DCIT 9(3), MUMBAI V. ROOPMANGAL TRADE AND INVESTMENT CO. P. LD, MUMBAI

ITA 3552/MUM/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3510 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-06-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2006-2007
• Appeal Filed On: 18-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: AJAY I THAKORE
• Keywords: Reopening of assessment; Business income; Speculation loss; Difference of opinion; Change of opinion; Speculative transactions
• Section: 43(5); 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'D' BENCH, MUMBAI BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER ITA NO. 3552/MUM/2012 (ASSESSMENT YEAR: 2006-07) DCIT, CIRCLE - 9(3) M/S. ROOPMANGAL TRADE AND ROOM NO. 229, 2 ND FLOOR INVESTMENT CO. PVT. LTD. AAYAKAR BHAVAN, M.K. ROAD VS. G-52, CORNER OF MAIN AVENUE MUMBAI 400020 &16 TH ROAD, SANTACRUZ (W) MUMBAI 400054 PAN - AAACR0368R APPELLANT RESPONDENT APPELLANT BY: SHRI RAJARSHI DWIVEDY RESPONDENT BY: SHRI AJAY I. THAKORE DATE OF HEARING: 12.06.2013 DATE OF PRONOUNCEMENT: 12.06.2013 O R D E R PER D. MANMOHAN, V.P. THIS IS AN APPEAL FIELD AT THE INSTANCE OF THE REVE NUE AND IT PERTAINS TO A.Y. 2006-07. 2. FOLLOWING TWO GROUNDS WERE URGED BY THE REVENUE: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN QUASHING THE RE-ASSESSMENT PROC EEDINGS U/S 148 OF THE ACT, WITHOUT CONSIDERING THAT THE PROCEE DINGS U/S 148 WERE INITIATED IN ACCORDANCE WITH THE PROVISIONS OF THE INCOME TAX ACT, 1961. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) FAILED TO APPRECIATE THAT THE AMENDMENT TO SECTION 43(5) OF THE I.T. ACT, 1961 IS APPLICABLE W.E.F. 1/ 4/2006 AND HENCE THE DERIVATIVE LOSS INCURRED BEFORE THIS PERI OD AND BROUGHT FORWARD IS SPECULATIVE LOSS AND HENCE NOT ELIGIBLE FOR SET OFF AGAINST BUSINESS PROFITS AS PER SECTION 73 OF THE I .T. ACT. 3. THE ISSUE ON MERITS IS WITH REGARD TO ELIGIBILITY O F CARRY FORWARDED LOSSES OF ` 10,24,597/- AS DEDUCTION IN THE YEAR UNDER CONSIDER ATION. THE ASSESSEE IS PRIVATE LIMITED COMPANY ENGAGED IN THE BUSINESS OF SHARE ITA NO. 3552/MUM/2012 M/S. ROOPMANGAL TRADE AND INVESTMENT CO. P. LTD. 2 TRADING AND DERIVATIVE TRANSACTIONS. THE ASSESSEE C OMPANY CLAIMED SET OFF OF DERIVATIVE LOSSES PERTAINING TO A.Y. 2005-06, TREAT ED AS SPECULATIVE LOSS, AGAINST BUSINESS INCOME OF A.Y. 2006-07. PRIOR TO T HE AMENDMENT TO CLAUSE (D) OF SUB-SECTION (5) OF SECTION 43 OF THE INCOME TAX ACT BY FINANCE ACT, 2005 TRANSACTIONS IN RESPECT OF TRADING IN DERIVATI VES WERE TO BE TREATED AS SPECULATIVE TRANSACTIONS. ACCORDING TO THE AO THE C HARACTER OF THE LOSS WOULD NOT ALTER FROM 01.04.2006 AND SET OFF OF DERI VATIVE LOSSES OF EARLIER YEAR AGAINST BUSINESS INCOME OF THE CURRENT YEAR IS NOT PERMISSIBLE. HE ACCORDINGLY REOPENED THE ASSESSMENT AND DISALLOWED THE CLAIM OF SET OFF IN A.Y. 2006-07. 4. THE CASE OF THE ASSESSEE BEFORE THE FIRST APPELLATI VE AUTHORITY WAS THAT THE ASSESSEE IS ENTITLED TO SEEK RECONSIDERATION OF THE NATURE OF LOSS IN THE YEAR IN WHICH THE SET OFF IS CLAIMED. IN OTHER WORD S, IT DOES NOT BIND THE ASSESSEE AND THE MATTER CAN BE DECIDED AFRESH IN TH E SUBSEQUENT YEAR. THE LEARNED CIT(A) FOLLOWED THE DECISION OF THE ITAT MU MBAI BENCH IN THE CASE OF GAJENDRAKUMAR T. AGARWAL 11 ITR 640 AND BASED UP ON THE DECISION TAKEN THEREIN THE LEARNED CIT(A) ACCEPTED THE PLEA OF THE ASSESSEE. AGGRIEVED, REVENUE IS IN APPEAL BEFORE US. 5. THE LEARNED COUNSEL FOR THE ASSESSEE PLACED RELIANC E UPON THE DECISION OF THE ITAT MUMBAI BENCH (SUPRA) TO CONTEND THAT IN THE YEAR UNDER CONSIDERATION THE ASSESSEE CAN CLAIM SET OFF OF THE EARLIER YEARS LOSSES AGAINST THE BUSINESS INCOME AND THE CIT(A) HAVING F OLLOWED THE DECISION OF THE ITAT THE ORDER PASSED BY THE LEARNED CIT(A) DOE S NOT CALL FOR ANY INTERFERENCE. 6. THE LEARNED D.R. ADMITTED THAT THE FACTS AND CIRCUM STANCES IN THE INSTANT CASE ARE IDENTICAL TO THE CASE ON WHICH REL IANCE WAS PLACED BY THE LEARNED COUNSEL FOR THE ASSESSEE. 7. HAVING REGARD TO THE CIRCUMSTANCES OF THE CASE WE U PHOLD THE ORDER OF THE CIT(A) ON MERITS, SINCE THE DECISION OF THE LEA RNED CIT(A) WAS IN TURN BASED UPON THE VIEW TAKEN BY THE ITAT MUMBAI BENCH. ITA NO. 3552/MUM/2012 M/S. ROOPMANGAL TRADE AND INVESTMENT CO. P. LTD. 3 8. THE NEXT ISSUE IS WITH REGARD TO THE VALIDITY OF RE OPENING OF ASSESSMENT. THE CASE OF THE LEARNED COUNSEL FOR THE ASSESSEE WAS THAT THERE IS CHANGE OF OPINION AND HENCE THE AO WAS NOT JUSTI FIED IN REOPENING THE ASSESSMENT. 9. ON THE OTHER HAND, THE LEARNED D.R. SUBMITTED THAT RE-ASSESSMENT PROCEEDINGS WERE INITIATED WITHIN FOUR YEARS AND HE NCE THE REOPENING IS PERMISSIBLE IN THE PECULIAR FACTS OF THE CASE. SINC E THE ISSUE IS CONTENTIOUS, BOTH THE PARTIES ADMITTED THAT IN THE EVENT OF DECI DING THE MAIN ISSUE, I.E. ON MERITS, IT MAY NOT BE NECESSARY TO GO INTO THE ISSU E OF REOPENING OF ASSESSMENT, SINCE IT IS OF ACADEMIC IMPORTANCE ONLY . UNDER THESE CIRCUMSTANCES WE DO NOT PROPOSE TO GO INTO THE CORR ECTNESS OF THE ORDER PASSED BY THE CIT(A) VIS--VIS GROUND NO. 1 OF THE REVENUE. 10. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS T REATED AS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH JUNE, 2013. SD/- SD/- (D. KARUNAKARA RAO) (D. MANMOHAN) ACCOUNTANT MEMBER VICE PRESIDENT MUMBAI, DATED: 12 TH JUNE, 2013 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 20, MUMBAI 4. THE CIT 9, MUMBAI CITY 5. THE DR, D BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.