JITENDRA V. SANGHAVI, MUMBAI V. ACIT 15(3), MUMBAI

ITA 4476/MUM/2011

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 71916 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 6 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-12-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: J
• Next Hearing Date: 29-10-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 03-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B P K
• Assessee Lawyers: SHAILESH N DOSHI
• Keywords: Business income; Revised return

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL J JJ J BENCH, BENCH, BENCH, BENCH, MUMBAI MUMBAI MUMBAI MUMBAI , . , . , ! ! ! ! '# '# '# '# BEFORE BEFORE BEFORE BEFORE SHRI SHRI SHRI SHRI VIJAY PAL RAO, JM VIJAY PAL RAO, JM VIJAY PAL RAO, JM VIJAY PAL RAO, JM & & & & SHRI SHRI SHRI SHRI D. KARUNAKARA RAO D. KARUNAKARA RAO D. KARUNAKARA RAO D. KARUNAKARA RAO, AM , AM , AM , AM ./ I.T.A. NO. I.T.A. NO. I.T.A. NO. I.T.A. NO.4476/MUM/2011 4476/MUM/2011 4476/MUM/2011 4476/MUM/2011 ( $% $% $% $% & & & & / ASSESSMENT YEAR :2007-08) JITENDRA V. SANGHAVI 13, MARWADI CHAWL, M. G. ROAD, GHATKOPAR (EAST) MUMBAI-400077 % % % % / VS. ACIT-15(3) MATRU MANDIR, GRANT ROAD, MUMBAI #' ! ./ ( ./ PAN/GIR NO. :AZDPS2873H ( ') / APPELLANT APPELLANT APPELLANT APPELLANT) .. ( *+') / RESPONDENT RESPONDENT RESPONDENT RESPONDENT) $% $%$% $% ,- ,- ,- ,- . / . / . / . / /ASSESSEE BY : SHRI SHAILESH N. DOSHI # # # # . / . / . / . / / REVENUE BY : SHRI B. P. K. PANDA % % % % . .. . -! -! -! -! / DATE OF HEARING : 5 TH DECEMBER 2013 01& 01& 01& 01& . .. .-! -! -! -! /DATE OF PRONOUNCEMENT: 11 TH DECEMBER 2013 '2 / O R D E R PER : , . . / VIJAY PAL RAO, JM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 23.2.2011 OF COMMISSIONER OF INCOME TAX(APPEALS) FO R THE ASSESSMENT YEAR 2007-08. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS IN THIS APPEAL: 1. THE LEARNED ASSISTANT COMMISSIONER OF INCOME TA X ERRED IN NOT ALLOWING EXPENSES INCURRED FOR THE BUSINESS PUR POSE WHILE CALCULATIONS THE NET PROFIT OF THE ASSESSEE. HE ALS O ERRED IN NOT ALLOWING THE VALUE OF CLOSING STOCK ON THE BASIS OF COST OR MARKET VALUE WHICH EVEN IS LOW. 2. THE LEARNED ASSISTANT COMMISSIONER OF INCOME TAX ERRED IN NOT ALLOWING STT PAID U/S 88E SINCE THE ASSESSEE IS ASSESSED AS INVESTOR AND NOT TRADERS. ITA NO.4476/M/2011 JITENDRA V. SANGHAVI 2 3. THE ASSESSEE HAS OFFERED SHORT TERM CAPITAL GAIN FROM PURCHASE AND SELL OF EQUITY SHARES. DURING THE COURSE OF ASS ESSMENT PROCEEDINGS THE A.O ISSUED A SHOW-CAUSE AND ASKED THE ASSESSEE AS TO WHY THE SHORT TERM CAPITAL GAIN OFFERED BY THE ASSESSEE SHOULD NO T BE TREATED AS BUSINESS INCOME. IN RESPONSE THE ASSESSEE CONCEDED TO THE SHOW-CAUSE AND ACCEPTED THE CAPITAL GAIN TO BE ASSESSED AS BUS INESS INCOME. HOWEVER, THE ASSESSEE CLAIMED THAT THE VALUATION OF CLOSING STOCK OF SHARES SHALL BE AT THE COST OR MARKET PRICE WHICHEV ER IS LOWER AND REBATE OF STT U/S 88E AS CONSEQUENTIAL TO THE TREATMENT OF CAPITAL GAIN AS BUSINESS INCOME. THE A.O DENIED THE CLAIM OF THE AS SESSEE ON BOTH ACCOUNTS BEING VALUATION OF CLOSING STOCK AS WELL A S REBATE U/S 88E IN RESPECT OF STT PAID. ON APPEAL, THE CIT(A) HAS CONF IRMED THE DENIAL OF CLAIM BY THE A.O. 4. WE HAVE HEARD THE LD. A.R AS WELL AS LD. D.R AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THE AUTHORITIES BELOW DENIED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT IN THE ABSENCE OF REVIS ED RETURN THE CLAIM CANNOT BE ALLOWED. THE LD. A.R HAS RELIED UPON THE CIRCULAR NO.4 OF 2007 DATED 15.6.2007 AND 9 OF 2006 DATED 10.10.2006 IN R ESPECT OF VALUATION OF CLOSING STOCK OF SHARES. AS REGARDS THE CLAIM OF REBATE U/S 88E IN RESPECT OF STT PAID THE LD. A.R HAS RELIED UPON THE FOLLOWING DECISIONS: ACIT VS PARVEEN JAIN 7 ITR (TRIB) 142 ITO VS CHUNILAL T. MEHTA 51 DTR 378 CIT VS PRUTHVI BROKERS 349 ITR 336 CIT VS JAI PARABOLIC SPRINGS LTD. 306 ITR 42 ACIT VS CREDIT LYONNAIS 21 ITR (TRIB) 359 ITA NO.4476/M/2011 JITENDRA V. SANGHAVI 3 GOPI S. SHIVNANI VS ITO 139 TTJ 308 5. ON THE OTHER HAND, THE LD. D.R HAS HEAVILY RELIE D UPON THE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT IN THE ABS ENCE OF REVISED RETURN THE CLAIM OF THE ASSESSEE CANNOT BE ALLOWED. 6. HAVING CONSIDERED THE RIVAL SUBMISSIONS AND CARE FUL PERUSAL OF THE RELEVANT MATERIAL ON RECORD WE NOTE THAT THE ASSESS EE OFFERED TO TAX SHORT TERM CAPITAL GAIN ARISING FROM PURCHASE AND SALE OF SHARES IN THE RETURN OF INCOME. HOWEVER, THE A.O PROPOSED THE ASSESSED T HE SHORT TERM CAPITAL GAIN AS BUSINESS INCOME WHICH WAS ACCEPTED BY THE ASSESSEE. IT IS CLEAR THAT THE CLAIM OF THE ASSESSEE FOR REBATE U/S 88E AS WELL AS VALUATION OF CLOSING STOCK OF STOCK IN TRADE OF SHARES IS NOT A FRESH CLAIM BUT THE SAME IS ONLY A CONSEQUENTIAL ALLOWABLE CLAIM WHEN T HE CAPITAL GAIN HAS BEEN ASSESSED AS BUSINESS INCOME. THE A.O IS BOUND TO ASSESS THE INCOME AS PER THE PROVISIONS OF THE INCOME TAX ACT BY ALLO WING ALL THE ALLOWABLE DEDUCTION UNDER THE ACT. ONCE THE INCOME OFFERED BY THE ASSESSEE AS SHORT TERM CAPITAL GAIN HAS BEEN ASSESSED AS BUSINE SS INCOME THEN CONSEQUENTIAL ELIGIBLE DEDUCTION AND CLAIMS HAS TO BE TAKEN INTO ACCOUNT. THEREFORE, WE DO NOT FIND ANY JUSTIFICATION IN DENI AL OF THE REBATE U/S 88E IN RESPECT OF SECURITY TRANSACTION TAX PAID BY THE ASSESSEE AS WELL AS VALUATION OF THE CLOSING STOCK WHEN THE SHARES HOLD BY THE ASSESSEE HAS BEEN TREATED AS STOCK IN TRADE. IT IS PERTINENT TO NOTE THAT THE VALUATION OF INVESTMENT IN SECURITIES IS ALWAYS AT COST PRICE WH EREAS THE VALUATION OF STOCK IN TRADE IS AT COST PRICE OR MARKET PRICE/REA LISATION VALUE WHICHEVER IS LESS AS PER THE ACCOUNTING STANDARDS. THEREFORE, WE SET ASIDE THE ORDERS ITA NO.4476/M/2011 JITENDRA V. SANGHAVI 4 OF THE AUTHORITIES BELOW QUA THIS ISSUE AND ALLOW T HE CLAIM OF THE ASSESSEE IN PRINCIPLE. THE A.O IS DIRECTED TO VERIFY THE PAY MENT OF STT AND THEN ALLOW THE REBATE U/S 88E. SIMILARLY, THE VALUATION OF THE CLOSING STOCK HAS TO BE DONE AS PER THE ACCOUNTING STANDARDS FOR VALU ATION OF STOCK IN TRADE. EVEN OTHERWISE THERE IS NO EMBARGO WITH THE APPELLA TE AUTHORITY TO ALLOW THE CLAIM IN THE ABSENCE OF REVISED RETURN AS HELD BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS PRU THVI BROKERS & SHAREHOLDERS PVT. LTD. (SUPRA). 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 11 TH DAY OF DECEMBER 2013 SD/- SD/- ( . ) ! '# (D. KARUNAKARA RAO) ACCOUNTANT MEMBER ( ) $ '# (VIJAY PAL RAO) JUDICIAL MEMBER PLACE: MUMBAI : DATED: 11 TH DECEMBER 2013 SUBODH COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI