PREETI INFRASTRUCTURE LIMITED, MUMBAI V. DEPUTY COMMISSIONER OF INCOME TAX 10(3)(2), MUMBAI

ITA 410/MUM/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 4294 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-03-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 18-01-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Reopening of assessment; Business income; Opportunity of being heard; Principle of natural justice; Bonafide belief; Period of limitation; Speculation loss; Reason to believe; Reassessment proceedings; Set aside
• Section: 143(3); 234B; 143(1); 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI BEFORE SHRI RAJESH KUMAR , A M AND SHRI AMARJIT SINGH, J M / I.T.A. NO. 410 /MUM/201 8 ( / ASSESSMENT YEARS: 2010 - 11 ) PREETI INFRASTRUCTURE LIMITED 501, HERITAGE PLAZA, JP ROAD OPP. INDIAN OIL COLONY ANDHERI (W), MUMBAI - 400053 . / VS. DCIT 10(3)(2) MUMBAI ROOM 509, 5 TH FLOOR, AAYAKAR BHAVAN, MUMBAI. ./ ./ PAN/GIR NO. : AADCP3591K ( / APPELLANT ) .. ( / RESPONDE NT ) / DAT E OF HEARING: 27 .0 2 .2019 /DATE OF PRONOUNCEMENT: 13 . 03 .2019 / O R D E R PER AMARJIT SINGH, JM: THE ASSESSEE HAS FILED THE PRESENT APPEAL AGAINST THE ORDER DATED 31 . 10 .2017 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 17 , MUMBAI [HEREINAFTER REFERRED TO AS THE CIT(A)] RELEVANT TO THE A.Y. 20 10 - 11 . 2 . THE ASSE SSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1. GROUND NO. 1: APPEAL DISMISSED BY THE CIT [APPEALS] ONLY ON TECHNICAL GROUND AND WITHOUT CONSIDERING THE MERITS AND FACTS OF THE CASE 1.1 ON THE GIVEN FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE L EARNED COMMISSIONER OF INCOME - TAX (APPEALS) - 17, MUMBAI ('THE CIT (APPEALS)'), ERRED IN NOT ADMITTING THE APPEAL FILED MANUALLY IN PAPER FORM ON APRIL 25, 2016 ON THE PREMISE THAT THE APPELLANT SHOULD HAVE BEEN FILED ELECTRONICALLY BEFORE EXTENDED PERIOD I.E. JUNE 15, 2016 AS PER CIRCULAR NO. 20/2016 DATED MAY 26, 2016, AND FURTHER ERRED IN DISMISSING THE APPEAL ONLY ON TECHNICAL GROUND (OF NON - FILING APPEAL IN ELECTRONIC FORM) AND WITHOUT CONSIDERING THE MERITS AND FACTS OF THE CASE. REVENUE BY: SHRI ABIRAMA KARTIKIYEN (DR) ASSESSEE BY : SHRI JIGAR MEHTA (AR) ITA NO. 410 /M/201 8 A. Y. 2 010 - 11 2 1.2 THE APPELLANT SUB MITS IN APRIL 2016 AND DURING THE EXTENDED PERIOD, THERE WERE TECHNICAL GLITCHES / TECHNICAL DIFFICULTIES IN 'E - FILING OF APPEAL' INASMUCH AS THE RELEVANT ASSESSMENT YEAR 2010.11 WAS NOT APPEARING IN THE 'DROP DOWN' TO ENABLE THE APPELLANT TO SUBMIT APPEAL IN ELECTRONIC FORMAT. THE APPELLANT, THEREFORE, HAD FILED THE APPEAL IN THE 'PAPER FORM' WITHIN THE PRESCRIBED TIME LIMIT AND SAME HAS NOT BEEN DISPUTED BY THE LEARNED CIT (APPEALS). THE APPELLANT WAS UNDER A BONAFIDE BELIEF THAT DUE TO SUCH TECHNICAL GLI TCHES / TECHNICAL DIFFICULTIES, THE APPEAL FILED IN THE 'PAPER FORM' WOULD BE CONSIDERED AS IN COMPLIANCE WITH THE LAW. 1.3 THE APPELLANT HAD RECEIVED A NOTICE ON OCTOBER 25, 2017 (WEDNESDAY) FROM THE CIT (APPEALS) TO RESPOND BY OCTOBER 31, 2017 (TUESDAY) (4 WORKING DAYS) AS TO HOW SHOULD APPEAL FILED IN 'PAPER FORM' BE CONSIDERED AS IN COMPLIANCE OF LAW. ON THE DATE OF HEARING, THE APPELLANT WAS INFORMED THAT THE CIT (APPEALS) WAS PRE - OCCUPIED AND THAT NEW DATE OF HEARING WILL BE INFORMED. HOWEVER, IT IS N OTED THAT THE CIT(APPEALS) DISMISSED THE APPEAL ON SAME DAY OCTOBER 31, 2017 WITHOUT INTIMATING NEXT OF DATE OF HEARING, OR WITHOUT PROVIDING SECOND CHANCE / FINAL OPPORTUNITY IN THE MATTER. 1.4 THE APPELLANT HUMBLY SAYS THAT APPELLANT IS VITALLY INTER ESTED IN PURSUING THE APPEAL AND THERE IS NO INTENTION NOT TO PURSUE THE APPEAL AND THEREFORE, REQUESTS YOUR HONOURS TO KINDLY GIVE NECESSARY DIRECTIONS TO THE CIT (APPEALS) TO KINDLY CONSIDER THE APPEAL AND DECIDE THE ISSUES THEREIN ON MERITS AND FACTS OF THE CASE. HE APPELLANT RAISES THE FOLLOWING GROUNDS OF APPEAL TO BE DECIDED ON MERITS AND FACTS OF THE CASE: GROUND NO. 2: WITHOUT PREJUDICE TO THE ABOVE, THE IMPUGNED REOPENING OF ASSESSMENT IS BAD IN LAW INASMUCH AS THERE WAS NO NEW 'TANGIBLE' MATERIAL IN THE POSSESSION OF THE ASSESSING OFFICER AT THE TIME OF FORMING A BELIEF THAT AN INCOME HAS ESCAPED ASSESSMENT AND THAT THE ASSESSING OFFICER HAD NO REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT AS THE ASSESSING OFFICER DID NOT APPLY HIS OWN MIND ON THE INFORMATION RECEIVED FROM THE INVESTIGATION WING (DIT(I&C1)1 AND INITIATED THE REASSESSMENT PROCEEDINGS IN A MECHANICAL MANNER 2.1 ON THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED ASSESSING OFFICER ERRED IN INITIATING REASSES SMENT PROCEEDINGS WITHOUT ANY NEW 'TANGIBLE' MATERIAL ON RECORD, ON THE BASIS OF WHICH HE COULD FORM A 'REASON TO BELIEVE' THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT, AND FURTHER ERRED IN INITIATING SUCH PROCEEDINGS, IN A MECHANICAL MANNER, MEREL Y BASED ON THE INFORMATION RECEIVED FROM THE DIT (I&CI) ('INVESTIGATION WING') AND WITHOUT APPLICATION OF HIS MIND TO FORM HIS OWN INDEPENDENT OPINION ON 'REASON TO BELIEVE' THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT AND ACCORDINGLY, REOPENING IS BAD IN LAW AND CONSEQUENTLY, ASSESSMENT ORDER PASSED UNDER SECTION 143(3) R.W.S 147 OF THE INCOME - TAX ACT, 1961 ('THE ACT') IS INVALID AND VOID OB INITIO AND BAD IN LAW. ITA NO. 410 /M/201 8 A. Y. 2 010 - 11 3 2.2 UNDER THE PRESENT FACTS, IN ABSENCE OF ANY 'TANGIBLE' MATERIAL ON RECORD AT THE T IME OF INITIATION OF REASSESSMENT PROCEEDINGS AND DUE TO NON - APPLICATION OF MIND BY THE ASSESSING OFFICER TO INITIATE THE REASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER SOUGHT FRESH INFORMATION FROM THE NATIONAL STOCK OF EXCHANGE OF INDIA LIMITED ('NSE') (AS INFORMED BY THE ASSESSING OFFICER DURING THE COURSE OF PROCEEDINGS) POST INITIATION OF REASSESSMENT PROCEEDINGS AND APPLIED THE SAME AGAINST THE APPELLANT AND ACCORDINGLY, THE IMPUGNED ASSESSMENT ORDER UNDER SECTION 143(3) R.W.S 147 OF THE ACT BE CONSI DERED AS INVALID AND VOID AB INITIO AND BAD IN LAW. 2.3 THE APPELLANT PRAYS FOR DUE RELIEF. 