INDOSUEZ W I CARR SECURITIES (I) P.LTD, MUMBAI V. DCIT RG 4(1), MUMBAI

ITA 6130/MUM/2013

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 0716 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-07-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 10-06-2015
• Assessment Year: 2001-2002
• Appeal Filed On: 18-10-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: H M WANARE
• Keywords: Additional evidence; Speculation loss; Corroborative evidences
• Section: 143(3)

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL,MUMBAI E BENCH . . , , , BEFOR E S/SH. A.D. JAIN,JUDICIAL MEMBER & RAJENDRA,ACCOUNTANT MEMBER /. ITA NO. 6130 /MUM/201 3 , / ASSESSMENT YEAR - 200 1 - 02 INDOSUEZ WI CARR SECURITIES (INDIA)PVT. LTD.HOECHST HOUSE, 12 TH FLOOR,NARIMAN POINT MUMBAI - 2 1 . PAN: AAACI 9368 J VS D CIT RANGE - 4(1) 6 TH FLOOR, ROOM NO.640 AAYAKAR BHAVAN M.K. ROAD , MUMBAI - 20 . ( / APPELLANT ) ( / RESPONDENT ) /. ITA NO. 5772 /MUM/201 3 , / ASSESSMENT YEAR - 200 1 - 02 DCIT RANGE - 4(1) MUMBAI. VS INDOSUEZ WI CARR SECURITIES (INDIA)PVT. LTD.MUMBAI - 400 021. ( / APPELLANT ) ( / RESPONDENT ) /ASSESSEE BY : SHRI K. GOPAL - AR / REVENUE BY : SHRI H.M. WANARE - DR / DATE OF HEARING : 20 - 07 - 2015 / DATE OF PRONOUNCEMENT : 20 - 07 - 2015 , 1961 254 ( 1 ) ORDER U/S.254(1)OF THE INCOME - TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDER DATED 26.07.2013OF THE CIT(A) - 15, MUMBAI,THE ASSESSING OFFICER (AO) AND THE ASSESSEE HAVE FILED CROSS APPEALS RAISING FOLLOWING GROUNDS OF APPEAL: ITA NO.6130/MUM/2013 : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF CASE, THE LEARNED CIT(A) GROSSLY ERRED IN NOT ALLOWING THE FULL AMOUNT OF BUSINESS LOSS OF RS. 65,34,607 / - , WHE REBY AN AMOUNT OF ONLY RS. 26,70,230 / - IS TREATED AS BUSINESS LOSS AND THE BALANCE AMOUNT OF RS. 39,61,958 / - IS DISALLOWED FOR WANT OF SUPPORTING EVIDENCE, 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL) FAILED TO APPRECIATE THE FACT THAT THE DOCUMEN TS SUBMITTED BY THE ASSESSEE TO THE EXTENT OF THE LOSS OF RS. 26,70,230 / - , REPRESENTED THE FULL NATURE OF BUSINESS LOSS IN TOTALITY, AS UNDER THE CIRCUMSTANCES OF THE CASE, AND INSPITE OF ITS BEST EFFORTS, IT WAS NOT POSSIBLE FOR THE ASSESSEE TO LOCATE ALL ITS OLD RECORDS. 'THE APPELLANTS CRAVE LEAVE TO AMEND OR ALTER ANY GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY' . ITA NO.5772/MUM/2013 : 1. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF FACT AND IN LAW, THE LD.CIT(A) ERRED IN ALLOWING THE APPE AL OF THE ASSESSEE TO THE EXTENT OF RS.26,70,230/ - ACCEPTING THE CONTENTION OF THE ASSESSEE THAT THE LOSS INCURRED ON ACCOUNT OF SQUARING UP OF TRANSACTIONS UNDERTAKEN ON BEHALF OF CLIENTS DUE TO ERROR IN EXECUTION OF TRADING.' 2. 'ON THE FACTS AN D IN THE CIRCUMSTANCES OF FACT AND IN LAW, WHETHER THE LD.CIT(A) WAS RIGHT IN TREATING THE SPECULATION LOSS AS BUSINESS LOSS IN SPITE OF THE FACT THAT THE ASSESSEE FAILED TO PROVE HIS CONTENTION AT THE TIME OF SCRUTINY PROCEEDING AS WELL AS DURING RE MAND PROCEEDING.' ITA/ 6130 & 5772 /MUM/2013,AY. 01 - 02 - INDOSUEZ. 2 3. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE IMPUGNED ORDER OF THE LD.CIT(A) IS CONTRARY TO LAW AND CONSEQUENTLY MERITS TO BE SET ASIDE THAT OF THE ASSESSING OFFICER BE RESTORED.' 4. 'THE APPELLANT C RAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY.' BRIEF HISTORY: EFFECTIVE GROUND OF APPEAL FILED BY THE ASSESSEE IS ABOUT NOT ALLOWING THE FULL AMOUNT OF BUSINESS LOSS OF RS. 65,34, 607/ - AND RESTRICTING THE CLAIM TO RS.26.70 LAKHS. ASSESSE - COMPANY ,DEALING IN SHARES AND STOCK, FILED ITS RETURN ON 10.10.2001, DECLARING THE INCOME OF RS. 50,02 LAKHS. THE AO COMPLETE THE ASSESSMENT ON 22.03.2004, DETERMINING ITS INCOME AT RS. 1,67,28,670/ - U/S. 143(3) OF THE ACT.THE MATTER TR AVELLED UP TO THE TRIBUNAL.VIDE ITS ORDER DATED 30.03.2010, THE TRIBUNAL SET ASIDE THE MATTER TO THE FILE OF THE AO FOR FRESH ADJUDICATION.THE AO FRAMED THE ASSESSMENT ON 28.12.2011, U/S.143(3)R.W.S.254 OF THE ACT AT TOTAL INCOME OF RS. 1,31, 13,502/ - . 3. AGG RIEVED BY THE ORDER OF THE AO,THE ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY(FAA). DURING APPELLATE PROCEEDINGS, THE ASSESSEE FILED DETAILS OF LOSS OF RS. 65,34,607/ - INCURRED ON ACCOUNT OF ERROR IN SALE PURCHASE OF SHARES EXECUTED ON BEHALF OF CLIENTS. IN ITS STATEMENTS DATED 22.05.2012 IT E XPLAINED THE REASONS AS TO WHY THE SAME COULD NOT BE FURNISHED IN EARLIER ASSESSMENT PROCEEDINGS. CONSIDERING THE FACTS AND CIRCUMSTANCES THE ADDITIONAL EVIDENCE FILED BY WERE ADMITTED AS ADDITION AL EVIDENCE UNDER RULE 46 A OF THE INCOME TAX RULES, 1962.THE FAA FOUND THAT THE ASSESSEE HAD FILED SUPPORTING EVIDENCE IN RESPECT OF NET LOSS OF RS. 26,70,230/ - INCURRED ON ACCOUNT OF SHARE DISCREPANCY REPOR T, ERROR IN SHARE TRADING ETC., EXECUTED ON BEH ALF OF CLIENT. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE ALONG WITH THE ADDITIONAL EVIDENCES AND THE ASSESSMENT ORDER THE FAA HELD THAT THAT THE ASSESSEE WAS ENGAGED IN SALE PURCHASE OF SHARES ON ITS OWN ACCOUNT AND SALE PURCHASE OF SHARES ON BEH ALF OF ITS CLIENT,THAT FOR THE TRANSACTION ENTERED IN TO ON BEHALF OF THE CLIENTS IT WOULD EARN BROKERAGE INCOME,THAT IT HAD HUGE BROKERAGE BUSI NESS OF LARGE NUMBER OF CLIENTS,THAT THE BROKERAGE EARNED DURING THE YEA R WAS APPROXIMATELY RS.27 CRORES.HE REFE RRED TO THE PROVISIONS OF EXPLANATION TO SECTION 73 OF THE ACT AND HELD THAT THE EXPLANATION WA S APPLICABLE ONLY TO THE EXTENT OF SALE PURCHASE OF SHARES CARRIED OUT ON ASSESSEE'S OWN ACCOUNT ,THAT THE ASSESSEE HAD PROVED WITH DOCUMENTARY EVIDENCE THE LOS S OF RS. 26 ,70,230/ - THAT WAS INCURRED DURING THE BUSINESS TRANSACTIONS CARRIED OUT ON BEHALF OF ITS CLIENTS ,THAT SU CH LOSS WAS NOT INCURRED ON ACCOUNT OF SALE PURCHASE OF SHARES ON ASSESSEE 'S OWN ACCOUNT ,THAT THE P ROVISIONS OF SECTION 73 WERE NOT APPLIC ABLE TO THIS LOSS,THAT THE TRIBUNAL HAD HELD THAT IF THE LOSS HAD ARISEN BECAUSE OF SQUARING UP OF TRANSACTIONS UNDERTAKEN ON BEHALF OF CLIENTS DUE TO ERROR IN EXECUTION OF TRADING THE LOSS WOULD BE ALLOWABLE AS BUSINESS LOSS ,THAT I N THE CASE UNDER CONSI DERATION THE ASSESSEE HAD C LAIMED DEDUCTION OF LOSS OF RS. 65,34,607/ - ,THAT IT HAD FILED DOCUMENTARY EVIDENCE IN RESPECT OF LOSS OF RS. 26,70,230/ - ONLY ARISEN ON ACCOUNT OF SQUARING UP OF TRANSACTION UNDERTAKEN ON BEHALF OF CLIENT DUE TO ERROR IN EXECUTION OF TRADING ,THAT THE CLAIM OF LOSS TO THAT EXTENT WAS ALLOWED AS BUSINESS LOSS ,THAT T HE BALANCE CLAIM OF LOSS WAS TO B E UPHELD FOR WANT OF SUPPORTING EVIDENCE. 4. DURING THE COURSE OF HEARING B EFORE US, AUTHORISED REPRESENTATIVE( A R)STATED THAT THE ASSESSEE HAD NOT CARRIED OUT ANY BUSINESS ON ITS OWN ACCOUNT,THAT ALL THE TRANSACTIONS WERE ENTERED IN TO ON BEHALF OF THE CLIENTS,THAT IT HAD ONLY TWO SCRIPS IN THE BALANCE SHEET,THAT ASSESSEE LOSS HAD ARISEN ITA/ 6130 & 5772 /MUM/2013,AY. 01 - 02 - INDOSUEZ. 3 ON ACCOUNT OF THE CLIENTSBUSINESS.DEPARTMENTAL REPRESE NTATIVE(DR)STATED THAT THE ASSESSEE HAD NOT PRODUCED BORKERS NOTES,THAT NO EVIDENCE WERE PRODUCED IN SUPPORT OF THE CLAIM MADE BY IT. 5. WE HAVE PERUSED THE MATERIAL BEFORE US.WE FIND THAT THE ONLY ISSUE IS DISALLOWANCE UPHELD BY THE FAA.THE ASSESSEE IS A GGRIEVED BY THE ADDITION UPHELD BY THE FAA AND THE AO HAS CHALLENGED THE RELIEF GRANTED BY THE FAA,AMOUNTING TO RS.26.70 LAKHS.IT IS THE SECOND ROUND OF APPEAL.VIDE ITS ORDER DATED 30.03. 