Shri Jasubhai Manilal Thakkar, Rajkot, Ahmedabad V. The Assistant Commissioner of Income Tax, Circle-2, RAJKOT-GUJARAT

ITA 405/RJT/2014

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 8800 (ITAT-RAJKOT)
• Duration Of Justice: 8 year(s) 2 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-09-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 22-06-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Speculation loss
• Section: 145; 143(3); 69A

Judgement Text

आयकर अपीलीय अिधकरण, अहमदाबाद Ɋायपीठ IN THE INCOME TAX APPELLATE TRIBUNAL, RAJKOT BENCH, RAJKOT BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER And SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER आयकर अपील सं./ITA Nos. 404-405/Rjt/2014 िनधाŊरण वषŊ/Asstt. Years: 2009-2010 & 2010-2011 Late Shri Jashubhai M. Thakkar, By L/H Dinesh J. Thakkar, C/o Ketan H. Shah, 512, Times Square-I, Opp. RamBaug Bunglow, Thaltej Shilaj Road, Thaltej, Ahmedabad. PAN: AAJPT5496L Vs. A.C.I.T., Circle-2, Rajkot. (Applicant) (Respondent) Assessee by : Shri Ketan Shah, A.R Revenue by : Shri B.D. Gupta Sr. DR सुनवाई की तारीख/Date of Hearing : 06/07/2022 घोषणा की तारीख /Date of Pronouncement: 09/09/2022 आदेश/O R D E R PER BENCH: The captioned two appeals have been filed at the instance of the Assessee against the order of the Learned Commissioner of Income Tax(Appeal)-III, Rajkot, dated 30/05/2014 arising in the matter of Assessment Order passed under s. 143(3) r.w.s. 147 of the Income Tax Act, 1961 (here-in-after referred to as "the Act") relevant to the Assessment Years 2009-2010 and 2010-11. ITA no.404-405/Rjt/2014 Asstt. Years 2009-10 & 2010-11 2 2. The issue raised by the assessee for both the assessment years i.e. 2009-10 and 2010-11 is interconnected, therefore we have clubbed both the appeals filed by the assessee together for the purpose of adjudication. 3. The interconnected issue raised by the assessee is that the learned CIT-A erred in upholding the order of the AO by treating the speculative income of Rs. 82,36,524.00 as bogus/ unexplained in nature and thereby disallowing the set off against the brought forward losses. 4. The facts in brief are that the assessee in the present case is an individual and claimed to be engaged in the activities of financing and money lending. The assessee has filed his return of income declaring the income under the head business and profession and agricultural income. It was also recorded by the AO in the assessment order that the assessee is following mercantile system of accounting. The assessee in the year under consideration has shown business income from the speculative activities amounting to Rs. 80,04,126.00 which was treated by the AO as bogus in nature bogus and accommodation entry taken from the broker M/s Orange commodity services private Ltd. Thus the AO did not allow the brought forward speculative loss to be set off against the speculative income declared by the assessee in the year under consideration. As such the AO for the year under consideration accepted the return of income filed by the assessee. 5. The AO further found that the assessee has received the impugned speculative income of Rs. 80,04,126.00 which was held as bogus and sham transaction, in the financial year 2009-10 corresponding to assessment year 2010- 11. The AO also worked out the cost of such accommodation entry at Rs. 1,60,083.00 only being 2% of 80,04,126.00. Thus, the AO added the sum of Rs. 82,35,524.00 ( the actual amount comes at Rs. 81,64,208.00), representing the bogus and sham transaction under section 69A of the Act, in the assessment year 2010-11 to the total income of the assessee. ITA no.404-405/Rjt/2014 Asstt. Years 2009-10 & 2010-11 3 6. Aggrieved assessee preferred an appeal to the learned CIT-A who confirmed the order of the AO. 7. Being aggrieved by the order of the learned CIT-A, the assessee is in appeal before us. 8. The learned AR before us filed a paper running from pages 1 to 231 and raised various contentions including challenging the validity of the assessment. Without prejudice, one of the contention of the learned AR for the assessee is that if at all the impugned amount of speculative business income is treated as bogus in nature, then the same is liable to be taxed in the assessment year 2009-10 whereas the revenue has made the addition in the assessment year 2010-11. 9. On the other hand, the learned DR vehemently supported the order of the authorities below. 10. We have heard the rival contentions of both parties and perused the materials available on record. Admittedly, the assessee has shown income from the speculative activities amounting to Rs. 82,35,524.00 in the assessment year 2009- 10 but the addition was sustained by the Revenue in the assessment year 2010-11. In this regard we have referred relevant documents such as the contract notes, books of accounts of the assessee, copy of the ledgers of different parties which are placed in the paper book filed before us. Admittedly, the assessee was following mercantile system of accounting and the transaction was recorded in the assessment year 2009-10. According to the provisions of section 4 of the Act, the income must be of previous year which is subject to the method of accounting i.e. mercantile /cash, specified under the provisions of section 145 of the Act. Admittedly, the assessee is following mercantile system of accounting and this fact can be verified from the finding of the AO of the assessment order. All the documents and the entries were recorded in the books of accounts of the assessee ITA no.404-405/Rjt/2014 Asstt. Years 2009-10 & 2010-11 4 pertaining to the assessment year 2009-10. Thus, we are of the view that, if at all impugned amount of speculative profit is treated as income, then the same should be brought to tax in assessment year 2009-10 instead of the assessment year 2010- 11. Thus on this count alone, the assessee succeeds and therefore we do not find to adjudicate the other contentions raised by the learned AR for the assessee at the time of hearing. Hence, we hold that the income shown by the assessee from the speculative business is bogus in nature and therefore, the same cannot be set off against the brought forward loss but at the same time, the same cannot be added to the total income of the assessee for the AY 2009-10 as the Revenue has not made any addition in that year. Likewise, the same speculative income cannot be added to the total income for the AY 2010-11 as it pertains to the AY 2009-10. Thus we direct the AO to delete the addition made by him in the AY 2010-11. Hence, the ground of appeal of the assessee for the AY 2009-10 is dismissed whereas the ground of appeal of the assessee for the AY 2010-11 is allowed. 11. In the result, the appeal filed by the assessee in ITA No. 404/AHD/2014 for the AY 2009-10 is dismissed whereas the appeal filed by the assessee in ITA No. 405/AHD/2014 for the AY 2010-11 is allowed. Order pronounced in the Court on 09/09/2022 at Ahmedabad. Sd/- Sd/- (SIDDHARTHA NAUTIYAL) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER (True Copy) Ahmedabad; Dated 09/09/2022 Manish