3. GROUND NO. 3: WITHOUT PREJUDICE TO THE ABOVE, THE REOPENING OF ASSESSMENT IS BAD IN LAW AS THE ASSESSING OFFICER INITIATED REASSESSMENT PROCEEDINGS BASED ON 'GEN ERIC' STATEMENTS OF THE BROKERS AND SAURASHTRA FINSTOCK PRIVATE LIMITED (ON WHOM ENQUIRIES WERE CONDUCTEDI WHOSE DETAILS WERE NOT PROVIDED TO THE APPELLANT AND WHICH HAS NO NEXUS WITH THE APPELLANT 3.1 WITHOUT PREJUDICE TO THE ABOVE, ON THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE ASSESSING OFFICER ERRED IN INITIATING REASSESSMENT PROCEEDINGS BASED ON THE 'GENERIC' STATEMENTS OF THE BROKERS (THE DETAILS OF WHICH WERE NOT PROVIDED TO THE APPELLANT EVEN AFTER THE SOME WERE REPEATEDLY SOUGHT B Y THE APPELLANT VIDE SUBMISSIONS DATED OCTOBER 5, 2015, JANUARY 15, 2016, MARCH 8, 2016, MARCH 17, 2016, MARCH 13, 2016 AND MARCH 30, 2016) ON WHOM SPOT VERIFICATION WAS CARRIED OUT BY THE INVESTIGATION WING. 3.2 ALSO, THE ASSESSING OFFICER, IN THE 'REASON S RECORDED FOR REOPENING' AS WELL AS IN THE 'DISPOSAL ORDER' HAS STATED THAT ENQUIRIES WERE CONDUCTED ON SAURASHTRA FINSTOCK PRIVATE LIMITED AND AT PARA 14 OF THE SAID DISPOSAL ORDER, IT IS STATED THAT THE INVESTIGATION WING HAS SUBSTANTIAL AND CLINCHING E VIDENCE IN THE CASE OF SAURASHTRA FINSTOCK PRIVATE LIMITED, THE DETAILS OF WHICH HAS NOT BEEN PROVIDED TO THE APPELLANT. 3.3 HOWEVER, ON FACTS, THERE IS NO NEXUS OF SAURASHTRA FINSTOCK PRIVATE LIMITED WITH THE APPELLANT. IT IS A SETTLED LEGAL POSITION THAT THERE HAS TO BE A NEXUS BETWEEN THE STATEMENTS OF THIRD PARTIES RELIED UPON, ENQUIRIES CONDUCTED UPON THIRD PARTIES AND THE INCOME BEING ALLEGED TO HAVE ESCAPED TAXATION. 3.4 IN ABSENCE OF ANY NEXUS BETWEEN THE 'GENERIC' STATEMENT OF THE BROKERS, SAURASH TRA FINSTOCK PRIVATE LIMITED (ON WHOSE STATEMENTS AND ENQUIRIES, REASSESSMENT PROCEEDINGS HAVE BEEN INITIATED) AND THE APPELLANT, THE SUBJECT ASSESSMENT ORDER BE CONSIDERED AS INVALID AND VOID OB INITIO AND BAD IN LAW AND CONSEQUENTLY, THE ADDITION / DISAL LOWANCE OF SUBJECT AMOUNT OF RS. 4,652,043 BE DELETED. 3.5 THE APPELLANT PRAYS FOR DUE RELIEF. 4. GROUND NO. 4: WITHOUT PREJUDICE TO THE ABOVE, THE SUBJECT ASSESSMENT ORDER UNDER SECTION 143(3) R.W.S 147 OF THE ACT IS INVALID AND VOID AB INITIO AND BAD IN LAW INASMUCH AS THE ASSESSING OFFICER DID NOT PROVIDE ITA NO. 410 /M/201 8 A. Y. 2 010 - 11 4 INFORMATION RECEIVED FROM THE INVESTIGATION WING AND THEREBY VIOLATED THE PRINCIPLES OF NATURAL JUSTICE. 4.1 WITHOUT PREJUDICE TO THE ABOVE, ON THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED ASSESSING OFFICER ERRED IN NOT PROVIDING INFORMATION, COMMUNICATION, CORRESPONDENCE RECEIVED FROM THE INVESTIGATION WING INCLUDING THE STATEMENTS OF THE BROKERS WHOSE STATEMENTS HAVE BEEN RELIED UPON BY THE INVESTIGATION WING AND SUBSTANTIAL A ND CLINCHING EVIDENCE IN THE CASE OF SAURASHTRA FINSTOCK PRIVATE LIMITED AND PROCEEDED TO COMPLETE THE ASSESSMENT UNDER SECTION 143(3) R.W.S 147 OF THE ACT VIDE ASSESSMENT ORDER DATED MARCH 31, 2016. 4.2 IT IS A SETTLED POSITION IN LAW THAT ANY ASSESSMENT ORDER PASSED UNDER SECTION 143(3) R.W.S 147 OF THE ACT IS BAD IN LAW WHERE THE ASSESSING OFFICER HAS NOT PROVIDED THE INFORMATION OF THE THIRD PARTY WHICH HAS BEEN APPLIED AGAINST THE ASSESSEE AND ACCORDINGLY, THE SUBJECT ASSESSMENT ORDER BE CONSIDERED AS INVALID AND VOID AB INITIO AND BAD IN LAW AND CONSEQUENTLY, THE ADDITION OF RS.4,652,043 BE DELETED. 4.3 THE APPELLANT PRAYS FOR DUE RELIEF. 5. GROUND NO. 5: WITHOUT PREJUDICE TO THE ABOVE, THE SUBJECT ASSESSMENT ORDER UNDER SECTION 143(3) R.W.S 147 OF THE ACT IS INVALID AND VOIDABINITIO AND BAD IN LAW INASMUCH AS THE ASSESSING OFFICER DID NOT GRANT AN OPPORTUNITY TO CROSS EXAMINE THE BROKERS AND ITS STATEMENT THERETO WHICH HAVE BEEN RELIED UPON BY THE INVESTIGATION WING AND CONSEQUENTLY BY THE ASSESSING OF FICER 5.1 WITHOUT PREJUDICE TO THE ABOVE, ON THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED ASSESSING OFFICER ERRED IN NOT PROVIDING ANY OPPORTUNITY TO CROSS EXAMINE THE BROKERS AND ITS STATEMENTS THERETO AND PROCEEDED TO COMPLETE TH E ASSESSMENT UNDER SECTION 143(3) R.W.S 147 OF THE ACT VIDE ASSESSMENT ORDER DATED MARCH 31, 2016. 5.2 IT IS A SETTLED POSITION IN LAW THAT ANY ASSESSMENT ORDER PASSED UNDER SECTION 143(3) R.W.S 147 OF THE ACT WITHOUT PROVIDING OPPORTUNITY FOR CROSS EXAMIN ATION IS BAD IN LAW ESPECIALLY WHERE THE ASSESSING OFFICER IS PLACING RELIANCE ON THE INFORMATION PROVIDED BY THE THIRD PARTY AND SUCH INFORMATION IS BEING APPLIED AGAINST THE ASSESSEE AND ACCORDINGLY, THE SUBJECT ASSESSMENT ORDER BE CONSIDERED AS INVALID AND VOID AB INITIO AND BAD IN LAW AND CONSEQUENTLY, THE ADDITION OF RS.4,652,043 BE DELETED. 5.3 THE APPELLANT PRAYS FOR DUE RELIEF. 6. GROUND NO. 6: WITHOUT PREJUDICE TO THE ABOVE, SINCE THE APPELLANT HAD HADSUBMITTED ALL THE NECESSARY INFORMATION TO THE ASSESSING OFFICER AND HAS ALSO ACTED ON GOOD FAITH AND BONAFIDE BASIS, THERE SHOULD NOT BE DISALLOWANCE OF SUCH AMOUNT OF RS. 4,652,043 6.1 WITHOUT PREJUDICE TO THE ABOVE, ON THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED ASSESSING O FFICER ERRED IN TREATING THE ALLEGED TRANSACTIONS AS THAT OF THE APPELLANT EVEN THOUGH THE APPELLANT HAD SUBMITTED ALL THE NECESSARY INFORMATION AND EXPLANATIONS SOUGHT BY ITA NO. 410 /M/201 8 A. Y. 2 010 - 11 5 THE ASSESSING OFFICER AND AS A RESULT, FURTHER ERRED IN DISALLOWING AMOUNT OF RS. 4, 652,043. 6.2 IT IS STATED THAT THE APPELLANT IS AN INVESTOR / TRADER IN SHARES AND SECURITIES AND IS NOT PRIVY TO INFORMATION IN RESPECT OF CLIENT CODE MODIFICATIONS. WHEN A CONTRACT NOTE IS RECEIVED FROM THE BROKER AND ALL THE DETAILS THEREIN ARE FOUND TO BE IN ORDER, THE APPELLANT IS UNDER A BONAFIDE BELIEF ABOUT THE GENUINENESS OF THE TRANSACTION. HOWEVER, ON RECEIPT OF THE CONTRACT NOTE, THE APPELLANT IS NOT AWARE WHETHER THE TRANSACTION DETAILS WERE PUNCHED WITHOUT ANY ERROR OR WHETHER ANY CODE! PRICE! SCRIP NAME, ETC. WAS FIRST INCORRECTLY PUNCHED AND WAS SUBSEQUENTLY RECTIFIED ONCE SUCH INADVERTENT ERROR WAS NOTICED BY THE BROKER. HENCE, AS A MATTER OF GOOD COMPLIANCE, DETAILS OF ALL THE TRANSACTIONS INCLUDING ALL THE CONTRACT NOTES THEREOF HAD BEEN S UBMITTED TO THE ASSESSING OFFICER. 6.3 IN THE PRESENT FACTS, THE ASSESSING OFFICER HAS NEITHER FOUND ANY DISCREPANCY NOR HAS RAISED ANY FACTUAL CONCERN ON THE SUBMISSION AND EXPLANATION AND CONTRACT NOTES SUBMITTED FOR THE YEAR NOR HAS PROVIDED A SPECIFIC AND FACTUAL INSTANCE (OR TRANSACTION) AS TO HOW THE APPELLANT GOT BENEFITED BUT MERELY STATED HYPOTHETICAL ILLUSTRATION AT PARAS 6.1 AND 6.2 OF THE IMPUGNED ASSESSMENT ORDER WITHOUT PROVING AS TO HOW THE TRANSACTIONS OF THE APPELLANT ARE IN ACCORDANCE WITH SUCH ILLUSTRATION. 6.4 THE ASSESSING OFFICER, WITHOUT APPRECIATING THE FACTS AND WITHOUT DISCUSSING THE RATIONALE AND ON THE BASIS OF MERE ASSUMPTION AND PRESUMPTION, ILLOGICALLY AND ADVERSELY CONCLUDED THAT FOR ALL THE TRANSACTIONS WHICH WERE ALLEGEDLY T RANSFERRED BY THE APPELLANT, THERE WILL BE SAME SET OF TRANSACTIONS WHICH REMAIN IN THE BOOKS OF THE APPELLANT AS WELL, EVEN AFTER THE SAME WERE TRANSFERRED. 6.5 THUS, THE LEARNED ASSESSING OFFICER ERRED IN MAKING THE SUBJECT ADDITION / DISALLOWANCE OF RS. 4,652,043 ON AN ASSUMPTION AND PRESUMPTION, WITHOUT REJECTING THE AUDITED BOOKS OF ACCOUNTS AND BASED ON SURMISES AND CONJECTURES. UNDER THE PRESENT FACTS AND CIRCUMSTANCES, THE APPELLANT PRAYS THAT THE SUBJECT AMOUNT OF RS. 4,652,043 OUGHT NOT TO BE DISA LLOWED. 6.6 THE APPELLANT PRAYS FOR DUE RELIEF. 7. GROUND NO. 7: SUFFICIENT OPPORTUNITY NOT GRANTED TO THE APPELLANT TO REPRESENT THE CASE BEFORE THE ASSESSING OFFICER THEREBY RESULTING INTO VIOLATION OF THE PRINCIPLES OF NATURAL JUSTICE 7.1 ON THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED ASSESSING OFFICER ERRED IN ISSUING A SHOW CAUSE ON MARCH 30, 2016 SEEKING EXPLANATION AS TO WHY THE SHARES DERIVATIVES LOSS BE NOT TREATED AS 'SPECULATIVE LOSS' AND FIXED THE HEARING FOR SAME ON MARCH 31, 2016 AND RUSHED TO COMPLETE THE ASSESSMENT ON MARCH 31, 2016 WITHOUT PROVIDING SUFFICIENT TIME TO THE APPELLANT TO REPRESENT THE MATTER INCLUDING TO REVIEW AND TO NEGATE THE SAID RULING RELIED UPON BY THE ASSESSING OFFICER AND THUS, HAS VIOLATED THE PRINCIPLES OF NATURAL JUSTICE. 7.2 IT IS A SETTLED POSITION IN LAW THAT ANY ASSESSMENT ORDER PASSED UNDER SECTION 143(3) R.W.S 147 OF THE ACT WITHOUT PROVIDING ADEQUATE ITA NO. 410 /M/201 8 A. Y. 2 010 - 11 6 OPPORTUNITY TO THE ASSESSEE TO MAKE REPRESENTATIONS BEFORE THE ASSESSING OFFICER IS BAD IN LAW. 7.3 THE APPELLANT PRAYS FOR DUE RELIEF. 8. GROUND NO. 8: LOSS ARISING ON TRADING IN SHARES DERIVATIVES INCORRECTLY ASSESSED AS SPECULATIVE IN NATURE AND AS A CONSEQUENCE, THE ASSESSING OFFICER DENIED THE SET - OFF OF SUCH LOSSES AGAINST THE BUSI NESS INCOME OF THE YEAR UNDER CONSIDERATION 8.1 ON THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED ASSESSING OFFICER ERRED IN NOT APPRECIATING THE BUSINESS OF THE APPELLANT INASMUCH AS INCOME/ LOSS ARISING FROM TRADING IN SHARES DERI VATIVES IS CONSIDERED AS BUSINESS INCOME/ LOSS UNDER SPECIFIC PROVISION SECTION 43(5)(D) OF THE ACT AND SUCH TRANSACTIONS CANNOT BE INVOKED UNDER EXPLANATION TO SECTION 73 OF THE ACT AND THEREBY FURTHER ERRED IN TREATING THE SHARES DERIVATIVES LOSS OF RS . 83,143,255 (AFTER ALLOCATING INCORRECT PROPORTIONATE EXPENSES) AS 'SPECULATION LOSS'. 8.2 THE LEARNED ASSESSING OFFICER FURTHER ERRED IN ALLOCATING PROPORTIONATE EXPENSES WHILE COMPUTING THE SHARES DERIVATIVES LOSS DURING THE YEAR UNDER CONSIDERATION. T HE ASSESSING OFFICER, IN ORDER TO COMPUTE THE AMOUNT OF EXPENSES ATTRIBUTABLE TO THE SHARES DERIVATIVES LOSS SO AS TO DISALLOW THE SAME, INADVERTENTLY, CONSIDERED THE ACTUAL SPECULATION LOSS OF RS.170,770 (WHICH WAS SHOWN AS SPECULATION LOSS ONLY IN THE AU DITED FINANCIALS I.E., WITHOUT APPLYING THE DEEMING PROVISION) AND PROPORTIONATELY DISALLOWED THE SAME. 8.3 THE INCOME/ LOSS ARISING FROM TRADING IN SHARES DERIVATIVES OUGHT TO BE CONSIDERED AS BUSINESS INCOME/ LOSS UNDER SPECIFIC PROVISION - SECTION 43(5 )(D) OF THE ACT AND SUCH TRANSACTIONS CANNOT BE INVOKED UNDER EXPLANATION TO SECTION 73 OF THE ACT AND AS A CONSEQUENCE, SHARES DERIVATIVES LOSS OF RS. 83,143,255 OUGHT TO BE CONSIDERED AS BUSINESS LOSS (AND NOT AS SPECULATION LOSS). 8.4 THE APPELLANT PRAY S FOR DUE RELIEF. 9. GROUND NO. 9: DENIAL OF SET - OFF AND CARRY FORWARD OF BROUGHT FORWARD BUSINESS LOSS OF ASSESSMENT YEAR 2009 - 10 AGGREGATING TO RS. 19,445,548 9.1 ON THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED ASSESSING OFFICER ERRED IN NOT GRANTING SET - OFF OF BROUGHT FORWARD BUSINESS LOSS OF ASSESSMENT YEAR 200940 AGGREGATING TO RS.19,445,548 AGAINST THE BUSINESS INCOME FOR THE YEAR AND CARRY FORWARD THE RESIDUAL AMOUNT (IF ANY). 9.2 IT IS STATED THAT IN THE RETURN OF INCOME A ND COMPUTATION OF TOTAL INCOME FILED FOR THE SUBJECT ASSESSMENT YEAR 2010 - 11, THE APPELLANT HAS SHOWN BROUGHT FORWARD BUSINESS LOSS OF RS.19,445,548 FOR THE ASSESSMENT YEAR 2009 - 10 AND SAME HAS NOT BEEN DISPUTED BY THE ASSESSING OFFICER. THE APPELLANT PRAY S FOR DUE RELIEF. 10 GROUND NO. 10, CHARGE OF INTEREST U/S 234B OF THE ACT. 10.1 ON GIVING EFFECT TO ALL OR ANY OF THE ABOVE GROUNDS OF APPEAL, THE QUANTUM OF INTEREST DETERMINED U/S 234B OF THE ACT WOULD CONSEQUENTLY CHANGE AND THE APPELLANT PRAYS THAT NE CESSARY DIRECTION BE GIVEN TO THE ASSESSING OFFICER TO RE - COMPUTE INTEREST U/S 234B OF THE ACT AFTER GIVING EFFECT TO THE ABOVE GROUNDS OF APPEAL. ITA NO. 410 /M/201 8 A. Y. 2 010 - 11 7 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME ON 30 .0 8.2010 DECLARING TOT AL LOSS TO THE TUNE OF RS. 7,89,06,229 / - . THE RETURN WAS PROCESSED U/S 143(1) OF THE INCOME TAX ACT, 1961 ( IN SHORT THE ACT) . THEREAFTER, THE ASSESSMENT OF THE ASSESSEE WAS REOPENED BY ISSUANCE OF NOTICE U/S 148 OF THE ACT. THE ASSESSEE WAS IN THE BUSIN ESS OF TRADING/INVESTMENT IN SHARES AND SHARES/COMMODITY DERIVATIVE . THE INFORMATION WAS RECEIVED FROM DGIT( I&CI), MUMBAI THAT FICTITIOUS PROFIT AND LOSSES WAS CREATED BY SOME BROKERS BY MISUSING THE CLIENT CODE MODIFICATION FACILITY IN P & O SEGMENT ON NA TIONAL STOCK EXCHANGE (NSE). THE BROKER HAS ADMITTED TO HAVE EARNED COMMISSION INCOME FROM 0.5 TO 2.0% ON AMOUNT OF SUCH FICTITIOUS PROFIT OR LOSSES. THE CONCERNED CLIENTS HAVE ALSO ADMITTED SUCH MALPRACTICE. ONE OF THE BENEFICIARIES WAS M/S. PREETI INFRAS TRUCTURE LTD. FOR AN AMOUNT OF RS.46,52,043/ - , THEREFORE, THE CASE WAS REOPENED. THE NECESSARY NOTICES WERE GIVEN AND AFTER THE REPLY OF THE ASSESSEE. THE INCOME OF THE ASSESSEE WAS ASSESSED IN SUM OF RS. 88,89,070/ - . FEELING AGGRIEVED, THE ASSESSEE FILED A N APPEAL BEFORE THE CIT(A) WHO DISMISSED THE APPEAL SPECIFICALLY ON THE GROUND THAT THE ASSESSEE FAILED TO FILE THE APPEAL ELECTRONICALLY BEFORE HIM , THEREFORE, THE ASSESSEE HAS FILED THE PRESENT APPEAL BEFORE US. ISSUE NO.1: - 4. UNDER THIS ISSUE THE ASSES SEE HAS CHALLENGED THE DISMISSAL OF APPEAL BY THE CIT(A) ON THE BASIS OF THIS FACT THAT THE ASSESSEE HAS FAILED TO FILE THE APPEAL BEFORE HIM ELECTRONICALLY. THE LD. REPRESENTATIVE OF THE ASSESSEE HAS ARGUED THAT IT IS NOT A DEFAULT AND IN THIS REGARD THE LD. REPRESENTATIVE OF THE ASSESSEE HAS RELIED UPON THE DECISION OF THE HONBLE ITAT IN THE CASE OF ALL INDIA FEDERATION OF TAX PRACTITIONERS VS. ITO IN ITA. NO. 7134/M/2017 DATED 04.05.2018 AND IN CASE OF ASTERIX REINFORCED LTD. VS. ITO IN ITA. NO.426/M/20 18 DATED 16.05.2018, THEREFORE, IN THE SAID ITA NO. 410 /M/201 8 A. Y. 2 010 - 11 8 CIRCUMSTANCES, THE APPEAL IS LIABLE TO BE RESTORED BEFORE THE CIT(A) TO DECIDE THE MATTER OF CONTROVERSY AFRESH . HOWEVER, ON THE OTHER HAND, THE LD. REPRESENTATIVE OF THE DEPARTMENT HAS REFUTED THE SAID CONTENTIO N. ON APPRAISAL OF THE ORDER PASSED BY THE CIT(A) WE NOTICED THAT THE CIT(A) DISMISSED THE APPEAL ON THE GROUND THAT THE ASSESSEE HAS FAILED TO FILE THE APPEAL ELECTRONICALLY BEFORE HIM. THE HONBLE ITAT HAS DECIDED THE ISSUE IN CASE OF TITLED AS ALL INDIA FEDERATION OF TAX PRACTITIONERS VS. ITO IN ITA. NO. 7134/M/2017 DATED 04.05.2018 . THE RELEVANT FINDING HAS BEEN GIVEN IN PARA NO. 6 WHICH IS REPRODUCED IS HEREBY AS UNDER.: - 6. WE HAVE HEARD THE COUNSELS FOR BOTH THE PARTIES AND WE HAVE ALSO PERUSED THE MATERIAL PLACED ON RECORD AS WELL AS ORDERS PASSED BY THE REVENUE AUTHORITIES. FROM THE RECORDS WE NOTICED THAT ELECTRONICALLY FILING OF THE APPEALS WAS INTRODUCED FOR THE FIRST TIME VIDE RULE 45 OF I.T. RULES 1962, MANDATING COMPULSORY E - FILING OF APPEAL S BEFORE APPELLATE COMMISSIONER WITH EFFECT FROM 1STMARCH 2016. WE NOTICED THAT IN THIS RESPECT, THERE IS NO CORRESPONDING AMENDMENT IN ANY OF THE PROVISIONS OF THE SUBSTANTIVE LAW I.E I.T. ACT, 1961., AS PER THE FACTS OF THE PRESENT CASE, THE ASSESSMENT I N THE ABOVE CASE WAS COMPLETED U/S 143(3) OF THE I.T. ACT 1961. HOWEVER, THE ASSESSEE HAS FILED APPEAL BEFORE LD. CIT(A) IN PAPER FORM AS PRESCRIBED UNDER THE PROVISIONS OF I.T. ACT 1961 WITHIN THE PRESCRIBED PERIOD OF LIMITATION. BUT THE SAME WAS DISMISSE D BY LD. CIT(A) BY HOLDING THAT ASSESSEE HAD NOT FILED APPEAL THROUGH ELECTRONIC FORM, WHICH IS MANDATORY AS PER I.T. RULES 1962. AFTER HAVING CONSIDERED THE ENTIRE FACTUAL POSITION, WE FIND THAT THE HONBLE APEX COURT HAS SAID IN AN ADVERSARIAL SYSTEM, NO PARTY SHOULD ORDINARILY BE DENIED THE OPPORTUNITY OF PARTICIPATING IN THE PROCESS OF JUSTICE DISPENSATION. THE HONBLE SUPREME COURT IN ITS JUDGEMENT REPORTED AS AIR 2005 (SC) 3304 IN THE CASE OF RANIKUSUMVRS. KANCHAN DEVI, REITERATED THAT, A PROCEDUR AL LAW SHOULD NOT ORDINARILY BE CONSTRUED AS MANDATORY, AS IT IS ALWAYS SUBSERVIENT TO AND IS IN AID OF JUSTICE. ANY INTERPRETATION, WHICH ELUDES OR FRUSTRATES THE RECIPIENT OF JUSTICE, IS NOT TO BE FOLLOWED. FROM THE FACTS OF THE PRESENT CASE, WE GATHERED THAT THE ASSESSEE HAD ALREADY FILED THE APPEAL IN PAPER FORM, HOWEVER ONLY THE E - FILING OF APPEAL HAS NOT BEEN DONE BY THE ASSESSEE AND ACCORDING TO US, THE SAME IS ONLY A TECHNICAL CONSIDERATION. IN THIS RESPECT, WE RELY UPON THE JUDGEMENT OF HONBLE SUP REME COURT, WHEREIN THE HONBLE SUPREME COURT HAS REITERATED THAT IF IN A GIVEN CIRCUMSTANCES, THE TECHNICAL CONSIDERATION AND SUBSTANTIAL JUSTICE ARE PITTED AGAINST EACH OTHER, THEN IN THAT EVENTUALITY THE CAUSEOF SUBSTANTIAL JUSTICE DESERVES TO BE PREFER REDAND CANNOT OVERSHADOWED OR NEGATIVED BY SUCH TECHNICAL CONSIDERATIONS. APART FROM ABOVE WE HAVE ALSO NOTICED THAT THE COORDINATE BENCH OF HONBLE ITAT DELHI BENCH IN APPEAL ITA NO. 6595/DEL/16 IN CASE TITLED GURINDER SINGH DHILLON VRS. ITO HAD RESTORED THE MATTER TO THE FILE OF LD. ITA NO. 410 /M/201 8 A. Y. 2 010 - 11 9 CIT(A) UNDER IDENTICAL CIRCUMSTANCES WITH A DIRECTION DO DECIDE APPEAL AFRESH ON MERIT, AFTER CONDONING THE DELAY, IF ANY. SINCE IN THE PRESENT CASE, WE FIND THAT APPEAL IN THE PAPER FORM WAS ALREADY WITH LD. CIT(A), THEREFORE IN THAT EVENTUALITY THE LD. CIT(A) OUGHT NOT TO HAVE DISMISSED THE APPEAL SOLELY ON THE GROUND THAT THE ASSESSEE HAS NOT FILED THE APPEAL ELECTRONICALLY BEFORE THE APPELLATE COMMISSIONER. KEEPING IN VIEW THE FACTS AND CIRCUMSTANCES AS WELL AS THE CASE LAW S DISCUSSED AND RELIED UPON ABOVE, WE ARE OF THE CONSIDERED VIEW THAT THE CAUSE OF JUSTICE WOULD BE SERVED IN CASE, WE SET ASIDE THE ORDERS OF LD. CIT(A) & ALLOW THE PRESENT APPEAL. WHILE SEEKING THE COMPLIANCE, WE DIRECT THE ASSESSEE TO FILE THE APPEAL EL ECTRONICALLY WITHIN 10 DAYS FROM THE DATE OF RECEIPT OF THIS ORDER. IN CASE, THE DIRECTIONS ARE, FOLLOWED THEN IN THAT EVENTUALITY, THE DELAY IN E - FILING THE APPEAL SHALL STAND CONDONED. LD. CIT(A) IS FURTHER DIRECTED TO CONSIDER THE APPEAL FILED BY THE AS SESSEE ON MERITS BY PASSING A SPEAKING ORDER. RESULTANTLY, WE ALLOW THE APPEAL FILED BY THE ASSESSEE. 5 . IN THE INSTANT CASE, THE CIT( A) HAS DISMISSED THE APPEAL ON THIS FACT THAT THE ASSESSEE HAS FAILED TO FILE THE RETURN ELECTRONICALLY. THE FACTS OF TH E PRESENT CASE ARE QUITE SIMILAR TO THE FACT OF THE CASE TITLED AS ALL INDIA FEDERATION OF TAX PRACTITIONERS VS. ITO IN ITA. NO. 7134/M/2017 DATED 04.05.2018 . BY HONORING THE DECISION OF THE HONBLE ITAT IN THE CASE OF ALL INDIA FEDERATION OF TAX PRACTITIO NERS VS. ITO IN ITA. NO. 7134/M/2017 DATED 04.05.2018 , WE ARE OF THE VIEW THAT THE FINDING OF THE CIT(A) IS NOT JUSTIFIABLE, THEREFORE, WE SET ASIDE THE FINDING OF THE CIT(A) ON THIS ISSUE AND RESTORED ALL THE ISSUES BEFORE HIM I.E. CIT(A) TO DECIDE THE CA SE ON MERITS IN ACCORDANCE WITH LAW BY GIVING AN OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. ITA NO. 410 /M/201 8 A. Y. 2 010 - 11 10 6 . IN THE RESULT, THE APPEA L OF THE ASSESSEE IS HEREBY ORDERED TO BE ALLOWED FOR STATISTICAL PURPOSES . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 13 .0 3 .201 9 . SD/ - SD/ - RAJESH KUMAR ) (AMARJIT SINGH ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; DATED 13. 03 .2019 V IJAY COPY OF THE ORDER FORWARDED TO : BY ORDER, ( ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//