CHIRANIKA TRADING P. LTD, MUMBAI V. DCIT RG 5(1), MUMBAI

ITA 4823/MUM/2009

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 79343 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 10 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-07-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 25-03-2014
• Assessment Year: 1997-1998
• Appeal Filed On: 20-08-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Opportunity of being heard; Speculation loss
• Section: 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI BEFORE SHRI VIJAY PAL RAO , JUDICIAL MEMBER AND SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER ./I.T.A. NO.4823/M/2009 (ASSESSMENT YEAR: 1997 - 1998 ) ./I.T.A. NO.4824/M/2009 (ASSESSMENT YEAR: 1998 - 1999 ) CHIRANIKA TRADING P LTD., NEELA HOUSE, 2 ND FLOOR,M.L. DAHANUKAR MARG, MUMBAI - 26. / VS. DCIT RANGE5(1), AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 20. ./ PAN : AAACC 2555 R ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : MS. VASANTI PATEL / RESPONDENT BY : SHRI SUNIL KUMAR, DR / DATE OF HEARING : 9.7.2014 / DATE OF PRONOUNCEMENT : 16 .7.2014 / O R D E R PER D. KARUNAKARA RAO, AM: THERE ARE TWO APPEALS UNDER CONSIDERATION INVOLVING AYS 1997 - 98 AND 1998 - 99 . BOTH THESE APPEALS ARE FILED BY THE ASSESSEE. SINCE, THE ISSUES RAISED IN BOTH THE APPEALS ARE IDENTICAL, FOR THE SAKE OF CONVENIENCE, THEY ARE CLUBBED, HEARD COMBINEDLY AND BEING ADJUDICATED IN THIS COMMON ORDER. APPEAL WISE AND GROUND WISE ADJUDICATION IS GIVEN IN THE FOLLOWING PARAS. 2. FIRSTLY, WE SHALL TAKE UP THE APPEAL ITA NO.4823/M/2009, WH ICH IS FILED AGAINST THE ORDER OF THE CIT (A) - V, MUMBAI DATED 23.6.2009 FOR THE ASSESSMENT YEAR 1997 - 98. I N THIS APPEAL, ASSESSEE RAISED THE FOLLOWING GROUND S WHICH READ AS UNDER: 1. THE CIT (A) HAS ERRED IN DISALLOWING LOSS OF RS. 4,79,907/ - ON THE ALLE GED GROUND THAT THE SAID LOSS F ALLS WITHIN THE EXPLANATION TO SECTION 73 OF THE ACT AND THEREBY TREATING THE SAME AS SPECULATION LOSS . 2. THE CIT (A) HAS FAILED TO APPRECIATE THAT THE APPELLANTS MAIN BUSINESS IS THAT OF GRANTING OF LOANS AND ADVANCES AND THEREFORE, THE APPELLANT IS NOT HIT BY THE EXPLANATION TO SECTION 73 OF THE ACT. THE CIT (A) FAILED TO APPRECIATE THE RATIO LAID DOWN BY THE SPECIAL BENCH IN THE CASE OF VENKATESWARA INVESTMENTS & FINANCE PVT LTD. 2 3. THE CIT (A) ERRED IN HOLDING THAT BUSI NESS OF BILL DISCOUNTING CANNOT BE EQUATED WITH THE BUSINESS OF GIVING LOANS AND ADVANCES. 4. THE CIT (A) HAS FAILED TO APPRECIATE THAT THE DIVIDEND AND OTHER INCOME IS A POSITIVE INCOME AGAINST LOSS DECLARED ON ACCOUNT OF VALUATION OF SHARES AND THEREFORE , IN VIEW OF THE SPECIAL BENCH JUDGMENT IN THE CASE OF CONCORD COMMERCIAL PVT LTD THE EXPLANATION TO SECTION 73 CANNOT BE INVOKED IN SUCH A SITUATION. 5. THE CIT (A) ERRED IN NOT ADJUDICATING GROUND NO.2 & 3 RAISED BEFORE HIM ON THE ALLEGED GROUND THAT APPELLANT WAS NOT ENTITLED TO RAISE THE ISSUE BEFORE HIM. 6. THE CIT (A) FAILED TO APPRECIATE THAT THE SAID LOSS OF RS. 4,79,907/ - HAD OCCURRED ONLY ON ACCOUNT O F VALUATION OF SHARES AND THERE WAS NO TRANSACTION OF SALE AND PURCHASE OF SHARES. THEREFORE, I N SUCH A SITUATION EXPLANATION TO SECTION 73 CANNOT BE INVOKED. 7. THE CIT (A) HAS FAILED TO APPRECIATE THAT IN THE ABSENCE OF ANY TRANSACTION OF SALE AND PURCHASE OF SHARES THE PROVISIONS OF SECTION 73 WOULD NOT APPLY AND THEREFORE, THERE IS NO QUESTION O F TREATING THE LOSS ON ACCOUNT OF VALUATION OF SHARES AS SPECULATION LOSS. 8. THE CIT (A) HAS ERRED IN LEVYING INTEREST U/S 234A, 234B AND 234C. 3. DURING THE PROCEEDINGS BEFORE US, A T THE OUTSET, MS. VASANTI PATEL, LD COUNSEL FOR THE ASSESSEE MENTIONED T HAT THIS IS THE SECOND ROUND OF PROCEEDINGS BEFORE THE TRIBUNAL. IN THE FIRST ROUND, THE TRIBUNAL DIRECTED THE AO TO CONDUCT FRESH EXAMINATION WHICH IS AS UNDER: 5.WE OBSERVE THAT IN PARTICULAR THE ISSUE REQUIRES FRESH EXAMINATION IN THE LIGHT OF SPE CIAL BENCHS DECISION IN THE CASE OF CONCORD COMMERCIALS PVT LTD (SUPRA), WHEREIN IT HAS BEEN HELD THAT PROVISIONS OF EXPLANATION TO SECTION 73 HAVE TO BE EXAMINED IN THE LIGHT OF CHARGEABILITY TO TAX VARIOUS COMPONENTS ON GROSS TOTAL INCOME, UNDER VARIOUS HEADS OF INCOME. WE ACCORDINGLY SET ASIDE THE MATTER BACK TO THE FILE F ASSESSING OFFICER TO DECIDE THE ISSUE AFRESH, AFFORDING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE, PARTICULARLY TAKING INTO ACCOUNT THE DECISION OF THE SPECIAL BENCH IN THE CASE OF CONCORD COMMERCIAL PVT LTD (SUPRA). 4. WHILE EXECUTING THE ABOVE DIRECTION, AS NOTICED BY US IN THE ORDERS, PROPER EXAMINATION WAS NOT DONE. EVENTUALLY, THE BILL DISCOUNTING INCOME WAS CONSIDERED AND HELD NOT EQUIVALENT OF INTEREST INCO ME. PARA 5 OF THE CIT (A)S ORDER IS RELEVANT IN THIS REGARD. TO DEMONSTRATE THAT THE LD COUNSEL FILED A COPY OF THE ORDER OF THE TRIBUNAL IN THE CASE OF MOMAYA INVESTMENTS (P) LTD VS. ITO [2011] 142 TTJ (MUMBAI) 761 FOR THE PROPOSITION ON THE FACTS OF THE CASE, INCOME BY WAY OF DISCOUNT IN THE BUSINESS OF BILL DISCOUNTING IS AKIN TO THE INTEREST INCOME. THE SAID ORDERS OF THE TRIBUNAL ARE NOT AVAILABLE TO THE CIT (A) AT THE TIME OF PASSING OF THE 3 IMPUGNED ORDER DATED 23.6.2009. IN ALL FAIRNESS, WE ARE OF THE OPINION THAT THE ISSUE RAISED IN THE GROUNDS MENTIONED ABOVE MUST REVISIT THE FILE OF THE CIT (A) FOR FRESH ADJUDICATION OF THE ISSUE AND CORRECTION IN THE ORDER, IF DEEMED FIT. ACCORDINGLY, THE GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. 5. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES . ./I.T.A. NO.4824/M/2009 (ASSESSMENT YEAR: 1998 - 1999) 6. THIS APPEAL FILED BY THE ASSESSEE ON 20.8.2009 IS AGAINST THE ORDER OF THE CIT (A) - V, MUMBAI DATED 23.6.2009 FOR THE ASSESSMENT YEAR 1998 - 1999. IN THIS APPEAL, ASSESSEE RAISED THE FOLLOWING GROUNDS WHICH READ AS UNDER: 1. THE CIT (A) HAS ERRED IN DISALLOWING LOSS OF RS. 2,64,500/ - ON THE ALLEGED GROUND THAT THE SAID LOSS F ALLS WITH IN THE EXPLANATION TO SECTION 73 OF THE ACT AND THEREBY TREATING THE SAME AS SPECULATION LOSS . 2. THE CIT (A) HAS FAILED TO APPRECIATE THAT THE APPELLANTS MAIN BUSINESS IS THAT OF GRANTING OF LOANS AND ADVANCES AND THEREFORE, THE APPELLANT IS NOT HIT BY T HE EXPLANATION TO SECTION 73 OF THE ACT. 3. THE CIT (A) FAILED TO APPRECIATE THE RATIO LAID DOWN BY THE SPECIAL BENCH IN THE CASE OF VENKATESWARA INVESTMENTS & FINANCE PVT LTD. 4. THE CIT (A) ERRED IN HOLDING THAT BUSINESS OF BILL DISCOUNTING CANNOT BE E QUATED WITH THE BUSINESS OF GIVING LOANS AND ADVANCES. 5. THE CIT (A) HAS FAILED TO APPRECIATE THAT THE DIVIDEND AND OTHER INCOME IS A POSITIVE INCOME AGAINST LOSS DECLARED ON ACCOUNT OF VALUATION OF SHARES AND THEREFORE, IN VIEW OF THE SPECIAL BENCH JUDGM ENT IN THE CASE OF CONCORD COMMERCIAL PVT LTD THE EXPLANATION TO SECTION 73 CANNOT BE INVOKED IN SUCH A SITUATION. 6. THE CIT (A) ERRED IN NOT ADJUDICATING GROUND NO.2 & 3 RAISED BEFORE HIM ON THE ALLEGED GROUND THAT APPELLANT WAS NOT ENTITLED TO RAISE THE ISSUE BEFORE HIM. 7. THE CIT (A) FAILED TO APPRECIATE THAT THE SAID LOSS OF RS. 2,64,500/ - HAD OCCURRED ONLY ON ACCOUNT F VALUATION OF SHARES AND THERE WAS NO TRANSACTION OF SALE AND PURCHASE OF SHARES. THEREFORE, IN SUCH A SITUATION EXPLANATION TO SECTI ON 73 CANNOT BE INVOKED. 8. THE CIT (A) HAS FAILED TO APPRECIATE THAT IN THE ABSENCE OF ANY TRANSACTION OF SALE AND PURCHASE OF SHARES THE PROVISIONS OF SECTION 73 WOULD NOT APPLY AND THEREFORE, THERE IS NO QUESTION OF TREATING THE LOSS ON ACCOUNT OF VALUA TION OF SHARES AS SPECULATION LOSS. 9. THE CIT (A) HAS ERRED IN LEVYING INTEREST U/S 234A, 234B AND 234C. 7. ALL THE ABOVE GROUNDS ARE EXACTLY IDENTICAL TO THAT OF THE GROUNDS RAISED BY THE ASSESSEE FOR THE AY 1997 - 98 AND THE ONLY DIFFERENCE IS IN FIGURES. WHILE 4 ADJUDICATING THE APPEAL FOR THE 1997 - 98, AFTER DISCUSSION, WE SET ASIDE THE GROUNDS TO THE FILE OF TH E CIT (A) FOR ADJUDICATING THE ISSUE INVOLVED IN THE GROUNDS AFTER AFFORDING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. SINCE, THE ISSUES INVOLVED IN THE PRESENT APPEAL ARE IDENTICAL TO THAT OF THE APPEAL FOR THE AY 1997 - 98, THEREFORE, OUR A DJUDICATION GIVEN THEREIN SQUARELY APPLIES TO THE INSTANT APPEAL TOO. ACCORDINGLY, ALL THE GROUNDS RAISED BY THE ASSESSEE IN THE APPEAL ARE SET A SIDE AND REMANDED TO THE FILE OF THE CIT (A) FOR FRESH ADJUDICATION. ACCORDINGLY, GROUNDS RAISED BY THE ASSES SEE ARE ALLOWED FOR STATISTICAL PURPOSES. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRON OUNCED IN THE OPEN COURT ON 1 6 T H JULY, 2014. S D / - S D / - (VIJAY PAL RAO) (D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; 1 6 .7.2014 . . ./ OKK , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI