Shri Darshak Vinodchandra Shah, Ahmedabad V. The Income Tax Officer, Ward-11(1), Ahmedabad

ITA 664/AHD/2014

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 9471 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 10 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 22-12-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 06-03-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: BHARAT S SHAH
• Keywords: Reopening of assessment; Business income; Speculation loss; Assessment record; Reason to believe; Reassessment proceedings
• Section: 143(3); 43(5); 148; 28

Judgement Text

ITA NO. 664 /AHD/201 4 A SSESSMENT Y EAR: 20 0 7 - 08 PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH, SMC , AHMEDABAD [CORAM: PRAMOD KUMAR AM] ITA NO. 664 /AHD/201 4 ASSESSMENT Y EAR : 200 7 - 08 DARSHAK VINODCHANDRA SHAH, ..... .......... .APPELLANT PROP. PREMOY IRON TRADERS, 8, GAUTAMBAUG SOCIETY, PALDI AHMEDABAD 380 007. [PAN: A FDPS 6649 M ] VS. INCOME TAX OFFICER, WARD 11 ( 1 ), AHMEDABAD . ................ RESPONDENT APPEARANCES BY: BHARAT S. SHAH FOR THE APPELLANT K. MADHUSUDAN FOR THE RESPONDENT D ATE OF CONCLUDING THE H EARING : 2 2 . 12 .201 6 DATE OF PRONOUNCING THE ORDER : 30 . 01.2017 O R D E R 1. BY WAY OF THIS APPEAL, THE ASSESSEE APPELLANT HAS CHALLENGED CORRECTNESS OF LEARNED CIT(A) S ORDER DATED 16.12.2003, IN THE MATTER OF ASSESSMENT UNDER SECTION 14 3(3) R.W.S. 147 OF THE INCOME TAX ACT 1961, FOR THE ASSESSMENT YEAR 2007 - 08. 2. GRIEVANCES RAISED BY THE ASSESSEE , AS PER REVISED GROUNDS OF APPEAL, ARE AS FOLLOWS : - 1. THAT THE LEARNED CIT(A) HAS FAILED IN CONSIDERING THE CONTENTION OF APPELLANT WHIL E DEALING WITH THE ORDER OF LEARNED AO PASSED U/S. 1 43(3) R.W.S. 147 DATED 20.12.2012 AND FURTHER FAILING IN CONSIDERING THE REASONS RECORDED BY LEARNED AO IS CONTRARY TO THE FACTS AND PROVISIONS OF THE LAW. THE LEARNED CIT(A) OUGHT TO HAVE CONSIDERED THIS CORE POINT OF THE ASSESSMENT AS BEING THE ROUTE OF THE MATTER. 2. THE IMPUGNED ORDER IS CONTRARY TO THE EVIDENCE AND MATERIAL ON RECORD, CONTRARY TO THE PRINCIPLES OF LAW AND BINDING JUDGMENTS OF THE COURT, CONTRARY TO THE RELEVANT PROVISIONS OF THE ACT AND DESERVES TO BE QUASHED AND SET ASIDE. ITA NO. 664 /AHD/201 4 A SSESSMENT Y EAR: 20 0 7 - 08 PAGE 2 OF 4 3. THE LEARNED CIT(A) FAILED IN CONSIDERING THE DIFFERENCE BETWEEN RECOGNIZED STOCK EXCHANGE AS ENVISAGED TO NOTIFICATION NO . 2/2206(SO 89(E) DATED 25/01/2006 INSERTED FROM FINANCE ACT 2005 W.E.F. 1.4.2006 AND AS RE FERRED IN CLAUSE ( E ) OF SECTION 43(5) BY FINANCE ACT 2013 WITH REFERENCE TO RULE 6DDD BY NOTIFICATION NO.92/2013. THEREFORE ADDITION CONFIRMED BY LEARNED CIT(A) TO BE QUASHED. 4. THAT THE LEARNED CIT(A) FAILED IN UNDERSTANDING THE NATURE OF TRANSACTIONS C ARRIED OUT BY THE APPELLANT WITHIN THE AMBIT OF THE LAW AND ITS CIRCULARS. 5 . THE LEARNED CIT(A) FAILED IN CONSIDERING THE INHERENT RIGHT OF APPELLANT TO CARRY FORWARD THE SPECULATION LOSS FOR A PERIOD OF 8 ASSESSMENT YEARS SUBSEQUENT TO THE ASSESSMENT Y EAR 2001 - 02 AS PER SECTION 73(4} AS ITS TOLD BEFORE AMENDED BY FINANCE ACT 2005 W.E.F. 01.04 . 2006. 3 . I FIND THAT IT IS A CASE OF REOPENED ASSESSMENT. THE REASONS RECORDED FOR REOPENING THE ASSESSMENT, AS RECORDED BY THE ASSESSING OFFICER ON 26.03.2012, WERE AS FOLLOWS : - IN THIS CASE, THE RETURN OF INCOME IN RESPECT OF A.Y.2007 - 08 WAS FILED BY THE ASSESSEE ON 31 - 08 - 2007 DECLARING THE TOTAL INCOME OF RS.1,41,632/ - . THE CASE WAS SELECTED FOR SCRUTINY AND ASSESSMENT U/S 143(3) OF THE ACT WAS FINALISED VIDE THE ASSESSMENT ORDER UNDER SECTION 143(3) OF THE ACT PASSED DATED 26 - 02 - 2009 DETERMINING THE TOTAL INCOME RS.1,46,630/ - . ON VERIFICATION OF THE ASSESSMENT RECORDS IT IS NOTICED THAT THE ASSESSEE HAD SHOWN PROFIT OF RS.6,58,939/ - FROM SPECULATION BUSIN ESS IN SHARE TRADING. AGAINST THIS PROFIT, THE ASSESSEE HAD CLAIMED DEDUCTION U/S. 28 .TO 44DA OF RS.1,29,649/ - AND B/F SPECULATION LOSS FOR THE A.Y. 1999 - 2000, 2000 - 01, 2001 - 02 OF RS. 5,29,290/ - WAS SET OFF. HOWEVER DEDUCTION U/S. 28 TO 44DA WAS ALSO CL AIMED IN SHARE TRADING BUSINESS AND LOSS OF RS.1,64,25 6 / - WAS SHOWN IN COMPUTATIO N OF INCOME. IN VIEW OF AMENDED - PROVISION OF SECTION 43(5) AND BOARD'S NOTIFICATION DATED 25/01/2006, THE PROFIT EARNED BY THE SH ARE TRADING WAS FROM NORMAL BUSINESS AND NOT FROM SPECULATION BUSINESS AS THE ASSESSEE WAS ENGAGED IN TRADING OF SHARES IN NATIONAL STOCK EXCHANGE OF INDIA LTD., MUMBAI AND BOMBAY STOCK EXCHANGE LTD . , MUMBAI. THUS, THE ALLOWANCE OF DEDUCTION U/S. 28 TO 44DA OF RS.1,29,649/ - AND SET OFF OF B/F . SP ECULATION LOSS OF RS.5,29,290/ - AGAINST BUSINESS INCOME WAS INCORRECT . IN VIEW OF THE ABOVE, THE UNDERSIGNED HAS REASON TO BELIEVE THAT THE INCOME CHARGEABLE TO TAX TO THE EXTENT OF RS.6,58,939/ - (1,29,649 + 5,29,290) BY ABOVE REASONS, HAS ESCAPED ASSESSM ENT BY REASON OF THE FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE F ULLY AND TRULY ALL MATERIALS FACTS IN RESPECT OF INCOME FOR A.Y.2007 - 08 RELEVANT TO F.Y. 2006 - 07 AS ENVISAGED U/S. 147 OF THE ACT AND THAT THE INCOME THAT HAS ESCA PED ASSESSMENT, SHOULD BE BROUGHT TO TAX . F OR THIS PURPOSE, THE AFORESAID REASONS ARE RECORDED U/S . 148(2), R.W.S. 147 OF TH E I.T. FOR ISSUE OF NOTICE U/S. 148 OF THE I.T. ACT, 1961 . ITA NO. 664 /AHD/201 4 A SSESSMENT Y EAR: 20 0 7 - 08 PAGE 3 OF 4 4 . WHILE THE ASSESSEE IS AGGRIEVED OF THE ASSESSMENT SO REOPENED BY THE ASSESSING O FFICER, T HE ASSESSEE FAIRLY SUBMITS THAT THIS ISSUE WAS NOT RAISED, DUE TO INADVERTENT MISTAKE, BEFORE THE AUTHORITIES BELOW. HE SUBMITS THAT IT IS A FOUNDATIONAL AND FUNDAMENTAL ASPECT OF THE MATTER AND HE IS VERY WELL HAS A LAWFUL RIGHT TO RAISE THIS ISSUE, EVEN FOR THE FIRST TIME, BEFORE ME. IN SUPPORT OF THIS PROPOSITION HE RELIES UPON HON BLE S UPREME COURT S JUDGMENT IN THE CASE OF NTPC LTD. VS. CIT [(1998 229 ITR 383 (SC)]. ON MERITS, HE SUBMITS THAT THE ASSESSING OFFICER WAS COMPLETELY IN ERROR IN PROCEEDI NG ON THE BASIS THAT PROFIT FROM SHARE TRADING, WITHOUT DELIVERY, ON NSE AND BSE IS REQUIRED TO BE TREATED AS NON - SPECULATIVE PROFIT BECAUSE NSE AND BSE ARE NOTIFIED UNDER SECTION 43(5)(D). IT IS POINTED OUT THAT SO FAR NOTIFICATION FOR THE PURPOSE OF SECT ION 43(5)(D) IS CONCERNED, ALL IT DOES IS THAT THE PROFITS FROM DEALING IN DERIVATIVES IS NOT TREATED AS SPECULATION PROFIT. HE THUS SUBMITS THAT THE VERY REOPENING OF ASSESSMENT IS BASED ON REASONS WHICH ARE INCORRECT AND UNSUSTAINABLE IN LAW. I AM THUS URGED TO QUASH THE REASSESSMENT PROCEEDINGS. LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, SUBMITS THAT THE MATTER CAN BEST BE REMITTED TO THE FILE OF THE LEARNED CIT(A) FOR FRESH ADJUDICATION ON THIS ASPECT OF THE MATTER. ON MERITS, HE RELIES UPON THE STAND OF THE ASSESSING OFFICER. 5. I HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE APPLICABLE LEGAL POSITION. 6. THE PLEA OF THE LEARNED COUNSEL IS INDEED WELL TAKEN. AS HELD BY HON BLE SUPREME COURT IN NTPC S CASE (SUPRA), THE POWERS OF THIS TRIBUNAL ARE NOT CONFINED TO THE ISSUES ARISING OUT OF THE ORDER OF THE CIT(A) AND EVEN THE ISSUES WHICH HAVE NOT BEEN TAKEN UP EARLIER CAN BE TAKEN UP FOR THE FIRST TIME BEFORE T HE TRIBUNAL. AS FOR THE MERITS OF THE GRIEVANCES RAISED BY THE ASSESSEE, AGAINST IMPUGNED REOPENING, I FIND THAT SECTION ITA NO. 664 /AHD/201 4 A SSESSMENT Y EAR: 20 0 7 - 08 PAGE 4 OF 4 43(5)(D) SPECIFICALLY REFER TO AN ELIGIBLE TRANSACTION IN RESPECT OF TRADING IN DERIVATIVES REFERRED TO IN CLAUSE AC OF SECTION 2 O F SECURITIES CONTRACT ACT 1956 CARRIED OUT IN A RECOGNIZED STOCK EXCHANGE . CLEARLY, THEREFORE, SECTION 43(5)(D) DOES NOT COVER DEALINGS IN SHARES AND OTHER SECURITIES. IN THIS VIEW OF THE MATTER, THE ASSESSING OFFICER WAS IN ERROR IN HOLDING THAT SHARE TRADING PROFITS ARE REQUIRED TO BE TREATED AS NORMAL BUSINESS PROFITS UNDER SECTION 43(5)(D) UPON NSE AND BSE BEING NOTIFIED UNDER SECTION 43(5)(D). THE REASONS RECORDED BY THE ASSESSING OFFICER FOR REOPENING THE ASSESSMENT ARE UNSUSTAINABLE IN LAW. I, T HEREFORE, QUASH THE REASSESSMENT PROCEEDINGS. GIVEN THIS CONCLUSION ON THE ISSUE ON REOPENING, ALL OTHER ISSUES RAISED IN THE APPEAL ARE RENDERED ACADEMIC AND INFRUCTUOUS. THERE IS NO NEED TO ADJUDICATE ON THESE ACADEMIC ISSUES. 7. IN THE RESULT, THE AP PEAL IS ALLOWED IN THE TERMS INDICATED ABOVE. P RONOUNCED IN THE OPEN COURT ON THIS 30 TH DAY OF JANUARY, 2017 . SD/ - PRAMOD KUMAR (ACCOUNTANT MEMBER) DATED: THE 30 TH DAY OF JANUARY, 2017 . PBN/* COPIES TO: (1) THE APPELLANT (2) THE RESPONDENT (3) CIT (4) CIT(A) (5) DR (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD