Nima Specific Family Trust, Ahmedabad V. The Dy.CIT., Circle-10, Ahmedabad

ITA 4137/AHD/2007

• Counselvise Citation: 413720514 RSA 2007
• Duration Of Justice: 6 year(s) 1 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-01-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 12-11-2013
• Assessment Year: 2000-2001
• Appeal Filed On: 19-11-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S N SOPARKAR
• Keywords: Tangible material; Speculation loss; Difference of opinion; Block assessment; Reason to believe; Change of opinion
• Section: 143(3); 234B; 43(5); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH AHMEDABAD , , , , BEFORE SHRI G.C.GUPTA , VICE PRESIDENT AND .., !' # # # # SHRI T.R. MEENA, ACCOUNTANT MEMBER $%.. , &' ( & ' ) & ' ) & ' ) & ' ) ITA NO. 4136/AHD/2007 ASSESSMENT YEAR : 2001-02 JETHIBEN K. PATEL DISCRETIONARY TRUST NIRMA HOUSE, ASHRAM ROAD, AHMEDABAD V/S . ASST. COMMISSIONER OF INCOME-TAX CIRCLE 10, AHMEDABAD PAN NO. A A ATJ0260F (APPELLANT) .. (RESPONDENT) ITA NOS. 4137 & 4138/AHD/2007 ASSESSMENT YEAR : 2000-01 & 01-02 NIMA SPECIFIC FAMILY TRUST NIRMA HOUSE, ASHRAM ROAD, AHMEDABAD V/S . ASST. COMMISSIONER OF INCOME-TAX CIRCLE 10, AHMEDABAD PAN NO . AA ATN0269J (APPELLANT) .. (RESPONDENT) ITA NO. 4139/AHD/2007 ASSESSMENT YEAR : 2001-02 HARSIDDH SPECIFIC FAMILY TRUST NIRMA HOUSE, ASHRAM ROAD, AHMEDABAD V/S . ASST. COMMISSIONER OF INCOME-TAX CIRCLE 10, AHMEDABAD PAN NO. AAATH1941D (APPELLANT) .. (RESPONDENT) ( * + & BY REVENUE SHRI SUBHASH BAINS, CIT D.R. WITH SHRI O.P. BATHEJA, SR. D.R. & * + & /BY ASSESSEE SHRI S. N. SOPARKAR, A.R. , * -%' /DATE OF HEARING 12.11.2013 ./0 * -%' /DATE OF PRONOUNCEMENT 17.01.2014 ITA NOS. 4136 TO 4139/AHD/2007, A.YS. 00-01 & 01-02 PAGE 2 O R D E R PER : SHRI T. R. MEENA, ACCOUNTANT MEMBER THESE FOUR APPEALS AT THE BEHEST OF THREE ASSESSEE WHICH HAVE EMANATED FROM THE ORDER OF CIT(A)-II, AHMEDABAD, DA TED 05.09.2007 IN ITA NOS. 4138 & 4139/AHD/07 FOR ASSESSMENT YEAR 2001-02 , DATED 12/09/2007 IN ITA NO.4137/AHD/07 FOR A.Y. 2000-01 & DATED 13/09/2 007 IN ITA NO.4136/AHD/07 FOR A.Y. 2001-02. THESE APPEALS WER E HEARD TOGETHER AND ARE BEING DISPOSED OF BY WAY OF THIS COMMON ORDER F OR THE SAKE OF CONVENIENCE. THE EFFECTIVE GROUNDS OF ALL APPEALS ARE AS UNDER: GROUNDS OF ITA NO. 4136/AHD/2013 1. IN LAW AND IN FACTS AND CIRCUMSTANCES OF THE AP PELLANT'S CASE, THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HAS GR OSSLY ERRED IN POINTS OF LAW AND FACTS. 2. IN LAW AND IN FACTS AND CIRCUMSTANCES OF THE APP ELLANT'S CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN CONFIRMING ISSU E OF NOTICE U/S.148 OF I.T. ACT. 3. IN LAW AND IN FACTS AND CIRCUMSTANCES OF THE APP ELLANT'S CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN CONFIRMING RE-A SSESSMENT ORDER PASSED U/S. 147 OF I.T. ACT. 4. IN LAW AND IN FACTS AND CIRCUMSTANCES OF THE APP ELLANT'S CASE, THE ID. COMMISSIONER OF INCOME-TAX (APPEALS) HAS ERRED IN DISMISSING THE GROUND THAT APPELLANT IS FOLLOWING CASH METHOD OF ACCOUNTING INSTEAD OF MERCANTILE METHOD ON THE GROUND THAT THE RE WAS NO ADDITION ON THIS ACCOUNT. 