M/s Flicker Trading Limited, Kolkata V. D.C.I.T,Cir- 8,Kolkata., Kolkata

ITA 399/KOL/2013

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 8244 (ITAT-KOLKATA)
• Duration Of Justice: 6 year(s) 4 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-07-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2006-2007
• Appeal Filed On: 27-02-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: C J SINGH
• Assessee Lawyers: MANISH TIWARI
• Keywords: Business income; Opportunity of being heard; Set aside

Judgement Text

1 ITA NO. 399/KOL/2013 M/S. FLICKER TRADING LTD., AY 2006-07 , C , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: KOL KATA ( ) . . , . ' # $% % , '( ) [BEFORE SHRI A. T. VARKEY, JM & DR. A. L. SAINI, A M] I.T.A. NO. 399/KOL/2013 ASSESSMENT YEAR: 2006-07 M/S. FLICKER TRADING LTD. (PAN: AAACF 4116 D) VS. D.C.I.T. CIRCLE 8, KOLKATA APPELLANT RESPONDENT DATE OF HEARING 24.06.2019 DATE OF PRONOUNCEMENT 17.07.2019 FOR THE APPELLANT SHRI MANISH TIWARI, FCA FOR THE RESPONDENT SHRI C.J. SINGH, ADDL. CIT, DR ORDER PER SHRI A.T.VARKEY, JM THIS IS AN APPEAL PREFERRED BY THE ASSESSEE-COMPANY AGAINST THE ORDER OF THE CIT(A)- 8, KOLKATA DATED 20.12.2012 FOR AY 2006-07. 2. THE 1 ST GROUND OF APPEAL OF THE ASSESSEE IS AGAINST THE AC TION OF THE LD. CIT(A) TO CONFIRM THE ACTION OF THE AO WHO DISALLOWED THE LOS S OF RS. 19,93,640/- ON PURCHASE AND SALE OF 9200 SHARES OF M/S. SARANG VINIYOG LTD. 3. BRIEF FACTS OF THE CASE IS THAT THE AO NOTED T HAT THE ASSESSEE HAD FILED RETURN A TOTAL INCOME OF RS. 48,52,615/-. THE AO NOTED THAT THE AS SESSEE HAS CLAIMED BUSINESS LOSS OF RS. 19,93,640/- ON PURCHASE AND SALE OF SHARES OF M/S. SARANG VINIYOG LTD. AND ACCORDING TO THE AO IT IS ONE OF THE PENNY STOCK TRADED IN CALCUTTA STOCK EXCHANGE WHICH IS USED FOR GIVING BOGUS CAPITAL LOSS / CAPITAL GAIN. ACCORDING TO THE AO THIS SCRIP WAS SUSPENDED BY SEBI VIDE NOTIFICATION DATED 02.12.2005 W.E.F. 05.12.200 5. THE AO TAKING NOTE OF CERTAIN OTHER FAULTS WAS OF THE OPINION THAT IT IS A BOGUS TRANSA CTION WHICH HAS BEEN CARRIED OUT WITH ACTIVE CONNIVANCE OF THE BROKER TO CREATE LOSS OF RS. 19,9 3,640/-. THEREFORE, HE DISALLOWED THE 2 ITA NO. 399/KOL/2013 M/S. FLICKER TRADING LTD., AY 2006-07 CLAIM AND MADE AN ADDITION OF THE SAID AMOUNT. AGGR IEVED THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A) WHICH WAS DISMISSED. AGGRIEVE D THE ASSESSEE IS BEFORE US. 4. AT THE OUTSET ITSELF, THE LD. AR FOR THE ASSESSE E SUBMITTED THAT THE ASSESSEE DID NOT GET PROPER OPPORTUNITY BEFORE THE AO TO PROPERLY EXPLAI N AND GIVE DETAILS / DOCUMENTS OF THE SAID TRANSACTION. ACCORDING TO THE LD. AR, ONE OPPO RTUNITY WAS GIVEN VIDE LETTER DATED 27.10.2008 AND SINCE THE ASSESSEE DID NOT RESPOND, THE AO HAS MADE THE ADDITION. WE FIND FROM PARA 3.2 OF THE ASSESSMENT ORDER THAT THE AO H AD ISSUED A SHOW CAUSE LETTER DATED 27.10.2008 WITH RESPECT TO THIS PARTICULAR TRANSACT ION AND SINCE ACCORDING TO AO THE ASSESSEE DID NOT COMPLY, HE DISALLOWED THE LOSS BY AN ORDER PASSED ON 18.12.2008. THE LD. AR CITED THE DECISION OF THE HONBLE SUPREME COURT IN THE CA SE OF TIN BOX AND PLEADED THAT GIVEN AN OPPORTUNITY BEFORE THE AO, THE ASSESSEE WOULD LIKE TO PLACE DOCUMENTS TO PROVE THE GENUINENESS OF THE TRANSACTION. THE HONBLE SUPREME COURT IN TIN BOX COMPANY VS. CIT (2001) 249 ITR 216 (SC) HAS HELD AS UNDER: IT IS UNNECESSARY TO GO INTO GREAT DETAIL IN THESE MATTERS FOR THERE IS A STATEMENT IN THE ORDER OF THE TRIBUNAL, THE FACT-FINDING AUTHORITY, THAT R EADS THUS : WE WILL STRAIGHTAWAY AGREE WITH THE ASSESSEES SUB MISSION THAT THE INCOME-TAX OFFICER HAD NOT GIVEN TO THE ASSESSEE PROPER OPPORTUNITY OF BEI NG HEARD. THAT THE ASSESSEE COULD HAVE PLACED EVIDENCE BEFORE THE FIRST APPELLATE AUTHORITY OR BEFORE THE TRIBUNAL IS REALLY OF NO CONSEQUENCE FOR IT IS THE ASSESSMENT ORDER THAT COUNTS. THAT ORDER MUST BE MADE AFTER THE ASSESSEE HAS BEEN GIVEN A RE ASONABLE OPPORTUNITY OF SETTING OUT HIS CASE. WE, THEREFORE, DO NOT AGREE WITH THE TRIBUNAL AND THE HIGH COURT THAT IT WAS NOT NECESSARY TO SET ASIDE THE ORDER OF ASSESSMENT AND REMAND THE MATTER TO THE ASSESSING AUTHORITY FOR FRESH ASSESSMENT AFTER GIVING TO THE ASSESSEE A PROPER OPPORTUNITY OF BEING HEARD. TWO QUESTIONS WERE PLACED BEFORE THE HIGH COURT, OF WHICH THE SECOND QUESTION IS NOT PRESSED. THE FIRST QUESTION READS THUS : 1. WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE TRIBUNAL WAS JUSTIFIED IN NOT SETTING ASIDE THE ASSESSMENT ORDER IN SPITE OF A FINDING ARRIVED AT BY IT THAT THE INCOME- TAX OFFICER HAD NOT GIVEN A PROPER OPPORTUNITY OF H EARING TO THE ASSESSEE ? IN OUR OPINION, THERE CAN ONLY BE ONE ANSWER TO THI S QUESTION WHICH IS INHERENT IN THE QUESTION ITSELF : IN THE NEGATIVE AND IN FAVOUR OF THE ASSESSEE. THE APPEALS ARE ALLOWED. THE ORDER UNDER CHALLENGE IS SET ASIDE. THE ASSESSMENT ORDER, THAT OF THE COMMISSIONER (APPEALS) AND OF THE TRIBUNAL A RE ALSO SET ASIDE. THE MATTER SHALL NOW BE REMANDED TO THE ASSESSING AUTHORITY FOR FRESH CO NSIDERATION, AS AFORESTATED. 3 ITA NO. 399/KOL/2013 M/S. FLICKER TRADING LTD., AY 2006-07 5. SINCE WE HAVE TAKEN NOTE THAT AFTER ISSUANCE OF THE SHOW CAUSE NOTICE DATED 27.10.2008, THE AO TAKING NOTE THAT THE ASSESSEE HA S NOT RESPONDED TO IT HAS DRAWN ADVERSE INFERENCE AGAINST THE ASSESSEE. WE ARE OF THE OPINI ON THAT THE ASSESSEE SHOULD BE GIVEN PROPER OPPORTUNITY AT THE ASSESSMENT STAGE, WHICH H AS NOT BEEN DONE IN THIS CASE, THEREFORE, THE ORDER OF THE LD. CIT(A) ON THIS ISSUE IS SET AS IDE AND THE ISSUE IS REMANDED BACK TO THE AO FOR DENOVO ASSESSMENT IN ACCORDANCE WITH LAW. NE EDLESS TO SAY PROPER OPPORTUNITY BE GIVEN TO THE ASSESSEE BEFORE THE ASSESSMENT IS FRAM ED ON THIS ISSUE. 6. COMING TO THE NEXT GROUND OF APPEAL OF THE ASSES SEE WHICH IS AGAINST THE ACTION OF THE LD. CIT(A) IN UPHOLDING THE ACTION OF THE AO WHO CO NSIDERED THE SURPLUS OF RS. 48,52,615/- ARISING FROM PURCHASE AND SALE OF 175000 SHARES OF M/S. POLAR PHARMA LTD. AS BUSINESS INCOME IN PLACE OF SHORT TERM CAPITAL AS CLAIMED BY THE ASSESSEE. 7. BRIEF FACTS OF THE CASE IS THAT THE AO NOTED THA T THE ASSESSEE CLAIMED THAT IT PURCHASED AND SOLD 175000 SHARES OF M/S. POLAR PHARMA LTD. (H EREIN AFTER M/S. PPL) ON 01.04.2005 AND WAS SUBSEQUENTLY SOLD IN THE FINANCIAL YEAR UND ER CONSIDERATION. IT WAS NOTED BY THE AO THAT THE ASSESSEE CLAIMED CAPITAL GAIN OF RS. 48,52 ,615/- FROM ITS TRANSACTION. AFTER AN ENQUIRY, THE AO FOUND THAT NO SUCH SHARES WERE PURC HASED ON 01.04.2005, HOWEVER ACCORDING TO AO 175000 SHARES WERE PURCHASED ON 30. 03.2005/31.03.2005 AND THAT THE ASSESSEE HAD 251991 SHARES OF THIS SCRIP IN ITS DEM AT ACCOUNT. THUS, ACCORDING TO THE AO, NO INVESTMENT WAS SHOWN THERE IN THE BOOKS OF ASSESSEE AS ON 31.03.2005. THE AO NOTED THAT IN THE FINANCIAL YEAR UNDER CONSIDERATION, THE ASSESSE E HAD SHOWN BUSINESS TRANSACTION ON ACCOUNT OF SALE OF 76991 SHARES OF M/S. PPL WHICH W AS REFLECTED AS CLOSING STOCK AS ON 31.03.2005. THUS ACCORDING TO THE AO SINCE ALL THES E SHARES WERE SOLD IN THIS FINANCIAL YEAR WHICH RESULTED IN PROFIT OF RS. 21,03,723/- SHOULD HAVE BEEN SHOWN AS BUSINESS PROFIT. THE AO NOTED THAT AS ON 31.03.2005, THE ASSESSEE HAD TO TAL 2,51,991 SHARES OF M/S. PPL, BUT IT SOLD ONLY 76991SHARES IN ITS BALANCE SHEET. SO ACCO RDING TO THE AO, 76,991 SHARES WHICH WERE SOLD IN THE FINANCIAL YEAR 2004-05 AND INCOME WAS SHOWN AS BUSINESS INCOME. ACCORDING TO AO THE BALANCE 175000 SHARES OF M/S. P PL WHICH WERE CARRY FORWARDED FROM 4 ITA NO. 399/KOL/2013 M/S. FLICKER TRADING LTD., AY 2006-07 31.03.2005 WAS INCORRECTLY SHOWN AS PURCHASE OF SHA RES OF M/S. PPL AS ON 01.04.2005 WHICH WERE LATER SOLD IN THIS ASSESSMENT YEAR BUT T HE ASSESSEE SHOWED THE RESULTANT PROFIT AS SHORT TERM CAPITAL GAIN, WHICH ACCORDING TO THE AO SHOULD HAVE BEEN SHOWN AS BUSINESS INCOME. THEREFORE HE ISSUED NOTICE CALLING UPON THE ASSESSEE AS TO WHY THE SAID TRANSACTION SHOULD NOT BE TREATED AS BUSINESS TRANSACTION VIDE LETTER DATED 27.10.2008. HOWEVER SINCE NO REPLY WAS RECORDED FROM ASSESSEE, ANOTHER NOTICE WA S ISSUED ON 14.11.2018 AND TAKING NOTE THAT NO REPLY WAS FORTHCOMING FROM ASSESSEE, THE AO TREATED THE SAME AS BUSINESS INCOME AND THEREBY NOT ACCEPTED THE CLAIM OF THE ASSESSEE THAT IT WAS SHORT TERM CAPITAL GAIN. AGGRIEVED THE ASSESSEE PREFERRED AN APPEAL WHO DISM ISSED IT. AGGRIEVED THE ASSESSEE IS BEFORE US. 8. AT THE OUTSET ITSELF, THE LD. AR FOR THE ASSESSE E SUBMITTED THAT THE ASSESSEE DID NOT GET PROPER OPPORTUNITY BEFORE THE AO TO PROPERLY EXPLAI N AND GIVE DETAILS / DOCUMENTS OF THE SAID TRANSACTION. ACCORDING TO THE LD. AR, ONLY ONE OPPORTUNITY WAS GIVEN VIDE LETTER DATED 27.10.2008 AND SINCE THE ASSESSEE DID NOT RESPOND, THE AO HAS MADE THE ADDITION. WE FIND FROM PARA 2.4 OF THE ASSESSMENT ORDER THAT THE AO H AD ISSUED A SHOW CAUSE LETTER DATED 27.10.2008 WITH RESPECT TO THIS PARTICULAR TRANSACT ION AND SINCE NO COMPLIANCE WAS MADE, HE PASSED THE ORDER ON 18.12.2008. ACCORDING TO LD AR, THE ASSESSEE DID NOT GET THE SECOND NOTICE DT 14.11.2018 AS RECORDED BY AO. THE LD. AR CITED THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF TIN BOX PLEADED THAT G IVEN AN OPPORTUNITY BEFORE THE AO, THE ASSESSEE WOULD LIKE TO PLACE DOCUMENTS TO PROVE THE GENUINENESS OF THE TRANSACTION. 9. SINCE WE HAVE TAKEN NOTE THAT AFTER ISSUANCE OF THE SHOW CAUSE NOTICE DATED 27.10.2008, THE AO TAKING NOTE THAT THE ASSESSEE HA S NOT RESPONDED TO HIS LETTER HAS DRAWN ADVERSE INFERENCE AGAINST THE ASSESSEE. THUS WE ARE OF THE OPINION THAT ASSESSEE DID NOT GET PROPER OPPORTUNITY BEFORE THE AO, SO RELYING ON THE ORDER OF HONBLE SUPREME COURT IN TIN BOX (SUPRA), WE ARE OF THE OPINION THAT THE ASSESSE E SHOULD BE GIVEN PROPER OPPORTUNITY AT THE ASSESSMENT STAGE THEREFORE THE ORDER OF THE LD. CIT(A) ON THIS ISSUE IS SET ASIDE AND THE ISSUE IS REMANDED BACK TO THE AO FOR DENOVO ASSESSM ENT IN ACCORDANCE WITH LAW. NEEDLESS 5 ITA NO. 399/KOL/2013 M/S. FLICKER TRADING LTD., AY 2006-07 TO SAY PROPER OPPORTUNITY GIVEN TO THE ASSESSEE BEF ORE THE ASSESSMENT IS FRAMED ON THIS ISSUE. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH JULY, 2019 SD/- SD/- (DR. A. L. SAINI) (A. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 17 TH JULY, 2019 BISWAJIT, SR. PS COPY OF THE ORDER FORWARDED TO: 1 APPELLANT M/S. FLICKER TRADING LTD., C/O. POLAR IN DUSTRIES LTD., 113, PARK STREET, KOLKATA 700 016. 2 RESPONDENT DCIT, CIRCLE 8, KOLKATA. 3 4 5 CIT(A) CIT DR, KOLKATA BENCHES, KOLKATA / TRUE COPY, BY ORDER, ASSISTANT REGISTRAR/H.O.O ITAT KOLKATA