2010 THE TRIBUNAL HAD HELD THAT IF THE ASSESSEE WAS NOT TRADING IN SH ARES ON OWN ACCOUNT AND THAT LOSS HAD ARISEN BECAUSE OF SQUARING UP THE TRANSACTIONS UNDERTAKEN ON BEHALF OF CLIENTS DUE TO ERROR IN EXECUTION OF TRADING THE LOSS WOULD BE ALLOWABLE AS BUSINESS LOSS OTHERWISE IT WOULD BE TREATED AS SPECULATION LOSS AS PER THE EXPLANATION TO THE SECTION 73 OF THE ACT.THUS,THE ISSUE BEFORE THE AO/FAA WAS VERY NARROW.THEY HAD TO FIND OUT AS TO WHETHER THE ASSESSEE HAD TRADED THE SHARES ON HIS ACCOUNT OR ON BEHALF OF THE CLIENTS AND THE ASSESSEE HAD TO PROVE THAT LOSS SUFFERED WAS ON ACCOUNT OF THE SQUARING UP THE TRANSACTIONS UNDERTAKEN ON BEHALF OF CLIENTS DUE TO ERROR IN EXECUTION OF TRADING .THE ASSESSEE PRODUCED FRESH EVIDENCES BEFORE THE FAA TO PROVE ITS CLAIM STATING THAT THE SAME COULD NOT BE PRODUCED EARLIER.THE FAA HA D ADMITTED THE EVIDENCES AS PER THE PROVISIONS OF RULE 46A OF THE ACT.AFTER CONSIDERING THE AVAILABLE EVIDENCES,HE FOUND THAT THE ASSESSEE WAS ABLE TO PROVE THAT LOSS AMOUNTING TO RS.26.70 WAS SUFFERED BY IT DUE TO THE TRANSACTIONS ENTERED IN TO ON BEHALF OF THE CLIENTS.AS THERE WAS NO EVIDENCE THAT THE REMAINING LOSS WAS RESULT OF THE CLIENTS TRANSACTION,SO,HE HELD THAT SAME WAS NOT ALLOWABLE. WE ARE OF THE OPINION THAT IT WAS THE DUTY OF THE ASSESSEE TO PRODUCE THE EVIDENCE THAT THE LOSS HAD NOT ARISEN F ROM THE TRANSACTION UNDERTAKEN BY IT.IT FAILED TO DISCHARGE THE PRIMARY ONUS. JUST MAKING A CLAIM IN THE BOOKS OF ACCOUNTS IS NOT SUFFICIENT - IT HAS TO BE PROVED BY DOCUMENTARY EVIDENCES.A CLAIM MADE WITHOUT EVIDENCE IS LIKE A WALL WITHOUT ANY FOUNDA - TI ON. THEREFORE, SA ME HAS TO FALL SOME - DAY.THE FAA ALLOWED THE CLAIM TO THE EXTENT THE EVIDENCES WERE PRODUCED,AS INSTRUCTED BY THE TRIBUANL.WE DO NOT FIND ANY LEGAL OR FACTUAL INFIRMITY IN HIS ORDER,THEREFORE,CONFIRMING IT WE DECIDE THE EFFECTIVE GROUND OF APPE AL AGAINST THE ASSESSEE . ITA NO.5772/MUM/2013 : AS FAR AS THE APPEAL OF THE AO IS CONCERNED IT IS SUFFICE TO SAY THAT THE FAA HAD CALLED FOR A REMAND REPORT AFTER ADMITTING ADDITIONAL EVIDENCES PRODUCED BY THE ASSESSEE ,THAT HE HAD ALLOWED THE LOSS THAT WAS PROVED BY THE ASSESSEE WITH DOCUMENTARY EVIDENCES AND HAD SUSTAINED THE BALANCE DISALLOWANCE.WE DO NOT WANT TO INTERFERE WITH HIS ORDER, AS IT IS A LEGALLY AND FACTUALLY SOUND ORDER.EFFECTIVE GROUND OF APPEAL IS DECIDED AGAINST THE AO. AS A RESULT,APPEAL S FILED BY THE ASSESSEE AND THE AO STAND DISMISSED. . ORDER PRONOU NCED IN THE OPEN COURT ON 20 TH ,JULY,2015. 20 , 2015 SD/ - SD/ - ( . . /A.D. JAIN) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / MUMBAI, /DATE:20.07. 2015 . . . JV . SR.PS. ITA/ 6130 & 5772 /MUM/2013,AY. 01 - 02 - INDOSUEZ. 4 / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR A BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , / ITAT, MUMBAI.