ALKA RAJESH AGARWAL, MUMBAI V. ACIT 17(2), MUMBAI

ITA 5007/MUM/2009

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9459 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 3 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-12-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 20-11-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 02-09-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SURINDER JIT SINGH
• Assessee Lawyers: DEVENDRA MEHTA
• Keywords: Capital asset; Cost of acquisition
• Section: 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A, MUMBAI BEFORE SHRI B.R. MITTAL, JUDICIAL MEMBER AND SHRI SANJAY ARORA, ACCOUNTANT MEMBER ITA NO. 5007/MUM/2009 (ASSESSMENT YEAR: 2005-06) ALKA RAJESH AGARWAL MEHTA MAHAL ANNEXE, DADASAHEB PHALKE ROAD, DADAT TT, MUMBAI - 400 014 [PAN: AAFPA 5985 K] VS. COMMISSIONER OF INCOME TAX, 17, MUMBAI (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI DEVENDRA MEHTA, AR RESPONDENT BY : SHRI SURINDER JIT SINGH, CIT-DR DATE OF HEARING: 20.11.2012 DATE OF PRONOUNCEMENT: 05.12.2012 O R D E R PER SANJAY ARORA, AM: THIS IS AN APPEAL BY THE ASSESSEE CONTESTING THE OR DER U/S. 263 OF THE INCOME TAX ACT 1961 (THE ACT HEREINAFTER) DATED 21.08.20 09 BY THE COMMISSIONER OF INCOME TAX-17 MUMBAI (THE CIT FOR SHORT), SETTING ASIDE HER ASSESSMENT FOR THE ASSESSMENT YEAR (A.Y.) 2005-06 (VIDE ORDER U/S. 143 (3) OF THE ACT DATED 10.07.2007), WITH THE DIRECTION TO REDO THE ASSESSMENT BY TAKING ON THE ISSUES SPECIFIED IN THE IMPUGNED ORDER IN ACCORDANCE WITH LAW. 2. THE FACTS OF THE CASE IN BRIEF ARE THAT THE LD. CIT, EXERCISING REVISIONARY JURISDICTION IN RESPECT OF THE IMPUGNED ASSESSMENT, WAS OF THE VIEW THAT THE ASSESSING OFFICER (AO) HAD NOT EXAMINED AND APPLIED HIS MIND IN RELATION TO TWO CLAIMS MADE ITA NO. 5007/MUM/2009 ALKA RAJESH AGARWAL V. CIT., MUMBAI (AY 2005-06) 2 BY THE ASSESSEE PER HER RETURN OF INCOME FOR THE YE AR. BOTH THESE ISSUES ARE BEING AGITATED BY THE ASSESSEE PER THE PRESENT APPEAL VID E GROUND 2(A) & 2(B) OF THE APPEAL MEMO, WHICH WE SHALL TAKE UP IN SERIATIM. 3. THE FIRST ISSUE RELATES TO THE SET OFF OF LOSS O F RS. 17.57 LACS ON THE SALE OF UNITS IN ICICI PRUDENTIAL BALANCE FUND ASSESSED UNDER THE HEAD SHORT TERM CAPITAL GAINS AGAINST THE DIVIDEND INCOME OF RS.18.59 LACS RECEIV ED ON THE SAID UNITS. THERE BEING NO WHISPER OF THE SAID CLAIM BY WAY OF THE SAID SET OFF BY THE ASSESSEE, WHICH WAS THUS ALLOWED IN ASSESSMENT, IN THE ASSESSMENT ORDER, THE ASSESSEE WAS INQUIRED BY THE BENCH DURING THE HEARING AS TO THE BASIS OF THE ASS ESSEES GRIEVANCE; IT BEING TRITE LAW THAT ABSENCE OF PROPER ENQUIRY WOULD MAKE AN ASSESS MENT PER SE ERRONEOUS TO THE EXTENT IT IS PREJUDICIAL TO THE INTEREST TO THE REV ENUE, RENDERING IT LIABLE FOR REVISION U/S. 263. THE LAW IN THE MATTER THOUGH WELL SETTLED AND TRITE [REFER, INTER ALIA, MALABAR INDUSTRIAL CO. LTD. V. CIT (2000) 243 ITR 83 (SC); RAM PYARI DEVI SAROGI V. CIT , 67 ITR 84 (SC); SWAROOP VEGETABLE PRODUCT INDUSTRIES LTD. V. CIT , 187 ITR 412 (ALL.); GEE VEE ENTERPRISES V. CIT (ADDL.) , 99 ITR 375 (DEL.); RAJALAKSHMI MILLS LTD. V. ITO , 121 ITD 343 (CHENNAI) (SB)]. TOWARD THIS, IT WAS PO INTED OUT BY THE LD. AR, THE ASSESSEES COUNSEL, THAT THE AO HAD SHOW CAUSED IT IN THE MATTER, REQUIRING OF IT TO EXPLAIN (VIDE ORDER SHEET ENTRY DATED 18.06.2007) A S TO WHY THE PROVISION OF SECTION 94(7) IS NOT APPLICABLE TO THE TRANSACTION IN ICICI MUTUAL FUND, PLACING THE COPY OF THE SAME ON RECORD. THE ASSESSEE HAD DULY REPLIED T HE SAME VIDE ITS LETTER DATED NIL, TAKING US THROUGH THE RELEVANT PART (PARA 1.4) THER EOF (PLACED AT PAGES 2 TO 4 OF ITS PAPER-BOOK). SECTION 94(7), IT STANDS EXPLAINED THE REIN, IN ORDER TO BE ATTRACTED, REQUIRES A SIMULTANEOUS SATISFACTION OF THREE CONDI TIONS, VIZ. THE SECURITY OR UNIT BEING PURCHASED WITHIN A PERIOD OF THREE MONTHS PRIOR TO THE RECORD DATE; THE SALE OF SUCH SECURITY/UNIT WITHIN A PERIOD OF THREE MONTHS AFTER SUCH (RECORD) DATE; AND THE RECEIPT OF DIVIDEND ON SUCH SECURITY/UNIT (WITHIN A PERIOD OF NINE MONTHS AFTER SUCH DATE) WHICH IS EXEMPT. THE FIRST CONDITION OF THE UNITS B EING PURCHASED WITHIN A PERIOD OF THREE MONTHS OF THE RECORD DATE IS NOT SATISFIED IN THE INSTANT CASE AS THE UNITS WERE PURCHASED ON 21.12.2004 , WHILE THE DIVIDEND WAS RECEIVED ONLY ON 29.03.200 5 , SO THAT ITA NO. 5007/MUM/2009 ALKA RAJESH AGARWAL V. CIT., MUMBAI (AY 2005-06) 3 THE SAID PROVISION HAD NO APPLICATION. THE ASSESSEE COULD NOT BE SUBJECTED TO REVISION MERELY BECAUSE THE AO, BEING SATISFIED WITH ITS EXP LANATION, OMITTED TO RECORD THE SAME. THE LD. DR, ON THE OTHER HAND, WOULD SUBMIT T HAT THERE IS NOTHING ON RECORD TO SHOW THAT THE PURCHASE OF THE UNITS IN THE INSTANT CASE IS WITHIN THREE MONTHS OF THE RECORD DATE. 4. WE HAVE HEARD PARTIES, AND PERUSED THE MATERIAL ON RECORD. THOUGH THE ASSESSEE WOULD, ON AN ENQUIRY BY THE BENCH, SEEK TO SHOW US, WITH REFERENCE TO A LETTER BY ICICI PRUDENTIAL DATED 01.04.2005, THAT THE RECORD DATE IN THE INSTANT CASE IS 24.03.2005 (PAPER-BOOK PAGE 2 DATED 29/7/2010), SO THAT S. 94(7) WOULD STILL NOT APPLY, IT IS APPARENT THAT THE SAID DETAIL WAS SUBM ITTED ONLY IN RESPONSE TO A REQUISITION BY THE BENCH ON AN EARLIER DATE OF HEARING, I.E., 3 1.5.2010. THE ASSESSEES REPLY DOES NOT INDICATE THE RECORD DATE, WHICH IS AN ESSENTI AL INGREDIENT TO DETERMINE THE APPLICATION OR OTHERWISE OF THE PROVISION OF S. 94( 7), AND WHICH IS ITSELF A CLEAR AND PATENT INDICATION THAT THERE WAS NO PROPER ENQUIRY AND VERIFICATION OF THE ASSESSEES CLAIM BY THE AO WHILE FRAMING THE ASSESSMENT. NO DO UBT, THE ASSESSEE CANNOT BE PUT TO ANY DISADVANTAGE ON ACCOUNT OF A MERE LAPSE BY T HE AO IN RECORDING HIS SATISFACTION; HOWEVER, THE FACT REMAINS THAT WE CAN INFER SATISFACTION OR OTHERWISE OF THE AO IN THE MATTER ONLY ON THE BASIS OF THE MATER IAL ON RECORD, EVEN AS SOUGHT TO BE DONE BY THE ASSESSEE ITSELF WHEN THE LD. AR DRAWS O UR ATTENTION TO THE QUERY PER THE ORDER SHEET BY THE AO. HOW COULD, WE WONDER, THE AO BE SATISFIED WITHOUT AS MUCH AS BEING CONFIRMED ABOUT THE RECORD DATE, EVEN AS SOUGHT TO BE BY THE BENCH ON AN EARLIER OCCASION, I.E., 31/5/2010. AS EVIDENT, APAR T FROM SEEKING A REPLY FROM THE ASSESSEE IN THE MATTER, THERE IS NOTHING TO INDICAT E ITS CONSIDERATION BY THE AO; HIS ORDER BEING SANS ANY REFERENCE THERETO, NOR HAS HE MADE ANY ATTEMPT TO VERIFY THE FACTS AND, CONSEQUENTLY, ISSUED ANY FINDING IN THE MATTER . FURTHER, THE LAW IN THE MATTER WOULD IN ANY CASE HOLD, I.E., ON THE MERITS OF THE ASSESSEES CLAIM, SO THAT WHERE VALID IN LAW, IT WOULD OBTAIN. NO PREJUDICE TO ASSESSEE, IN OUR CLEAR OPINION, STANDS CAUSED BY THE IMPUGNED DIRECTION ON THIS ASPECT BY THE LD. CIT, WHICH IS TO BE DECIDED ON THE ITA NO. 5007/MUM/2009 ALKA RAJESH AGARWAL V. CIT., MUMBAI (AY 2005-06) 4 BASIS OF THE LAW IN THE MATTER AND, THUS, CANNOT BE FAULTED WITH, THOUGH WE CANNOT HELP BUT MENTIONING THAT THE MATTER REQUIRING NO DETAILE D INVESTIGATION, IT WOULD HAVE BEEN DECIDEDLY PREFERABLE IF THE LD. CIT HAD, IN EXERCIS E OF HIS WIDE POWERS U/S. 263, CAUSED THE VERIFICATION HIMSELF, AND DETERMINED THE MATTER AFTER SATISFYING HIMSELF AS TO THE APPLICATION OR OTHERWISE OF S. 94(7) IN THE FACTS O F THE CASE AND, WHERE SO, TO WHAT EXTENT. WE DECIDE ACCORDINGLY, REJECTING THE ASSESS EE OBJECTION. 5. THE SECOND ISSUE ARISING IN THE INSTANT CASE IS THE CLAIM OF INTEREST (IN THE SUM OF RS.30,15,402) BY THE ASSESSEE AGAINST SHORT TER M CAPITAL GAINS ON THE SALE OF THREE DIFFERENT SCRIPS, I.E., NTPC LTD., DATA MATRIX LTD. AND NDTV LTD. AS ACCEDED TO BY THE LD. AR DURING THE HEARING, THERE WAS NO QUERY B Y THE AO IN THE MATTER DURING ASSESSMENT. THE QUESTION OF EXAMINING THE SAME, AND APPLICATION OF HIS MIND THEREON BY THE ASSESSING AUTHORITY, IN THE CIRCUMSTANCES, D OES NOT ARISE. THE LD. AR WOULD, HOWEVER, SUBMIT THAT INTEREST HAS BEEN RIGHTLY CLAI MED BY THE ASSESSEE; ITS BEING CASE BEING SUPPORTED BY CASE LAW BY THE TRIBUNAL. IT WAS OBSERVED BY THE BENCH THAT INTEREST, A FINANCING COST, IS A CONTINUING COST DE PENDENT ON THE LENGTH OF THE HOLDING AND, IN ANY CASE, THE LENGTH OF THE HOLDING BEING F INANCED THUS, I.E., BY BORROWED CAPITAL. IT IS THUS ESSENTIALLY A HOLDING COST, I.E ., WOULD STAND TO BE INCURRED ONLY ON ACCOUNT OF HOLDING, WHILE THE COST OF ACQUISITION W OULD STAND TO GET CRYSTALLIZED OR DETERMINED AT THE TIME OF ACQUISITION (OF THE RELEV ANT CAPITAL ASSET) ITSELF. IT WAS, IN RESPONSE, SUBMITTED BY THE LD. AR THAT THE INTEREST STANDS CLAIMED BY THE ASSESSEE ONLY UP TO THE DATE OF ALLOTMENT OF THE SHARES, I.E., FR OM THE DATE OF APPLICATION FOR SHARES TO THE DATE OF THEIR ALLOTMENT. AT THIS STAGE, IT WAS AGAIN POINTED OUT TO HIM THAT THE CAPITAL ASSET (I.E., THE SHARES UNDER REFERENCE) COMES INTO BEING AND, IN ANY CASE, BECOMES THE ASSESSEES ASSET ONLY ON ITS ALLOTMENT AND, THEREFORE, IT IS AGAIN APPARENTLY NOT UNDERSTOOD AS TO HOW INTEREST FOR THE PRE-ALLOT MENT PERIOD WOULD GO TO COMPRISE THE ACQUISITION COST OF THE SAID ASSET PRIOR THERET O (ALLOTMENT). ALSO, THE QUANTUM OF BORROWED CAPITAL ON WHICH INTEREST HAS BEEN CLAIMED WOULD BE IN ISSUE AS THE ENTIRE OF THE APPLICATION MONEY FINANCED THEREBY MAY NOT HAVE BEEN CONVERTED INTO THE ASSET. ITA NO. 5007/MUM/2009 ALKA RAJESH AGARWAL V. CIT., MUMBAI (AY 2005-06) 5 THE LD. DR, ON THE OTHER HAND, WOULD SUBM IT THAT THERE HAS BEEN CLEARLY NO INQUIRY IN THE MATTER BY THE AO, WHICH IS BORNE BY THE FACT THAT, APART FROM THE INTEREST EVEN SERVICE CHARGES HAVE BEEN CLAIMED BY THE ASSES SEE IN THE COMPUTATION OF THE SHORT TERM CAPITAL GAINS, AND STAND ALLOWED IN ASSE SSMENT. 6. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. THERE IS A CLEAR ABSENCE OF ANY VERIFICATION AS WELL AS APPLICATION OF MIND IN THE MATTER BY THE AO, EVEN AS CONCEDED TO BY THE LD. AR DURING HEARING. U NDER THE CIRCUMSTANCES, WE FIND NO INFIRMITY IN THE IMPUGNED DIRECTION, AND CONFIRM THE DIRECTION TO THE AO TO FRAME THE ASSESSMENT AFRESH IN ACCORDANCE WITH LAW ON THE SAID ISSUE, DULY CONSIDERING THE ASSESSEES CLAIMS ON MERITS. IN THIS REGARD WE FURT HER CLARIFY THAT THE VIEWS AS EXPRESSED BY US DURING HEARING OUGHT NOT DETERMINE THE ADJUDICATION IN THE MATTER, WHICH IS TO BE AS PER LAW, AND THAT THE SAME WAS ON LY WITH A VIEW AND TOWARD HIGHLIGHTING THE VARIOUS ISSUES INCIDENT ON THE CLA IM UNDER REFERENCE, WHICH THUS CANNOT BY ANY MEANS BE REGARDED AS SETTLED (AS SOUG HT TO BE PROJECTED BY THE LD. AR DURING HEARING), BUT AT BEST CONTENTIOUS, AND WHICH WOULD REQUIRE TO BE DELIBERATED UPON. THIS IS AS THOUGH OUR PURVIEW IN THE APPEAL C HALLENGING REVISION ORDER DOES NOT EXTEND TO THE MERITS OF THE CASE WHERE THE ASSESSME NT STANDS SET ASIDE, AS IN THE INSTANT CASE, WITH A DIRECTION TO REDO THE SAME, YET IF THE MATTER IS WELL SETTLED IN FAVOR OF THE ASSESSEE, WITH THE MATERIAL FACTS ON RECORD, WHICH HAVE BEEN BROUGHT TO THE NOTICE OF THE REVISIONARY AUTHORITY, THERE IS LITTLE TO GAIN BY REQUIRING THE MATTER TO BE RESTORED TO THE FILE OF THE AO FOR FRESH CONSIDERATION. IN THE PRESENT CASE, IT WOULD THOUGH BE A CASE OF FIRST CONSIDERATION, AS THE SAME HAD NOT BE EN SUBJECT TO CONSIDERATION BY THE ASSESSING AUTHORITY IN THE FIRST INSTANCE. WE DECID E ACCORDINGLY. 7. IN VIEW OF THE FOREGOING, WE UPHOLD THE IMPU GNED ORDER. ITA NO. 5007/MUM/2009 ALKA RAJESH AGARWAL V. CIT., MUMBAI (AY 2005-06) 6 8. IN THE RESULT, THE ASSESSEES APPEAL IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 5 TH DAY OF DECEMBER, 2012 SD/- (B.R. MITTAL) JUDICIAL MEMBER SD/- (SANJAY ARORA) ACCOUTANT MEMBER MUMBAI, DATE: 05 /12/2012 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT- 17, MUMBAI. 4) THE D.R. A BENCH, MUMBAI. 5) COPY TO GUARD FILE. BY ORDER ASSTT. REGISTRAR RASIKA I.T.A.T ., MUMBAI