DCIT 4(1), MUMBAI V. INDIA ADVANTAGE SECURITIES LTD, MUMBAI

ITA 3759/MUM/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 4256 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-02-2016
• Appeal Filed By: Department
• Bench Allotted: I
• Assessment Year: 2009-2010
• Appeal Filed On: 26-05-2014
• Court: TRIBUNAL
• Keywords: Opportunity of being heard; Principle of natural justice; Question of law; Speculation loss
• Section: 14A

Judgement Text

IN THE INCO ME TAX APPELLATE TRIBUNAL I BENCH, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI SANJAY GARG, JUDICIAL MEMBER I.T.A. NO.3759/M/2014 (ASSESSMENT YEAR: 2009 - 2010 ) DCIT - 4(1), R.NO. 640, 6 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400 020. / VS. M/S. INDIA ADVANTAGE SECURITIES LTD., 4 TH FLOOR, OM PLAZA, VASANJI LALJI ROAD, KANDIVALI (W), MUMBAI - 67. ./ PAN : AADCP5317M ( / APPELLANT) .. ( / RESPONDENT ) I.T.A. NO.3576/M/2014 (ASSESSMENT YEAR: 2009 - 2010 ) M/S. INDIA ADVANTAGE SECURITIES LTD., 4 TH FLOOR, OM PLAZA, VASANJI LALJI ROAD, KANDIVALI (W), MUMBAI - 67. / VS. DCIT - 4(1), R.NO. 640, 6 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400 020. ./ PAN : AADCP5317M ( / APPELLANT) .. ( / RESPONDENT ) / ASSESSEE BY : SHRI DHARMESH SHAH / REVENUE BY : SHRI SANTOSH MANKOSKAR, DR / DATE OF HEARING : 27.01 .2016 / DATE OF PRONOUNCEMENT : 10 .02.2016 / O R D E R PER D. KARUNAKARA RAO, AM: THERE ARE TWO APPEALS UNDER CONSIDERATION AND THEY ARE CROSS APPEALS INVOLVING THE AY 2009 - 2010. SINCE, THE ISSUES RAISED IN BOTH THESE APPEALS ARE CONNECTED, THEREFORE, THEY ARE CLUBBED, HEARD COMBINEDLY AND DISPOSED OF IN THIS CONSOLIDATED ORDER. APPEAL WISE ADJUDICATION IS GIVEN IN THE FOLLOWING PARAGRAPHS OF THIS ORD ER. 2 ITA NO.3759/M/2014 (AY 2009 - 2010) (BY REVENUE) 2. THIS APPEAL FILED BY THE REVENUE ON 23.11.2015 IS AGAINST THE ORDER OF THE CIT (A) - 8, MUMBAI DATED 18.3.2014 FOR THE ASSESSMENT YEAR 2009 - 2010. IN THIS APPEAL, REVENUE RAISED THE FOLLOWING SOLITARY GR OUND AND THE SAME READS AS UNDER: - WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT (A) IS RIGHT IN DIRECTING THE AO TO DELETE THE ADDITION OF DEEMED SPECULATION LOSS OF RS. 3,55,93,499/ - MADE BY THE AO UNDER EXPLANATION TO S ECTION 73 OF THE IT ACT, 1961 AS THE ASSESSEE HAS WRONGLY SET OFF SPECULATIVE LOSS AGAINST NON - SPECULATIVE INCOME. 3. THE ONLY ISSUE RAISED BY THE REVENUE RELATES TO THE APPLICABILITY OF THE PROVISIONS OF EXPLANATION TO SECTION 73 OF THE ACT. THE CASE OF THE ASSESSING OFFICER IS THAT THE SAID PROVISIONS APPLY TO THE PRESENT CASE, SINCE, THE LOSS EARNED ON TRADING OF SECU RITIES SHOULD BE TREATED AS A SPECULATION LOSS AND THEREFORE, IT SHOULD NOT BE SET - OFF AGAINST THE NORMAL PROFITS OF THE BUSINESS. DURING THE FIRST APPELLATE PROCEEDINGS, CIT (A) DISCUSSED THE FACTS OF THE CASE, ANALYSED THE REASONS AND GAVE A FINDING THAT THE PROVI SIONS SHOULD NOT APPLY TO THE CASE AS THE INCOME EARNED BY THE ASSESSEE FROM OTHER SOURCES BEING RS. 57,70,782/ - IS HIGHER. HE ANALYSED THE SAID EXPLANATION TO SECTION 73 OF THE ACT IN PARA 3.3.9 OF HIS ORDER BEFORE FOR COMING TO THE ABOVE CONCLUSION. CO NSIDERING THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. DARSHAN SECURITIES P. LTD [341 ITR 556 (MUM)] (PARA 3.3.11 OF THE CIT (A)S ORDER IS RELEVANT IN THIS REGARD), CIT (A) HELD THAT THE PROVISIONS OF EXPLANATION TO SECTION 73 DO NOT APPLY TO THE FACTS OF THE PRESENT CASE. CIT (A) ALSO DISCUSSED OTHER ARGUMENTS OF THE REVENUE BEFORE DISMISSING THE ARGUMENTS OF THE AO. AGGRIEVED, REVENUE CARRIED THE MATTER IN APPEAL BEFORE THE TRIBUNAL BY RAISING THE ABOVE MENTIONED GROUND. 4. DURING THE PROCEEDINGS BEFORE US, LD COUNSEL FOR THE ASSESSEE DEMONSTRATED THAT THE DECLARED SPECULATION LOSS WAS NEVER ADJUSTED AGAINST THE NON - SPECULATIVE BUSINESS PROFITS OF THE ASSESSEE. RELYING ON THE CONTENTS OF PAGES 1, 2 AND 3 OF THE PAPER BOO K, BEING THE COMPUTATION OF INCOME, LD COUNSEL FOR THE ASSESSEE DEMONSTRATED THAT LOSS OF RS. 59,58,527/ - WAS CARRIED FORWARD FOR FUTURE SET - OFF, IF ANY. 5. ON THE OTHER HAND, LD DR FOR THE REVENUE RELIED ON THE ORDER OF THE AO. 6. AFTER HEARING BOTH TH E P ARTIES AND ON PERUSAL CIT (A)S ORDER IN GENERAL AND PARAS 3.3.10 AND 3.3.11 OF HIS ORDER IN PARTICULAR, WE FIND THE SAME ARE RELEVANT 3 HERE. CONSIDERING THE SIGNIFICANCE OF THE SAID PARAS FROM THE CIT (A)S ORDER AS WELL AS FOR THE SAKE OF COMPLETENESS OF THIS ORDER, THE SAME ARE EXTRACTED AS UNDER: - 3.3.10. IN VIEW OF THE ABOVE PROVISIONS, THE AO, THEREFORE, HAS TO EXAMINE WHETHER THE GROSS TOTAL INCOME OF THE APPELLANT MAINLY CONSIST OF INCOME FROM ANY OTHER HEADS THE INCOME DECLARED UNDER THE COMPUTA TION OF INCOME IS AS UNDER: - PARTICULARS AMOUNT NET PROFITS UNDER THE PROFIT AND GAINS FROM BUSINESS OR PROFESSION ( - ) RS. 14,36,943/ - INCOME FROM OTHER SOURCES RS. 57,70,782/ - 3.3.11. THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. DARSHAN SECURITIES P. LTD [341 ITR 556 (MUM)] HAS HELD THAT WHILE COMPUTING THE INCOME UNDER VARIOUS HEADS FOR THE PURPOSE OF SECTION 73 OF THE ACT, SPECULATIVE TRANSACTIONS CANNOT BE SEPARATELY CONSIDER ED AND THAT ALL THE TRANSACTIONS HAVE TO BE COMPUTED IN THE NORMAL WAY IGNORING THE EXPLANATION TO SECTION 73 OF THE ACT. ONLY AFTER THE COMPUTATION OF INCOME UNDER THE VARIOUS HEADS, ONE CAN COME TO A CONCLUSION WHETHER THE PROVISIONS OF SECTION 73 OF TH E ACT ARE APPLICABLE. ACCORDING TO HONBLE HIGH COURT, TRANSACTIONS IN PURCHASE AND SALE OF SHARES HAVE TO BE REGARDED AS NORMAL TRANSACTIONS FOR THE PURPOSE OF EXAMINING THE APPLICABILITY OF SECTION 73 OF THE ACT. IN THE PRESENT CASE, CONSIDERING THE TRA NSACTIONS IN PURCHASE AND SALE OF SHARES AS NORMAL ACTIVITY, INCOME FROM OTHER SOURCES IS AMOUNTING TO RS. 57,70,782/ - AS AGAINST THE INCOME UNDER THE HEADS PROFIT AND GAIN OF BUSINESS OR PROFESSION OR RS. ( - ) 14,36,943/ - . SINCE, THE INCOME FROM OTHER SOURCES IS HIGHER THAN THE INCOME FROM BUSINESS, THE PROVISIONS OF SECTION 73 OF THE ACT ARE INAPPLICABLE IN THE PRESENT CASE........ 7. CONSIDERING THE ABOVE SETTLED NATURE OF THE ISSUE IN THE LIGHT OF THE JURISDICTIONAL HIGH COURT JUDGMENT IN THE CA SE OF DARSHAN SECURITIES P. LTD (SUPRA), WE ARE OF THE OPINION THAT THE ORDER OF THE CIT (A) ON THIS ISSUE IS FAIR AND REASONABLE AND IT DOES NOT CALL FOR ANY INTERFERENCE. ACCORDINGLY, GROUND RAISED BY THE REVENUE IS DISMISSED. 8. IN THE RESULT, APPEAL O F THE REVENUE IS DISMISSED . ITA NO.3576/M/2014 (AY 2009 - 2010) (BY ASSESSEE) 9. THIS APPEAL FILED BY THE ASSESSEE ON 20.5.2015 IS AGAINST THE SAID ORDER OF THE CIT (A) - 8, MUMBAI DATED 18.3.2014 FOR THE ASSESSMENT YEAR 2009 - 2010. IN THIS APPEAL, ASSESSEE RAISED THE FOLLOWING GROUNDS WHICH READ AS UNDER: - 1. THE CIT (A) HAS ERRED IN LAW AND FACTS IN CONFIRMING DISALLOWANCE OF RS. 23,95,721/ - INVOKING SECTION 14A OF THE ACT. 2. THE LD CIT (A) HAS ERRED IN LAW AND IN FACTS NOT APPRECIATING THAT THE ASSESSING OFFICER HAD NOT COMPLIED WITH THE PROVISIONS OF RULE 8D(1) WHILE MAKING THE DISALLOWANCE U/S 14A OF THE ACT. 10. AT THE OUTSET, LD COUNSEL FOR THE ASSESSEE MENTIONED THAT IN THE ORDER OF THE REVENUE THERE IS AN ERROR BY WAY OF INCLUSION OF STOCK - IN - TRAD E FOR THE PURPOSE OF 4 DETERMINING THE DISALLOWABLE U/S 14A OF THE ACT. IN THIS REGARD, LD COUNSEL FOR THE ASSESSEE MENTIONED THAT SUCH INCLUSION OF STOCK - IN - TRADE IS NOT APPROVED BY THE JURISDICTIONAL HIGH COURT IN ASSESSEES OWN CASE IN INCOME TAX APPEAL NO.1131 OF 2013 , DATED 13 TH APRIL, 2015. IN SUPPORT, ASSESSEE FILED THE TRIBUNAL ORDER IN ITA NO.6711/M/2011 (AY 2008 - 2009), DATED 14.9.2012. PARA 6 OF THE SAID TRIBUNALS ORDER (SUPRA) IS RELEVANT IN THIS REGARD AND THE RELEVANT LINES FROM THE SAID PARA 6 ARE EXTRACTED AS UNDER: - 6.......WE, THEREFORE, SEE NO INFIRMITY IN THE ORDER OF THE LD CIT (A) IN DELETING THE DISALLOWANCE U/S 14A COMPUTED BY THE AO IN RELATION TO THE STOCK - IN - TRADE...... 11. LD COUNSEL FOR THE ASSESSEE ALSO SUBMITTED THAT IN TH E JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT (SUPRA) DATED 13.4.2015, WHICH IS AGITATED BY THE REVENUE, THE HIGH COURT HELD THAT NO SUBSTANTIAL QUESTION OF LAW ARISES OUT OF THE ORDER OF THE TRIBUNAL ON THE ABOVE ISSUE . IT IS THE SUBMISSION OF THE LD COUNSEL THAT CONSIDERING THE SAME, ASSESSES CASE MAY BE ALLOWED. 12. WE HAVE HEARD LD REPRESENTATIVES OF BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AS WELL AS THE CITED JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT (SUPRA) AND THE ORDE R OF THE TRIBUNAL (SUPRA) DATED 14.9.2012. CONSIDERING THE SAME, WE DIRECT THE AO TO COMPLY WITH THE SAID TRIBUNALS ORDER AS WELL AS THE JUDGMENT OF THE JURISDICTIONAL HIGH COURT FOR THE AY 2008 - 2009 AND DECIDE THE ISSUE AFRESH. THE ARGUMENTS RELATING T O THE APPLICABILITY OF THE HIGH COURT JUDGMENT IN THE CASE RELIANCE UTILITIES AND POWER LIMITED [2009] 313 ITR 340 (BOM) IS ALSO REMANDED TO THE FILE OF THE AO FOR SIMILAR ADJUDICATION. AO SHALL GRANT A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AS PER THE SET PRINCIPLES OF NATURAL JUSTICE. ACCORDINGLY, GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. 13. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNC ED IN THE OPEN COURT ON 10 TH FEBRUARY, 2016. SD/ - SD/ - ( SANJAY GARG ) (D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; 10 .2.2016 . . ./ OKK , SR. PS 5 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI