Chandra Ramesh, CHENNAI V. ACIT, CHENNAI

ITA 373/CHNY/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 5660 (ITAT-CHENNAI)
• Duration Of Justice: 9 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-12-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 04-07-2017
• Assessment Year: 2000-2001
• Appeal Filed On: 13-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASISHTRIPATI JCIT
• Assessee Lawyers: R VIJAYARGHAVAN
• Keywords: Business income
• Section: 143(3); 147

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI . . . , , # BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER /. I.T.A. NOS. 371, 372 & 373/MDS/2017 / ASSESSMENT YEARS : 1998-99, 1999-2000 & 2000-01 S MT. CHANDRA RAMESH, NO.2, VIJAYARAGAHAVA ROAD, T. NAGAR, CHENNAI 600 017. [PAN: AAAPR 6568L] VS. ASSISTANT COMMISSIONER OF INCOME TAX, NON CORPORATE CIRCLE -1(1), CHENNAI. ( / APPELLANT) ( / RESPONDENT) %& / APPELLANT BY : SHRI. R. VIJAYARGHAVAN, ADVOCATE )*%& / RESPONDENT BY : SHRI. ASISHTRIPATI, JCIT & /DATE OF HEARING : 14.09.2017 & /DATE OF PRONOUNCEMENT : 08.12.2017 / O R D E R PER S. JAYARAMAN, ACCOUNTANT MEMBER: THE ASSESSEEFILED THESE APPEALS AGAINST THE COM MON ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-2, CHENNAI IN ITA NOS. 148,241&20/CIT(A)-2/2013-14 DATED 16.12.2016 FOR T HE ASSESSMENT YEARS 1998-99 TO 2000-2001. :-2-: ITA NOS. 371, 372 & 373/MDS/2017 2. THE ASSESSEE IS A TRADER AND DEALER IN SHARES BE SIDES HAVING INVESTMENTS . HER ASSESSMENT FOR AY 2000-2001 WAS MADE U/S. 143(3) ON 31.3.2004, IN WHICH THE AO DISALLOWED , INTER-ALIA, THE PROVISION FOR DIMINUTION BEING THE DIFFERENCE BETWEEN COST AND MARKET VALUE OF SHARES. THE SAID ADDITION WAS UPHELD BY THE CIT(A)-VI, CHENNAI VIDE ORDER DT. 13.12.2004 AND ALSO BY THE HON'BLE ITAT, CHENNAI BENCH 'A', VIDE ITS ORDER IN ITA NO. 708(MDS)/2005DT. 7.5.2008. FOLLOWING THIS, THE ASS ESSMENTS FOR AYS 1998- 99 TO 2000-01 WERE RE- OPENED U/S. 147 AND WERE CO MPLETED BRINGING TO TAX (I) THE PROVISION FOR DIMINUTION IN VALUE OF INVEST MENT FOR AYS.1998-99 & 2000- 01 AND (2) THE LOSS IN TRADING OF SCRIPS FOR WHICH DELIVERY HAS BEEN TAKEN FOR AY 1998-99 ALONE. THE CIT(A)-VI, CHENNAI VIDE ORDER S DT. 29.2.2008 HAS DELETED THESE ADDITIONSFOR ALL THESE YEARS . ON RE VENUES APPEALS, THE HONBLE ITAT, BENCH 'C', CHENNAI VIDE ORDER IN ITA NOS. 1683 TO 1686/MDS/2008 DT.5.2.2010 FOR AYS. 1998-99, 1999-20 00, 2000-01 & 2003- 04, SET ASIDE THE ORDERS OF THE LOWER AUTHORITIES Q UA THESE TWO ISSUES AND REMITTED THEM TO THE RECORD OF THE ASSESSING OFFICE R TO GIVE A CONCRETE FINDING AFTER VERIFYING FROM THE RECORD THAT WHETHER THESE INVESTMENTS SHOWN BY THE ASSESSEE ARE PURELY FOR INVESTMENTS OR IT IS ONLY T RADING IN THE SHARES AND INSTEAD OF CLOSING STOCK, THE ASSESSEE IS SHOWING U NDER THE HEAD 'INVESTMENT' IN THE BALANCE SHEET. THE HON'BLE ITAT HAS DIRECTED THE ASSESSING OFFICER TO DECIDE THE ISSUE AFTER CONSIDERING ALL THE CONTENTI ONS AND OBJECTIONS OF THE ASSESSEE. :-3-: ITA NOS. 371, 372 & 373/MDS/2017 2.1 IN ADHERENCE TO THE DIRECTIONS OF THE HON'BLE I TAT, THE AO POSTED THE CASES FOR HEARINGS ON VARIOUS DATES. HOWEVER, THERE WAS NO RESPONSE , WHATSOEVER , FROM THE ASSESSE AND FINALLY, AFTER IN FORMING THE ASSESSEE THAT ITS ABSENCE FOR THE SAID HEARINGS WOULD BE INFERRED THA T IT HAS NO BONAFIDE SUBMISSIONS TO BE MADE AND IT HAS NO OBJECTIONS AGAINST THE PR OCEEDINGS BEING FINALIZED FOR THESE YEARS ON MERITS ALSO , THE CASES REMAINED UNREPRESENTED AND HENCE THE AO PASSED ORDERS U/S.144 R.W.S. 254 ON 23.12.2010 F OR ALL THESE AYS ON THE LINES OF THE ORIGINAL ASSESSMENT ORDERS, EXCEPTING THE RELIEF PROVIDED BY THE HON'BLE ITAT. AGGRIEVED, THE ASSESSEE FILED APPEALS FOR THESE YEARS BEFORE THE CIT (A). 2.2 THE CIT (A) AFTER CONSIDERING ALL THE PLEAS AN D THE MATERIAL FURNISHED BY THE ASSESSEE CONFIRMED THE ADDITIONS/ DISALLOWAN CES ON ACCOUNT OF LOSS FROM TRADING IN SHARES FOR WHICH DELIVERY HAS BEEN MADEFOR A Y 1998-99 AND ON ACCOUNT OF PROVISION FOR DIMINUTION IN THE VALUE OF SHARES FOR ALL THE THREE A YS. I.E. AYS. 1998-99 TO 2000-01. AGGRIEVED , THE A SSESSEE FILED THESE APPEALS WITH FOLLOWING COMMON GROUNDS OF APPEAL . 1. THE ORDER OF THE LEARNED CIT APPEALS IS CONTRA RY TO LAW AND OPPOSED TO THE FACTS OF THE CASE. 2. THE LEARNED CIT APPEALS HAS ERRED IN CONCLUDING THAT THE SHARES HELD BY THE APPELLANT CONSTITUTED INVESTMENTS AND NOT STOCK IN TRADE. 3. THE LEARNED CIT APPEALS HAS ERRED IN OVERLOOKING THE FACT THAT THE APPELLANT HAD BY CONDUCT TREATED THE INVESTMENTS IN SHARES AS STOCK IN TRADE ONLY. THE APPELLANT HAD BEEN OFFERING THE PROFIT/LOSSES ON SA LE OF SHARES AS BUSINESS INCOME IN ALL THE YEARS. :-4-: ITA NOS. 371, 372 & 373/MDS/2017 4. THE LEARNED CIT APPEALS HAS ERRED IN CONCLUDING THAT MERELY BECAUSE THE SHARES WERE SHOWN UNDER INVESTMENTS IT WAS NOT ST OCK IN TRADE FOR THE APPELLANT. 5. THE LEARNED CIT APPEALS HAD ERRED IN OVERLOOKING THE FACT THAT CBDT VIDE ITS CIRCULAR DATED 29 TH FEBRUARY, 2016 INSTRUCTED THAT WHEREVER THE ASSESS EE HAS CHOSEN TO TREAT INVESTMENTS AS STOCKINTRADE IT SHOU LD NOT BE INTERFERED WITH AND THE SAME SHOULD BE ACCEPTED. THE APPELLANT HAS BEE N CONSISTENTLY VALUING THE INVESTMENTS AT COST OR MARKET PRICE WHICHEVER IS LO WER AND OFFERING THE PROFIT/LOSS AS BUSINESS INCOME ONLY AND NOT UNDER CAPITAL GAINS. 6. THE APPELLANT CRAVES LEAVE TO ALTER/ FILE ADDITI ONAL GROUNDS OF APPEAL. 