DILIP S. DAHANUKAR, MUMBAI V. ITO 12(3)(3), MUMBAI

ITA 6164/MUM/2010

• Counselvise Citation: 616419914 RSA 2010
• Duration Of Justice: 1 year(s) 11 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-07-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 17-05-2012
• Assessment Year: 1996-1997
• Appeal Filed On: 11-08-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C S K NANI
• Assessee Lawyers: P PARDIWALLA
• Keywords: Question of law; Assessment record
• Section: 148; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH D , MUMBAI BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI RAJENDRA SINGH, ACCOUNTANT MEMBER ITA NO.6164/MUM/2010 ASSESSMENT YEAR : 1996-97 SHRI DILIP S. DAHANUKAR 3 RD FLOOR, INDUSTRIAL ASSURANCE BLDG. , CHRUCHGATE MUMBAI-400 020. PAN NO. ABAPD 1050 G INCOME TAX OFFICER WARD 12(3)(3) AAYAKAR BHAVAN, 1 ST FLOOR M.K. ROAD MUMBAI-400 020. (APPELLANT) VS. (RESPONDENT) APPELLANT BY : SHRI P. PARDIWALLA RESPONDENT BY : SHRI C.S.K. NANI DATE OF HEARING : 28.6.2012 DATE OF PRONOUNCEMENT : 18.7.2012 O R D E R PER RAJENDRA SINGH, AM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER D ATED 2.7.2010 OF CIT(A) FOR THE ASSESSMENT YEAR 1996-97. THE ONLY DISPUTE RAISED BY THE ASSESSEE IN THIS APPEAL IS REGARDING DISALLO WANCE OF LOSS OF RS.66,00,000/- CLAIMED BY THE ASSESSEE AS SHARE TRADING LOSS. 2. THE FACTS IN BRIEF ARE THAT THE ASSESSEE FOR THE ASSESSMEN T YEAR 1996-97 HAD FILED RETURN OF INCOME ON 28.11.1996 DECL ARING TOTAL ITA NO.6164/M/10 A.Y.96-97 2 INCOME OF RS.7,75,094/-. THE RETURN HAD BEEN ACCEPTED U NDER SECTION 143(1) BUT SUBSEQUENTLY THE SAME WAS RE-OPENED VIDE NOT ICE UNDER SECTION 148 ISSUED ON 18.3.1998. THEREAFTER THE REASSESSMEN T WAS MADE UNDER SECTION 143(3)/147 OF THE ACT IN WHICH THE A O DISALLOWED THE CLAIM OF SHARE TRADING LOSS OF RS. 66.00 LACS HOLDING THE SAME AS SHORT TERM CAPITAL LOSS. THE ASSESSMENT ORDER WAS CONFIRMED B Y CIT(A) AS WELL AS THE TRIBUNAL AND THE FOLLOWING QUESTION OF LAW HAD BEEN ADMITTED BEFORE THE HONBLE HIGH COURT:- WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW AN AMOUNT OF RS.66.00 LACS IS ALLOWABLE AS BUSINESS LOSS TO THE APPELLANT 2.1 THE HONBLE HIGH COURT IN THE ORDER NO.63 OF 2004 DATED 9.2.2009 NOTED THAT THOUGH THE AO HAD GIVEN A FINDI NG THAT THE ASSESSEE WAS NOT CARRYING ON THE BUSINESS OF DEALING IN SHAR ES, NEITHER CIT(A) NOR TRIBUNAL HAD CONFIRMED THE SAID FINDING. B OTH CIT(A) AND THE TRIBUNAL HAD PROCEEDED ON THE FOOTING THAT THE R ECORD MAINTAINED BY THE ASSESSEE SHOWED THAT THE SHARES WERE SHOWN AS INVESTME NT AND NOT AS STOCK IN TRADE. THE HONBLE HIGH COURT ALSO OB SERVED THAT THE SAID FINDING WAS CONTRARY TO THE ENTRY IN THE BALA NCE SHEET PRODUCED BEFORE THE HONBLE COURT IN WHICH THE SHARES WE RE SHOWN AS TRADING STOCK. THE HONBLE HIGH COURT ACCORDINGLY RESTORE D THE MATTER TO THE AO FOR RECONSIDERATION AND TO RECORD A FINDING AFRESH ACCORDING TO LAW. IN THE FRESH ASSESSMENT PROCEEDINGS, THE AO ASKED ASSESSEE ITA NO.6164/M/10 A.Y.96-97 3 TO PRODUCE NECESSARY EVIDENCE TO PROVE THAT THE SHARES OF GOOD VALUE MARKETING CO.LTD. (GVMCL) FROM WHICH LOSS HAD BEEN SHOW N WAS HELD AS STOCK IN TRADE. THE ASSESSEE THEREAFTER FILED A LETTER DATED 4.6.2003 FROM M/S. NITEEN D. KSHIRSAGAR & CO. THE CHARTERED ACCOU NTANTS ENCLOSING THEREIN THE RECAST BALANCE SHEET OF ASSESSMENT YEA R 1996-97 IN WHICH INVESTMENT AND WIP APPEARING IN THE ORIGI NAL BALANCE SHEET WERE TRIFURCATED INTO THE HEAD INVESTMENT, WIP AND STOCK-IN-TRADE. 2.2 THE ASSESSEE IN THE RECAST BALANCE SHEET HAD SHOWN SHARES OF GVMCL AS STOCK-IN-TRADE. THE ASSESSEE SUBMITTED THAT IN THE ORIGINAL BALANCE SHEET, THERE WAS MISTAKE WHICH HAD BEEN CORRECTED. THE ASSESSEE ALSO SUBMITTED THAT HE HAD BEEN DOING THE BUSINESS IN DEALING OF SHARES AS A PROPRIETOR OF M/S. BASIX INDIA. T HE AO HOWEVER NOTED FROM THE ACCOUNTS OF M/S. BASIX INDIA FOR ASSESSMENT YEAR 1997- 98 THAT HE HAD DECLARED DIVIDEND INCOME OF RS.7,93,67 8/- AND INTEREST ON DEBENTURE OF RS.8,765/- AND, SIMILARLY, F OR ASSESSMENT YEAR 1995-96, HE HAD SHOWN DIVIDEND OF RS.6,92,692/-. 2.3 THE AO OBSERVED THAT THOUGH THE ASSESSEE CLAIMED THA T HE WAS DOING BUSINESS IN SHARES SINCE ASSESSMENT YEAR 1991-92 TILL 1 996-97 THERE WAS NO EVIDENCE PRODUCED TO SUBSTANTIATE THE SAME. IT WAS ALSO OBSERVED BY HIM IN THE ORIGINAL BALANCE SHEET OF 1996 -97, THE SHARES HAD BEEN DECLARED AS INVESTMENT BUT IN THE RECAST BALANCE SHEET, THE ITA NO.6164/M/10 A.Y.96-97 4 SAME WAS SHOWN AS TRADING. THERE WAS ALSO NO EVIDENCE PROD UCED TO SHOW THAT INVESTMENT IN SHARES OF GVMCL HAD BEEN CONVERT ED INTO STOCK-IN-TRADE. THE AO THEREFORE, DID NOT ACCEPT THE GE NUINENESS OF CLAIM OF THE ASSESSEE THAT SHARES OF GVMCL HAD BEEN HELD AS STOCK- IN-TRADE. THE AO DISALLOWED LOSS OF RS.60.00 LACS CLAIMED BY THE ASSESSEE AS TRADING LOSS TREATING THE SAME AS SHORT TERM CAPIT AL LOSS AND COMPUTED TOTAL INCOME AT RS.1,27,18,520/-. 3. THE ASSESSEE DISPUTED THE DECISION OF AO AND SUBMITTED B EFORE CIT(A) THAT THE ASSESSEE HAD PRODUCED EVIDENCE BEFORE AO TO SHOW THAT HE WAS CARRYING ON SHARE TRADING BUSINESS SINCE 1991. IT WAS ALSO SUBMITTED THAT SHARES OF GVMCL HAD BEEN ACQUIRED FR OM THE RIGHTS ISSUE AND SAME WERE SHOWN AS TRADING STOCK IN ASSESSMEN T YEAR 1995-96. IT WAS POINTED OUT THAT IN THE AUDITED BALA NCE SHEET AS ON 31.3.1995, SHARE OF GVMCL HAD BEEN SHOWN AS TRADING ST OCK AS PER DETAILS GIVEN BELOW:- A) INVESTMENT 9,83,87,805.00 B) WORK IN PROGRESS 12,76,28,085.68 C) STOCK IN TRADE (4,36,350 SHARES OF RS.10/- EACH OF GOOD VALUE MARKETING CO.LTD.) 2,18,17,500.00 TOTAL 