSS O F RS. 1,02,22,686/- WAS DISALLOWED AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 7. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) A ND REITERATED THAT THE A.O HAS GROSSLY ERRED IN DENYING THE CLAIM OF L OSS NECESSARY DETAILS ALONG WITH SUPPORTING EVIDENCES WERE ONCE AGAIN FIL ED BEFORE THE LD. CIT(A). IT WAS STRONGLY CONTENDED BEFORE THE FIRST APPELLATE AUTHORITY THAT THE A.O HAS COLLECTED CERTAIN INFORMATION BEHI ND THE BACK OF THE ASSESSEE FOR WHICH NO OPPORTUNITY TO CROSS EXAMINE WAS GIVEN BY THE A.O. HENCE THE EVIDENCES RELIED UPON BY THE A.O ARE IN GROSS VIOLATION OF THE PRINCIPLES OF NATURAL JUSTICE. 8. AFTER CONSIDERING THE FACTS AND THE SUBMISSIONS AND THE SUPPORTING DOCUMENTARY EVIDENCES, THE LD. CIT(A) WAS CONVINCED THAT THERE IS A VIOLATION OF THE PRINCIPLES OF NATURAL JUSTICE IN A S MUCH AS THE A.O HAS RELIED UPON CERTAIN INFORMATION WHICH WERE GATHERED BEHIND THE BACK OF THE ASSESSEE AND DRAWING SUPPORT FROM THE DECISI ON OF THE HONBLE SUPREME COURT IN THE CASE OF VIJAY KUMAR SHARMA 249 ITR 554 AND HONBLE GUJARAT HIGH COURT IN THE CASE OF LATE LAXM ANBHAI S. PATEL 327 ITR 290. THE LD. CIT(A) DIRECTED THE A.O TO DEL ETE THE IMPUGNED DISALLOWANCE. AGGRIEVED BY THIS, THE REVENUE IS BEF ORE US. THE LD. D.R. STRONGLY SUPPORTED THE FINDINGS OF THE ASSESSING OF FICER BUT COULD NOT CONTROVERT THE FACT THAT THERE WAS A DENIAL OF THE PRINCIPLES OF NATURAL ITA NO. 3145 /AHD/2011 . A.Y. 2008-09 4 JUSTICE. PER CONTRA, THE LD. COUNSEL FOR THE ASSESS EE REITERATED WHAT HAS BEEN STATED BEFORE THE LOWER AUTHORITIES. THE LD. C OUNSEL ALSO DREW OUR ATTENTION TO THE DOCUMENTARY EVIDENCES FILED IN THE FORM OF A PAPER BOOK AND POINTED OUT THAT THE TRANSACTIONS WITH G.R . PANDYA SHARE BROKING LTD. ARE WELL SUPPORTED BY THE CONTRACT NOT ES, BANK STATEMENTS, AFFIDAVITS AND PAYMENT DETAILS. 9. HAVING HEARD THE RIVAL SUBMISSIONS, WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE ORDERS OF THE AUTHORITIES BELO W AND WITH THE ASSISTANCE OF THE LD. COUNSEL WE HAVE ALSO GONE THR OUGH THE RELATED DOCUMENTARY EVIDENCES BROUGHT ON RECORD BEFORE US. THE A.O HAS DENIED THE CLAIM OF LOSS MERELY BECAUSE THERE WAS N O CONFIRMATION RECEIVED FROM THE BROKER G.R. PANDYA SHARE BROKING LTD. HOWEVER, WE FIND THAT IN THE PAPER BOOK, THE ASSESSEE HAS FURNI SHED ALL THE SUPPORTING EVIDENCES RELATING TO THE TRANSACTIONS D ONE WITH THE SAID BROKER. WE ALSO FIND THAT THE SAME WERE FURNISHED D URING THE COURSE OF THE ASSESSMENT PROCEEDINGS ITSELF. WE FAIL TO UNDER STAND WHY THESE DOCUMENTARY EVIDENCES WERE RUBBISHED BY THE A.O. WE EQUALLY FAILED TO UNDERSTAND WHY THE A.O COMPLETED THE ASSESSMENT PROCEEDINGS ON THE STRENGTH OF INFORMATION GATHERED BEHIND THE BAC K OF THE ASSESSEE WHICH ACTION IS IN COMPLETE VIOLATION OF THE PRINCI PLES OF NATURAL JUSTICE. AS ENDORSED BY THE HONBLE SUPREME COURT AND THE HO NBLE HIGH COURT OF GUJARAT (SUPRA). 10. A PERUSAL OF THE DOCUMENTARY EVIDENCES CLEARLY SHO WS THAT THE ASSESSEE HAS DONE TRANSACTION WITH THE SAID BROKER AND, THEREFORE, THE ALLEGATIONS MADE BY THE A.O DOES NOT HOLD ANY WATER . WE, THEREFORE, ITA NO. 3145 /AHD/2011 . A.Y. 2008-09 5 DECLINE TO INTERFERE WITH THE FINDINGS OF THE LD. C IT(A), APPEAL FILED BY THE REVENUE IS ACCORDINGLY DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 11 - 03 - 2016 SD/- SD/- (KUL BHARAT) (N. K. BILLAIYA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHME DABAD