JITEN P. MODY (HUF), MUMBAI V. ITO 16(2)(1), MUMBAI

ITA 3673/MUM/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 84528 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-12-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: J
• Next Hearing Date: 18-12-2014
• Assessment Year: 2001-2002
• Appeal Filed On: 09-05-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: LOVE KUMAR
• Keywords: Business income; Additional evidence
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL J BENCH, MUM BAI .. , , BEFORE SHRI I. P. BANSAL, JM AND SHRI SANJAY ARORA , AM ./ I.T.A. NO. 3673/MUM/2013 ( / ASSESSMENT YEAR: 2001-02) JITEN P. MODY (HUF) 111-A, PARADISE APARTMENT, 44, NEPEAN SEA ROAD, MUMBAI-400 006 / VS. ITO-16(2)(1), MUMBAI ./ ./PAN/GIR NO. AACPJ 5895 G ( /APPELLANT ) : ( !' / RESPONDENT ) # $ / APPELLANT BY : SHRI VIJAY MEHTA !' # $ / RESPONDENT BY : SHRI LOVE KUMAR % &'( # )* / DATE OF HEARING : 18.12.2014 +,- # )* / DATE OF PRONOUNCEMENT : 18.12.2014 . / O R D E R PER SANJAY ARORA, A. M.: THIS IS AN APPEAL BY THE ASSESSEE DIRECTED AGAINST THE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS)-6, MUMBAI (CIT(A) FOR SHO RT) DATED 01.03.2013, DISMISSING THE ASSESSEES APPEAL CONTESTING ITS ASSESSMENT U/S . 143(3) R/W S. 254 OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER) FOR THE ASSESSMEN T YEAR (A.Y.) 2001-02 VIDE ORDER DATED 31.12.2009. 2. THE APPEAL RAISES THREE ISSUES PER ITS GROUNDS 2 (A) TO 2(C), WHICH WE SHALL TAKE UP IN SERIATIM, WITH GD. # 1 BEING GENERAL IN NATURE, NOT WARRANTING ANY ADJUDICATION, AND WHICH WE SHALL THEREFORE TAKE UP IN SERIATIM. 3. VI DE ITS FIRST EFFECTIVE GROUND, GD. # 2 ITA NO. 3673/MUM/2013 (A.Y. 2001-02) JITEN P. MODY (HUF) VS. ITO 2(A), THE ASSESSEE AGITATES THE DISALLOWANCE IN THE SUM OF RS.20,873/-, BEING THE DIFFERENCE IN THE EXPENDITURE BY WAY OF RENT CLAIME D BY IT (RS.1,70,873/-), AND THAT CORRESPONDINGLY SHOWN AS RENT RECEIVED BY THE LANDL ORD, SHRI SUKETU MODY (RS.1,50,000/-). THE DISALLOWANCE STANDS MADE, AS W ELL AS CONFIRMED BY THE LD. CIT(A), ON THE GROUND THAT THE ASSESSEE WAS UNABLE TO EXPLA IN THE SAID DIFFERENCE. THE POSITION CONTINUES TO OBTAIN BEFORE US AS WELL, SO THAT WE F IND NO REASON TO INTERFERE THEREWITH. THE DISALLOWANCE IS ACCORDINGLY CONFIRMED. WE DECIDE AC CORDINGLY. 3. GROUNDS # 2(B) AND 2(C), AS EXPLAINED BY THE LD. AUTHORIZED REPRESENTATIVE (AR), THE ASSESSEES COUNSEL, ARE INTER-RELATED, RAISING IN EFFECT A SINGLE ISSUE, WITH THE LATTER BEING AN ASPECT OF THE PRINCIPAL ISSUE RAISED PER G D. 2(B). THIS IS THE SECOND ROUND BEFORE THE TRIBUNAL, HE WOULD FURTHER CONTINUE, PLACING A COPY OF ITS ORDER IN THE FIRST ROUND (IN ITA NOS. 1585 & 1266/MUM/2006 DATED 03.11.2008) ON RECORD, WITH IT RESTORING THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER (A .O.) FOR FRESH CONSIDERATION IN