Mr. Gaurishankar Neelkanth kalyani, Pune V. DCIT, Cir.-11(1), Pune

ITA 650/PUN/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 56515 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 5 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-10-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 27-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANOJ KU MAR SR

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI I.C.SUDHIR, JUDICIAL MEMBER AND SHRI D.KARUNAKARA RAO, ACCOUNTANT MEMBER ITA NO.650/PN/2010 (ASSESSMENT YEAR: 2006-07) MR.GAURISHANKAR NEELKANTH KALYANI .. APPELLANT PARVATI NIWAS, 221/D, KALYANI NAGAR, PUNE 411 006. PAN ABAPK7885J VS. DY.C.I.T. CIRCLE 11(1), PUNE .. RESPONDENT APPELLANT BY: SHRI C.H.NANIW ADEKAR, AR RESPONDENT BY: SHRI MANOJ KU MAR, SR AR ORDER PER D.KARUNAKARA RAO, AM : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (A)-I, PUNE DATED 01/12/ 2009 FOR THE ASSESSMENT YEAR 2006-07. 2. THE GROUNDS OF APPEAL, AS RAISED BY THE ASSESSEE , READ AS UNDER: 1. THE LEARNED C.I.T.(APPEALS) ERRED ON FACTS AND IN LAW IN CONFIRMING DISALLOWANCE OF SHORT TERM CAPITAL LOSS OF RS.17,90,787/- BY APPLYING OF SECTION 94(7) WHEN IN FACT SECTION 94 (7) IS NOT APPLICABLE IN THE INSTANT CAS E. 2. THE LEARNED C.I.T.(APPEALS) ERRED IN FACTS AND I N LAW IN COMING TO A CONCLUSION THAT BY VIRTUE OF FILING REVISE COM PUTATION OF INCOME THE ASSESSEE HAS MADE A CONCESSION. HE FAIL ED TO APPRECIATE THAT THE SAID STATEMENT WAS FILED AS PER THE DIRECTION OF A.O. AND DOES NOT AMOUNT TO A CONCESSION . IN ANY CASE THE CONCESSION, IF AT ALL, IS NOT TENABLE IF IT IS NOT IN ACCORDANCE WITH LEGAL PROVISIONS. THE LEARNED C.I.T.(APPEALS) FAIL ED TO APPRECIATE THE PRINCIPLE OF NO ESTOPPEL AGAINST THE LAW. 3. THE LEARNED C.I.T.(APPEALS) ALLOWED HIMSELF TO BE COMPLETELY MISDIRECTED HIMSELF AND HAS ERRED IN INTERPRETING T HE PROVISIONS OF SECTION 94(7). 3. RELEVANT FACTS OF THE CASE ARE THAT THE ASSESSEE EARNED LONG TERM CAPITAL LOSS ON ACCOUNT OF SALE AND PURCHASE OF SEC URITIES/UNITS. AO IGNORED THE SAID LOSS BY INVOKING THE PROVISIONS OF SECTION 94(7) OF THE ACT. DURING THE FIRST APPELLATE PROCEEDINGS, THE ASSESSEE MENTIONED THAT THE SUB-SECTION 7 OF 94 OF THE ACT SPECIFIES THREE CONDITIONS AND THEY H AVE TO BE CUMULATIVELY ITA NO.650/PN/2010 (ASSESSMENT YEAR: 2006-07) MR.GAURISHANKAR NEELKANTH KALYANI APPLIED BEFORE DISALLOWING THE LOSS CLAIMED BY THE ASSESSEE. IT IS FURTHER MENTIONED THAT THE ASSESSEE HAS AGREED FOR DISALLOW ANCE BEFORE THE ASSESSING OFFICER AND THE SAME SHOULD BE RESTORED IN FAVOUR OF THE ASSESSEE IN VIEW OF THE EXPRESS LEGAL POSITION AND THE SUPPORTING LEGAL DECISION IN THE MATTER. FURTHER, THE ASSESSEE DEMONSTRATED THE CLAUSE (A) S UB-SECTION 7 OF 94 IS DIRECTLY NOT FULFILLED IN THE INSTANT CASE AND THER EFORE, ASSESSEE IS ENTITLED TO RELIEF. THE CIT(A) CONSIDERED THE ABOVE SUBMISSION S AND DISMISSED THE SAME. THE CIT(A) IS OF THE OPINION THAT THE PUNCTUATIONS MENTIONED IN VARIOUS CLAUSES IN THE SAID SUBSECTION (7) ASSUMES IMPORTA NCE AND IN HIS OPINION, THE CONDITIONS MENTIONED IN SUB-SECTION (7) OF 94 OF TH E ACT ARE APPLICABLE MUTUALLY EXCLUSIVE AND IT IS THE INTENTION OF THE LEGISLATURE. FINALLY, THE CIT(A) DISMISSED THE APPEAL OF THE ASSESSEE. 4. AGGRIEVED WITH THE SAME, THE ASSESSEE FILED AN A PPEAL BEFORE US. DURING THE PROCEEDINGS, THE LEARNED COUNSEL FOR THE ASSESSEE TOOK US THROUGH THE TABLE MENTIONED IN THE CIT(A) IN PARA 5.3 OF T HE IMPUGNED ORDER AND DEMONSTRATED THAT THE PURCHASE DATES OF THE IMPUGNE D SHARES/ UNITS ARE OUTSIDE THE PERIOD OF THREE MONTHS PRIOR TO THE REC ORD DATE AND THEREFORE THE CLAUSE (A) OF THE SUB-SECTION (7) OF 94 OF THE ACT IS NOT COMPLIED WITH. THEREFORE, THE ASSESSING OFFICER CANNOT INVOKE THE SAID SUB-SECTION (7) OF 94 IN THIS CASE AND THEREFORE, THE DISALLOWANCE OF THE CLAIMED LOSS BY THE ASSESSEE IS UNCALLED FOR. FURTHER, THE ASSESSEE A RGUED THAT SAID THREE CONDITIONS (A), (B) AND (C) MENTIONED IN SUB-SECTIO N (7) OF 94 OF THE ACT HAVE TO BE CUMULATIVELY APPLIED TO BE IMPUGNED TRANSACTIONS.FOR THIS PROPOSITION ASSESSEE RELIED ON ORDER OF BOMBAY HIGH COURT IN CA SE OF ASHOK KUMAR DAMANI 130 ITD 287 FOR THE PROPOSITION. SEC.94(7) COMES INTO PLAY ONLY WHEN ALL THE THREE CONDITIONS ARE FULFILLED ; ALL THE EVENTS ENVISAGED BY S.94(7) HAVING OCCURR ED DURING THE RELEVANT YEAR, DISALLOWANCE OF LOSS UNDER S.94( 7) HAS TO BE MADE IN THIS YEAR ITSELF; S.94(7) DEALS WITH ONLY LOSS ON A CCOUNT OF PURCHASES AND SALE OF UNITS AND NOT WITH THE ENTRIES OR TREAT MENT IN THE ASSESSEES BOOKS OF ACCOUNT. 5. FURTHER, THE COUNSEL FILED ANOTHER DECISION OF D ELHI BENCH OF THE TRIBUNAL IN THE CASE OF SHAMBHU MERCANTILE LTD., 115 ITD 337 DATED 29 TH FEBRUARY 2008, WHERE THE ONE OF THE UNDERSIGNED IS A PARTY TO THE ORDER, AND MENTIONED THAT AN IDENTICAL VIEW WAS TAKEN IN FAVO UR OF THE ASSESSEE. HE REFERRED PARA 12 TO 14 OF THIS ORDER TO DERIVE STRE NGTH IN HIS FAVOUR. ON THE OTHER HAND, THE LEARNED AR FOR THE REVENUE RELIED O