Sri Sibendu Basu, Kolkata V. ITO, Ward 54(4), Kolkata, Kolkata

ITA 316/KOL/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 1877 (ITAT-KOLKATA)
• Duration Of Justice: 10 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-01-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 16-02-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ROBIN CHOUDHURY AD DL
• Keywords: Corroborative evidences; Revenue expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BE NCH : KOLKATA [BEFORE HONBLE SRI N.V.VASUDEVAN, JM] I.T.A NO. 316/KOL/201 6 ASSESSMENT YEAR : 2009-1 0 SRI SIBENDU BASU -VS.- I.T.O., WARD-54 ( 4), KOLKATA KOLKATA [PAN : AECPB 9682 F] (APPELLANT) (RESPONDENT) FOR THE APPELLANT : SHRI SUBASH AGARWAL, ADVOCATE FOR THE RESPONDENT : SHRI ROBIN CHOUDHURY, AD DL.CIT DATE OF HEARING : 13.12.2017. DATE OF PRONOUNCEMENT : 03.01.2018. ORDER THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDER DATED 03.01.2017 OF CIT(A)-21 KOLKATA RELATING TO A.Y.2009-10. 2. GROUND NOS. 3 AND 4 WERE NOT PRESSED AND THE SAM E ARE DISMISSED AS NOT PRESSED. GROUND NO.5 IS GENERAL IN NATURE CALLING FOR NO SPE CIAL ADJUDICATION. GROUND NO.1 RAISED BY THE ASSESSEE READS AS FOLLOWS :- 1. FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE ACTION OF THE LD. A.O. IN MAKING DISALLOWANCE OF LOSS RS.7,.13,392/- OUT OF THE TOTAL LOSS OF RS.15,80,21 3.70 SUFFERED BY THE ASSESSEE DUE TO BRAZEN EMBEZZLEMENT DURING THE COURSE OF SHARE TRAD ING BUSINESS BY THE ERRANT OFFICIALS OF RELIGARE SECURITIES LTD. 3. THE ASSESSEE IS AN INDIVIDUAL. HE IS AN ADVOCATE BY PROFESSION. FOR A.Y.2009-10 HE FILED RETURN OF INCOME DECLARING TOTAL INCOME OF RS.4,33,400/-. IN COMPUTING TOTAL INCOME THE ASSESSEE HAD CLAIMED DEDUCTION A SUM OF RS.15,80,125/- BEING THE LOSS ON ACCOUNT OF SHARE TRADING. THE ASSESSEE HAD APPOINT ED M/S. RELIGARE SECURITIES LTD, WHO IS CARRYING ON SHARE AND SHARE BROKERAGE ACTIVI TY AS A CORPORATE MEMBER OF BOMBAY 2 ITA NO.316/KOL/2016 SRI SIBENDU BASU A.YR.2009-10 2 STOCK EXCHANGE LTD. HE HAD OPENED AN ACCOUNT AND HA D OFF-LINE TRADING AND DP ACCOUNT WITH M/S RELIGARE SECURITIES LTD. HE ALSO D EALT IN FUTURE AND OPTION SEGMENTS ON NSE LTD, THROUGH HIS STOCK BROKER. IT WAS THE PL EA OF THE ASSESSEE THAT M/S RELIGARE SECURITIES LTD HAD CARRIED OUT CERTAIN TRANSACTIO NS ON BEHALF OF THE ASSESSEE WITHOUT PROPER INSTRUCTIONS FROM THE ASSESSEE WHICH RESULTE D IN A LOSS OF RS.15,80,213.70 AND THE SAID LOSS HAD TO BE ALLOWED AS DEDUCTION IN COM PUTING THE TOTAL INCOME OF THE ASSESSEE. THE DETAILS OF THE TRANSACTION OF SHARES IN WHICH THE LOSS WAS INCURRED BY THE ASSESSEE WAS AS FOLLOWS :- 4. THE AO CALLED UPON THE ASSESSEE TO GIVE CONTRACT NOTES EVIDENCING THE LOSS IN SHARE TRADING IN FUTURE AND OPTION SEGMENT. THE ASS ESSEE WAS ABLE TO FILE EVIDENCE OF 3 ITA NO.316/KOL/2016 SRI SIBENDU BASU A.YR.2009-10 3 CONTRACT NOTES TO THE EXTENT OF LOSS OF RS.8,66,821 /-. SINCE THE EVIDENCE RELATING TO THE CONTRACT NOTES AND OTHER DOCUMENTS FOR THE REMAININ G LOSS OF RS.7,13,392/- WAS NOT FURNISHED, THE AO WAS OF THE VIEW THAT THE SAID LOS S CANNOT BE ALLOWED AS DEDUCTION. THE ASSESSEE POINTED OUT THAT IT HAD RAISED A DISPU TE FOR ARBITRATION WITH REGARD IMPROPER EXECUTION OF CONTRACTS BY M/S. RELIGARE SE CURITIES LTD AND HAD MADE A CLAIM AGAINST M/S. RELIGARE SECURITIES LTD FOR A SUM OF R S.15,76,022.07 WHICH WAS THE UNAUTHORIZED TRANSACTION CARRIED OUT BY THE STOCK B ROKER WHICH RESULTED IN THE LOSS TO THE ASSESSEE. THE ASSESSEE CLAIMED THAT THE LOSS IN QUE STION WAS IN RESPECT OF TRANSACTION THE DETAILS OF WHICH HAS ALREADY BEEN FURNISHED TO THE AO AND HE WAS NOT IN A POSITION TO GIVE THE EXACT CONTRACT NOTES FOR SOME OF THE TRANS ACTIONS AS THE BROKER HAS NOT FURNISHED THE SAME TO THE ASSESSEE IN VIEW OF THE PENDING DIS PUTE BEFORE THE ARBITRATOR. THE AO WAS OF THE VIEW THAT SINCE THE ASSESSEE HAD NOT FIL ED ANY SUPPORTING EVIDENCE TO PROVE THE REMAINING LOSS THE CLAIM OF THE ASSESSEE CANNOT BE ENTERTAINED. HENCE, LOSS TO THE EXTENT OF RS.7,13,392/- WAS NOT ALLOWED AS DEDUCTIO N IN COMPUTING TOTAL INCOME OF THE ASSESSEE. 5. ON APPEAL BY THE ASSESSEE THE CIT(A) CONFIRMED T HE ORDER OF THE AO. AGGRIEVED BY THE ORDER OF CIT(A) THE ASSESSEE IS IN APPEAL BE FORE THE TRIBUNAL. 6. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE CIT(A). HE ALSO FILED A COPY OF THE ARBITRATOR AWA RD DATED 10.06.2008 IN WHICH THE CLAIM OF THE ASSESSEE WAS REJECTED BY THE ARBITRATO RS. HE POINTED OUT THAT IN THE SAID AWARD AT PAGE 5 PARA-VII, THE ARBITRATOR HAS REFERR ED TO THE FACT THAT THE LOSS OF RS.15,76,022/- COULD NOT HAVE BEEN AVERTED BY M/S R ELIGARE SECURITIES LTD BECAUSE THE ASSESSEE HAD NOT GIVEN PROPER INSTRUCTIONS TO THE B ROKER FOR TAKING POSITION IN FUTURE AND OPTION SEGMENT. THIS SUBMISSION ACCORDING TO THE LD . COUNSEL FOR THE ASSESSEE IN THE ARBITRARY AWARD IS SUFFICIENT TO CONCLUDE THAT EVEN THE BROKERS HAVE ACCEPTED THAT THE LOSS INCURRED BY THE ASSESSEE WAS A SUM OF RS.15,76 ,022/- OWING TO DEALINGS BY M/S. 4 ITA NO.316/KOL/2016 SRI SIBENDU BASU A.YR.2009-10 4 RELIGARE SECURITIES LTD. ACCORDING TO HIM THIS EVID ENCE WAS SUFFICIENT TO ALLOW THE CLAIM OF THE ASSESSEE. THE LD. DR RELIED ON THE ORD ER OF THE CIT(A). 7. I HAVE CONSIDERED THE RIVAL SUBMISSIONS. I HAVE ALSO PERUSED THE AWARD DATED 10.06.2008 FILED BY THE LD. COUNSEL FOR THE ASSESSE E BEFORE ME. IT APPEARS THAT THE CLAIM OF THE ASSESSEE AGAINST M/S. RELIGARE SECURITIES LT D WAS THAT THEY HAD INCURRED A LOSS OF RS.15,76,022/- IN THE MATTER OF TRADING ON BEHALF O F THE ASSESSEE IN FUTURE AND OPTION SEGMENT AND THAT BECAUSE OF THE NEGLIGENCE IN NOT T AKING PROPER POSITION IN FUTURE AND OPTION SEGMENT OF BUYING AND SELLING SECURITIES, TH E LOSS HAS OCCURRED. THE PLEA OF M/S. RELIGARE SECURITIES LTD WAS THAT THE ASSESSEE DID N OT GIVE PROPER INSTRUCTIONS OF TAKING POSITION IN FUTURE AND OPTION SEGMENT AND THEREFORE HE CANNOT DISOWN THE LOSS. M/S. RELIGARE SECURITIES LTD HAD NOT DISPUTED THE QUANTU M OF LOSS AS OF RS.15,76,022/-. THE ARBITRATOR ULTIMATELY FOUND NO SUBSTANCE IN THE CLA IM OF THE ASSESSEE AND DISMISSED THE CLAIM OF THE ASSESSEE AGAINST M/S. RELIGARE SECURIT IES LTD. IN MY OPINION THIS EVIDENCE IS SUFFICIENT TO PROVE THE CLAIM OF THE ASSESSEE TH AT HE HAD INCURRED A LOSS OF RS.15,76,022/-. THE LOSS IS DIRECTED TO BE ALLOWED AS DEDUCTION. GROUND NO.1 IS ALLOWED. 8. GROUND NO.2 RAISED BY THE ASSESSEE READS AS FOLL OWS :- 2. FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE DISALLOWANCE OF RS. 85,743/- MADE BY THE A.O. ON ACCOUNT OF INTEREST ON IL & FS FOR MARGIN FUNDING I N FUTURE AND OPTION TRADING OF SHARE 9. AS FAR AS GROUND NO.2 RAISED BY THE ASSESSEE IS CONCERNED THE FACTS ARE AS FOLLOWS :- THE ASSESSEE IN INCOME AND EXPENDITURE ACCOUNT SHOW ED INTEREST OF RS.85,743/- PAID TO IL AND FS DURING THE RELEVANT PREVIOUS YEAR. THIS B ORROWING FROM IL AND FS FOR ACQUIRING INVESTMENTS AND THE INTEREST OF RS.85,743 /- HAD BEEN CAPITALIZED BY DEBITING THE INVESTMENT ACCOUNT. IN THE ABOVE CIRCUMSTANCES THE AO WAS OF THE VIEW THAT SINCE 5 ITA NO.316/KOL/2016 SRI SIBENDU BASU A.YR.2009-10 5 THE INTEREST EXPENSES HAS BEEN CAPITALIZED AS PART OF THE INVESTMENT THE SAME CANNOT BE ALLOWED AS DEDUCTION AND REVENUE EXPENDITURE WHIL E COMPUTING THE TOTAL INCOME OF THE ASSESSEE. 10. BEFORE CIT(A) THE ASSESSEE SUBMITTED THAT THE I NTEREST WAS WRONGLY CAPITALIZED AS COST OF INVESTMENT IN THE BOOKS OF ACCOUNTS AND THE TREATMENT SHOWN BY THE ACCOUNTANT WAS ERRONEOUS. THE ASSESSEE POINTED OUT THAT IT DOES NOT DESIRE TO CAPITALIZE THE INTEREST EXPENSES AS REVENUE EXPENDITURE. 11. THE CIT(A) HOWEVER REJECTED THE CLAIM OF THE AS SESSEE BY OBSERVING AS FOLLOWS :- I HAVE CONSIDERED THE FINDINGS OF THE AO AND THE W RITTEN SUBMISSION FILED BY THE AR. DURING THE ASSESSMENT PROCEEDINGS, DESPITE REPE ATED REQUEST AND OPPORTUNITIES GIVEN. THE ASSESSEE DID NOT FILE AUDITOR'S CERTIFIC ATE IN SUPPORT OF THE REVISED BALANCE SHEET. DURING THE APPELLATE PROCEEDINGS ALS O THE ASSESSEE HAS NOT FILED ANY SUCH CERTIFICATES FROM ITS AUDITOR REGARDING REVISE D BALANCE SHEET. IN SUCH SITUATION HOW CAN A CLAIM MADE BY THE ASSESSEE ON THE BASIS O F REVISED BALANCE SHEET E ACCEPTED. ACCORDINGLY, ASSESSEE'S APPEAL ON GROUND NO 3 IS DISMISSED. 12. AGGRIEVED BY THE ORDER OF CIT(A) THE ASSESSEE H AS RAISED GROUND NO.2 BEFORE THE TRIBUNAL. 13. AFTER CONSIDERING THE RIVAL SUBMISSIONS, I AM O F THE VIEW THAT THE ASSESSEE CLAIMS THAT INTEREST NEED NOT BE CAPITALIZED AS COST OF IN VESTMENT . THEREFORE THE CLAIM FOR ALLOWING AS REVENUE EXPENDITURE OUGHT TO HAVE BEEN ALLOWED BY THE REVENUE AUTHORITIES. I THEREFORE DIRECT THE AO TO ALLOW THE CLAIM OF THE ASSESSEE. HOWEVER IT IS MADE CLEAR THAT THE ASSESSEE CANNOT CLAIM THIS INTEREST AS COS T OF INVESTMENT IN FUTURE. THE LD. COUNSEL FOR THE ASSESSEE HAS MADE A STATEMENT ACROS S THE BAR THAT THE ASSESSEE UNDERTAKES NOT TO MAKE SUCH A CLAIM. GROUND NO.2 I S ACCORDINGLY ALLOWED. 6 ITA NO.316/KOL/2016 SRI SIBENDU BASU A.YR.2009-10 6 14. IN THE RESULT THE APPEAL BY THE ASSESSEE IS PAR TLY ALLOWED. ORDER PRONOUNCED IN THE COURT ON 03.01.2018. SD/- [ N.V.VASUDEVAN ] JUDICIAL MEMBER DATED : 03.01.2018. [RG SR.PS] COPY OF THE ORDER FORWARDED TO: 1. SRI SIBENDU BASU, 39A, TOWNSHED ROAD, GROUND FLO OR, KOLKATA-700025. 2. I.T.O., WARD-54(4), KOLKATA. 3. CIT(A)-10, KOLKATA 4. C.I.T.-8, KOLKA TA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER SENIOR PRIVATE SECR ETARY HEAD OF OFFICE/ D.D.O., ITAT KOLKATA BENCHES