VIEW OF THE ADDITIONAL EVIDENCES BEING RELIED UPON BY THE A SSESSEE. THE REVENUES CASE, AS MADE OUT BY THE A.O., WAS THAT THE LOSS OF RS.19,86,189/ - ON REDEMPTION OF UNITS OF KOTAK MAHINDRA MUTUAL FUND, WAS CLEARLY A CASE OF DIVIDE ND STRIPPING, SO THAT THE DIVIDEND OF RS.15,67,486/-, CLAIMED EXEMPT, CANNOT BE SAID TO B E INCOME AND, IN ANY CASE, THE SAID LOSS ALLOWED AS A SHORT TERM CAPITAL LOSS. THE PROF IT ON THE SALE OF SHARES, I.E., RS.2,73,251/-, ASSESSED AS SHORT-TERM CAPITAL GAIN (STCG), WAS ACCORDINGLY COMPUTED WITHOUT ALLOWING SET OFF THE AFORE-SAID SHORT-TERM CAPITAL LOSS (STCL) OF RS.19.86 LACS, AND WHICH FORMED THE SUBJECT MATTER OF THE ASSESSEE S GROUNDS 2(B) AND 2(C); IT CONTESTING THE DENIAL OF CLAIM OF CAPITAL LOSS OF RS.19.86 LAC S AS WELL AS OF THE PROFIT ON SALE OF SHARES BEING NOT ASSESSED AS BUSINESS INCOME. THE A.O., HOWEVER, HE WOULD CONTINUE, HAS IN THE SET ASIDE PROCEEDINGS ISSUED A FINDING O F THE IMPUGNED LOSS OF RS.19.86 LACS AS BEING A SHAM TRANSACTION, I.E., APART FROM HIS FIND ING OF IT BEING A CASE OF DIVIDEND STRIPPING, SO THAT THE SAID LOSS COULD NOT BE ALLO WED. THIS WAS NOT PERMISSIBLE IN-AS-MUCH AS THE SCOPE OF THE PROCEEDINGS BEFORE HIM WAS LIMI TED BY THE DIRECTIONS BY THE TRIBUNAL IN THE FIRST INSTANCE AS CONTAINED AT PARA 11 OF ITS O RDER - WHEREAT THE SAID ISSUE STANDS 3 ITA NO. 3673/MUM/2013 (A.Y. 2001-02) JITEN P. MODY (HUF) VS. ITO DISCUSSED BY IT, REFERRING THERETO. THE LD. CIT(A) HAS ALSO CONFIRMED HIS ORDER ON BOTH THE ASPECTS, RAISED VIDE GROUNDS # 4 TO 6 BEFORE HIM, B Y MERELY CONFIRMING HIS FINDINGS PER A NON-SPEAKING ORDER, I.E., WITHOUT ISSUING ANY SPECI FIC FINDINGS OF HIS OWN. FURTHER, THE ASSESSEES CASE, EVEN IF CONSIDERED AS OF DIVIDEND STRIPPING, IS FULLY COVERED BY THE DECISION BY THE APEX COURT IN CIT VS. WALFORT SHARE & STOCK BROKERS (P.) LTD. [2010] 326 ITR 1(SC). SECTION 94(7), PROVIDING FOR IGNORING SU CH LOSSES, STANDS CO-OPTED ON THE STATUTE BOOK ONLY W.E.F. A.Y. 2002-03. THE ASSESSEE S CONTENTIONS, WHERE NOT ACCEPTABLE, THE MATTER COULD BE RESTORED BACK TO THE FILE OF TH E A.O. FOR RECONSIDERATION. ON AN ENQUIRY WITH REGARD TO THE NATURE OF THE ADDITIONAL EVIDENCES, HE CLAIMED THE SAME TO BE THE ASSESSEES ANNUAL ACCOUNTS, VIZ. BALANCE-SHEET, PROFIT & LOSS ACCOUNT, ETC. THE LD. DR, ON THE OTHER HAND, WOULD SUBMIT THAT TH E FACTS BEING UNDISPUTED, THERE COULD BE NO CHARGE OF IMPROPER CONSIDERATION OF THE ASSESSEES CASE BY THE AUTHORITIES BELOW, WITH IN FACT ITS CONDUCT BEFORE THE LD. CIT (A) BEING FOUND SERIOUSLY WANTING, EVEN AS CLEARLY STATED BY HIM, AND NEITHER IS ANY C ASE FOR REMAND MADE OUT. 4. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. THE FACTS OF THE CASE, AS STATED AT PARA 2 (PAGE 3) OF THE ASSESSMENT ORDER, ARE SIMPLE AND UNDISPUTED; THE LD. AR ADMITTING TO THE SAME ON BEING QUESTIONED IN THE MATTER. THE ASSESSEE PURCHASED UNITS IN A MUTUAL FU ND FOR RS.140 LACS ON 09.10.2000, I.E., A DAY PRIOR TO THE DECLARATION OF DIVIDEND, RECEIVE D AT RS.15.67 LACS BY CHEQUE, AND CLAIMED EXEMPT. THE SAID UNITS WERE ALSO REDEEMED T HE VERY SAME DAY, I.E., 10.10.2000, AT A LOSS OF RS.19.86 LACS. THIS IS PRECISELY WHAT LED THE REVENUE TO STATE OF IT BEING CLEARLY A CASE OF DIVIDEND STRIPPING. NO DEFINITE FINDING WITH REGARD TO THE TRANSACTIONS BEING NOT GENUINE HAS BEEN ISSUED BY THE REVENUE AU THORITIES; THE A.O. ONLY MAKING A CASUAL REMARK OF IT APPARENTLY APPEARING TO BE SO, WITH NO SEPARATE OR INDEPENDENT FINDING IN THE MATTER BEING ISSUED BY THE LD. CIT(A), EVEN AS CONTENDED BY THE ASSESSEE BEFORE US. ITS CHALLENGING THE A.O.S LEGAL COMPETENCE TO ISS UE THE SAID FINDING IS, THUS, OF NO MOMENT. IN FACT, T HE ORDER BY THE ASSESSING AND THE FIRST APPELLATE A UTHORITY IN THE FIRST ROUND ARE NOT BEFORE US, SO AS TO ABLE TO STATE IF THERE HAS AT ALL BEEN AN EXPANSION IN THEIR 4 ITA NO. 3673/MUM/2013 (A.Y. 2001-02) JITEN P. MODY (HUF) VS. ITO FINDINGS, I.E., WITH REFERENCE TO THAT COMPRISING T HE REVENUES CASE IN THE FIRST ROUND. FURTHER, INASMUCH AS THE TRIBUNAL DIRECTED FRESH CO NSIDERATION, THE A.O. WAS REQUIRED TO RE-ADJUDICATE THE ISSUE, TAKING INTO ACCOUNT THE AD DITIONAL EVIDENCES BEING RELIED UPON BY THE ASSESSEE. HE COULD, THEREFORE, IN DOING SO, DEF INITELY FORM A VIEW ABOUT THE CHARACTER OF THE TRANSACTION. THERE IS NOTHING IN LAW THAT TH E FINDINGS IN THE SUBSEQUENT PROCEEDINGS COULD ONLY BE MORE FAVORABLE TO THE ASSESSEE, I.E., VIS--VIS THE EARLIER FINDINGS. AS SUCH, THOUGH DEFINITELY BOUND BY THE DIRECTION/S BY THE T RIBUNAL, WE FIND NOTHING THEREIN SO AS TO RESTRICT ANY INQUIRY OR VERIFICATION BY HIM OF THE ASSESSEES CLAIMS, SO THAT THERE WAS NO RESTRICTION ON HIS POWER OF ASSESSMENT, WHICH IS PL ENARY. ON FACTS, AS AFORE-NOTED, HE HAS MADE NO SUCH INQUIRY, MAKING ONLY A PASSING OBSERVA TION. AS WE DISCERN, THE DOUBT EXPRESSED QUA THE GENUINENESS OF THE TRANSACTION/S BY THE REVENU E IS WITH REGARD TO THE ASSESSEES INTENT IN HOLDING THE UNITS (BY WAY OF I NVESTMENT) OR OF ACTUALLY EARNING ANY HOLDING INCOME THEREON, BUT MOTIVATED BY TAX ARBITR AGE, WHICH IS IN FACT PATENT. ON MERITS, AS REGARDS THE FINDING OF DIVIDEND STRI PPING, THE SAME IS SELF-EVIDENT. THE ASSESSEE IN FACT DOES NOT DISPUTE THE SAME BEFO RE US, RELYING THOUGH ON THE DECISION IN THE CASE OF WALFORT SHARE & STOCK BROKERS (P.) LTD . (SUPRA). THE SAME BEING BINDING ON ALL THE COURTS IN INDIA; WE FIND THE REVENUES C ASE AS WITHOUT MERIT. THE ASSESSEES PLEA FOR REMISSION, MADE ON A CONDITIONAL BASIS, IS EQUALLY WITHOUT MERIT. WHAT IS THERE TO EITHER DENY THE ASSESSEES CLAIM OR TO RESTORE IT B ACK ? EVEN THE ADDITIONAL EVIDENCES FURNISHED, CLAIMED TO BE NOT EXAMINED, AND THEIR PU RPORT, IS, IN VIEW OF THESE INCIDENCES, LOST ON US, OR COULD BE EXPLAINED BY THE LD. AR DUR ING HEARING. WHY, RATHER, WE WONDER, WAS THE SAID DECISION NOT CANVASSED BEFORE THE AUTH ORITIES BELOW? THE PROVISION OF SECTION 94(7) STANDS INSERTED ON THE STATUTE BY FIN ANCE ACT, 2001 W.E.F. 01.04.2002, EVEN AS CLARIFIED BY THE APEX COURT THEREIN. IT STANDS F URTHER EXPLAINED BY IT THAT THE PROVISION OF SECTION 14A WOULD ALSO NOT APPLY IN-AS-MUCH AS LOS S IS NOT THE SAME AS EXPENDITURE, WHICH FALLS WITHIN THE PURVIEW OF SECTION 14A. THE ASSESSEE HAD ONLY MADE USE OF THE PROVISIONS OF LAW TO ITS BENEFIT, AND WHICH THEREF ORE CANNOT BE SAID TO BE AN ABUSE OF LAW. THE MATTER IS THUS SQUARELY COVERED BY THE SAID DEC ISION, AND WHICH LED US TO REMARK AND WONDER AS TO WHY THIS MATTER, SINCE SETTLED BY THE APEX COURT, SHOULD HAVE TRAVELLED 5 ITA NO. 3673/MUM/2013 (A.Y. 2001-02) JITEN P. MODY (HUF) VS. ITO BEFORE US. THE ASSESSEE IS ACCORDINGLY ENTITLED TO CLAIM STCL OF RS.19.86 LACS ON THE SALE OF UNITS, EVEN AS IT CLAIMS THE DIVIDEND RECEIVED T HEREON AS TAX EXEMPT. WE DECIDE ACCORDINGLY, ACCEPTING ITS GROUND # 2(B). WITH REGARD TO THE CLAIM OF PROFIT OF RS.2.73 LACS , EXPLAINED TO BE THE SECOND ASPECT OF THE MATTER, PER GROUND 2(C), WE ARE UNABL E TO SEE AS TO HOW THE SAME CONSTITUTES AN ASPECT OF THE ISSUE OF DIVIDEND STRIPPING ARIS ING ON THE PURCHASE AND SALE OF UNITS. THE SAID ISSUE WAS RAISED BEFORE THE FIRST APPELLAT E AUTHORITY, AS ALSO THE TRIBUNAL, AS INDEED IT IS BEFORE US, PER SEPARATE GROUNDS. ON ME RITS, THE FIRST APPELLATE AUTHORITY, THE RELEVANT PART OF WHOSE ORDER STANDS REPRODUCED BY T HE TRIBUNAL AT PARA 9 OF ITS ORDER (SUPRA), CLEARLY STATES THAT THE ASSESSEE ITSELF DI D NOT CLAIM THE GAIN ON THE SALE OF THE SHARES AS ITS BUSINESS INCOME AND, FURTHER, THAT NO SATISFACTORY EXPLANATION WAS GIVEN FOR THE DIFFERENTIAL GROUPING OF THE GAIN ARISING ON SU CH TRANSACTIONS, I.E., SOME AS PROFIT ON SALE OF SHARES AND SOME AS STCG. THE TRIBUNAL AL SO OBSERVED AN INCONSISTENCY IN ITS METHOD OF ACCOUNTING, DISCOUNTENANCING THE SAME - R EFER PARA 11 OF ITS ORDER, PART OF WHICH STANDS REPRODUCED IN THE IMPUGNED ASSESSMENT ORDER. NO PROPER EXPLANATION STANDS RENDERED OR OTHERWISE BROUGHT ON RECORD BY THE ASSE SSEE IN THE SECOND ROUND OF PROCEEDINGS AS WELL. UNDER THE CIRCUMSTANCES, WE OB SERVE NO INFIRMITY IN THE SAME BEING TREATED AS STCG. WE DECIDE ACCORDINGLY, DISMISSING THE ASSESSEES GROUND 2(C). 5. IN THE RESULT, THE ASSESSEES APPEAL IS PARTLY A LLOWED. /-)0 &12/) # 3. ' 4 ) # ) 56 ORDER PRONOUNCED IN THE OPEN COURT ON DECEMBER 18, 2014 SD/- SD/- (I. P. BANSAL) (SANJAY ARORA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER % ( MUMBAI; 7& DATED : 18.12.2014 '.&../ ROSHANI , SR. PS 6 ITA NO. 3673/MUM/2013 (A.Y. 2001-02) JITEN P. MODY (HUF) VS. 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