N THE ORDERS OF THE REVENUE. ITA NO.650/PN/2010 (ASSESSMENT YEAR: 2006-07) MR.GAURISHANKAR NEELKANTH KALYANI 6. WE HAVE HEARD BOTH THE PARTIES, THE LIMITED ISSU E TO BE ADJUDICATED BY US RELATES TO WHETHER THE PROVISIONS OF SUB-SECTION (7) OF 94 ARE APPLIC ABLE TO THE FACTS OF THIS CASE AND, TO BE PRECISE, IF ALL T HE THREE CONDITIONS SPECIFIED IN THE SAID SUB-SECTION HAVE TO BE CUMULATIVELY FULFIL LED. LEGALLY, THE PROVISIONS OF SUB-SECTION (7) OF SECTION 94 SPELT OUT THREE RE QUIREMENTS; (I) THE PURCHASE OR ACQUISITION OF ANY OF THE SECURITIES OR UNITS SH OULD TAKE PLACE WITHIN A PERIOD OF THREE MONTHS PRIOR TO THE RECORD DATE; ( II) THE SALE OR TRANSFER SHOULD TAKE PLACE WITHIN A PERIOD OF THREE MONTHS A FTER THE RECORD DATE; AND (III) THE DIVIDEND OR INCOME RECEIVED OR RECEIVABLE SHOULD BE EXEMPT . IN THE EVENT THAT THESE THREE CONDITIONS WERE FULFILLED, T HE LOSS, IF ANY ARISING FROM THE PURCHASE OR SALE OF SECURITIES OR UNITS, HAD TO BE IGNORED FOR THE PURPOSE OF COMPUTING THE INCOME CHARGEABLE TO TAX, TO THE E XTENT SUCH LOSS DID NOT EXCEED THE AMOUNT OF DIVIDEND OR INCOME RECEIVED OR RECEIVABLE. THEREFORE, WE NEED TO EXAMINE IF THE SAID CONDITIONS ARE FULFI LLED OR NOT. FOR THIS, WE PROCEED BRING HERE THE RELEVANT DETAIL RELATING TO THE PURCHASE AND SALES OF SECURITIES / UNITS. THEY ARE AS UNDER: NAME OF SCRIP BUY DATE RECORD DATE SALE DATE BUY PRICE SALE PRICE DIVIDEND LOSS ING VYSYA 09-06-05 15-09-05 21-9- 200 5 30,00,000 21,74,312 12,77,851 8,25,688 ING VYSYA 21-09-05 26-12-05 20-2- 2006 34,49,963 25,54,711 10,48,923 8,95,252 PRINCIPAL RESURGENT FUND 05-12-05 24-03-06 24-3- 2006 10,00,000 9,30,153 2,76,831 69,847 TOTAL 74,79,963 56,59,176 26,03,605 17,90,787 7. ON PERUSAL OF THE COLUMN 2 AND 3 OF THE ABOVE TA BLE, IE BUY DATE AND RECORD DATE, WE FIND THAT THE PURCHASE OF SECURITIE S/SCRIP IS NOT DONE WITHIN PERIOD OF 90 DAYS FROM THE RECORD DATES. FROM THE ABOVE, IT IS CLEAR THAT ALL THE SECURITIES/ UNITS ARE PURCHASED BEYOND PERIOD OF THREE MONTHS. THE SAME HELPS THE ASSESSEE AS THE CONDITION OF 90 DAYS, WHI CH IS SPECIFIED IN CLAUSE (A) OF SUB-SECTION (7) OF 94 OF THE ACT, IS NOT FULFILL ED. NOW, ON WHETHER ALL THE THREE CONDITIONS HAVE TO BE CUMULATIVELY FULFILLED OR NOT, IN OUR OPINION, THIS ISSUE IS ALREADY DECIDED BY VARIOUS BENCHES OF THE TRIBUNAL. FOR THE SAKE OF THE COMPLETENESS OF THIS ORDER, WE REPRODUCE PARA 1 2 TO 14 RELIED BY THE LEARNED COUNSEL WHICH READ AS UNDER. 