ITO WD 1(1)(4), MUMBAI V. GALA TRADING P.LTD, MUMBAI

ITA 6999/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 92497 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-05-2015
• Appeal Filed By: Department
• Bench Allotted: G
• Next Hearing Date: 27-04-2015
• Assessment Year: 2001-2002
• Appeal Filed On: 29-11-2013
• Court: TRIBUNAL
• Department Lawyers: LOVE KUMAR
• Keywords: Business income
• Section: 143(3)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL G , BENCH MUMBAI . . , , BEFORE : SHRI R.C.SHARMA, AM & SHRI VIJAY PAL RAO , JM ./ ITA NO. 6999 / MUM/20 1 3 ( / ASSESSMENT YEAR : 20 0 1 - 0 2 ) ITO WD.1(1) - 4, MUMBAI VS. M/S G ALA TRADING PVT. LTD., TIMES SQUARE BLDG., UNIT NO.2, A - WING, 3 RD FLOOR, MAROL, ANDHERI - KURLA ROAD, ANDHERI(E), MUMBAI - 400059 ./ ./ PAN/GIR NO. : A A ACG 8667 N ( / APPELLANT ) .. ( / RESPONDENT ) AND ./ ITA NO. 6930/ MUM/20 1 3 ( / ASSESSMENT YEAR :2001 - 02 ) M/S G ALA TRADING PVT. LTD., TIMES SQUARE BLDG., UNIT NO.2, A - WING, 3 RD FLOOR, MAROL, ANDHERI - KURLA ROAD, ANDHERI(E), MUMBAI - 400059 VS. ITO WD.1(1) - 4, MUMBAI ./ ./ PAN/GIR NO. : AAACG 8667 N ( / APPELLANT ) .. ( / RESPONDENT ) /REVENUE BY : SHRI LOVE KUMAR /ASSE SSEE BY : SHRI TARUN ROHATGI / DATE OF HEARING : 27 / 0 4 /201 5 / DATE OF PRONOUNCEMENT : 08/05 / 2015 / O R D E R PER R.C.SHARMA ( A .M.) : TH ESE ARE THE CROSS APPEALS FILED BY THE REVENUE AN D ASSESSEE AGAINST THE ORDER OF CIT(A) , DATED 16 - 9 - 2013 , FOR THE ASSESSMENT YEAR 20 0 1 - 0 2 , IN THE MATTER OF ORDER PASSED U/S. 143(3) R.W.S254 OF THE I.T.ACT . ITA NO S . 6999 &6930 /20 1 3 2 2 . COMMON GRIEVANCE OF ASSESSEE AND REVENUE RELATES TO DISALLOWANCE OF ASSESSEES CLAIM OF BUSINESS LOSS WHICH WAS TREATED BY THE AO AS CAPITAL LOSS. 3 . RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. THE PRESENT APPEALS OF THE ASSESSEE AND REVENUE HAVE ARISEN AGAINST THE SET ASIDE ASSESSMENT ORDER PASSED U/S.143(3) R.W.S254 OF THE ACT DATED 14. 12.2009. THE TRIBUNAL IN ASSESSEES APPEAL AGAINST THE ORDER OF LD. CIT(A) - I, MUMBAI FOR A.Y.2001 - 02 VIDE ITA NO.3996/MUM/2005 DATED 29.09.2008 HAD SET ASIDE THE ORDER OF THE LD.CIT(A) AND RESTORED THE ISSUES OF (I) DIMINUTION IN VALUE OF CURRENT INVESTMEN T OF RS.49,18,573/ - (II) ADDITION ON ACCOUNT OF PROFESSIONAL EXPENSES AND ADMINISTRATIVE EXPENSES TO THE FILE OF THE LAO TO DECIDE THE ISSUES AFRESH AFTER AFFORDING OPPORTUNITY TO THE APPELLANT. THE RELEVANT PARAGRAPH NOS.3 AND 4 OF THE RELEVANT ITAT ORDER DATED 29.09.2008 READS AS UNDER: - '3. AFTER CONSIDERING THE SUBMISSIONS AND PERUSING THE MATERIAL ON RECORD WE ARE OF THE VIEW THAT THIS MATT ER NEEDS RE - VERIFICATION. THE LD. A. O . HAS DISALLOWED THE CLAIM MERELY ON THE REASON THAT THE ASSETS HAVE BEEN S HOWN AS INVESTMENT AND NOT STOCK IN TRADE. OTHER ASPECT OF THE CASE WAS NOT EXAMINED BY THE A. O . THE LD. CIT(A) HAS ALSO CONFIRMED THE FINDING OF THE LD. A. O . OTHER ASPECT WERE ALSO NOT EXAMINED BY THE LD. CIT(A). THE NATURE OF TRANSACTION HAS TO BE TAKEN INTO CONSIDERATION WHILE DECIDING THE ISSUE. IT HAS BEEN REPEATEDLY SAID THAT THE PURCHASE AND SALE WERE MADE IN SHORT PERIOD AND THEY WERE NOT FOR THE PURPOSE OF EARNING DIVIDEND AS THE SALE AND PURCHASE WERE FOR THE PURPOSE OF EARNING PROFITS. WE NOTED T HAT EARNING OF DIVIDEND IS OF VERY SMALL AMOUNT WHEREAS PROFIT ON SALE OF SHARES IS OF SUBSTANTIAL AMOUNT. IT HAS ALSO BEEN STATED THAT YEAR AFTER YEAR THE ASSESSEE IS SHOWING PROFIT ON ACCOUNT OF PURCHASE AND SALES OF SHARES UNDER THE HEAD BUSINESS INCOME . THESE ASPECTS WERE NOT EXAMINED BY THE LD. AO . THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT THE MATTER SHOULD GO BACK TO THE FILE OF THE A O TO EXAMINE THE ISSUE AFRESH. THE LD. A O WILL TAKE INTO CONSIDERATION THE TRANSACTION OF THE ASSESSEE MADE YEAR AF TER YEAR AND THEN WILL DRAW A CONCLUSION THAT, THEY ARE IN NATURE OF TRADING IN SHARES OR THEY ARE IN NATURE OF CAPITAL GAINS. IT IS A SETTLED POSITION OF LAW THAT THE ENTRIES IN THE BOOKS OF ACCOUNTS ARE ITA NO S . 6999 &6930 /20 1 3 3 NOT DECISIVE, BUT HAS TO BE LOOKED INTO. IN VIEW OF THESE FACTS AND CIRCUMSTANCES, WE RESTORE THIS ISSUE TO THE FILE OF THE A.O . TO DECIDE THE ISSUE AFRESH AFTER AFFORDING OPPORTUNITY TO THE ASSESSEE. WE ORDER ACCORDINGLY. 4. SECOND ISSUE IS AGAINST SUSTAINING THE ADDITION ON ACCOUNT OF PROFESSIONAL EXPE NSES AND ADMINISTRATIVE EXPENSES. 4.1 SINCE, WE HAVE RESTORED THE MAIN ISSUE TO THE FILE OF THE A. O . TO EXAMINE THE NATURE OF THE BUSINESS ACTIVITY AFRESH, THEREFORE, WE FEEL THAT THIS MATTER SHOULD ALSO GO BACK TO THE FILE OF THE A. O . TO DECIDE THE SAME AFRESH ALONG WITH MAIN ISSUE. WE ORDER ACCORDINGLY.' WHILE GIVING EFFECT TO THE ABOVE MENTIONED ITAT ORDER FOR A.Y.2001 - 02, THE A O HAS NOT GIVEN COMPLETE AND PROPER EFFECT TO THE OPERATIVE PARAGRAPH NOS.3 AND 4 OF THE SAID ITAT ORDER. THE ASSESSEE APPRO ACHED TO THE CIT(A). BY THE IMPUGNED ORDER THE CIT(A) HELD AS UNDER : - 5.1 I HAVE CAREFULLY AND DISPASSIONATELY CONSIDERED THE FACTS AND CIRCUMSTANCES OF THE CASE. THE LAO IS DIRECTED TO GIVE AND FULL CORRECT EFFECT TO THE ORDER OF THE JURISDICTIONAL ITAT , 'G' BENCH, MUMBAI IN THE APPELLANT'S CASE AS SET ASIDE VIDE ITA NO.3996/MUM/2005 DATED 29.09.2008. SECONDLY, IT HAS BEEN STATED THAT YEAR AFTER YEAR THE APPELLANT IS SHOWING THE PROFIT ON ACCOUNT OF PURCHASE AND SALE OF SHARES UNDER THE HEAD BUSINESS INC OME. T HE LAO HAS NOT PROPERLY APPLIED THE DIRECTIONS OF THE HEN' BLE ITAT, 'G' BENCH, MUMBAI. HE HAS REPEATED THE DISALLOWANCES EARLIER MADE BY HIM IN THE ORIGINAL ASSESSMENT ORDER AND HAS RELIED ON THE ORDER OF LD. CIT(A) - L WHICH HAS ALREADY BEEN REVERSED BY THE HON'BLE ITAT, 'G' BENCH, MUMBAI. DEPARTMENTAL APPEAL HAS BEEN DISMISSED BY THE HON'BLE BOM BAY HIGH COURT, AS STATED BY THE LAR. 5.2 HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE, I AM CONSTRAINED TO DIRECT THE LAO TO GIVE FULL, TRUE AND C ORRECT EFFECT TO THE ORDER OF HO N'BLE ITAT 'G' BENCH, MUMBAI IN APPELLANT'S CASE FOR A.Y.200 1 - 02 DEC IDED VIDE ITA NO.3996/MUM/2005 DATED 29.09.2008. 5.3 FOR STATISTICAL PURPOSES, GROUN DS OF APPEAL ARE PARTLY ALLOWED. 5. AGAINST THE ABOVE ORDER OF CI T(A), BOTH REVENUE AND ASSESSEE ARE IN APPEALS BEFORE US. 6. WE HAVE CONSIDERED RIVAL CONTENTIONS, CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND FOUND FROM THE RECORD THAT THE AO HAS ITA NO S . 6999 &6930 /20 1 3 4 DISALLOWED THE ASSESSEES CLAIM FOR DIMINUTION IN VALU E OF SHARES ON THE PLEA THAT ASSESSEE WAS INVESTING IN SHARES. IN FIRST ROUND OF APPEAL, THE TRIBUNAL RESTORED THE MATTER BACK TO THE FILE OF AO WITH A DIRECTION TO EXAMINE THE NATURE OF TRANSACTION ENTERED INTO BY THE ASSESSEE. THE AO HAS ALSO DIRECTED TO TAKE INTO CONSIDERATION THE TRANSACTION OF THE ASSESSEE MADE YEAR AFTER YEAR SO AS TO FIND OUT AS TO WHETHER THE ASSESSEE WAS TRADING IN SHARES OR HOLDING THE SHARES AS INVESTMENT. THE TRIBUNAL ALSO OBSERVED THAT AS PER THE SETTLED POSITION OF LAW ENTRIES IN THE BOOKS OF ACCOUNTS ARE NOT DECISIVE. HOWEVER, IN THE SECOND ROUND THE AO DID NOT EXAMINE THE ISSUE AS PER THE DIRECTIONS AND JUST REPEATED THE ADDITION MADE IN THE FIRST ROUND. WE FOUND THAT CONSISTENTLY PROFIT DECLARED BY THE ASSESSEE ON SALE OF S HARES HAVE BEEN ASSESSED AS BUSINESS INCOME FROM ASSESSMENT YEARS 2002 - 03 TO 2007 - 08. ALL THE ASSESSMENT FROM 2003 - 04 TO 2007 - 08 HAS BEEN FRAMED U/S.143(3), WHEREIN STAND OF THE ASSESSEE TO THE EFFECT THAT PROFIT/LOSS ON SALE OF SHARES WAS ASSESSABLE AS BU SINESS INCOME, WAS ACCEPTED BY THE DEPARTMENT. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAD CLAIMED LOSS OF RS. 49 ,18,573/ - ON ACCOUNT OF VALUATION OF SHARES ON THE DATE OF BALANCE SHEET AND THE LOSS RESULTED DUE TO THE FACT THAT MARKET RATES FALL EN AS COMPARED TO THE COST PRICE OF THE SHARES. SINCE THE ASSESSEE WAS DEALING IN SHARES, AT THE END OF THE YEAR ASSESSEE WAS REQUIRED TO VALUE THE SHARE A T COST O R THE MARKET PRICE, WHICHEVER IS LOWER. THE LOSS HAS OCCASION ED DUE TO THE VALUATION OF THE SHA RES ON THE CLOSING DATE AS PER THE MARKET PRICE , SUCH LOSS IS TO BE ALLOWED. ACCORDINGLY, WE DIRECT THE AO TO ALLOW ITA NO S . 6999 &6930 /20 1 3 5 LOSS ON VALUATION OF THE SHARES AS ON THE CLOSING DATE INSOFAR AS CONSISTENTLY ASSESSEE WAS DEALING IN SHARERS AS BUSINESS. 7. THE ASSESSEE IS ALSO AGGRIEVED FOR DISALLOWANCE OF PROFESSIONAL FEES OF RS. 2 LAKHS AND ADMINISTRATIVE EXPENSES OF RS. 1,06,458/ - . NO REASON HAS BEEN MENTIONED BY THE AO FOR THE SAID DISALLOWANCE IN THE SET ASIDE ORDER. WE FOUND THAT FOR ALL THE SUBSEQUENT YEARS PROFESSI ONAL FEE PAID BY THE ASSESSEE WAS ALLOWED IN SCRUTINY ASSESSMENT U/S.143(3). WE FOUND THAT DURING THE YEAR UNDER CONSIDERATION ASSESSEE HAS PAID PROFESSIONAL FEES OF RS. 2 LAKHS WHICH WAS DISALLOWED BY THE AO. HOWEVER, SIMILAR PROFESSIONAL FEES OF RS. 78 LA KHS, RS.45 LAKHS, RS.18 LAKHS AND RS.4 LAKHS PAID IN THE ASSESSMENT YEAR 2003 - 04 TO 2007 - 08, RESPECTIVELY WERE ALLOWED UNDER SCRUTINY ASSESSMENT. ACCORDINGLY, WE DO NOT FIND ANY JUSTIFICATION IN THE DISALLOWANCE OF PROFESSIONAL FEES OF RS.2 LAKHS FOR THE PURPOSE OF ASSESSEES BUSINESS. SO FAR AS DISALLOWANCE OF RS. 1,06,458/ - OUT OF ADMINISTRATIVE EXPENSES ARE CONCERNED, NOTHING WAS BROUGHT ON RECORD BY LD. AR TO PERSUADE US TO DELETE THE DISALLOWANCE SO MADE. ACCORDINGLY, WE CONFIRM THE DISALLOWANCE OF RS . 1,06,458/ - OUT OF THE ADMINISTRATIVE EXPENSES SO INCURRED AND DEBITED IN THE PROFIT AND LOSS ACCOUNT. 8. IT IS PERTINENT TO MENTION THAT IN THE ORDER PASSED BY THE CIT(A), THE CIT(A) HAS NOT ALLOWED THE LOSS CLAIMED BY THE ASSESSEE ON ACCOUNT OF DIMINU TION IN VALUE OF SHARES, HE HAS ONLY RESTORED THE MATTER BACK TO THE FILE OF THE AO FOR GIVING EFFECT TO THE ORDER OF THE TRIBUNAL. THUS, NO RELIEF HAS BEEN GIVEN BY THE CIT(A), THEREFORE, GROUNDS TAKEN BY THE REVENUE ITA NO S . 6999 &6930 /20 1 3 6 ARE MISCONCEIVED INSOFAR AS IT STATES THAT CIT(A) HAS ALLOWED THE LOSS ON ACCOUNT OF DIMINUTION IN VALUE OF SHARES. 9 . IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED, WHEREAS APPEAL OF THE ASSESSEE IS ALLOWED IN PART. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 08/05/ 201 5 . SD/ - SD/ - ( ) ( VIJAY PAL RAO ) ( . . ) ( R.C.SHARMA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED 08/05 /201 5 . . /PKM , . / PS / COPY OF THE ORDER FORWARDED TO : / BY ORDER, / ( ASSTT. REGISTRAR) , / ITAT, MUMBAI DATE INITIAL 1. DRAFT DICTATED ON 27 - 4 - 15 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 2 8 - 4 - 15 (DICTATION PAD HAS BEEN ENCLOSED ALONG WITH THIS ORIGINAL FILE) SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 . DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/ PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS 7. FILE SENT TO THE BENCH CLERK SR.PS 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER. 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A), MUMBAI. 4. / CIT 5. , , / DR, ITAT, MUMBAI 6 . / GUARD FILE. //TRUE COPY//