5. IN LAW AND IN FACTS AND CIRCUMSTANCES OF THE APP ELLANT'S CASE, THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HAS ER RED IN ITA NOS. 4136 TO 4139/AHD/2007, A.YS. 00-01 & 01-02 PAGE 3 CONFIRMING THAT AMOUNT OF RS.50,49,898 SHOULD BE AS SESSED AS INTEREST INCOME INSTEAD OF SHORT TERM CAPITAL GAIN. 6. IN LAW AND IN FACTS AND CIRCUMSTANCES OF THE APP ELLANT'S CASE, THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HAS GR OSSLY ERRED IN HOLDING THAT LEVY OF INTEREST U/SS. 234A, 234B AND 234C OF I.T. ACT IS CONSEQUENTIAL. 7. IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF THE APPELLANT'S CASE, THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HA S GROSSLY ERRED IN REJECTING APPELLANT'S GROUND REGARDING INI TIATION OF PENALTY PROCEEDING U/S.271(1)(C) OF I.T. ACT. GROUNDS OF ITA NO. 4137/AHD/2007 1. IN LAW AND IN FACTS AND CIRCUMSTANCES OF THE AP PELLANT'S CASE, THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HAS GR OSSLY ERRED IN POINTS OF LAW AND FACTS. 2. IN LAW AND IN FACTS AND CIRCUMSTANCES OF THE APP ELLANT'S CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN CONFIRMING ISSU E OF NOTICE U/S.148 OF I.T. ACT. 3. IN LAW AND IN FACTS AND CIRCUMSTANCES OF THE APP ELLANT'S CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN CONFIRMING RE-A SSESSMENT ORDER PASSED U/S. 147 OF I.T. ACT. 4. IN LAW AND IN FACTS AND CIRCUMSTANCES OF THE APP ELLANT'S CASE, THE ID. COMMISSIONER OF INCOME-TAX (APPEALS) HAS ERRED IN DISMISSING THE GROUND THAT APPELLANT IS FOLLOWING CASH METHOD OF ACCOUNTING INSTEAD OF MERCANTILE METHOD ON THE GROUND THAT THE RE WAS NO ADDITION ON THIS ACCOUNT. 5. IN LAW AND IN FACTS AND CIRCUMSTANCES OF THE APP ELLANT'S CASE, THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HAS GR OSSLY ERRED IN CONFIRMING LOSS OF RS.3,65,164 AS SPECULATIVE LOSS. ITA NOS. 4136 TO 4139/AHD/2007, A.YS. 00-01 & 01-02 PAGE 4 6. IN LAW AND IN FACTS AND CIRCUMSTANCES OF THE APP ELLANT'S CASE, THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HAS GR OSSLY ERRED IN HOLDING THAT LEVY OF INTEREST U/SS. 234A, 234B AND 234C OF I.T. ACT IS CONSEQUENTIAL. 7. IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF THE APPELLANT'S CASE, THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HA S GROSSLY ERRED IN REJECTING APPELLANT'S GROUND REGARDING INI TIATION OF PENALTY PROCEEDING U/S.271(1)(C) OF I.T. ACT. GROUNDS OF ITA NO. 4138/AHD/2007 1. IN LAW AND IN FACTS AND CIRCUMSTANCES OF THE AP PELLANT'S CASE, THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HAS GR OSSLY ERRED IN POINTS OF LAW AND FACTS. 2. IN LAW AND IN FACTS AND CIRCUMSTANCES OF THE APP ELLANT'S CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN CONFIRMING ISSU E OF NOTICE U/S.148 OF I.T. ACT. 3. IN LAW AND IN FACTS AND CIRCUMSTANCES OF THE APP ELLANT'S CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN CONFIRMING RE-A SSESSMENT ORDER PASSED U/S. 147 OF I.T. ACT. 4. IN LAW AND IN FACTS AND CIRCUMSTANCES OF THE APP ELLANT'S CASE, THE ID. COMMISSIONER OF INCOME-TAX (APPEALS) HAS ERRED IN DISMISSING THE GROUND THAT APPELLANT IS FOLLOWING CASH METHOD OF ACCOUNTING INSTEAD OF MERCANTILE METHOD ON THE GROUND THAT THE RE WAS NO ADDITION ON THIS ACCOUNT. 5. IN LAW AND IN FACTS AND CIRCUMSTANCES OF THE APP ELLANT'S CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN CONFIRMING LOSS OF RS.10,42,652 AS SPECULATIVE LOSS. 6. IN LAW AND IN FACTS AND CIRCUMSTANCES OF THE APP ELLANT'S CASE, THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HAS GR OSSLY ERRED IN ITA NOS. 4136 TO 4139/AHD/2007, A.YS. 00-01 & 01-02 PAGE 5 HOLDING THAT LEVY OF INTEREST U/SS. 234A, 234B AND 234C OF I.T. ACT IS CONSEQUENTIAL. 7. IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF THE APPELLANT'S CASE, THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HA S GROSSLY ERRED IN REJECTING APPELLANT'S GROUND REGARDING INI TIATION OF PENALTY PROCEEDING U/S.271(1)(C) OF I.T. ACT. GROUNDS OF ITA NO. 4139/AHD/2007 1. IN LAW AND IN FACTS AND CIRCUMSTANCES OF THE AP PELLANT'S CASE, THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HAS GR OSSLY ERRED IN POINTS OF LAW AND FACTS. 2. IN LAW AND IN FACTS AND CIRCUMSTANCES OF THE APP ELLANT'S CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN CONFIRMING ISSU E OF NOTICE U/S.148 OF I.T. ACT. 3. IN LAW AND IN FACTS AND CIRCUMSTANCES OF THE APP ELLANT'S CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN CONFIRMING RE-A SSESSMENT ORDER PASSED U/S. 147 OF I.T. ACT. 4. IN LAW AND IN FACTS AND CIRCUMSTANCES OF THE APP ELLANT'S CASE, THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HAS GR OSSLY ERRED IN CONFIRMING THAT LOSS OF RS.62,518 AS SPECULATIVE LO SS. 5. IN LAW AND IN FACTS AND CIRCUMSTANCES OF THE APP ELLANT'S CASE, THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HAS GR OSSLY ERRED IN HOLDING THAT LEVY OF INTEREST U/SS. 234A & 234B OF I.T. ACT IS CONSEQUENTIAL. 6. IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF THE APPELLANT'S CASE, THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HA S GROSSLY ERRED IN REJECTING APPELLANT'S GROUND REGARDING INI TIATION OF PENALTY PROCEEDING U/S.271(1)(C) OF I.T. ACT. ITA NOS. 4136 TO 4139/AHD/2007, A.YS. 00-01 & 01-02 PAGE 6 2. GROUND NO.1, IN ALL THE APPEALS, IS GENERAL IN N ATURE. THEREFORE, NO ADJUDICATION IS REQUIRED. 3. GROUND NOS. 2 & 3 IN ALL THE CASES ARE AGAINST R ECORDING OF REASONS U/S.147 OF THE IT ACT AND ISSUE OF NOTICE U/S.148 O F THE IT ACT. THE A.O. IN ALL CASES OBSERVED THAT IN THIS CASE, RETURNS WERE FILE D AND PROCESS U/S.143(1) OF THE IT ACT AND NO SCRUTINY ASSESSMENT WAS MADE U/S. 143(3) OF THE IT ACT. THE A.O. RECORDED REASONS: REASONS FOR INITIATING ACTION U/S. 147 IN THE CASE OF NIMA SPECIFIC FAMILY TRUST FOR A.Y. 2000-01. THE ASSESSEE PURCHASED DEBENTURES OF TATA FINANCE L TD. IN A.Y. 2000- 01. THE DEBENTURES HAD FOLLOWING FEATURES: A) IT HAD TWO COMPONENTS PRINCIPAL AND INTEREST B) THE DEBENTURES WERE SECURED REDEEMABLE AT THE RA TE OF 17% C) INTEREST COUPONS COULD BE SOLD SEPARATELY INDEPE NDENT AT PRINCIPAL STRIPS. 2. DURING THE BLOCK ASSESSMENT PROCEEDINGS OF THE A SSESSEE U/S.158BD IT WAS ASCERTAINED THAT IMMEDIATELY AFTER THE PURCHASE OF THE DEBENTURE OF RS.25 LACS THE ASSESSEE SOLD OFF THE P RINCIPAL COMPONENT OF THE DEBENTURE TO M/S. SHREE DEVELOPERS LTD. FOR RS. 12.5 LACS. IN THIS TRANSACTION THE ASSESSEE TOOK WHOLE OF THE COST OF THE PRINCIPAL SCRIP AND THUS ON THIS SALE IT BOOKED SHORT TERM CAPITAL LOSS OF RS.12.5 LACS. 3. THIS SHORT TERM CAPITAL LOSS WAS INCORRECTLY BOO KED BY THE ASSESSEE AS NO APPORTIONMENT OF THE COST OF ACQUISI TION BETWEEN THE PRINCIPAL SCRIP AND THE INTEREST SCRIP WAS MADE. T HIS LEADS TO EXCESS CLAIM OF LOSS. 4. FURTHER DURING THE COURSE OF THE BLOCK ASSESSMEN T PROCEEDINGS VIDE SUBMISSIONS DATED 29-6-2004 IT HAS BEEN VERIFI ED THAT LOSSES IN TRANSACTIONS OF SHARES OF HPCL AND RELIANCE INDUSTR IES LTD. WERE BOOKED THROUGH TRANSACTIONS FOR WHICH NO DELIVERY WAS TAKE N OR GIVEN BY THE ASSESSEE. THESE TRANSACTIONS WHICH HAVE BEEN ULTIM ATELY SETTLED WITHOUT ITA NOS. 4136 TO 4139/AHD/2007, A.YS. 00-01 & 01-02 PAGE 7 ACTUAL DELIVERY COME WITHIN THE AMBIT OF SECTION 43 (5) OF THE ACT. THE ASSESSEE HAS WRONGLY CLAIMED SET-OFF OF LOSES IN TH ESE SPECULATIVE TRANSACTIONS AGAINST CAPITAL GAINS IN OTHER SHARE T RANSACTIONS. 