24,78,33,390.68 3.1 THE ASSESSEE ALSO SUBMITTED THAT SINCE GVMCL SHARES WERE SHOWN AS TRADING STOCK IN ASSESSMENT YEAR 1995-96, THERE WAS NO ITA NO.6164/M/10 A.Y.96-97 5 NEED TO CONVERT THEM INTO TRADING STOCK IN ASSESSMENT YEA R 1996-97 AS MENTIONED BY THE AO IN THE ASSESSMENT ORDER. THE ASSESSE E IN THE BALANCE SHEET FOR ASSESSMENT YEAR 1996-97 HAD MADE A MISTA KE IN NOT PROPERLY RECORDING THE SHARES WHICH WAS SUBSEQUENTLY CORRECT ED IN THE RE-CAST BALANCE SHEET. IT WAS POINTED OUT THAT DIVIDEND INCOME HAD ARISEN FROM SHARES WHICH HAD BEEN PURCHASED DURING COURSE O F SHARE TRADING. IT WAS ALSO SUBMITTED THAT THE ASSESSEE HAD GIVE N DETAILS BEFORE THE AO OF EARLIER YEARS TO SHOW THAT THE ASSESSEE WAS IN THE BUSINESS OF PURCHASE AND SALE OF SHARES, VIDE LETTER DATED 15.12.2009 WHICH HAD BEEN TOTALLY IGNORED BY THE AO. THE ASSESSEE ALSO SUBMITTED THAT AO HAD REFERRED TO JOURNAL ENTRY NO.3 3, 34, 33A AND 34A. IT WAS EXPLAINED THAT THE JOURNAL ENTRIES 33 AND 34 RECORDED SALE OF SHARES EFFECTED ON 28.12.1995 AND 29.12.1995 @RS.31. 25 PER SHARE WHICH WAS THE MARKET RATE PER SHARE. THE ENTRIES A T SL.NO. 33A, 34A, RECODED LOSS INCURRED IN THE TRANSACTIONS OF SALE OF SHARES. THE AO WAS, THEREFORE, NOT CORRECT IN STATING THAT THE ASSESSEE HAD INSERTED THESE ENTRIES TO ADJUST ADVANCE RECEIVED AS SHARE S IN INVESTMENT. THE AO HAD MIS-UNDERSTOOD THE RECEIPT OF SA LE PRICE AS PER JOURNAL ENTRIES 33 AND 34 AS ADVANCE RECEIPT. THE D ECISION OF THE AO WAS THUS BASED ON WRONG INTERPRETATIONS OF ENTRIES. T HERE WAS THUS ENOUGH EVIDENCE TO SHOW THAT THE ASSESSEE WAS IN THE BUSINE SS OF TRADING IN SHARES AND HAD ACQUIRED SHARES OF GVMCL AS ST OCK-IN-TRADE. ITA NO.6164/M/10 A.Y.96-97 6 3.2 CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND ON PERUSAL OF RECORDS OBSERVED THAT THE ASSESSEE HAD CLAIMED T HAT IN THE BALANCE SHEET FOR ASSESSMENT YEAR 1995-96 HE HAD GIVEN A BREAK-UP OF RS.24,78,33,390/- AS INVESTMENT, WORK-IN-PROGRESS AN D STOCK-IN- TRADE BUT THE ASSESSMENT RECORD MADE AVAILABLE BY THE AO SHOWED THAT APPELLANT HAD SHOWN ONLY INVESTMENT AND WORK-IN -PROGRESS OF RS.24,78,33,390/- IN THE BALANCE SHEET FOR ASSESSMENT YEAR 1995-96. THE ASSESSEE IN THE BALANCE SHEET HAD NOT GIVEN ANY SCHEDUL E TO GIVE FURTHER BREAK-UP OF INVESTMENT AND WORK-IN-PROGRE SS. CIT(A) ALSO OBSERVED THAT DURING THE PROCEEDINGS UNDER SECTION 154 F OR ASSESSMENT YEAR 1995-96, THE ASSESSEE HAD BEEN ASKED TO EXPL AIN AS TO WHY DIVIDEND INCOME AND INTEREST INCOME SHOULD NOT BE TREATED AS INCOME FROM OTHER SOURCES AND CLAIM FOR DEDUCTION UNDER SE CTION 80IA SHOULD NOT BE DISALLOWED TO THAT EXTENT. BUT THE ASSESSEE NEVER STATED THAT THE SHARES OF GVMCL WERE HELD AS STOCK-IN-TRADE. TH E SAME WAS THE POSITION IN ASSESSMENT YEAR 1996-97 IN WHICH A SUM OF RS.24,73,49,656/- WAS SHOWN AGAINST INVESTMENT AND WORK -IN- PROGRESS AND THERE WAS NO MENTION OF STOCK-IN- TRADE. CIT(A) THEREFORE, CONCLUDED THAT THE ASSESSEE HAD NOWHERE SHOWN THE SHARES OF GVMCL AS STOCK-IN-TRADE AND HAD ALSO NOT SHOWN THE CON VERSION OF SHARES INTO STOCK-IN-TRADE. THE ASSESSEE FILED THE RECAST BAL ANCE SHEET ITA NO.6164/M/10 A.Y.96-97 7 ONLY BEFORE THE HONBLE HIGH COURT WHICH WAS NOT THE S AME BALANCE SHEET AS FILED DURING THE ASSESSMENT PROCEEDINGS. THE AO A LSO POINTED OUT THAT IN THE RETURN FOR THE ASSESSMENT YEAR 1997-98 THE ASSESSEE HAD AGAIN DECLARED ONLY INVESTMENT AND WORK-IN-PORGR ESS AND HAD HIMSELF CLAIMED CAPITAL LOSS ON SALE OF 80,000 SHARES OF G VMCL. THE ASSESSEE HAD ALSO FAILED TO PRODUCE BOOKS OF ACCOUNT DURING THE ASSESSMENT PROCEEDINGS FOR THE ASSESSMENT YEAR 1995-96. DUR ING THE SAID PROCEEDINGS, THE ASSESSEE HAD ALSO NOT GIVEN DETAILS O F SHARES HELD AS STOCK-IN-TRADE. THE ASSESSEE HAD THUS FAILED TO PRO VE THAT THE RIGHT SHARES OF GVMCL WERE EVER BROUGHT INTO THE BOOK S OF ACCOUNT AS STOCK-IN-TRADE. CIT(A) THEREFORE CONFIRMED THE MADE B Y AO DISALLOWANCE AGGRIEVED BY WHICH THE ASSESSEE IS IN APPEAL BEFORE TRIBUNAL. 4. BEFORE US, THE LD. AR FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE LOWER AUTHORITIES THAT SHARES OF GVMCL WER E SHOWN AS STOCK-IN-TRADE IN THE BALANCE SHEET FOR THE ASSESSMENT YEAR 1995-96 COPY OF WHICH WAS AVAILABLE AT PAGE-32 OF THE PAPER B OOK . IT WAS ALSO SUBMITTED THAT 4,36,350 SHARES OF GVCL HAD BEEN ACQUIRE D IN MARCH 1995 IN THE RIGHTS ISSUE WITH THE INTENTION TO SELL AND ACCORDINGLY THE SAME WERE SHOWN AS STOCK-IN-TRADE IN THE BALANCE SHEET. OU T OF THESE SHARES, 352000 SHARES WERE SOLD IN THE FINANCIAL YEAR 19 95-96 AND BALANCE 84350 SHARES WERE SHOWN CLOSING STOCK-IN-TRADE IN THE ITA NO.6164/M/10 A.Y.96-97 8 BALANCE SHEET FOR THE ASSESSMENT YEAR 1996-97. THE LD. AR SUBMITTED THAT IN THE BALANCE SHEET FOR THE ASSESSMENT YEAR 1996-9 7, THE ASSESSEE HAD ORIGINALLY MADE MISTAKE BY MENTIONING THE SHARE AS INVESTMENT WHICH WAS LATER CORRECTED IN THE RE-CAST BALANC E SHEET, BUT IN THE BALANCE SHEET FOR THE ASSESSMENT YEAR 1995-96, THE SE WERE DECLARED AS TRADING STOCK. HE ALSO REFERRED TO AFFIDAVIT DATED 19.3.2012 OF THE ASSESSEE PLACED ON RECORD IN WHICH ASSESSEE HAS STATED THAT THE ASSESSEE HAD FILED BALANCE SHEET FOR ASSESSMENT YEAR 1995-96 DURING THE ASSESSMENT PROCEEDINGS IN WHICH SHARES WERE SHOWN AS STOCK -IN- TRADE. IT HAS ALSO BEEN STATED THAT THE ASSESSEE HAD MADE APPLICATION DATED 30.11.2011 TO CIT(A) FOR GIVING COPY OF THE BA LANCE SHEET FOR ASSESSMENT YEAR 1995-96 WHICH HAD BEEN FILED BY THE ASSESSEE IN THE ASSESSMENT PROCEEDINGS FOR THE ASSESSMENT YEAR 1995-96. THE BALANCE SHEET OBTAINED IN RESPONSE TO THE SAID REQUEST HA S BEEN ENCLOSED WITH THE AFFIDAVIT IN WHICH IT IS STATED THAT T HE SHARES HAVE BEEN SHOWN AS STOCK-IN-TRADE. THE ASSESSEE HAS ALSO STATED I N THE AFFIDAVIT THAT THE AO WAS WRONG IN STATING THAT THE A SSESSEE HAD SHOWN LOSS ON SALES OF GVMCL SHARES IN THE ASSESSMENT YEAR 1997-98. A COPY OF THE RETURN FOR THE ASSESSMENT YEAR 1997-98 HAS BE EN ENCLOSED WITH THE AFFIDAVIT TO SHOW THAT THE ASSESSEE IN THAT YEA R HAD NOT DECLARED ANY CAPITAL LOSS. ITA NO.6164/M/10 A.Y.96-97 9 4.1 THE LD. AR FOR THE ASSESSEE FURTHER SUBMITTED THAT T HE ASSESSEE IN THE BALANCE SHEET FOR THE ASSESSMENT YEAR 1991-92 A CO PY OF WHICH IS PLACED ON PAGE-74 OF THE PAPER BOOK HAD SHOWN THE ST OCK-IN-TRADE OF RS.8,45,080/- OF 27 COMPANIES BREAK-UP OF WHICH IS AVAILABLE AT PAGE 76 OF THE PAPER BOOK. FURTHER, COPIES OF P&L ACCOU NT FOR THE ASSESSMENT YEARS 1994-95, 1995-96 PLACED AT PAGES 268-269 OF THE PAPER BOOK ALSO SHOW THAT THE ASSESSEE HAD DECLARED LOSS ON SALE OF SHARES OF RS.4,400/- IN ASSESSMENT YEAR 1994-95 AND PROFIT OF RS.1,75,573/- IN ASSESSMENT YEAR 1995-96, WHICH SHOW THAT THE ASSESSEE WAS DOING BUSINESS OF DEALING IN SHARES. IT WAS ACCOR DINGLY URGED THAT THE CLAIM OF SHARE TRADING LOSS SHOULD BE AL LOWED. 4.2 THE LD. DR ON THE OTHER HAND SUPPORTED THE ORDER S OF AUTHORITIES BELOW. IT WAS SUBMITTED THAT IN THE SCHEDULE-B OF THE AUDITED ACCOUNTS FOR THE ASSESSMENT YEAR 1996-97 PLACED AT PAGE-54 OF THE PAPER BOOK, THE ASSESSEE HAD DECLARED LOSS ON SALE OF INVESTMENT OF RS.66 .00 LACS WHICH CLEARLY SHOWS THAT THE SHARES HAD BEEN HELD AS INVE STMENT. IT WAS ALSO POINTED OUT THAT THE CLAIM OF THE ASSESSEE THAT T HE SHARES HAD BEEN DECLARED AS STOCK-IN-TRADE IN THE BALANCE SHEET FOR ASSESSMENT YEAR 1995-96 WAS NOT CORRECT. IT WAS ALSO POINTED OUT THAT SHARES OF GVMCL OF WHICH THE ASSESSEE WAS A PROMOTER HAD BE EN ACQUIRED IN RIGHTS ISSUE AND THEREFORE, THE SAME COULD NO T BE TREATED AS STOCK-IN-TRADE. IN REPLY, THE LD. AR FOR THE ASSESSEE STATED THAT THE ITA NO.6164/M/10 A.Y.96-97 10 SCHEDULE-B AT PAGE 54 OF THE PAPER BOOK REFERRED TO BY THE LD. DR WAS THE ORIGINAL BALANCE SHEET IN WHICH THE SHARES HAD BEEN SHOWN BY THE ASSESSEE AS INVESTMENT BY MISTAKE WHICH WAS SUBSEQUENTLY CORRE CTED IN THE RE-CAST BALANCE SHEET AND, THEREFORE, THE SAME COU LD NOT BE THE BASIS TO DECIDE THE NATURE OF THE TRANSACTION. 5. WE HAVE PERUSED THE RECORDS AND CONSIDERED THE RIVAL CONTENTIONS CAREFULLY. THE DISPUTE RAISED IN THIS APPEA L IS REGARDING NATURE OF LOSS INCURRED BY THE ASSESSEE FROM SALE OF GVM CL SHARES. THE ASSESSEE WAS PROMOTER OF THE SAID COMPANY IN WHICH HE WAS HOLDING SHARES AS PROMOTER. IN FEBRUARY/MARCH 1995, THE ASSESSEE HAD BEEN ALLOTTED 436350 SHARES OF FACE VALUE OF RS.10/ - EACH FOR RS.2,18,17,500/-. IN THE ASSESSMENT YEAR 1996-97, THE ASSE SSEE HAD SOLD 3,52,000 SHARES OF