The ITO, Ward-1(3), Veraval V. Shri Govind Premji Vasoya,

ITA 340/RJT/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 0172 (ITAT-RAJKOT)
• Duration Of Justice: 2 year(s) 3 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-08-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 24-08-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 28-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D R CHHATRE
• Assessee Lawyers: MJ RANPURA
• Keywords: Peak credit; Tax effect
• Section: 43(5)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL, RAJKOT [CONDUCTED THROUGH E COURT AT AHMEDABAD] BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER ./ ITA.NO.340/RJT/2014 WITH CO NO.16/RJT/2014 / ASSTT. YEAR: 2008-2009 ITO, WARD - 1(3) VERAVAL. VS SHRI GOVIND PREMJI VASOYA C/O. KHODIYAR TRADING CO TALALA DIST. GIR SOMNATH. ! / (APPELLANT) '# ! / (RESPONDENT) REVENUE BY : SHRI D.R. CHHATRE, SR.DR ASSESSEE BY : SHRI M.J. RANPURA, AR / DATE OF HEARING : 24/08/2016 / DATE OF PRONOUNCEMENT: 29/08/2016 $%/ O R D E R PER AMARJIT SINGH, ACCOUNTANT MEMBER: THIS IS REVENUES APPEAL AND ASSESSEES CO AGAINST ORDER OF LD.CIT(IV), RAJKOT DATED 26.3.2014. ASSESSMENT YEA R INVOLVED IS 2008-09. BOTH APPEAL AND THE CO ARE BEING DISPOSED OF BY THI S CONSOLIDATED ORDER. 2. FIRST WE TAKE UP THE ASSESSEES CO. 3. THOUGH THE ASSESSEE HAS RAISED ONLY ONE SUBSTANT IVE GROUND, BUT IT RAISES THREE ISSUES VIZ. (A) AGAINST RETENTION OF A DDITION UNDER SECTION 69A OF RS.11,20,000/-, (B) TREATMENT OF RS.4 LAKHS AS AGRI CULTURE INCOME AND (C) DIRECTION TO THE AO TO ALLOW SET OFF OF NET LOSS OF RS.3,46,000/- FROM DERIVATIVE TRANSACTIONS FROM THE PEAK AMOUNT OF RS. 11,20,000/-. ITA NO.340/RJT/2014 WITH CO 2 4. BRIEF FACTS OF THE CASE ARE THAT ASSESSEE IS AN AGRICULTURIST. HE FILED RETURN OF INCOME ON 26.2.2009 DECLARING TOTAL INCOM E AT RS.33,350/-, WHICH WAS PROCESSED UNDER SECTION 143(1). THEREAFTER, TH E CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT UNDER SECTION 143( 2), AND REQUISITE NOTICE WAS ISSUED ON THE ASSESSEE. AS PER THE AIR INFORMA TION, THE AO NOTICED THAT ASSESSEE HAS DEPOSITED CASH OF RS.20,60,000/- IN HI S SAVING BANK ACCOUNT DURING THE RELEVANT ASSESSMENT YEAR. THE ASSESSEE WAS CALLED UPON TO EXPLAIN THE SOURCE OF DEPOSITS WITH DETAILS. ASSESSEE CLAI MED THAT SOURCE OF DEPOSITS WAS FROM SALE OF AGRICULTURAL PRODUCE FROM THE LAND BELONGED TO THE HUF AND THAT CASH BELONGED TO THE HUF. HE FURNISHED COPY O F BANK STATEMENT, PROOF OF BEING AGRICULTURIST, SALES BILLS TO THE TUNE OF RS.25,59,194/- AND ALSO COPY OF RENT AGREEMENT OF MANGO ORCHARD. HOWEVER, THE AO D ECLINED ASSESSEES EXPLANATION AND TREATED THE ENTIRE DEPOSITS AS UNEX PLAINED INCOME OF THE ASSESSEE AND MADE ADDITION OF RS.20,60,000/-. 5. IN THE FIRST APPEAL, THE LD.CIT(A) ON THE BASIS OF COPIES OF 7/12 AND NUMBER OF TREES PLANTED THEREIN, FOUND THAT THE ASS ESSEE WAS HAVING AGRICULTURE LAND AND CULTIVATING MANGOES FROM ITS O RCHID. ACCORDINGLY, BASED AGRICULTURE INCOME SHOWN BY THE ASSESSEE IN THE SUB SEQUENT YEAR, HE ESTIMATED AGRICULTURE INCOME OF THE ASSESSEE AT RS.4.00 LAKHS AND DIRECTED THE AO TO TREAT RS.4.00 LAKHS AS AGRICULTURE INCOME. AS FAR AS ADDITION OF RS.20,60,000/- IS CONCERNED, THE LD.CIT(A) HELD THAT THERE ARE SEVERAL INSTANCES OF WITHDRAWALS AND DEPOSITS AND THEREFORE BENEFIT OF RE-DEPOSIT OF CASH FROM SUCH WITHDRAWAL SHOULD BE GIVEN, AND ACCORDINGLY, A PEAK DEPOSIT HAS BEEN WORKED AT RS.1 1,20,000/- AND TREATED THEM TO BE UNEXPLAINED CASH DEPOSITS. THE LD.CIT(A ) ALSO DIRECTED THE AO TO GIVE CREDIT OF RS.4.00 LAKHS AS AGRICULTURE INCOME. ITA NO.340/RJT/2014 WITH CO 3 SO FAR AS SET OFF LOSS FROM FUTURES & OPTIONS IS C ONCERNED, THE AO NOTICED THAT ASSESSEE HAS USED INCOME FROM AGRICULT URE PRODUCE FOR THE PURPOSE OF INVESTMENT IN SHARES/SECURITIES AND EARN ED SHORT TERM CAPITAL GAIN OF RS.5,24,226/. AGAINST THAT, THE ASSESSEE HAS CL AIMED SET OFF OF LOSS INCURRED ON TRADING IN FUTURES & OPTIONS, WHICH THE AO DENIE D THE CLAIM OF THE ASSESSEE ON THE GROUND THAT THE SAME WAS NOT ALLOWA BLE, AS THE SAID LOSS ARISES OUT OF SPECULATIVE ACTIVITIES. THE LD.CIT(A) HAS A LLOWED THE CLAIM OF THE ASSESSEE IN VIEW OF PROVISIONS OF SECTION 43(5) AND PROVISO (D) AS PER WHICH TRANSACTIONS CARRIED OUT IN RESPECT OF TRADING IN D ERIVATIVES THROUGH RECOGNIZED STOCK EXCHANGE SHALL NOT BE DEEMED TO BE SPECULATIV E TRANSACTIONS. 6. HAVING HEARD BOTH THE SIDES, AND CONSIDERING MAT ERIAL AVAILABLE ON RECORD, WE DO NOT FIND ANY MERIT IN THE CROSS-OBJEC TION OF THE ASSESSEE. AS REGARDS CASH DEPOSITS ARE CONCERNED, THE LD.CIT(A) NOTICED THAT THERE WERE SEVERAL WITHDRAWALS AND DEPOSITS IN THE BANK. THER EFORE, BY APPLYING PEAK CREDIT, THE LD.CIT(A) WORKED OUT UNEXPLAINED CASH D EPOSITS AT RS.11,20,000/-. THE LD.CIT(A) ALSO CONSIDERED THAT BENEFIT OF RE-DE POSIT OF THE WITHDRAWALS OF CASH CANNOT BE RULED OUT. AS REGARDS AGRICULTURE INCOME, THE LD.CIT(A) FOUND THAT ASSESSEE WAS HOLDING AGRICULTURE LAND WITH MANGO-ORCHID, WHICH W AS EVIDENT FROM VILLAGE RECORD LIKE 7/12 AND ALSO SALES BILLS. THEREFORE, HE ESTIMATED AGRICULTURE INCOME OF RS.4.00 LAKHS. SO FAR AS CLAIM OF SET OFF OF LOSS INCURRED ON ACCOUNT TRADING IN FUTURE & OPTIONS IS CONCERNED, T HE LD.CIT(A) ALLOWED THIS CLAIM AS PER SPECIFIC SECTION 43(5) OF THE INCOME T AX ACT. WHILE ALLOWING SET OFF OF LOSS, THE LD.CIT(A) ALSO FOLLOWED THE DE CISION OF HONBLE MADRAS HIGH COURT IN THE CASE OF M/S.CHENSINGH VENTURES (S UPRA), 291 ITR 258. CONSIDERING WELL REASONED FINDING OF THE LD.CIT(A) ON THESE ISSUES, WE DO NOT FIND ANY MERIT IN THE GROUNDS OF CO, AND THE REFORE, NO INTERFERENCE IN ITA NO.340/RJT/2014 WITH CO 4 THE LD.CIT(A) IS CALLED FOR, WHICH IS CONFIRMED, AN D CO OF THE ASSESSEE IS DISMISSED. 7. NOW WE TAKE UP THE APPEAL OF THE REVENUE. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS IN ITS APPEAL. (1) ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN LAW IN LIMITING THE ADDITION OF RS.20,60,0 00/- TO RS.11,20,000 ON ACCOUNT OF UNEXPLAINED PEAK CASH DEPOSIT AND THE REBY DELETING AN ADDITION OF RS 9,40,000. (2) ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN LAW IN DIRECTING THE AO TO TREAT RS. 4 LAC S AS AGRICULTURAL INCOME OF THE ASSESSEE AND ALLOW CREDIT OUT OF TOTA L PEAK AMOUNT OF RS 11,20,000. (3) ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LD. CIT (A) HAS ERRED IN LAW IN DIRECTING THE AO TO ALLOW SET OFF O F NET LOSS OF RS 3,46,000/- FROM DERIVATIVE TRANSACTIONS FORM THE PE AK AMOUNT OF RS. 1120,000/- 8. WHILE CONSIDERING THE CO OF THE ASSESSEE IN THE FOREGOING PARAGRAPHS OF THIS ORDER, WE HAVE UPHELD THE ORDER OF THE LD.C IT(A), THEREFORE, APPEAL OF THE REVENUE DOES NOT SURVIVE. EVEN OTHERWISE ALSO, APPEAL OF THE REVENUE IS NOT ADMISSIBLE IN VIEW OF RECENT CBDT CIRCULAR NO.2 1/2015 DATED 10.12.2015, RESTRICTING THE DEPARTMENT NOT TO FILE APPEAL BEFORE THE TRIBUNAL WHERE THE TAX EFFECT IS BELOW RS.10 LAKHS. THE LD. DR HAS NOT DISPUTED THAT TAX EFFECT ON ADDITIONS CONTESTED BY THE REVENUE IS BEL OW RS.10 LAKHS. THEREFORE, THE APPEAL OF THE REVENUE IS DISMISSED A S BEING FILED IN VIOLATION OF THE ABOVE CBDT INSTRUCTIONS. 9. IN THE RESULT, APPEAL OF THE REVENUE AND CO OF T HE ASSESSEE, BOTH ARE DISMISSED. SD/- SD/- (RAJPAL YADAV) JUDICIAL MEMBER (AMARJ IT SINGH) ACCOUNTANT MEMBER AHMEDABAD; DATED 29/08/2016