5. IN VIEW OF THE ABOVE AND IN VIEW OF EXPLANATION 2 TO SECTION 147. I HAVE REASON TO BELIEVE THAT INCOME CHARGEABLE TO TA X FOR A.Y. 2000-01 HAS ESCAPED ASSESSMENT. IN VIEW OF THIS, NOTICE U/S. 1 48 IS ISSUED TO THE ASSESSEE. THE SIMILAR REASONS WERE RECORDED IN CASE OF NIMA S PECIFIC FAMILY TRUST IN A.Y. 01-02 AND HARSIDDH SPECIFIC FAMILY TRUST IN A. Y. 01-02, EVEN SCRIPTS OF PURCHASE AND SALE ARE SAME. REASONS RECORDED IN CASE OF JETHIBEN K. PATEL DISC RETIONARY TRUST FOR A.Y. 2001-02. 1. DURING THE BLOCK ASSESSMENT PROCEEDINGS, THE ASS ESSEE VIDE SUBMISSION DATED 22.05.2003, IT WAS ASCERTAINED THA T THE ASSESSEE EARNED RS.50,49,898 FROM VYAJ BADLA TRANSACTIONS. T HIS INCOME HAS BEEN RETURNED BY THE ASSESSEE IN THE RETURN FOR A. Y. 20 01-02, NOT AS INTEREST INCOME BUT AS STCG. THIS STCG HAS BEEN SET OFF AGAI NST OTHER E/F CAPITAL LOSSES OF 96-97 THEREBY REDUCING THE TAXABLE INCOME . 2. FOR ANY TRANSACTION OF INVESTMENT THERE IS AN IN HERENT 'PRICE RISK' I.E. THE RETURN/LOSS TO THE INVESTOR IS DEPENDENT ON THE PRICE MOVEMENT OF THE INVESTMENT DURING THE PERIOD OF HOLDING. THE INHERENT PROPERTIES OF THIS TRANSACTION ARE AS UNDER: I. IF THE PRICE OF THE INVESTMENT BETWEEN SALE AND PURCHASE DATES GOES UP THE INVESTOR HAS GAINS AND IF THE PRICE GOES DOWN T HERE IS A LOSS. II. THE TOTAL RETURN ON AN INVESTMENT HAS NO DIRECT ONE TO ONE CO-RELATION WITH THE PERIOD FOR WHICH THE INVESTMENT IS CARRIED . 3. HOWEVER IN VYAJ BADLA TRANSACTION THE ELEMENT OF 'PRICE RISK' I.E. INHERENT IN ANY INVESTMENT IS NOT THERE. THIS IS ALL THE MORE CLEAR AS IN A 'VYAJ BADLA' TRANSACTION THE INVESTOR CANNOT HAVE N EGATIVE RETURN ON ANY OF THE TRANSACTIONS. EVEN DURING THE INTERVENING PERIOD WHEN SHARES IN WHICH VYAJ BADLA INVESTMENTS WERE MADE, WERE LYI NG WITH THE CLEARING ITA NOS. 4136 TO 4139/AHD/2007, A.YS. 00-01 & 01-02 PAGE 8 HOUSE THE RIGHTS OF THE APPELLANTS OVER THE SHARES WERE NOT IN ANY WAY COMPARABLE TO ABSOLUTE RIGHT OF OWNERSHIP. THIS IS SO AS DURING THIS PERIOD THE APPELLANTS COULD HAVE NEITHER ENFORCED DELIVERY OF THESE SHARES TO THEMSELVES NOR COULD THEY HAVE SOLD THESE SECURITIE S TO AN INDEPENDENT PARTY. 4. THE TRUE NATURE OF THE TRANSACTIONS OF 'VYAJ BAD IA ' CAN HE EQUALED WITH TRANSACTION OF LENDING AGAINST SECURITY OF SHARES. THIS BECOMES CLEAR WHEN WE COMPARE THE RISK TAKEN BY THE APPELLANTS IN THESE TRANSACTIONS WITH THE INHERENT RISKS OF A LENDING TRANSACTION. I N ANY LENDING TRANSACTION THE LENDOR BEARS A 'CREDIT RISK ' I.E. THE RISK THA T THE PERSON TO WHOM THE MONEY IS BEING LENT MAY DEFAULT ON THE REPAYMENT OF THE LOAN, THE INHERENT PROPERTIES OF THIS TRANSACTION ARE US UNDER: I. AGAINST THE 'CREDIT RISK' THE LENDOR MAY CALL FO R A SECURITY TO BE GIVEN TO HIM. IN A LENDING TRANSACTION THE LENDOR HAS A RIGH T TO ENFORCE THE SECURITY ONLY, IN CASE THERE IS DEFAULT IN REPAYMENT BY THE LENDEE. II. THE RATE OF RETURN IN THIS TRANSACTION IS DEPEN DENT ON THE QUALITY OF THE SECURITY AND THE CREDIT WORTHINESS OF THE LENDEE. III. THE TOTAL RETURN IN THE TRANSACTION HAS A DIRE CT ONE TO ONE CORRELATION WITH THE PERIOD OF TIME FOR WHICH MONEY IS LENT. BU T FOR THE EVENTUALITY OF THE LENDEE DEFAULTING THE RETURN ON THE TRANSACTION CANNOT BE NEGATIVE. 5. ALL THESE INHERENT PROPERTIES OF A LENDING TRANS ACTION ARE THERE IN THE 'VYAJ BADLA' TRANSACTION CARRIED OUT BY THE APPELLA NTS: I. AGAINST THE MONEY LENT THE BROKER GIVES THE SECU RITIES OF SHARES WHICH ARE KEPT WITH THE CLEARING HOUSE. THE LIEN OVER THE SE SECURITIES CAN BE EXERCISED BY THE APPELLANTS ONLY IF THE BROKER GOES BANKRUPT OR REFUSES TO REPAY THE MONEYS LENT. II. THE RATE OF RETURN ON THE TRANSACTION IS DEPEND ENT ON THE QUALITY OF THE SECURITY I.E. THE PARTICULAR SHARE DEALT IN. III. AS THE RISK TAKEN BY THE APPELLANTS IS 'CREDIT RISK' AND NOT 'PRICE RISK ' THE TOTAL RETURN TO THE APPELLANTS HAS DIRECT ONE T O ONE CO-RELATION WITH THE PERIOD OF INVESTMENT I.E. THE LONGER THE INVESTMENT S ARE CARRIED FROM ONE SETTLEMENT TO ANOTHER THE MORE IS THE RETURN LO THE APPELLANTS. IN THIS ITA NOS. 4136 TO 4139/AHD/2007, A.YS. 00-01 & 01-02 PAGE 9 TRANSACTION ALSO BUT FOR THE EVENTUALITY OF THE BRO KER GOING BANKRUPT THE APPELLANTS COULD NOT HAVE HAD NEGATIVE RETURNS. 6. IN VIEW OF THE ABOVE THE CORRECT TREATMENT OF IN COME SO EARNED IS INTEREST INCOME, WHICH COULD NOT HAVE BEEN SET OFF AGAINST CAPITAL LOSSES THUS IN VIEW OF EXPLANATION 2 TO SECTION 1471 HAVE REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX FOR A. Y. 2001-02 HAS ESCA PED ASSESSMENT. IN VIEW OF THIS, NOTICE US. 14$ IS ISSUED TO THE ASSES SEE. 4. BEING AGGRIEVED BY THE ORDER OF THE A.O., THE AS SESSEE CARRIED THE MATTER BEFORE THE CIT(A) IN ALL CASES AND APPEALS W ERE DISMISSED ON THESE GROUNDS BY OBSERVING THAT ON IDENTICAL FINDING IN A LL CASES, WHICH IS REPRODUCED AS UNDER: ON CONSIDERATION OF THE SUBMISSION IT IS OBSERVED THAT ON VERIFICATION OF THE DETAILS IT WAS FOUND THAT THE TRANSACTIONS OF P URCHASE AND SALE OF SHARES AND CONSEQUENT LOSS IS NOT A CAPITAL LOSS BU T IT IS SPECULATIVE LOSS IN NATURE AND HENCE THE A.O. WAS JUSTIFIED IN INITI ATING PROCEEDINGS U/S.148 OF IT ACT. IT IS FURTHER OBSERVED THAT THE APPELLAN T HAS CLAIMED THAT ORIGINAL ORDER WAS PASSED U/S.143(3) OF THE IT. ACT. NOWHERE IN THE ASSESSMENT ORDER THIS FACT IS MENTIONED. EVEN THE APPELLANT HA S NOT GIVEN THE DATE ON WHICH THE ASSESSMENT ORDER WAS ORIGINALLY PASSED U/ S.143(3) OF IT ACT. THESE SUBMISSIONS ARE THUS MADE WITHOUT ANY SUPPORT ING EVIDENCE. ON THE CONTRARY IN THE ASSESSMENT ORDER ITSELF THE A.O . HAS WHILE DEALING WITH THE OBJECTION REGARDING CHANGE OF OPINION OBSERVED THAT THE ASSESSMENT PROCEEDINGS U/S. 143(3) OF IT ACT WERE NEVER CARRIE D OUT FOR THIS YEAR IN THE PAST AS THE CASE WAS NOT SELECTED FOR SCRUTINY ASSE SSMENT (PARA 4.3 OF THE ASSESSMENT ORDER). THE APPELLANT HAS THUS MADE INCO RRECT SUBMISSIONS. AS NO OPINION WAS FORMED EARLIER ON THE FACTS OF TH E CASE, THERE WAS NO CHANGE OF OPINION AS ALLEGED. THESE GROUNDS OF APPE AL ARE, THEREFORE, REJECTED. 5. NOW THE ASSESSEES ARE BEFORE US. LD. COUNSEL FO R THE APPELLANTS CONTENDED THAT THE ACCOUNTS WERE FILED WITH THE RET URN OF INCOME. THE INCOME ITA NOS. 4136 TO 4139/AHD/2007, A.YS. 00-01 & 01-02 PAGE 10 WAS DISCLOSED IN THE RETURN UNDER THE HEAD CAPITAL GAIN. THERE IS NO ESCAPEMENT OF INCOME IN CASE OF JETHIBEN K. PATEL D ISCRETIONARY TRUST. SIMILARLY ACCOUNTS WERE FILED DURING THE ASSESSMENT PROCEEDING, THE SAME SHOWS THAT THE SHARES OF SHRI RAMA MULTITECH LTD. A S INVESTMENT IN CASE OF HARSIDDH SPECIFIC FAMILY TRUST. IN CASE OF NIMA SP ECIFIC FAMILY TRUST IN A.Y. 2000-01 ORDER U/S. 143 WAS PASSED ON 31.03.2003 AND ACCOUNTS WERE FILED DURING THE ASSESSMENT PROCEEDINGS. THE SAME SHOWS T HE SHARES OF HINDUSTAN PETROLEUM CORPORATION LTD. AND RELIANCE I NDUSTRIES LTD. AS INVESTMENT, WHICH HAS BEEN ACCEPTED BY THE A.O. IN A.Y. 01-02, ACCOUNTS WERE FILED DURING THE ASSESSMENT PROCEEDINGS. THE LD. COUNSEL FURTHER ARGUED THAT EVEN WHERE RETURN HAS BEEN ACCEPTED U/S .143(1) AND THERE IS NO TANGIBLE MATERIAL WITH THE A.O. AND BELIEF WAS MERE LY ON GOING THROUGH THE RETURN OF INCOME AND NOTHING MORE RE-OPENING HELD I N CASE OF CIT VS. ORIENT CRAFT LTD. [2013] 29 TAXMANN.COM392 (DELHI) BAD IN LAW. IN CASE OF RASNA PRIVATE LIMITED VS. ACIT , IN SPECIAL CIVIL APPLICATION NO. 375 OF 2005 VIDE ORDER DATED 09.07.2012, HONBLE GUJARAT HIGH COURT CONSIDERED THIS ISSUE OF THE REASONS TO BELIEVE AND FORMING OF AN OPINION BY THE A.O. IN CASE OF RETURN WAS PROCESS U/S.143(1) OF THE IT ACT AND HELD THAT REASONS RECORDED WAS NOT WARRANTED ON HOLDING OF SUCH BELIEF TO NECESSITATE THE ISSUANCE OF NOTICE U/S. 148 OF THE IT ACT. THUS, HE ARGUED THAT RE-OPENING IS NOT JUSTIFIED. 6. AT THE OUTSET, LD. CITD.R. ARGUED THAT IN CASE O F NIMA SPECIFIC FAMILY TRUST, JETHIBEN K. PATEL DISCRETIONARY TRUST AND H ARSIDDH SPECIFIC FAMILY TRUST, NO SCRUTINY WAS MADE BY THE A.O. AND ONLY C ASE WAS PROCESSED U/S. 143(1) OF THE IT ACT. AS PER HONBLE GUJARAT HIGH COURT DECISION IN CASE OF ITA NOS. 4136 TO 4139/AHD/2007, A.YS. 00-01 & 01-02 PAGE 11 INDUCTOTHERM (INDIA) (P.) LTD. VS. DCIT [2013] 356 ITR 481 (GUJ.), IN CASE OF NO SCRUTINY U/S. 143(3) AND RETURN IS PROCESSED U/S . 143(1) ONLY, NOTICE U/S. 143(2) WITHIN 4 YEARS IS VALID. HONBLE SUPREME CO URT HAS HELD IN CASE OF ACIT VS. RAJESH JHAVERI [2007] 291 ITR 500 (SC), THAT WHERE RETURN IS PROCESSES U/S. 143(1)(A), IT WAS HELD THAT THERE BE ING NO ASSESSMENT U/S. 143(1)(A), THE QUESTION OF CHANGE OF OPINION DOES N OT ARISE. WHAT IS REQUIRED REASON TO BELIEVE BUT NOT THE ESTABLISHED FACT OF E SCAPEMENT OF INCOME. AT THE STAGE OF ISSUE OF NOTICE, THE ONLY QUESTION IS WHETHER THERE WAS RELEVANT MATERIAL ON WHICH A REASONABLE PERSON COULD HAVE FO RMED THE REQUISITE BLAME. WHETHER MATERIAL WOULD CONCLUSIVELY PROVE E SCAPEMENT OF INCOME IS NOT CONCERNED AT THAT STAGE. THIS IS SO BECAUSE TH E FORMATION OF BELIEF IS WITHIN THE REALISM OF SUBJECT TO SATISFACTION OF A. O. THE LD. A.O. HAD NOT FORMED ANY OPINION IN THREE CASES, WHEREAS IN CASE OF NIMA SPECIFIC FAMILY TRUST IN A.Y. 2000-01, THE A.O. HAS TANGIBLE MATERI AL WITH HIM THAT CLAIM OF ASSESSEES SHORT TERM CAPITAL LOSS WAS IN FACT SPEC ULATIVE LOSS. THUS, THE A.O. RIGHTLY REOPENED THE CASE U/S. 147 AND ISSUED NOTIC E U/S. 148. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. IN THESE CASES, NO SCRUTINY ASSESSMENTS WE RE MADE AND IN NIMA SPECIFIC FAMILY TRUST IN A.Y. 2000-01 SCRUTINY OF A SSESSMENT WAS MADE BUT NOTICE U/S.148 WAS ISSUED WITHIN FOUR YEARS. THE H ONBLE SUPREME COURT IN CASE OF ACIT VS. RAJESH JHAVERI (SUPRA) HELD THAT I N CASE OF CASE PROCESSED U/S. 143(1)(A), NO OPINION HAS BEEN FORMED BY THE A .O. THEREFORE, NO QUESTION OF CHANGE OF OPINION IS THERE. THE REASON S RECORDED BY THE A.O. ARE OF SUBJECTIVE SATISFACTION OF THE A.O. AND WITHIN T HE REALISM OF HIM. IN CASE OF ITA NOS. 4136 TO 4139/AHD/2007, A.YS. 00-01 & 01-02 PAGE 12 NIMA SPECIFIC FAMILY TRUST IN A.Y. 2000-01, NOTICE U/S. 148 WAS WITHIN FOUR YEARS AND ASSESSEE HAS NOT DEMONSTRATED WITH EVIDEN CE THAT THIS ISSUE EVEN HAS BEEN TOUCHED BY THE A.O. IN FIRST SCRUTINY ASSE SSMENT. THE A.O. HAS AMPLE POWER AS HELD BY THE SUPREME COURT IN VARIOUS CASES EVEN CASES REOPENED WHERE SCRUTINY ASSESSMENT HAD BEEN MADE PR EVIOUSLY. THUS, BOTH THE GROUND NOS. 2 & 3 ARE DISMISSED IN ALL CASES. 8. GROUND NO.4 IN ALL THE CASES, IS AGAINST NOT ACC EPTING CASH METHOD OF ACCOUNTING EXCEPT HARSIDDH SPECIFIC FAMILY TRUST IN A.Y. 01-02. THE A.O. ASSESSED THE CASE U/S.143(3) ON THE BASIS OF MERCAN TILE SYSTEM OF ACCOUNTING NOT ON CASH. LD. A.R. FOR THE ASSESSEE SERIOUSLY N OT PRESSED THE ISSUE. EVEN DOES NOT AGGRIEVE BY THE ORDER OF THE A.O. THEREFO RE, THIS GROUND OF APPEAL IS DISMISSED. 9. GROUND NO.5 IN NIMA SPECIFIC FAMILY TRUST IN A.Y . 01-02 IS AGAINST CONFIRMING LOSS OF RS.10,42,652/- AS SPECULATIVE LO SS AND CONFIRMING LOSS OF RS.3,65,164/- IN A.Y. 00-01 IN THIS CASE. GROUND N O.5 IN CASE OF JETHIBEN K. PATEL DISCRETIONARY TRUST FOR A.Y. 2001-02 IS AGAIN ST CONFIRMING THE AMOUNT OF RS.50,49,898/- AS INTEREST INCOME IN PLACE OF SHORT TERM CAPITAL GAIN AND GROUND NO.4 IN A.Y. 01-02 IN CASE OF HARSIDDH SPECI FIC FAMILY TRUST IS AGAINST ASSESSING SPECULATIVE LOSS OF RS.62,518/- IN PLACE OF SHORT TERM CAPITAL LOSS. 9(I). THE A.O. OBSERVED THAT THE ASSESSEE HAS NOT T AKEN DELIVERY OF SHARES OF ARVIND MILLS LTD., SHREE RAMA MULTITECH LTD. AND SURANA TELECOM LTD. AND AFTER CONSIDERING THE ASSESSEES REPLY, HE HELD TH AT LOSS INCURRED IN SHARE TRANSACTION IS SPECULATIVE LOSS U/S.43(5). THE SHA RES WERE PURCHASED AND SOLD ON SAME DATE AS REVEALED FROM THE DETAIL OF CO MPUTATION OF CAPITAL LOSS. ITA NOS. 4136 TO 4139/AHD/2007, A.YS. 00-01 & 01-02 PAGE 13 THE ASSESSEE DID NOT FURNISH PROOF OF POSSESSION IN FORM OF LETTER OF ALLOTMENT, LETTER OF TRANSFER, COPY OF DEMAT ACCOUNT ON WHICH HE CAN INFER THAT ASSESSEES CLAIM WAS RIGHT IN CASE OF NIMA SPECIFIC FAMILY TRU ST IN A.Y. 01-02. SIMILARLY, IN A.Y. 00-01, THE ASSESSEE HAD CLAIMED SHORT TERM CAPITAL LOSS ON SALE OF SHARES OF HPCL AND RELIANCE INDUSTRIES LTD. WHICH H AS ALSO BEEN HELD TRANSACTION U/S.43(5) AS SPECULATIVE LOSS BY THE A. O. THE ASSESSEE DID NOT FURNISH ANY EVIDENCE TO SUBSTANTIATE HIS CLAIM IN F ORM OF TRANSFER CERTIFICATE OF SHARES OR COPY OF DEMAT ACCOUNT. IN CASE OF JETHIB EN K. PATEL DISCRETIONARY TRUST FOR A.Y. 2001-02, THE ASSESSEE HAS SHOWN INCO ME FROM VYAJ BADLA AS CAPITAL GAIN BUT THE A.O. HELD THAT IN VYAJ BADLA T RANSACTION RATE OF RETURN IS GENERALLY FIXED. THE ASSESSEE EXTENDED FUND TO TRI UMPH INTERNATIONAL FINANCE LTD. AGAINST SHARES OF HIMACHAL FUTURISTIC COMMUNICATION LTD. AND SATYAM COMPUTERS ON WHICH VYAJ BADLA WAS EARNED BY THE ASSESSEE. IN VYAJ BADLA, THERE IS NO RISK. THE PROBABILITY OF LOSS O N ACCOUNT OF THIS TRANSACTION IS VERY LOW COMPARED TO SHARE TRANSACTION. AS SUCH, T HERE IS NO PRICE RISK IN CASE OF VYAJ BADLA TRANSACTION. THERE IS A REMOTE POSSIBILITY THAT BROKER DEFAULTS THE OWNERSHIP OF SECURITY TRANSFER IN THE HANDS OF VYAJ BADLA CREDITORS. THEREFORE, HE ASSESSED INTEREST INCOME AND NOT AS S HORT TERM CAPITAL GAIN AND ALSO HAS NOT ALLOWED TO BE SET OFF AGAINST THE CAPI TAL LOSS INCURRED IN OTHER SECURITIES. IN CASE OF HARSIDDH SPECIFIC FAMILY TR UST, THE ASSESSEE CLAIMED SHORT TERM CAPITAL LOSS IN PURCHASE AND SALE OF SHA RES OF SHREE RAMA MULTITECH LTD. AT RS.62,518/-. BUT THE A.O. HELD T HAT THIS TRANSACTION IS COVERED U/S. 43(5) OF THE IT ACT AS NO DELIVERY BAS ED PURCHASE AND SALE WAS MADE BY THE ASSESSEE TO ANY OTHER PERSON. THE ASSE SSEE DID NOT FURNISH ANY ITA NOS. 4136 TO 4139/AHD/2007, A.YS. 00-01 & 01-02 PAGE 14 DETAIL OF TRANSFER OF SHARES. COPY OF DEMAT ACCOUN T, COPY OF CONTRACT NOTE TO THE A.O. TO VERIFY THE NATURE OF THE TRANSACTION. THUS, HE TREATED THIS TRANSACTION SPECULATIVE LOSS AND SAME IS NOT ALLOWE D TO BE SET OUT AGAINST THE CAPITAL GAIN OF OTHER SHARES. 10. BEING AGGRIEVED BY THE ORDER OF THE A.O. THE AS SESSEE CARRIED THE MATTER BEFORE THE CIT(A) WHO HAD CONFIRMED THE FIND ING OF THE A.O. IN ALL CASES ON SIMILAR FINDINGS AS GIVEN BY THE A.O. IN A SSESSMENT. 11. NOW ASSESSEE IN ALL CASES ARE BEFORE US AND FIL ED THE COPY OF PAPER BOOK WHICH INCLUDES VARIOUS LETTERS SUBMITTED BEFOR E THE A.O. AND CIT(A) AND CLAIMED THAT THESE TRANSACTIONS IN CASE OF HARSIDDH SPECIFIC FAMILY TRUST, NIMA SPECIFIC FAMILY TRUST (2 YEARS) AND IN CASE OF JETHIBEN K. PATEL DISCRETIONARY TRUST IN A.Y. 01-02 ARE SHORT TERM CA PITAL LOSS. THE ASSESSEE ALSO RELIED UPON IN CASE OF DCIT VS. M/S. PARAMOUNT LTD. IN ITA NO. 1760/AHD/2007 FOR A.Y. 2003-04, WHEREIN ISSUE OF SPECULATIVE BUSINESS LOSS WAS CONSIDERED U/S.73. AT THE OUTSET, LD. CIT D.R. SUPPORTED THE ORDER OF THE CIT(A). 12. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. IT IS FOUND FROM THE ORDER OF THE LOWER AU THORITIES THAT ASSESSEE ONLY FURNISHED COMPUTATION OF CAPITAL LOSS ALONG WITH TH E RETURN AND EXPLANATION WITH DETAILS BUT WITHOUT ANY EVIDENCE AND HE CONCLU DED THAT THE NATURE OF TRANSACTION IS WITHOUT DELIVERY AND COVERED U/S. 43 (5) OF THE IT ACT. THE LD. A.R. ALSO HAS NOT PRODUCED ANY EVIDENCE BEFORE US B Y WHICH HE CAN DEMONSTRATE THAT NATURE OF TRANSACTION IS SHORT TER M CAPITAL LOSS. IN ABSENCE EVIDENCE, IT IS DIFFICULT TO ASCERTAIN THE NATURE O F THE TRANSACTION. THERE IS NO ITA NOS. 4136 TO 4139/AHD/2007, A.YS. 00-01 & 01-02 PAGE 15 EVIDENCE OF PAST FROM THE ASSESSEES RECORD WHICH S UBSTANTIATE ASSESSEES CLAIM. THEREFORE, WE SET ASIDE THIS ISSUE TO THE A .O. AND ASSESSEE IS DIRECTED TO PRODUCE ALL EVIDENCES WITHIN 30 DAYS FROM THE RE CEIPT OF ORDER BEFORE THE A.O. THE A.O. IS DIRECTED TO CONSIDER ALL EVIDENCE , IF IT WILL BE SUBMITTED BY THE ASSESSEE, OTHERWISE TAKE DECISION ON THE BASIS OF EVIDENCE AVAILABLE ON RECORD AS PER LAW. THIS GROUND IS SET ASIDE. 13. GROUND NOS. 6 & 7 IN 4136 TO 4138/AHD/2007 & G ROUND NOS. 5 & 6 IN ITA NO. 4139/AHD/2007 ARE CONSEQUENTIAL OF THE ABOV E FINDING. THEREFORE, NO ADJUDICATION IS REQUIRED. 14. IN THE RESULT, APPEALS IN ALL CASES ARE ALLOWED FOR STATISTICAL PURPOSES. THESE ORDERS PRONOUNCED IN OPEN COURT ON 17.01.2014 SD/- SD/- (G.C.GUPTA) (T.R. MEENA) VICE PRESIDENT ACCOUNTANT MEMBER TRUE COPY S.K.SINHA &1 &1 &1 &1 * ** * 2-3 2-3 2-3 2-3 4&30- 4&30- 4&30- 4&30- / COPY OF ORDER FORWARDED TO:- 1. 67 / APPELLANT 2. 2967 / RESPONDENT 3. ## - ; / CONCERNED CIT 4. ;- / CIT (A) 5. 3? 2- , , / DR, ITAT, AHMEDABAD 6. A BC / GUARD FILE. BY ORDER/ &1 &, / # ,