THE SAID COMPANY FROM WHICH HE H AD INCURRED LOSS OF RS.66.00 LACS. THE AO DECLARED LOSS AS TRADING LOSS. HOWEVER, THE AO IN THE ORIGINAL ASSESSMENT IN ASSESSMENT YEAR 1996- 97 TREATED THE LOSS AS SHORT TERM CAPITAL LOSS HOLDING THAT THE SHARES WERE INVESTMENT OF THE ASSESSEE AND NOT TRADING STOCK, THE ORDE R OF THE AO HAD BEEN CONFIRMED BY THE CIT(A) AND THE TRIBUNAL AN D, IN FURTHER APPEAL BEFORE THE HONBLE HIGH COURT, THE ASSESSEE HAD PRO DUCED THE BALANCE SHEET FOR THE ASSESSMENT YEAR 1995-96 IN WHICH TH E SHARES HAD BEEN SHOWN AS TRADING STOCK. THE HONBLE HIGH COURT H AD ACCORDINGLY RESTORED THE MATTER TO THE FILE OF AO FOR FRESH DECISION IN ITA NO.6164/M/10 A.Y.96-97 11 ACCORDANCE WITH LAW. THE AO DURING THE FRESH ASSESSMENT PR OCEEDINGS NOTED THAT IN THE ORIGINAL BALANCE SHEET FOR THE ASSESSM ENT YEAR 1996- 97, THE ASSESSEE HAD SHOWN RS.24,73,49,656/- UNDER THE HE AD INVESTMENT AND WIP. HOWEVER, BEFORE THE HONBLE HIGH COURT AS WELL AS DURING FRESH PROCEEDINGS, THE ASSESSEE HAD FILED A RE-CA ST BALANCE SHEET DULY SIGNED BY CA IN WHICH FRESH BREAK-UP OF THE SUM OF RS.24,73,49,656/- WAS SHOWN AS UNDER :- A) INVESTMENT 10,18,15,545.00 B) WORK IN PROGRESS 14,13,16,612.00 C) STOCK IN TRADE (84350 SHARES OF RS.10/- GOOD VALUE MARKETING CO. LTD.) 42,17,500.00 TOTAL 24,73,49,656.00 5.1 THE AO IN THE FRESH ASSESSMENT HAS HELD THAT THE RE-CA ST BALANCE SHEET FILED BY THE ASSESSEE FOR THE ASSESSMENT YEAR 1 996-97 WAS ONLY AN AFTER THOUGHT. THE ASSESSEE CLAIMED THAT HE W AS DOING BUSINESS IN SHARES FROM ASSESSMENT YEAR 1991-92 TO 1996-97 B UT NO EVIDENCE HAD BEEN PRODUCED. AO HAS ALSO NOTED THAT IN A SSESSMENT YEAR 1995-96 AND 1996-97, THE ASSESSEE HAD DECLARED ONL Y DIVIDEND INCOME AND INTEREST INCOME. THE ASSESSEE ALSO COULD NOT SHOW THAT THE ASSESSEE HAD CONVERTED THE SHARES ACQUIRED IN RIGHTS ISSUE IN ASSESSMENT YEAR 1995-96 INTO STOCK-IN-TRADE. THE AO HAS, T HEREFORE, ITA NO.6164/M/10 A.Y.96-97 12 TREATED THE SHARES OF GVMCL AS INVESTMENT AND LOSS OF RS.6 6.00 LACS AS SHORT TERM CAPITAL LOSS. 5.2 THE ASSESSEE DISPUTED THE CLAIM OF AO THAT HE HAD NOT PRODUCED EVIDENCE OF SHARE TRADING BUSINESS . IT WAS SUBMITTED BEF ORE CIT(A) THAT THE ASSESSEE HAD GIVEN DETAILS OF SHARE BUSINESS DONE IN THE EARLIER YEARS. IT WAS CLAIMED THAT THE ASSESSEE IN THE B ALANCE SHEET FOR ASSESSMENT YEAR 1991-92 A COPY OF WHICH HAS BEEN PLACED AT PAGE-74 OF THE PAPER BOOK HAD CLEARLY STATED STOCK-IN-TRADE OF RS.8,45,080/- CONSISTING OF STOCK OF 27 COMPANIES, BREAK-UP OF WHICH HAD BEEN GIVEN WHICH IS AVAILABLE AT PAGE-76 OF THE PAPER BOOK. THE ASSESSEE HAD ALSO FILED COPIES OF P&L ACCOUNT FOR ASSESSMENT YEARS 1994-95 AN D 1995- 96 COPIES OF WHICH ARE PLACED AT PAGES 268-269 OF THE P APER BOOK IN WHICH THE ASSESSEE HAD SHOWN LOSS ON SALE OF SHARES OF RS.4,400 /- IN ASSESSMENT YEAR 1994-95 AND PROFIT OF RS.1,75,573/- IN ASSESSMENT YEAR 1995-96. THE CIT(A) HAS NOT GIVEN ANY ADVERSE F INDING IN RESPECT OF THESE CLAIMS OF THE ASSESSEE. THEREFORE, CLAIM OF THE AS SESSEE THAT HE WAS IN THE SHARE TRADING BUSINESS FROM ASSESSMENT YEAR 19 91-92 HAS TO BE ACCEPTED. 5.3 THE ASSESSEE BEFORE CIT(A) ALSO SUBMITTED THAT HE HAD SHOWN SHARES OF GVMCL ACQUIRED IN THE RIGHTS ISSUE IN FEBRUARY /MARCH, 1995 AS TRADING STOCK WHICH WAS DECLARED IN THE BALANCE SHEET AS UNDER :- ITA NO.6164/M/10 A.Y.96-97 13 A) INVESTMENT 9,83,87,805.00 B) WORK IN PROGRESS 12,76,28,085.00 C) STOCK IN TRADE (4,36,350 SHARES OF RS.10/- EACH OF GOOD VALUE MARKETING CO.LTD.) 2,18,17,500.00 TOTAL 24,78,33,390.00 5.4 CIT(A) HAS OBSERVED THAT IN THE BALANCE SHEET FOR T HE ASSESSMENT YEAR 1995-96 WHICH HAD BEEN MADE AVAILABLE BY THE AO, THE ASSESSEE HAD SHOWN A SUM OF RS.24,78,33,390/- AS INVEST MENT AND WORK-IN-PROGRESS AND NO FURTHER BREAK-UP WAS GIV EN IN ANY SCHEDULE. THE CIT(A) HAS FURTHER OBSERVED THAT THE SAME WAS THE POSITION IN THE ORIGINAL BALANCE SHEET FOR ASSESSMENT YEAR 1996-97 IN WHICH A SUM OF RS.24,73,49,656/- HAD BEEN SHOWN AGAINST INVESTMENT AND WORK-IN-PROGRESS AND THERE WAS NO MENT ION OF STOCK- IN-TRADE. CIT(A) HAS ALSO POINTED OUT THAT IN THE RE TURN FOR ASSESSMENT YEAR 1997-98, THE ASSESSEE HIMSELF HAD CLAIMED CAPITAL LOSS ON SALE OF 80,000 SHARES OF GVMCL. CIT(A) HAS ALSO NOTED THAT DURI NG THE ASSESSMENT PROCEEDINGS FOR ASSESSMENT YEAR 1995-96, ASSESSEE FAI LED TO PRODUCE THE BOOKS OF ACCOUNT AND HAD NOT GIVEN DETAI LS OF ANY SHARES HELD AS STOCK-IN-TRADE. CIT(A), HAS, THEREFORE CO NCLUDED THAT THE ASSESSEE HAD FAILED TO PROVE THAT THE SHARES OF GVMCL WERE EVER BROUGHT INTO BOOKS AS STOCK-IN-TRADE. ITA NO.6164/M/10 A.Y.96-97 14 5.5 THUS, THE REASONS FOR WHICH THE CLAIM OF TRADING LO SS HAS BEEN DISALLOWED ARE THAT THERE WAS NO EVIDENCE THAT THE ASSE SSEE HAD DECLARED THE RIGHTS SHARE OF GVMCL ACQUIRED IN ASSESSMENT Y EAR 1995- 96 AS STOCK-IN-TRADE IN THE BOOKS OF ACCOUNT AND THAT THE ASSESSEE HIMSELF IN ASSESSMENT YEAR 1997-98 HAD DECLARED, CAPITAL L OSS FROM SALE OF GVMCL SHARES. AS REGARDS THE FINDING OF CAPITAL L OSS FOR ASSESSMENT YEAR 97-98, THE LD. AR HAS FILED THE COPY OF T HE RETURN FILED FOR ASSESSMENT YEAR 1997-98 WHICH DOES NOT SHOW ANY CAPITAL LOSS DECLARED BY THE ASSESSEE. THUS THE ONLY ISSUE WHICH IS REQUI RED TO BE ADDRESSED IS WHETHER THE ASSESSEE HAD DECLARED THE RIGHTS SHA RE IN ASSESSMENT YEAR 1995-96 AS STOCK-IN-TRADE. 5.6 THE CASE OF THE ASSESSEE IS THAT HE WAS PROMOTER OF G VMCL AND SHARES ACQUIRED AS PROMOTER OF THE COMPANY HAD BEEN DE CLARED AS INVESTMENT IN THE BALANCE SHEET. THE COMPANY HAD COME OU T WITH RIGHTS ISSUE IN FEBRUARY95 AND ASSESSEE HAD SUBSCRIBED TO RI GHTS ISSUE ONLY WITH THE INTENTION OF SELLING THE RIGHTS SHARES. T HE INTENTION OF THE ASSESSEE CAN BE GATHERED FROM THE NATURE OF ENTRY MADE I N THE BOOKS OF ACCOUNT AT THE TIME ACQUISITION OF RIGHTS SHARES IN FEB RUARY/MARCH, 1995. NORMALLY, A PROMOTER DOES NOT ACQUIRE THE SHARES OF HIS OWN COMPANY FOR THE PURPOSE OF TRADING. BUT IN CASE THE ASSE SSEE HAD ACQUIRED THE SHARES WITH THE INTENTION TO SELL AND NOT TO HOLD AS INVESTMENT, THE ENTRY IN THE BOOKS AT THE TIME OF INV ESTMENT SHOULD ITA NO.6164/M/10 A.Y.96-97 15 INDICATE SUCH INTENTION AND THAT IS HOW THE ENTRY IN T HE BOOKS HAS BECOME IMPORTANT. THE LD. AR FOR THE ASSESSEE SUBMITTED T HAT THE ASSESSEE VIDE LETTER DATED 30.11.2011 HAD MADE APPLICAT ION TO CIT(A) FOR GIVING COPY OF THE BALANCE SHEET FOR 1995-96 FILED BY THE ASSESSEE DURING ASSESSMENT PROCEEDINGS FOR THE YEAR 1995-96. THE ASSESSEE HAS ALSO FILED AN AFFIDAVIT DATED 19.3.2012 IN WHICH I T HAS BEEN STATED THAT THE ASSESSEE HAD FILED THE BALANCE SHEET FOR ASSESSMENT YEAR 1995-96 DURING THE ASSESSMENT PROCEEDINGS IN WHICH THE SHAR ES WERE SHOWN AS STOCK-IN-TRADE. THE ASSESSEE HAS ALSO SUBMITTED THAT THE ASSESSEE HAD OBTAINED THE BALANCE SHEET OF ASSESSMENT YEAR 19 95-96 FROM CIT(A) IN RESPONSE TO APPLICATION DATED 30.11.201 1, A COPY OF WHICH HAS BEEN ENCLOSED WITH THE AFFIDAVIT SHOWING THA T THE SHARES OF GVMCL HAD BEEN DECLARED AS STOCK-IN-TRADE. HOWEVER, FR OM THE PERUSAL OF THE SAID BALANCE SHEET WE NOTE THAT THE SAME IS NOT THE CERTIFIED COPY OF BALANCE SHEET GIVEN BY CIT(A) FROM HI S RECORDS BECAUSE IT NEITHER BEARS THE STAMP OF THE OFFICE OF CIT( A) NOR THERE IS ANY COVERING LETTER FROM CIT(A) ENCLOSING THEREWITH COP Y OF BALANCE SHEET. THEREFORE, IT IS NOT ESTABLISHED WHETHER THE BAL ANCE SHEET FOR THE ASSESSMENT YEAR 1995-96 NOW BEING FILED IS COPY OF BA LANCE SHEET FILED DURING THE ASSESSMENT PROCEEDINGS FOR THE ASSESSMENT YEAR 1995-96. HOWEVER, SINCE THE ASSESSEE HAS GIVEN AN AFFIDAVIT THAT IT IS THE COPY OF BALANCE SHEET FILED DURING THE ASSESSMENT PROCE EDINGS, THE ITA NO.6164/M/10 A.Y.96-97 16 MATTER IN OUR VIEW REQUIRES VERIFICATION AT THE LEVEL OF CIT(A). IN CASE, IT IS FOUND THAT THE ASSESSEE HAD DECLARED THE SHARES AS STO CK-IN-TRADE IN THE BALANCE SHEET FOR ASSESSMENT YEAR 1995-96, THE CLAI M OF THE ASSESSEE HAS TO BE ALLOWED. WE, THEREFORE, SET ASIDE THE O RDER OF CIT(A) AND RESTORE THE MATTER TO CIT(A) FOR PASSING A FRESH ORDER AFTER NECESSARY EXAMINATION AND AFTER ALLOWING OPPORTUNITY O F HEARING TO THE ASSESSEE. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR ST ATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 18.7.2012. SD/- SD/- (D. MANMOHAN ) VICE PRESIDENT (RAJENDRA SINGH) ACCOUNTANT MEMBER MUMBAI, DATED: 18.7.2012. JV. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.