PUJA IMPEX P.LTD, MUMBAI V. ITO RG 3(2)(4), MUMBAI

ITA 4904/MUM/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 88122 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 5 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-01-2015
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 20-01-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 30-07-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SUNIL NAHTA SHRI TRUSHIT SHAH
• Assessee Lawyers: AKHILENDRA YADAV
• Section: 14A; 115JB; 12; 10; 11

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL C BE NCH, MUMBAI , !' #$%& , '' ' ( BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER ./I .T.A. NO. 4904/MUM/2012 ./I .T.A. NO. 2008/MUM/2013 ( ! ! ! ! ) ) ) ) / ASSESSMENT YEARS : 2008-09 & 2009-10 M/S. PUJA IMPEX PVT. LTD., 161, ATLANTA PREMISES CO. OP. SOC. LTD., NARIMAN POINT, MUMBAI-400 021 ! ! ! ! / VS. THE ITO, RANGE-3(2)(4), AAYAKAR BHAVAN, MUMBAI-400 020 * '' ./ + ./ PAN/GIR NO. : AABCP 1659A ( *, / APPELLANT ) .. ( -.*, / RESPONDENT ) *, / ' / APPELLANT BY: SHRI SUNIL NAHTA SHRI TRUSHIT SHAH -.*, 0 / ' / RESPONDENT BY: SHRI AKHILENDRA YADAV ! 0 12' / DATE OF HEARING :20.01.2015 3) 0 12' / DATE OF PRONOUNCEMENT :22.01.2015 '4 / O R D E R PER N.K. BILLAIYA, AM: ITA NO. 4904/M/2012 FILED BY THE ASSESSEE IS DIREC TED AGAINST THE ORDER OF THE LD. CIT(A)-4, MUMBAI DT.21.5.2012 PERT AINING TO A.Y.2008- 09 AND ITA NO.2008/M/13 IS ALSO AN APPEAL BY THE AS SESSEE PREFERRED ITA NO. 2008/M/2013 2 AGAINST THE ORDER OF THE LD. CIT(A)-4 MUMBAI DT. 3. 1.2013 PERTAINING TO A.Y. 2009-10. AS COMMON ISSUES ARE INVOLVED IN BOT H THESE APPEALS, THEY WERE HEARD TOGETHER AND DISPOSE OF BY THIS COM MON ORDER FOR THE SAKE OF CONVENIENCE AND BREVITY. ITA NO. 4904/M/2012 A.Y. 2008-09 2. THE ASSESSEE IS TRADING IN SECURITIES AND ALSO I N THE BUSINESS OF ADVISORY SERVICE, FINANCE LEASING AND INVESTMENT IN SECURITIES. THE RETURN FOR THE YEAR WAS SELECTED FOR SCRUTINY ASSESSMENT. DURING THE COURSE OF THE SCRUTINY ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS EARNED DIVIDEND INCOME OF RS. 16, 92,522/- AND LONG TERM CAPITAL GAIN OF RS. 85,74,072/-, BOTH WERE CL AIMED AS EXEMPT U/S. 10(34) AND 10(38) OF THE ACT RESPECTIVELY. THE AO OBSERVED THAT THE ASSESSEE HAS DISALLOWED DEMAT CHARGES OF RS. 49,269 /- AND SECURITIES TRANSACTION CHARGES OF RS. 2,03,107/- AND RS. 8,463 /- BEING 0.5% OF DIVIDEND. THE AO SIMPLY OBSERVED THAT THE DISALLOW ANCE COMPUTED BY THE ASSESSEE IS NOT IN ACCORDANCE WITH RULE 8D. TH E AO PROCEEDED BY COMPUTING THE DISALLOWANCE AND COMPUTED THE SAME A T RS.5,23,235/. SINCE THE ASSESSEE HAS ALREADY DISALLOWED RS. 2,60, 839/-, THE AO PROCEEDED BY DISALLOWING RS. 2,62,396/-. 3. AGGRIEVED BY THIS, THE ASSESSEE CARRIED THE MATT ER BEFORE THE LD. CIT(A) BUT WITHOUT ANY SUCCESS. 4. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE STAT ED THAT THE ASSESSEE ITSELF HAD DISALLOWED RS. 2,60,839/- AND THE AO HA S NOT POINTED OUT ANY SPECIFIC DEFECT IN THE COMPUTATION OF THE DISALLOWA NCE MADE BY THE ITA NO. 2008/M/2013 3 ASSESSEE, THEREFORE, THE DISALLOWANCE MADE BY THE A O IS AGAINST THE RELEVANT PROVISIONS OF THE LAW. 6. THE LD. DEPARTMENTAL REPRESENTATIVE SUPPORTED TH E ORDER OF THE FIRST APPELLATE AUTHORITY. 7. WE HAVE CAREFULLY PERUSED THE ORDERS OF THE AUTH ORITIES BELOW. IT IS AN UNDISPUTED FACT THAT THE ASSESSEE ITSELF HAS OFF ERED 0.5% OF DIVIDEND INCOME ON ACCOUNT OF OTHER EXPENSES. IT IS ALSO AN UNDISPUTED FACT THAT THE AO HAS NOT POINTED OUT ANY DEFECT IN THE CALCUL ATION MADE BY THE ASSESSEE NOR AO HAS RECORDED ANY DISSATISFACTION WI TH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF SUCH EXPEND ITURE IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME . CONSIDERING ALL THESE FACTS IN THE LIGHT OF THE PROVISIONS OF SEC. 14A OF THE ACT, WE SET ASIDE THE FINDINGS OF THE LD. CIT(A) AND DIRECT THE AO TO DELETE THE ADDITION OF RS. 2,60,839/-. GROUND NO. 1 IS ACCORD INGLY ALLOWED. 8. GROUND NO. 2(A) AND 2(B) ARE CONSEQUENTIAL TO OU R FINDING TO GROUND NO.1, THEREFORE, GROUND NO. 2(A) AND 2(B) AR E TREATED AS ALLOWED IN VIEW OF OUR FINDINGS GIVEN FOR GROUND NO. 1. 9. GROUND NO. 3 RELATES TO THE ADDITION OF RS. 2,03 ,107/- BEING SECURITIES TRANSACTION TAX TO THE BOOK PROFIT COMPU TED U/S. 115JB. 10. A PERUSAL OF THE ASSESSMENT ORDER SHOWS THAT TH E ADDITION HAS BEEN MADE AS PER THE EXPLANATION 1(F) OF SEC. 115 JB OF THE ACT. THE SAID PROVISION SHOWS THAT IT REFERS THE AMOUNT OF EXPEND ITURE RELATABLE TO ANY INCOME TO WHICH SEC. 10 OTHER THAN THE PROVISIONS C ONTAINED IN CLAUSE-38 THEREOF OR SECTION 11 OR SECTION 12 APPLY. IN THE CASE IN HAND THE ASSESSEE HAS CLAIMED EXEMPTION U/S. 10(38) OF THE ACT THEREF ORE THE ASSESSEE IS ITA NO. 2008/M/2013 4 COVERED BY THE EXCLUSION PROVIDED IN CLAUSE (F) TO EXPLANATION-1 TO SEC. 115JB OF THE ACT. THEREFORE, WE DIRECT THE AO TO E XCLUDE RS. 2,03,107/- FROM THE BOOK PROFIT. GROUND NO. 3 IS ACCORDINGLY ALLOWED. 11. GROUND NO. 4 RELATES TO THE ADDITION OF RS. 6,7 2,108/- WRONGLY ACCOUNTED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE B EING CHARGED TO BOOK PROFIT U/S. 115JB. 12. FACTS ON RECORD SHOW THAT THE ASSESSEE HAS INAD VERTENTLY CREDITED IN THE P&L ACCOUNT AS SPECULATION GAIN AMOUNTING TO RS . 6,72,108/-. THE SAID MISTAKE WAS REALIZED DURING THE ASSESSMENT PRO CEEDINGS AND THE ASSESSEE IMMEDIATELY FILED REVISED COMPUTATION OF I NCOME VIDE LETTER DT. 3.12.2010. THE AO DID NOT ACCEPT THE SAID REVISION AS THE CLAIM WAS NOT MADE IN THE RETURN OF INCOME. 13. THE LD. CIT(A) ALLOWED THE RELIEF TO THE ASSESS EE FROM THE NORMAL COMPUTATION OF TOTAL INCOME. HOWEVER, THE LD. CIT( A) DECLINED TO GIVE RELIEF FOR THE PURPOSE OF BOOK PROFIT U/S. 115JB OF THE ACT. IT IS NOT IN DISPUTE THAT THE ASSESSEE HAS MADE BOOK ENTRIES OF SPECULATION GAIN WHICH IT HAS NOT ACTUALLY EARNED DURING THE YEAR. SINCE T HE SPECULATION GAINS WERE CREDITED TO THE PROFIT AND LOSS ACCOUNT, IT CA N BE SAID THAT THE PROFIT AND LOSS ACCOUNT ARE NOT PREPARED IN ACCORDANCE WIT H PART-II OF SCHEDULE- VI AND FOR THE PURPOSE OF SEC. 115JB. EVERY COMPAN Y HAS TO PREPARE ITS ACCOUNTS IN THE MANNER PROVIDED IN PART-II AND PART -III OF SCHEDULE-VI TO THE COMPANIES ACT 1956. SINCE THE ASSESSEES PROFI T AND LOSS ACCOUNT IS NOT PREPARED IN ACCORDANCE WITH THE RELEVANT PROVIS IONS OF THE COMPANIES ACT, THE NOTIONAL PROFIT SHOWN BY THE ASSESSEE HAS TO BE REDUCED WHILE COMPUTING THE BOOK PROFIT U/S. 115JB OF THE ACT. SIMILAR VIEW HAS BEEN TAKEN BY THE TRIBUNAL IN THE CASE OF M/S. BOMBAY D IAMOND CO. LTD IN ITA NO. 7488/M/07 WHEREIN THE TRIBUNAL HAS HELD AS UNDER: ITA NO. 2008/M/2013 5 THE VARIOUS OTHER DECISIONS RELIED ON BY THE LD. C IT(A) IN HIS ORDER ARE ALSO NOT APPLICABLE. IN NONE OF THE CASE IT HAS BEEN HELD THAT EVEN WHERE THE ACCOUNTS ARE NOT PREPARED IN THE MANNER PROVIDED AS PER PART II AND PART III OF SCHEDULE VI TO THE COMPANIES ACT, 1956 THE ASSESSING OFFICER HAS NO PO WER TO GO BEYOND THE BOOK PROFIT AS PER THE AUDITED ACCOUNTS. IN OUR OPINION, THE AO CANNOT GO BEYOND THE BOOK PROFITS AS PER THE AUDITED ACCOUNTS PROVIDED THEY ARE PREPARED AS PER THE MANN ER PROVIDED IN PART II AND PART III OF SCHEDULE VI TO THE COMPA NIES ACT, 1956 AND ARE ADOPTED IN THE AGM. HOWEVER, IN THE INSTAN T CASE, ADMITTEDLY THE ACCOUNTS ARE NOT PREPARED IN THE MAN NER PROVIDED IN PART II AND PART III OF SCHEDULE VI TO THE COMPA NIES ACT, 1956 SINCE THE PROFIT ON SALE OF INVESTMENTS AMOUNTING T O RS. 10,38,13,765/- WHICH IS A MATERIAL AMOUNT, HAS NOT BEEN ROUTED THROUGH THE PROFIT AND LOSS A/C. THEREFORE, THE AO , IN OUR OPINION HAS THE POWER TO RE-WORK THE BOOK PROFIT BY RECASTI NG THE ACCOUNTS IN THE MANNER PROVIDED AS PER PART II AND PART III OF SCHEDULE VI TO THE COMPANIES ACT, 1956. IN THIS VIEW OF THE MA TTER, THE ORDER OF THE CIT(A) ON THIS ISSUE IS SET ASIDE AND THAT OF T HE AO IS RESTORED. RESPECTFULLY FOLLOWING THE DECISION OF THE CO ORDI NATE BENCH, WE DIRECT THE AO TO RE-WORK THE BOOK PROFIT BY EXCLUDI NG RS. 6,72,108/-. GROUND NO. 4 IS ACCORDINGLY ALLOWED. 14. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE FOR A.Y. 2008-09 IS ALLOWED. ITA NO. 2008/M/2013 A.Y. 2009-10 15. THE ONLY GROUND IN THIS APPEAL RELATES TO THE D ISALLOWANCE OF RS. 5,29,673/- U/S. 14A OF THE ACT. 16. FACTS AND ISSUES ARE IDENTICAL TO THE FACTS CON SIDERED BY US IN ITA NO. 4904/M/2012 QUA GROUND NO. 1 OF THAT APPEAL. F OLLOWING OUR OWN ITA NO. 2008/M/2013 6 FINDINGS GIVEN IN THE SAID APPEAL, WE DIRECT THE AO TO DELETE THE ADDITION MADE BY HIM. THIS GROUND IS ACCORDINGLY ALLOWED. 17. IN THE RESULT, BOTH THE APPEALS FILED BY THE AS SESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND JANUARY, 2015 SD/- SD/- (JOGINDER SINGH ) (N.K. BILLAIYA) /JUDICIAL MEMBER '' / ACCOUNTANT MEMBER MUMBAI; 5! DATED : 22 ND JANUARY, 2015 . ! . ./ RJ , SR. PS '4 '4 '4 '4 0 00 0 -1# -1# -1# -1# 6'#)1 6'#)1 6'#)1 6'#)1 / COPY OF THE ORDER FORWARDED TO : 1. *, / THE APPELLANT 2. -.*, / THE RESPONDENT. 3. 7 ( ) / THE CIT(A)- 4. 7 / CIT 5. #8 -1! , , / DR, ITAT, MUMBAI 6. 9 : / GUARD FILE. '4! '4! '4! '4! / BY ORDER, .#1 -1 //TRUE COPY// ; ;; ; / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI