R.R. HOSIERY P. LTD, MUMBAI V. DCIT CC -47, MUMBAI

ITA 6945/MUM/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75660 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 4 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-02-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 05-02-2014
• Assessment Year: 2005-2006
• Appeal Filed On: 13-10-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SURINDER JIT SINGH
• Keywords: Speculation loss
• Section: 143(3); 153A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUM BAI , , BEFORE SHRI SANJAY ARORA, AM AND SHRI VIJAY PAL RA O, JM ./ I.T.A. NO. 6945/MUM/2011 ( / ASSESSMENT YEAR: 2005-06) R. R. HOSIERY PVT. LTD. MARKET CITY RESOURCES PVT. LTD., SHREE LAXMI WOOLEN MILLS COMPOUND, DR. E MOSES ROAD, MAHALAXMI, MUMBAI-400 011 / VS. DY. CIT, CENTRAL CIRCLE-47, MUMBAI ./ ./PAN/GIR NO. AAACR 2450 G ( ! /APPELLANT ) : ( '#! / RESPONDENT ) ! $ % / APPELLANT BY : SHRI VIJAY MEHTA '#! $ % / RESPONDENT BY : SHRI SURINDERJIT SINGH & ' ( $ ) * / DATE OF HEARING : 06.02.2014 +,- $ ) * / DATE OF PRONOUNCEMENT : 21.02.2014 . / O R D E R PER SANJAY ARORA, A. M.: THIS IS AN APPEAL BY THE ASSESSEE DIRECTED AGAINST THE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS)-38, MUMBAI (CIT(A) FOR SH ORT) DATED 21.06.2011, DISMISSING THE ASSESSEES APPEAL CONTESTING ITS ASSESSMENT U/S .143(3) OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER) FOR THE ASSESSMENT YEAR (A. Y.) 2005-06 VIDE ORDER DATED 29.12.2010. 2. THE ONLY ISSUE ARISING IN THE INSTANT APPEAL BY THE ASSESSEE, PER ITS TWO GROUNDS, IS THE TREATMENT OF THE LOSS SUSTAINED BY IT ON ACCOUN T OF DERIVATIVE TRADING AS A SPECULATIVE 2 ITA NO.6945/MUM/2011 (A.Y. 2005-06) R. R. HOSIERY PVT. LTD. VS. DY. CIT LOSS. THOUGH THE ASSESSEE HAS RAISED TWO GROUNDS ON MERITS, IT WAS FAIRLY CONCEDED AT THE TIME OF HEARING BY THE LD. AUTHORIZED REPRESENTATIV E (AR), THE ASSESSEES COUNSEL, THAT THE MATTER STANDS DECIDED AGAINST IT BY THE DECISIO N BY THE TRIBUNAL IN ITS OWN CASE FOR THIS YEAR, I.E., IN PURSUANCE OF SECTION 143(3) PRO CEEDINGS (IN ITA NO.3237/MUM/2009 DATED 30.09.2010/PB PGS.35-40), FOLLOWING THE DECIS ION BY ITS SPECIAL BENCH IN SHREE CAPITAL SERVICES (P.) LTD. VS. ASST. CIT [2009] 121 ITD 498 (KOL)(SB). AND THAT THE SAME STANDS FURTHER CONFIRMED BY THE JURISDICTIONAL HIGH COURT (IN ITA(L) NO. 2473 OF 2010 DATED 18.04.2011/PB PG.41) FOLLOWING ITS DECISION O F EVEN DATE IN CIT VS. SHRI BHARAT R. RUIA (HUF) (IN ITA NO.1539 OF 2010). FURTHER, THE ASSESSEE HA S PREFERRED AN APPEAL BEFORE THE APEX COURT, ADVERTING OUR ATTENTION TO T HE ADMISSION OF ITS SLP BY IT (PB PGS.42-43). ON THIS, IT WAS OBSERVED BY THE BENCH T HAT THE FACT THAT THE ASSESSEES SLP AGAINST THE DISMISSAL OF ITS APPEAL BY THE HONBLE JURISDICTIONAL HIGH COURT HAS BEEN ADMITTED BY THE APEX COURT, WOULD NOT IN ANY MANNER DETRACT FROM THE PRECEDENCE VALUE OF THE DECISION BY THE HONBLE HIGH COURT, WHICH IS BINDING ON US. UPON THIS POSITION BEING CLARIFIED THERETO, THE LD. AR SOUGHT TIME TO FILE AN ADDITIONAL GROUND/S, WHICH WAS GRANTED, I.E., WHEN THE APPEAL WAS FIRST TAKEN UP F OR HEARING (ON 04.02.2014). THE ASSESSEE HAS NOW RAISED TWO ADDITIONAL GROUNDS, WHI CH READ AS UNDER, PRESSING FOR THEIR ADMISSION ON THE GROUND THAT THEY ARE LEGAL GROUNDS , WITH THE RELEVANT FACTS BEING ON RECORD AND UNDISPUTED: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED CIT(A) OUGHT TO HAVE HELD THAT THE ACTION O F AO, IN TREATING LOSS OF RS.70,49,962 AS SPECULATIVE LOSS IN THE ASSESSMENT ORDER PASSED U/S.153A OF THE ACT., IS WITHOUT JURISDICTION AND BAD IN LAW. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED THAT THE I SSUE OF DERIVATIVE LOSS WAS SUBJECT MATTER OF APPEAL IN THE ORIGINAL PROCEE DINGS ON THE DATE OF INITIATION OF SEARCH AND HENCE THE LEARNED AO OUGHT NOT TO HAVE MADE THE DISALLOWANCE IN ASSESSMENT ORDER PASSED U/S.153A AS A FRESH ADDITION/ DISALLOWANCE. 3. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. 3 ITA NO.6945/MUM/2011 (A.Y. 2005-06) R. R. HOSIERY PVT. LTD. VS. DY. CIT 3.1 THE ASSESSEE FIRSTLY ASSAILS THE JURISDICTION O F THE ASSESSING OFFICER (A.O.) TO TREAT THE IMPUGNED TRADING LOSS AS A SPECULATION LOSS INA SMUCH AS THE SAME HAS BEEN THE SUBJECT MATTER OF CONSIDERATION BY HIM IN THE REGULAR PROCE EDINGS U/S. 143(3), WHICH STOOD CONCLUDED ON THE FRAMING OF THE ASSESSMENT ON 27.12 .2007 (COPY OF THE ASSESSMENT ORDER ON RECORD/PB PGS.1-20). THE ASSESSMENT FOR THE CURR ENT YEAR BEING PENDING BEFORE THE LD. CIT(A) AS ON THE DATE OF SEARCH (20.02.2008); THE A SSESSEES APPEAL BEFORE HIM HAVING BEEN INSTITUTED ON 31.01.2008, THE ASSESSMENT ALREA DY FRAMED WOULD NOT ABATE AS PER SECTION 153A. FURTHER, VIDE ITS SECOND ADDITIONAL G ROUND, THE ASSESSEE OBJECTS TO THE A.O. HAVING REFLECTED THE SAID ADJUSTMENT, INASMUCH AS T HE SAME STOOD NOT ACCEPTED AS A BUSINESS LOSS BUT ONLY AS A SPECULATIVE LOSS, TO BE CARRIED FORWARD SEPARATELY, AS A SEPARATE AND DISTINCT ITEM, AS IF IT WAS A SUBJECT MATTER WI TH REGARD THERETO. NO MATERIAL QUA THE SAME HAVING BEEN ADMITTEDLY FOUND IN SEARCH, AND NO CHANGE TO THE ASSESSMENT AS FRAMED U/S. 143(3) HAVING BEEN MADE BY HIM IN THE FRESH AS SESSMENT IN ITS RESPECT, THE A.O. OUGHT TO HAVE MADE THE COMPUTATION FROM THE INCOME AS ALREADY ASSESSED U/S.143(3). THE OBJECTION, THE LD. AR, ON A QUERY BY THE BENCH AS T O ITS IMPORT INASMUCH AS THE INCOME AND AT THE SAME SUM AND NATURE/CONFIGURATION STAN DS ASSESSED, WOULD SUBMIT, IS NOT TECHNICAL INASMUCH AS THE SAME CAN HAVE BEARING IN THE COLLATERAL PROCEEDINGS, VIZ. THE PENALTY PROCEEDINGS. 3.2 WE ADMIT THE ASSESSEES ADDITIONAL GROUNDS INAS MUCH AS THEY RAISE LEGAL ISSUE/S, WITH THE RELEVANT FACTS BEING ON RECORD. EVEN AS CL ARIFIED DURING THE COURSE OF HEARING ITSELF, ON AN OBJECTION THERETO BEING RAISED BY THE LD. DEPARTMENTAL REPRESENTATIVE (DR), WE FIND NO MERIT IN THE ASSESSEES ADDITIONAL GROUN D NO.1. THE JURISDICTION OF THE A.O. IN THE ASSESSMENT PROCEEDINGS PURSUANT TO A SEARCH IS TO ASSESS THE TOTAL INCOME FOR EACH OF THE ASSESSMENT YEARS FALLING WITHIN THE PERIOD OF S IX YEARS IMMEDIATELY PRECEDING THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WH ICH THE SEARCH IS CONDUCTED OR THE REQUISITION IS MADE. REFERENCE IN THIS CONTEXT MAY BE MADE TO THE DECISION BY THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. ANIL KUMAR BHATIA [2013] 352 ITR 493 (DEL), SO THAT THERE ARE NO FETTERS ON THE POWER OF THE AO TO ASSESS ANY INCOME THAT IN HIS VIEW 4 ITA NO.6945/MUM/2011 (A.Y. 2005-06) R. R. HOSIERY PVT. LTD. VS. DY. CIT FORMS PART OF THE TOTAL INCOME OF THE ASSESSEE FOR THE RELEVANT YEAR/S, AND WOULD THUS INCLUDE THE IMPUGNED INCOME AS WELL, INCLUDING AS T O ITS NATURE/CHARACTER. 3.3 WITH REGARD TO THE ASSESSEES SECOND OBJECTION, I.E., PER ITS ADDITIONAL GROUND NO.2, WE FIND THE SAME AS NOT WITHOUT FORCE. THIS THOUGH IS NOT FOR THE REASON THAT NO MATERIAL IN RELATION TO THE IMPUGNED INCOME STOOD FOUND IN S EARCH, ON WHICH ASPECT WE OBSERVE CONFLICT OF JUDICIAL OPINION, BUT FOR THE REASON TH AT THE A.O. HAS ADMITTEDLY NOT ALTERED EITHER THE NATURE OR THE QUANTUM OF ADDITION AS MAD E IN THE REGULAR ASSESSMENT, SINCE SUSTAINED IN APPEALS. INASMUCH AS THEREFORE THE SAI D ASSESSMENT DOES NOT IN LAW ABATE, AND THE A.O. HAS MERELY ADOPTED THE SAME IN THE SECTION 153A ASSESSMENT, THE SAME OUGHT TO BE REFLECTED THEREIN AS SUCH. STATING THE SAME TO B E AN ADDITION IN THE SECTION 153A ASSESSMENT IS THUS INCONSISTENT WITH THE LAW IN THE FACTS OF THE CASE. TO CLARIFY FURTHER, EVEN IF, THEREFORE, HE HAD MADE AN ADDITION ON THAT SCORE, HE WOULD BEGIN WITH THE INCOME ALREADY ASSESSED U/S.143 (3), I.E., IN REGULAR ASSE SSMENT, SPECIFYING THE NATURE OF THE MODIFICATION BEING NOW CARRIED OUT. WE, ACCORDINGLY , FOR THE REASONS STATED, ACCEPTING THE ASSESSEES CONTENTION IN THIS REGARD, DIRECT THE A. O. TO MODIFY HIS ORDER BY BRINGING OUT THE FACT OF HAVING ADOPTED THE INCOME AS ALREADY AS SESSED BY HIM, IN THE IMPUGNED ASSESSMENT. WE DECIDE ACCORDINGLY. 3.4 THE ASSESSEES PRINCIPAL GROUND, CHALLENGING TH E ASSESSMENT OF INCOME AS SPECULATIVE, I.E., ON THE MERITS OF THE ADDITION, F AILS IN VIEW OF THE DECISION BY THE HONBLE COURT IN ITS OWN CASE, EVEN AS CLARIFIED AT PARA 2 ABOVE. THE OTHER (SECOND) GROUND NO. 2 RELATES TO PROCEEDINGS IN THE SUCCEEDING YEAR/S AND IS, THUS, NOT MAINTAINABLE IN THE PRESENT APPEAL. WE DECIDE ACCORDINGLY. 4. IN THE RESULT, THE ASSESSEES APPEAL IS PARTLY A LLOWED ON THE AFORE-SAID TERMS. ORDER PRONOUNCED IN THE OPEN COURT ON FEBRUARY 21, 2014 SD/- SD/- (VIJAY PAL RAO) (SANJAY ARORA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER & /( MUMBAI; 0' DATED : 21.02.2014 5 ITA NO.6945/MUM/2011 (A.Y. 2005-06) R. R. HOSIERY PVT. LTD. VS. DY. CIT .'../ ROSHANI , SR. PS !' # $%&' (!'% / COPY OF THE ORDER FORWARDED TO : 1. ! / THE APPELLANT 2. '#! / THE RESPONDENT 3. & 1) ( ) / THE CIT(A) 4. & 1) / CIT - CONCERNED 5. 4 5 ')'67 , * 67- , & /( / DR, ITAT, MUMBAI 6. 5 89 : ( / GUARD FILE !' ) / BY ORDER, */)+ , (DY./ASSTT. REGISTRAR) , & /( / ITAT, MUMBAI