SHREELA DIAMONDS & JEWELS P. LTD, MUMBAI V. ITO WD 5(3)(2), MUMBAI

ITA 3646/MUM/2016

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 7443 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-04-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 26-05-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V VIDHYADHAR
• Assessee Lawyers: J P PUROHIT
• Keywords: Cost of acquisition; Speculation loss

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO. 3646 /MUM./2016 ( ASSESSMENT YEAR : 20 11 12 ) M/S. SHREELA DIAMONDS & JEWELS P. LTD. 16/1, MONT BLANC, NR. SHALIMAR HOTEL KEMPS CORNER, MUMBAI 400 036 PAN AABCG1688G . APPELLANT V/S INCOME TAX OFFICER WARD 5(3)(2), MUMBAI . RESPONDENT ASSESSEE BY : SHRI J.P. PUROHIT REVENUE BY : SHRI V. VIDHYADHAR DATE OF HEARING 10.04.2018 DATE OF ORDER 25.04.2018 O R D E R PER SAKTIJIT DEY, J.M. THIS IS AN APPEAL BY THE ASSESSEE AGAINST ORDER DATED 1 9 TH FEBRUARY 2016 , PASSED BY THE LEARNED COMMISSIONER (APPEALS) 10 , MUMBAI, FOR THE ASSESSMENT YEAR 20 11 12 . THE EFFECTIVE GROUND RAISED BY THE ASSESSEE READS AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED COMMISSIONER (APPEALS) ERRED IN CONFIRMING THE DISALLOWANCE OF LOSS OF ` 39,49,375 ON CANCELLATION OF FORWARD CONTRACT IN FOREIGN EXCHANGE. 2 M/S. SHREELA DIAMONDS & JEWELS P. LTD. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED COMMISSIONER (APPEALS) ERRED IN CONFIRMING THE DISALLOWANCE OF ` 2,87,520 PAID TOWARDS THE SOCIETY MAINTENANCE CHARGES OUTSTANDING FROM THE MEMBERS FROM WHOM THE PROPERTY WAS PURCHASED AND ADDED TO THE COST OF PROPERTY. 2 . BRIEF FACTS ARE, THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRADING AND EXPORT OF CUT AND POLISHED DIAMOND. FOR THE ASSESSMENT YEAR UNDER DISPUT E, THE ASSESSEE FILED ITS RETURN OF INCOME ON 20 TH SEPTEMBER 2011, DECLARING INCOME OF ` 11,90,861. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICING THAT THE ASSESSEE HAS CLAIMED LOSS OF ` 73,99,318, ON ACCOUNT OF CANCELLATION OF FORWARD C ONTRACT CALLED UPON THE ASSESSEE TO JUSTIFY THE CLAIM. IN RESPONSE TO THE QUERY RAISED BY THE ASSESSING OFFICER, THE ASSESSEE SUBMITTED ITS REPLY JUSTIFYING THE CLAIM OF LOSS . HOWEVER, THE ASSESSING OFFICER REJECTING THE EXPLANATION OF THE ASSESSEE DISALLO WED AN AMOUNT OF ` 39,13,375, TREATING IT AS SPECULATION LOSS. FURTHER, THE ASSESSING OFFICER DISALLOWED DEDUCTION CLAIMED WHILE COMPUTING SHORT TERM CAPITAL GAIN THEREBY DETERMINING SHORT TERM CAPITAL GAIN AT ` 1,31,928, AS AGAINST LOSS SHOWN AT ` 2,80,780. THE ASSESSEE CHALLENGED THE ADDITION / DISALLOWANCE BEFORE THE FIRST APPELLATE AUTHORITY. 3 . THE LEARNED COMMISSIONER (APPEALS), HOWEVER, SUSTAINED THE ADDITIONS MADE BY THE ASSESSING OFFICER. 3 M/S. SHREELA DIAMONDS & JEWELS P. LTD. 4 . LEARNED AUTHORISED REPRESENTATIVE SUBMITTED THAT DURI NG THE ASSESSMENT PROCEEDINGS, THE ASSESSEE IN REPLY TO THE QUERY RAISED BY THE ASSESSING OFFICER HAS MADE SUBMISSIONS QUANTIFYING THE LOSS ON ACCOUNT OF CANCELLATION OF PRE MATURE FORWARD CONTRACTS AT ` 22,11,842. HOWEVER, THE ASSESSING OFFICER WITHOUT PR OPERLY VERIFYING THE FACTS AND MATERIAL BROUGHT ON RECORD HAS DISALLOWED AN AMOUNT OF ` 39,13,375, WHICH HAS ALSO BEEN SUSTAINED BY THE LEARNED COMMISSIONER (APPEALS). LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , THE DEPARTMENTAL AUTHORITIES HAVING QUANTIF IED THE DISALLOWANCE AT A HIGHER FIGURE WITHOUT PROPERLY VERIFYING THE FACTS ON RECORD, THE ISSUE SHOULD BE RESTORED BACK TO THE FILE OF THE ASSESSING OFFICER FOR EXAMINING AFRESH. HE FURTHER SUBMITTED THAT THE DEDUCTION CLAIMED ON ACCOUNT OF SHORT TERM CA PITAL GAIN INCLUDED PAYMENT OF ` 2,87,520 TOWARDS SOCIETY MAINTENANCE CHARGES. HE SUBMITTED, THE ASSESSEE HAD TO PAY THE SAID AMOUNT AS IT WAS AN OUTSTANDING AMOUNT OF THE EARLIER OWNER FROM WHOM THE ASSESSEE HAD PURCHASED THE PROPERTY. HE SUBMITTED, THE A MOUNT HAS TO BE ADDED TO THE COST OF PROPERTY. HE SUBMITTED, WITHOUT PROPERLY VERIFYING THE FACT THE DEPARTMENTAL AUTHORITIE S HAVE MADE THE ADDITION WHICH SH OULD ALSO BE RESTORED BACK TO THE ASSESSING OFFICER FOR FRESH ADJUDICATION. 5 . THE LEARNED DEPARTMENT AL REPRESENTATIVE, THOUGH, RELIED UPON THE ORDER OF THE LEARNED COMMISSIONER (APPEALS), HOWEVER, HE 4 M/S. SHREELA DIAMONDS & JEWELS P. LTD. SUBMITTED , THE ISSUE S MAY GO BACK TO THE ASSESSING OFFICER FOR FACTUAL VERIFICATION. 6 . WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED MATERIAL ON RECORD. AS CAN BE GATHERED FROM THE SUBMISSIONS OF THE LEARNED AUTHORISED REPRESENTATIVE, THE BASIC GRIEVANCE OF THE ASSESSEE IS , THE ASSESSING OFFICER HAS MADE BOTH THE ADDITIONS WITHOUT PROPERLY VERIFYING THE FACTS AND MATERIALS BROUGHT ON RECORD BY THE ASSESSEE. FROM THE SUBMISSIONS MADE BEFORE THE ASSESSING OFFICER WHICH IS REPRODUCED IN THE ASSESSMENT ORDER, IT APPEARS THAT AS PER ASSESSEES CLAIM, THE LOSS ON ACCOUNT OF PRE MATURE CANCELLATI ON OF FORWARD CONTRACT AMOUNTED TO ` 22,11,842, WHEREAS , THE ASSESSING OFFI CER DISALLOWED AN AMOUNT OF ` 39,13,375. SIMILARLY, ASSESSEES CLAIM THAT THE AMOUNT OF ` 2,87,520 ADDED TO THE COST OF ACQUISITION OF PROPERTY REPRESENTS SOCIETY MAINTENANCE CHARGES OF THE EARLIER OWNER APPEARS TO HAVE NOT BEEN CONSIDERED BY THE DEPARTMEN TAL AUTHORITIES . S INCE THE ISSUE S RAISED BY THE ASSESSEE ARE PURELY FACTUAL AND HAS TO BE ASCERTAINED BY VERIFYING THE FACTS BROUGHT ON RECORD WHICH HAVE NOT BEEN DONE IN THE EARLIER STAGES OF THE PROCEEDINGS, WE ARE INCLINED TO RESTORE BOTH THE ISSUES REL ATING TO DISALLOWANCE OF LOSS ON CANCELLATION OF FORWARD CONTRACT AS WELL AS PAYMENT OF SOCIETY MAINTENANCE CHARGES TO THE FILE OF THE ASSESSING OFFICER FOR DENOVO ADJUDICATION AFTER DUE OPPORTUNITY 5 M/S. SHREELA DIAMONDS & JEWELS P. LTD. OF BEING HEARD TO THE ASSESSEE. BOTH THE GROUNDS ARE ALLO WED FOR STATISTICAL PURPOSES. 7 . IN THE RESULT, ASSESSEE S APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 25.04.2018 SD/ - RAJESH KUMAR ACCOUNTANT MEMBER SD/ - SAKTIJIT DEY JUDICIAL MEMBER MUMBAI, DATED: 25.04.2018 COPY OF THE ORDER FORWARDED TO : ( 1 ) THE ASSESSEE; ( 2 ) THE REVENUE; ( 3 ) THE CIT(A); ( 4 ) THE CIT, MUMBAI CITY CONCERNED; ( 5 ) THE DR, ITAT, MUMBAI; ( 6 ) GUARD FILE . TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY (ASSTT. REGISTRAR/SR.P.S) ITAT, MUMBAI