12. THE QUESTION THAT NOW ARISES FOR CONSIDERATI ON IS AS TO WHETHER CLS. (A), (B) AND (C) OF S.94 (7) NEED TO BE SATISF IED CUMULATIVELY OR NOT. WE MAY TAKE A LOOK AT THE LANGUAGE USED IN OTHER PO RTIONS OF THE IT ACT, 1961, WHERE SUCH REQUIREMENT FOR SATISFYING ON E OF THE MANY CONDITIONS OR ALL CONDITIONS CUMULATIVELY LAID DOWN . THE CASE WHERE ONLY ONE CONDITION IS NEEDED TO BE SATISFIED AS LAI D DOWN IN THE PROVISO TO S. 139(1) RELATING TO ONE BY SIX SCHEM E, MAY BE TAKEN FOR INSTANCE. THE LANGUAGE OF SUCH PROVISION USES THE EXPRESSION OR AT THE END OF EACH CONDITION. APART FROM THE ABOVE, T HE PROVISION USES THE EXPRESSION ANY ONE OF THE FOLLOWING CONDITIONS . FOR AN EXAMPLE ITA NO.650/PN/2010 (ASSESSMENT YEAR: 2006-07) MR.GAURISHANKAR NEELKANTH KALYANI WHERE THE LEGISLATURE WHEN IT DESIRED THAT ALL THE CONDITIONS ARE TO BE SATISFIED CUMULATIVELY, WE MAY TAKE THE LANGUAGE US ED IN PROVISIONS OF S.80-O, WHERE THE CONDITIONS OF RECEIPT OF INCOME IN CONVERTIBLE FOREIGN EXCHANGE AND SUCH INCOME SHOULD BE FOR SERVICES REN DERED OUTSIDE INDIA ARE CUMULATIVELY REQUIRED TO BE SATISFIED. 13. WE FIND THAT A PLAIN READING OF THE PROVISION O F S.94(7) OF THE ACT SHOWS THAT IT HAS NEITHER USED THE EXPRESSION OR NOR THE EXPRESSION AND. THE REVENUE WANTS TO SAY THAT EACH OF THE CONDITIONS LAID DOWN IN S.94(7) IS INDEPENDENT AND IF AN ASSESSEE S ATISFIES ANY ONE OF THE CONDITIONS, THEN HE SHOULD BE HELD TO BE COVERE D WITHIN THE MISCHIEF OF THE LAW. THE PROVISIONS ARE AMBIGUOUS AND OBSCURE, AS WE HAVE ALREADY NOTICED ABOVE. IN THE CIRCUMSTANCES, WE WOULD PLACE A CONSTRUCTION ON THE PROVISIONS OF S. 94(7) SO AS TO PLACE LEAST RESTRICTION ON AN INDIVIDUALS (ASSESSEE) RIGHTS. WE WOULD TH EREFORE, HOLD THAT THE CLAIM OF THE ASSESSEE THAT ALL THE CONDITIONS LAID DOWN IN CLS. (A),(B) AND (C) HAVE TO BE SATISFIED BEFORE THE SAID PROVIS IONS CAN BE APPLIED IN A GIVEN CASE, SHOULD BE ACCEPTED. 14. THEREFORE, THE ABSENCE OF WORD OR AT THE END OF CLS. (A) AND (B) DOES NOT PROVIDE FOR THE INTERPRETATION THAT SUB-S. (7) OF S. 94 APPLIES, WHERE TRANSACTIONS SATISFY AT LEAST ONE CONDITION. RATHER, SIMPLE READING OF THE CLAUSES EVEN WITHOUT THE EXPRESSION AND CAN LEAD ONLY TO ONE CONDITION THAT ALL THE THREE CONDITIONS CUMULATIVELY ARE REQUIRED TO BE SATISFIED BEFORE INVOKING S.94(7). THE USE OF WORDS AS SUCH PERSON, SUCH UNIT, SUCH DATE S UCH SECURITIES OR UNITS IN CLS. (B) AND (C) OF S.94(7), ALSO INDICATE THAT THE THREE CLAUSES HAVE TO BE READ TOGETHER . THUS THEY ADVOCATE FOR CUMULATIVE APPLICATION OF CONDITIONS AND NOT OTHERWISE . IN SUPPORT OF THIS INTERPRETATION, WE FIND THAT THE CIRCULAR NO.14 OF 2001, WHICH EXPLAINS THE FINANCE ACT, 2001 ISSUED BY CBDT PROVIDES NECESSARY STAMP OF APPROVAL TO SUCH INTERPRETATION. IN THE SAID CIRCULAR, IT IS NOTICEABLE THAT IN PARA 56.3, IT USES WORD AND AT COUPLE OF PLACES THEREBY PROVIDING FOR CUMULATIVE APPLICATION OF ALL THE THR EE CONDITIONS. THUS, THE VIEW OF THE CBDT IS THAT ALL THE CONDITIONS PRE SCRIBED IN S.94(7) ARE TO BE CUMULATIVELY SATISFIED AND NOT OTHERWISE . THEREFORE, WE FIND NO REASON TO INTERFERE WITH THE ORDER OF LEARNED CIT(A) AND THE GROUNDS RAISED BY REVENUE IN APPEAL, BEING DEVOID OF MERIT, ARE REJECTED. 8. THE ABOVE EXTRACT FOCUSES ON THE REQUIREMENT OF FULFILLING OF ALL THE THREE CONDITIONS CUMULATIVELY. VIDE THE PARA 12 ABO VE, THE TEXTUAL EXPRESSIONS USED IN DRAFTING THE PROVISIONS OF SECTION 139(1) R ELATING TO ONE-BY-SIX SCHEME ARE USED FOR ANALOGOUS PURPOSE FOR DECIDING WHAT CONSTITUTE CUMULATIVE. THE CONTENTS OF THE PARAGRAPH 14 EXTRAC TED ABOVE ALSO IS CLEAR IN MENTIONING THAT ALL THE THREE CONDITIONS PRESCRIBED IN S.94(7) ARE TO BE CUMULATIVELY SATISFIED BEFORE THE AO RESORT OF INVO KE THE SAID PROVISIONS AND NOT OTHERWISE. THE ABOVE VIEWS OF OURS IN THE CASE OF SHAMBU MERCHANTILE LTD HAS BEEN AFFIRMED BY THE HONBLE HIGH COURT OF DELHI VIDE THE CITATIO N AT 325 ITR 535 (DELHI) TOO. FURTHER, WE FIND THAT THE SAID VIEWS ARE FURTHER AFFIRMED BY THE JUDGMENT OF THE BINDING AND JURISDICTIONAL HIGH COURT OF BOMBAY IN THE CASE OF SMT ALKA BHOSLE 325 ITR 550(BOM.). IN THIS CASE THE ITA NO.650/PN/2010 (ASSESSMENT YEAR: 2006-07) MR.GAURISHANKAR NEELKANTH KALYANI JUDGMENT OF THE DELHI HIGH COURT SHAMBHU MERCANTILE LTD. (SUPRA) IS FOLLOWED. RELEVANT EXTRACT FROM THE HELD PORTION IS EXTRACTED AS UNDER: HELD , DISMISSING THE APPEAL, THAT SUB-SECTION (7) OF SE CTION 94 SPELT OUT THREE REQUIREMENTS ; (I) THE PURCHASE OR ACQUIS ITION OF ANY OF THE SECURITIES OR UNITS SHOULD TAKE PLACE WITHIN A PERI OD OF THREE MONTHS PRIOR TO THE RECORD DATE; (II) THE SALE OR TRANSFE R SHOULD TAKE PLACE WITHIN A PERIOD OF THREE MONTHS AFTER THE RECORD DA TE; AND (III) THE DIVIDEND OR INCOME RECEIVED OR RECEIVABLE SHOULD BE EXEMPT. IN THE EVENT THAT THESE THREE CONDITIONS WERE FULFILLED, T HE LOSS, IF ANY ARISING FROM THE PURCHASE OR SALE OF SECURITIES OR UNITS, H AD TO BE IGNORED FOR THE PURPOSE OF COMPUTING THE INCOME CHARGEABLE TO T AX, TO THE EXTENT SUCH LOSS DID NOT EXCEED THE AMOUNT OF DIVIDEND OR INCOME RECEIVED OR RECEIVABLE. THE SALE OF THE UNITS HAD TAKEN PLACE AFTER THE EXPIRY OF A PERIOD OF THREE MONTHS FROM THE RECORD DATE. HEN CE, THE SECOND CONDITION SPELT OUT FOR THE APPLICABILITY OF SUB-SE CTION 7 WOULD NOT COME INTO FORCE. THE CONDITIONS PRESCRIBED IN CLAUSES (A), (B) AND ( C) OF SUB-SECTION 7 WERE CUMULATIVE IN NATURE. THUS, SECTION 94(7) WOULD NOT APPLICABLE. 9. IN VIEW OF THE SPECIFIC FACTS OF THE CASE AND TH E VALUABLE PRECEDENT ON THE ISSUE WITH WHICH ONE OF THE UNDERSIGNED IS ASSO CIATED, WE ARE OF THE OPINION, THE FIRST CONDITION AT CLAUSE (A) OF SECTI ON 94(7) OF THE ACT IE THE PURCHASE OR ACQUISITION OF ANY OF THE SECURITIES OR UNITS SHOULD TAKE PLACE WITHIN A PERIOD OF THREE MONTHS PRIOR TO THE RECORD DATE IS NOT MET THEREBY, ALL THE THREE CONDITIONS SPECIFIED IN SECTION 94(7) OF THE ACT ARE NOT FULFILLED IN OF THIS CASE TO ATTRACT THE SAID PROVISIONS. THEREF ORE, THE AO ERRONEOUSLY INVOKED THE SAID PROVISIONS AND COMMITTED AN ERROR OF IGNORING THE LOSS CLAIMED BY THE ASSESSEE. FURTHER, THE CIT(A) ALSO E RRED IN SUSTAINING THE SAID ERRONEOUS DECISION OF THE AO IGNORING THE EXISTING ORDERS OF THE TRIBUNAL EXACTLY ON THE TOPIC. CONSEQUENTLY, THE LOSS CLAIME D BY THE ASSESSEE HAS TO BE ALLOWED IN FAVOUR OF THE ASSESSEE. ACCORDINGLY, GRO UND 1 OF THE ASSESSEE IS ALLOWED. 10. GROUND 2 REFERS TO THE OBSERVATIONS OF THE CIT( A) ON THE TOPIC OF CONCESSIONS MADE BY THE ASSESSEE BEFORE THE AO. ON HEARING THE PARTIES, WE FIND THAT THE SAID OBSERVATION OF THE CIT(A) IS NOT LEGALLY SUSTAINABLE AS THE PROVISIONS OF SECTION 94(7) OF THE ACT ARE CLEARLY IN FAVOUR OF THE ASSESSEE. IN FACT, IT IS THE DUTY OF THE AO TO MAKE LEGALLY SUST AINABLE ASSESSMENT INSTEAD OF RESORTING TO OBTAINING OF THE CONCESSIONS FROM THE ASSESSEE. THEREFORE, IN OUR OPINION SUCH CONCESSIONS OBTAINED BY THE AO ARE LEG ALLY ERRONEOUS IN NATURE AND THEREFORE, SUCH CONCESSION REQUIRED TO BE RESTO RED TO THE ASSESSEE. ACCORDINGLY, THE GROUND 2 OF THE APPEAL IS ALLOWED . ITA NO.650/PN/2010 (ASSESSMENT YEAR: 2006-07) MR.GAURISHANKAR NEELKANTH KALYANI 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE COURT ON 05 -10-2011. SD/- SD/- (I.C.SUDHIR) (D.KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE, DATED: 05-10-2011 ASHWINI COPY TO:- 1) ASSESSEE 2) THE DY.CIT CIR.11(1),PUNE 3) THE CIT(A) I, PUNE 4) THE CIT CONCERNED 5) THE DEPARTMENTAL REPRESENTATIVE, B BENCH, I.T .A.T., PUNE. 6) GUARD FILE BY ORDER //TRUE COPY// ASST. REGISTRAR, I.T.A.T., PUNE