3. THE AR SUBMITTED THE SAME SUBMISSIONS MADE BEFOR E THE CIT (A) AND ARGUED THE CASE ON THE LINES OF GROUNDS OF APPEAL. THE RELEVANT PORTION IS EXTRACTED FROM THE ORDER OF THE CIT(A) AS UNDER: 4. THE COMMON GROUND IN ALL THE ABOVE APPEALS RELA TES TO THE DETERMINATION WHETHER THE APPELLANT IS ENGAGED IN THE BUSINESS OF TRADING IN SHARES. THE APPELLANT IS AN INDIVIDUAL ENGAGED IN THE BUSINESS OF TRADING IN SHARES. SHE IS AN INDIVIDUAL MEMBER OF THE BANGALORE STOCK EXCHANG E AND A CORPORATE MEMBER OF THE NSE IN PROFESSIONAL CATEGORY. THE APP ELLANT HAS BEEN CONSISTENTLY VALUING ALL THE SHARES HELD BY HER AT COST OR MARKET VALUE WHICHEVER IS LESS AS IT REPRESENTS THE STOCK IN TRA DE. EVERY YEAR AT THE YEAR END THE MARKET VALUE OF THE SHARES HELD BY HER WOULD BE ASCERTAINED AND WHEREVER IT IS LOWER THAN COST A PROVISION IS MADE FOR THE F ALL IN THE VALUE OF HER SHARES. THE DETAILS OF SUCH PROVISION MADE FOR THE VARIOUS YEARS UNDER APPEAL ARE AS UNDER: AY: 1998-99 RS.1,58,333/- AY: 1999-00 RS. NIL AY: 2000-01 RS.9,46,713/- THE APPELLANT HAD DURING THE RELEVANT YEARS ENGAG ED IN TRADING OF SHARES AS UNDER: :-5-: ITA NOS. 371, 372 & 373/MDS/2017 ASSTYR PURCHASE SALES 1998-99 441319426 440079655 1999-2000 24085693 18750067 2000-2001 50609265 45310171 THE DETAILS OF SHARES BOUGHT AND SOLD DURING EACH YEAR IS ENCLOSED IN THE ANNEXURE-1. THE APPELLANT HAS BEEN CONSISTENTLY VAL UING THE SHARES AS STATED ABOVE AND MAKING A PROVISION FOR DIMINUTION IN VALU E WHEREVER REQUIRED. THE VOLUME OF TRADING IN SHARES CLEARLY INDICATES THAT THE APPELLANT'S BUSINESS IS TRADING IN SHARES. THE APPELLANT HAS ALL ALONG BEEN OFFERING THE PROFIT/(LOSS) ON SALE OF SHARES AS BUSINESS INCOME ONLY AS UNDER: 31-03-98 (1243878) 31-03-99 (501015) 31-03-00 343379 31-03-2001 (303993) 31-03-2003 1776738 31-03-2005 159961 31-03-2006 1085562 THE CBDT VIDE CIRCULAR' NO 6/2016 DT 29/02/2016 HAS CLARIFIED THAT 'WHERE THE ASSESSEE ITSELF IRRESPECTIVE OF THE HOLDING PERIOD OF THE SHARES OPTS TO TREAT THEM AS STOCK IN TRADE, THE INCOME. '(COPY OF THE C IRCULAR ENCLOSED)' 5. IN THE CASE OF COMMISSIONER OF INCOME TAX (CENTR A!), CALCUTTA VS ASSOCIATED INDUSTRIAL DEVELOPMENT COMPANY (P) LTD (82 ITR 586) , THE SUPREME COURT OBSERVED THAT: 'WHETHER A PARTICULAR HOLDING OF SHARES IS BY WAY OF INVESTMENT OR FORMS PART OF THE STOCK-IN-TRADE IS A MATTER WHICH IS WITHIN THE KNOWLEDGE OF THE ASSESSEE WHO HOLDS THE SHARES AND IT SHOULD, IN NORMAL CIRCUMSTANCES, BE IN A POSITION TO PRODUCE EVIDENCE FROM ITS RECORDS AS TO WHETHER IT HAS MAINTAINED ANY DISTINCTION BETWEEN THOSE SHARES WHI CH ARE ITS STOCK-IN-TRADE AND THOSE WHICH ARE HELD BY WAY OF INVESTMENT. ' THE APPELLANT HAS BY HER CONDUCT OF OFFERING THE PR OFIT/LOSS ON SALE OF SHARES AS BUSINESS INCOME AND NOT AS CAPITAL GAINS HAS CLEARL Y INDICATED THAT SHE IS ENGAGED IN THE BUSINESS OF TRADING IN SHARES. THE L EARNED ASSESSING OFFICER HAD NOT PROVIDED SUFFICIENT OPPORTUNITY TO THE APPELLAN T TO ESTABLISH THE ABOVE FACTS. :-6-: ITA NOS. 371, 372 & 373/MDS/2017 FOR A PARTICULAR ASSET TO BE TREATED AS STOCK IN TR ADE THE INTENSION WHETHER TO MAKE PROFIT OR EARN DIVIDENDS, FREQUENCY OF TRANSAC TIONS, AND THE TREATMENT OF THE SAME IN THE BOOKS OF ACCOUNTS ARE THE DETERMINA TE FACTOR. THE APPELLANT BY CONSISTENTLY RETURNING THE PROFIT/LOSS AS BUSINESS INCOME, VALUING THE SHARES AT COST OR MARKET PRICE WHICHEVER IS TOWER HAS CLEARLY ESTABLISHED THAT IT IS STOCK IN TRADE. THIS IS ALSO SUPPORTED BY THE FACT THAT THE APPELLANT IS A DEALER, TRADER IN SHARES WHICH IS PROVED BY THE FREQUENCY OF TRANSACT IONS UNDERTAKEN DURING THESE YEARS. IN VIEW OF THE ABOVE IT IS PRAYED THAT THE ORDER OF THE LEARNED AO BE SET ASIDE AND RELIEF AS PRAYED FOR BE GRANTED. ' PER CONTRA, THE DR RELIED ON THE ORDER OF THE CIT(A ) AND HER FINDINGS . 4. WE HEARD THE RIVAL CONTENTIONS AND GONE THROUGH THE RELEVANT MATERIAL. THE ASSESSEE HAS FURNISHED A PAPER BOOK, GIVING THE BREAKUP OF INVESTMENT FOR AYS 1997-98 TO 1999-2000 WHICH IS EXTRACTED AS UNDER: FY 1997-98 1998-99 1999-2000 RS RS RS INVESTMENT CRFS 6550000 6550000 7500000 CRFO 6844940 6844940 6109940 CRSS 2081622 2081622 2081622 15476562 15476562 15691562 OTHERS-STOCK IN TRADE 495586 5363069 3577876 (SIT) TOTAL INCL S-I-T 15972148 20839631 19269438 LOWER OF CM/MP 337253 5363069 2631163 PROVISION 158333 158333 946713 :-7-: ITA NOS. 371, 372 & 373/MDS/2017 AND SUBMITTED THAT THE INVESTMENTS SHOWN UNDER SCH EDULE F OF THE BALANCE SHEET COMPRISES THE VALUE OF STOCK-IN-TRADE ALSO. FOR EXAMPLE, THE OTHERS- STOCK IN TRADE IN ABOVE TABLE DENOTES THE STOCK IN TRADE. THUS, THE ASSESSE SUBMITS THAT THOUGH IT IS A WRONG ENTRY, THE FACT R EMAINS THAT THE ASSESSEE WAS UNDERTAKING TRADE IN SHARES AND THE CLOSING STO CK OF SHARES IN TRADE WAS WRONGLY INCLUDED IN THE INVESTMENTS, HOWEVER, ALL H ER CLAIMS MADE IN ALL THESE AYS ARE VERIFIABLE WITH REFERENCE TO PURCHASES, SAL ES OF STOCK AND ITS VALUATION ETC. THE AR INVITED OUR ATTENTION TO PAGE NO. 9 TO 28 OF THE PAPER BOOK, SPECIFICALLY PAGE NOS. 21 TO 28 ON THE IMPUGNED ISS UES. WE HAVE CONSIDERED THE ASSESSEES REPLY AND FIND THAT PRIMA FACIA, THE FACTS ASSOCIATED WITH THE ISSUES REQUIRE PROPER VERIFICATION AND DUE DECISION . IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES, WE DEEM IT FIT TO SET ASIDE THE IMPUGNED ISSUES TO THE AO FOR A FRESH EXAMINATION. THE AO SHALL AFFORD ADEQU ATE OPPORTUNITY TO THE ASSESSEE TO LAY THE RELEVANT MATERIALS IN SUPPORT O F HER CONTENTION AND AFTER AFFORDING ADEQUATE OPPORTUNITY, SHALL PASS SPEAKING ORDERS IN ACCORDANCE WITH LAW. THE APPEALS FILED BY THE ASSESSEE FOR AYS 19 98-99 TO 2000-01 ARE TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 5. IN THE RESULT, THE ASSESSEES APPEALS IN ITA NOS 371, 372 & 373/MDS/2017 ARE TREATED AS ALLOWED FOR STATISTICAL PURPOSES. :-8-: ITA NOS. 371, 372 & 373/MDS/2017 ORDER PRONOUNCED ON FRIDAY, THE 08 TH DAY OF DECEMBER, 2017 AT CHENNAI. SD/- ( . . . ) (N.R.S. GANESAN) !' /JUDICIAL MEMBER SD/- ( ) (S. JAYARAMAN) ' /ACCOUNTANT MEMBER /CHENNAI, 0 /DATED: 08 TH DECEMBER, 2017 JPV &)1232 /COPY TO: 1. %/ APPELLANT 2. )*% /RESPONDENT 3. 4 ) (/CIT(A) 4. 4 /CIT 5. 2) /DR 6. 7 /GF