HERTZ CHEMICALS LTD, MUMBAI V. ITO 7(2)(1), MUMBAI

ITA 38/MUM/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 4266 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-07-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 01-07-2013
• Assessment Year: 2004-2005
• Appeal Filed On: 03-01-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: K C P PATNAIK
• Keywords: Business income; Speculation loss; Assessment record; Reassessment proceedings
• Section: 143(3); 80HHC; 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH H, MUMBAI BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND DR. S.T.M. PAVALAN, JUDICIAL MEMBER ITA NO. 38/MUM/2012 ASSESSMENT YEAR: 2004-05 M/S. HERTZ CHEMICALS LTD. 2/3 SARAF KASKAR INDUSTRIAL ESTATE, S.V. ROAD, JOGESHWARI (W), OSHIWARA MUMBAI- 400 101 PAN::AAACH 2664 L VS. DCIT 8(2) MUMBAI (APPELLANT) (RESPONDENT) & ITA NO. 136/MUM/2012 ASSESSMENT YEAR: 2004-05 DCIT 8(2) MUMBAI VS. M/S. HERTZ CHEMICALS LTD. 2/3 SARAF KASKAR INDUSTRIAL ESTATE, S.V. ROAD, JOGESHWARI (W), OSHIWARA MUMBAI- 400 101 PAN::AAACH 2664 L (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI DARSHAK SHAH REVENUE BY : SHRI K.C.P. PATNAIK DATE OF HEARING : 01.07.2013 DATE OF PRONOUNCEMENT : 10.07.2013 O R D E R PER DR. S.T.M. PAVALAN, JM: THESE CROSS APPEALS FILED BY THE REVENUE AND THE A SSESSEE ARE DIRECTED AGAINST THE COMMON ORDER OF THE LD.CIT(A) -17, MUMB AI DATED 13.10.2011 FOR THE ASSESSMENT YEAR 2004-05. THESE APPEALS ARE DIS POSED OFF BY THIS COMMON ORDER. ITA NOS. 38/MUM/2012 & 136/MUM/2012 M/S. HERTZ CHEMICALS LTD. ASSESSMENT YEAR: 2004-05 2 2. THE GROUNDS RAISED IN THE APPEAL OF THE REVENUE RELATE TO THE ADDITION OF RS.4,95,13,114/- MADE BY THE AO ON ACCOUNT OF SP ECULATION LOSS AND THE SAME DELETED BY THE LD.CIT(A). 2.1 THE RELEVANT FACTS ARE THAT THE ASSESSEE, A COM PANY ENGAGED IN THE BUSINESS OF MANUFACTURING COSMETICS & TOILETRIES AN D TRADING IN SHARES DURING THE YEAR UNDER CONSIDERATION HAD OFFERED PROFIT/LOS S FROM SHARE TRADING AS SPECULATIVE AND THAT FROM MUTUAL FUNDS/BONDS ETC AS BUSINESS INCOME. HOWEVER, IN THE ASSESSMENT FRAMED U/S 143(3) READ W ITH SECTION 147 OF THE INCOME TAX ACT, THE AO ON PERUSAL OF THE ASSESSMENT RECORDS FOR AYS 2004-05 & 2003-04 FOUND THAT THE ASSESSEE COMPANY HAD SHOWN CLOSING STOCK OF SHARES AS ON 31.03.2003 AS RS.6,69,18,499/- AND ADOPTED RS .1,01,82,418/- AS OPENING STOCK OF SHARES AS ON 01.04.2003 FOR THE YE AR UNDER CONSIDERATION WHICH WAS NOT IN ACCORDANCE WITH THE PRINCIPLES OF ACCOUNTANCY. SINCE THE CLOSING STOCK AS PER LAST DAY OF THE ACCOUNTING YEA R SHALL BE THE OPENING STOCK OF THE SUBSEQUENT YEAR, THE AO WORKED OUT THE SPECU LATION PROFIT/LOSS ON SHARE BY TAKING THE OPENING STOCK OF SHARES AS ON 01.04.2 003 AT RS.6,69,18,499/- INSTEAD OF RS.1,01,82,418/- AS AGAINST THE CLAIM OF THE ASSESSEE, THEREBY ARRIVED THE SPECULATION LOSS AT RS.4,95,13,114/- AN D ADDED THE SAME TO THE BUSINESS INCOME OF THE ASSESSEE. 2.2 ON APPEAL, THE LD.CIT(A) DELETED THE IMPUGNED A DDITION MADE BY THE AO AS THE ASSESSEE HAD RIGHTLY BIFURCATED THE OPENI NG STOCK BETWEEN SHARES AND MUTUAL FUNDS WHICH IS PERMISSIBLE IN ACCORDANCE WITH THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF APOLLO TYRES L TD. VS. CIT (2002) 174 CTR (SC). AGGRIEVED BY THE IMPUGNED DECISION, THE REVEN UE IS IN APPEAL BEFORE US. 2.3 HAVING HEARD BOTH THE SIDES AND PERUSED THE MAT ERIAL ON RECORD, IT IS OBSERVED THAT THE OPENING STOCK DURING THE YEAR UND ER CONSIDERATION, HAS BEEN BIFURCATED BETWEEN THOSE OF MUTUAL FUNDS AND THOSE OF SHARES BY THE ASSESSEE, KEEPING IN VIEW THE RATIO OF THE DECISION OF THE SU PREME COURT IN THE CASE OF APOLLO TYRES, 255 ITR 273. IN THE EARLIER YEARS, TH E ASSESSEE HAD TREATED THE ITA NOS. 38/MUM/2012 & 136/MUM/2012 M/S. HERTZ CHEMICALS LTD. ASSESSMENT YEAR: 2004-05 3 LOSS ON MUTUAL FUND AND TRADING IN SHARES AS SPECUL ATIVE IN NATURE UNDER EXPLANATION TO SECTION 73. HOWEVER, IN THE CURRENT YEAR, KEEPING IN VIEW THE CITED DECISION OF THE SUPREME COURT, LOSS FROM TRAD ING IN MUTUAL FUNDS HAS BEEN BIFURCATED AS NORMAL BUSINESS INCOME AND INCOM E FROM TRADING IN SHARES AS SPECULATIVE INCOME. IN VIEW OF THAT MATTER, WE A RE OF THE CONSIDERED OPINION THAT THE LD.CIT(A) IS JUSTIFIED IN DELETING THE IMP UGNED ADDITION MADE BY THE AO. THUS THE GROUNDS ARE DISMISSED . 3. THE ASSESSEE, IN ITS APPEAL HAS CHALLENGED THE V ALIDITY OF SUSTAINING THE REOPENING OF THE ASSESSMENT BY THE LD.CIT(A). 3.1. THE RELEVANT FACTS ARE THAT THE RETURN OF INCO ME FOR THE A.Y. 2004-05 WAS FILED BY THE ASSESSEE ON 01.11.2004 AND THE ORI GINAL ASSESSMENT WAS FRAMED U/S 143(3) ON 19.12.2006. SUBSEQUENTLY, THE CASE WAS REOPENED U/S 147 ON THREE GROUNDS NAMELY, (A) THE ASSESSEE HAS N OT INCLUDED TURNOVER OF MUMBAI UNIT IN TOTAL TURNOVER OF BUSINESS FOR THE P URPOSE OF COMPUTATION OF DEDUCTION U/S. 80HHC OF THE ACT, (B) THE ASSESSEE H AS CONSIDERED OPENING STOCK OF SHARES AT RS. 1.01 CRORES INSTEAD OF RS.6. 69 CRORES RESULTING IN INCREASE IN INCOME BY RS. 4.95 CRORES AND (C) RS. 5,32,395/- EXPENSES ALLOCATED TO SPECULATION INCOME IS NOT CONSIDERED IN COMPUTATION OF BUSINESS INCOME. 3.2 HAVING HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD, IT IS OBSERVED THAT EXCEPT THE ADDITION OF RS.5,32,395/- ON ACCOUNT OF EXPENSES ALLOCATED TO SPECULATIVE BUSINESS WHICH HAS NOT BEE N CONSIDERED WHILE COMPUTING THE BUSINESS INCOME, THE ASSESSEE IS ALRE ADY REDRESSED WITH THE RELIEF PERTAINING TO THE ISSUES ARISING OUT OF REOP ENING THE ASSESSMENT. AS REGARDS THE ADDITION OF RS.5,32,395/- ON ACCOUNT OF REOPENING THE ASSESSMENT, IT IS PERTINENT TO NOTE THAT THE ASSESSEE HAS CLEAR LY ADMITTED DURING THE REASSESSMENT PROCEEDINGS THAT THE SAID AMOUNT WAS I NADVERTENTLY NOT ADDED TO THE INCOME FROM BUSINESS AND PROFESSION AND THEREBY ACCEPTED THE SAME. IN VIEW OF THAT MATTER, WE ARE OF THE OPINION THAT ADJ UDICATION OF THIS GROUND OF ITA NOS. 38/MUM/2012 & 136/MUM/2012 M/S. HERTZ CHEMICALS LTD. ASSESSMENT YEAR: 2004-05 4 THE ASSESSEES APPEAL IS PURELY ACADEMIC IN NATURE AND HENCE REQUIRES NO ADJUDICATION. 4. IN THE RESULT THE APPEALS FILED BY THE REVENUE A ND THAT OF THE ASSESSEE ARE DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 10 TH DAY OF JULY, 2013. SD/- SD/- (P.M. JAGTAP) (DR. S.T.M. PAVALAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 10.07.2013. *SRIVASTAVA COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR H BENCH //TRUE COPY// [ BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.