ACIT 4(2)(1), MUMBAI V. POOJA SHARE BROKING P. LTD, MUMBAI

ITA 7032/MUM/2016

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8054 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-12-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 27-06-2017
• Assessment Year: 2012-2013
• Appeal Filed On: 02-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N HEMALATHAL
• Keywords: Business income; Speculation loss
• Section: 143(3); 43(5)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH SMC, MUMBAI BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER ITA NO.7032/M/2016 ASSESSMENT YEAR: 2012-13 ASSTT. COMMISSIONER OF INCOME TAX 4(2)(1), ROOM NO.642, 6 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400 020 VS. M/S. POOJA SHARE BROKING PVT. LTD., 68, ALI CHAMBERS, 78/80, TAMARIND LANE, FORT, MUMBAI-400 001 PAN: AADCP5747K (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI RAHUL HAKANI, A.R. REVENUE BY : MS. N. HEMALATHAL, D.R. DATE OF HEARING : 11.12.2017 DATE OF PRONOUNCEMENT : 11.12.2017 O R D E R PER D.T. GARASIA, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE REVENU E AGAINST THE ORDER DATED 26.09.2016 OF THE COMMISSIONER OF I NCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS THE CIT(A)] R ELEVANT TO ASSESSMENT YEAR 2012-13. 2. THE SHORT FACTS OF THE CASE ARE AS UNDER: THE ASSESSEE COMPANY HAS SET OFF ITS BROUGHT FORWA RD BUSINESS LOSS OF AY 2009-10 AGAINST BUSINESS INCOME OF RS.32 ,99,985/- DURING THE YEAR UNDER CONSIDERATION. IT IS SEEN FRO M THE PERUSAL OF THE BUSINESS LOSS OF 2009-10 THAT DURING THE YEAR UNDER DISPUTE, THERE WAS NO ASSESSMENT U/S 143(3) OF THE ACT. THE ASSESS EE COMPANY HAS CLAIMED BUSINESS LOSS DURING A.Y. 2009-10. IT IS FU RTHER SEEN THAT DURING AY 2008-09, THE ASSESSEE COMPANY HAD SIMILAR LY SHOWN ITA NO.7032/M/2016 M/S. POOJA SHARE BROKING PVT. LTD. 2 BUSINESS LOSS BUT DURING ASSESSMENT PROCEEDINGS IT WAS DISCOVERED THAT THE LOSS WAS ON ACCOUNT OF TRADING IN SHARES A ND THEREFORE DUE TO DEEMING FICTION OF EXPLANATION TO SECTION 73 OF THE ACT, THE LOSS WAS TREATED AS SPECULATION LOSS. THE ASSESSEE COMPANY W AS ASKED TO JUSTIFY ITS CLAIM OF BUSINESS LOSS DURING AY 2009-1 0 WITH DOCUMENTARY EVIDENCE TO JUSTIFY ITS CLAIM OF SET OF F OF THE SAID BUSINESS LOSS AGAINST BUSINESS PROFIT OF THE YEAR U NDER CONSIDERATION. THE ASSESSEE DID NOT SUBMIT ANY EVIDENCE TO SUBSTAN TIATE ITS CLAIM OF BUSINESS LOSS. THE ASSESSEE FURTHER CLAIMED THAT TH E COMMODITY PROFIT EARNED DURING THE YEAR WAS CARRIED OUT ON UN -RECOGNIZED STOCK EXCHANGE THEREFORE THE ASSESSEE CLAIMED THAT ITS CO MMODITY PROFIT HAS BEEN WRONGLY SHOWN AS BUSINESS INCOME. THE SAME SHOULD BE TREATED AS SPECULATION PROFIT AND BE ALLOWED TO BE SET OFF AGAINST ITS SPECULATION LOSS FOR THE YEAR. THE ASSESSEE WAS ASK ED TO SUBSTANTIATE ITS CLAIM BY DOCUMENTARY EVIDENCES SUCH AS CONTRACT NOTES AND BILLS SHOWING THE NAME OF THE STOCK EXCHANGE. THE ASSESSE E FAILED TO PROVIDE ANY DOCUMENTS. THE CONTRACT NOTE SUBMITTED BY IT SHOWED THE NAME OF THE BROKER. BUT THE ASSESSEE COULD NOT PROVE AS TO WHY IN ITS BOOKS OF ACCOUNTS, IT HAS SHOWN COMMODITY PR OFIT AS BUSINESS INCOME AND WHY DURING THE COURSE OF ASSESSMENT PROC EEDINGS, IT WANTS THE COMMODITY PROFIT TO BE TREATED AS SPECULA TION PROFIT. PRIMA FACIE, MCX IS A RECOGNIZED EXCHANGE AND THE SAID TR ANSACTION IS COVERED BY PROVISO TO SECTION 43(5) OF THE ACT, 196 1 AND IT IS A BUSINESS PROFIT. SIMILARLY IN AY 2008-09, THE ASSE SSEE HAS TREATED THE COMMODITY PROFIT AS SPECULATION PROFIT, HOWEVER , AS PER THE DOCUMENTS ON FILE IT IS APPARENT THAT THE SAID TRAN SACTION IS COVERED ITA NO.7032/M/2016 M/S. POOJA SHARE BROKING PVT. LTD. 3 BY THE PROVISO TO SECTION 43(5) OF THE ACT, 1961 AN D SHOULD BE TREATED AS BUSINESS PROFIT. FOR WANT OF VERIFICATIO N, THE CLAIM OF THE ASSESSEE CANNOT HE ACCEPTED AND THE BROUGHT FORWARD LOSS AS CLAIMED BY THE ASSESSEE IS NOT ALLOWED TO SET OFF AGAINST B USINESS INCOME OF THIS YEAR. 3. MATTER CARRIED TO THE LD. CIT(A) AND THE LD. CIT (A) HAS ALLOWED THE APPEAL BY OBSERVING AS UNDER: 6.3. I HAVE CONSIDERED THE STAND OF THE AO AS WELL AS SU BMISSIONS OF THE APPELLANT. THE AO IN ITS ASSESSMENT ORDER ITSELF HA S WRITTEN THAT THERE WAS NO ASSESSMENT UNDER SECTION 143(3) FOR AY 2009-10. HOW EVER, THE AO FURTHER, SAYS THAT DURING ASSESSMENT PROCEEDINGS, IT WAS DISCOVER ED THAT THE LOSS WAS ON ACCOUNT OF TRADING IN SHARES AND THEREFORE DUE TO DEEMING F ICTION OF EXPLANATION TO SEC 73 OF THE ACT, THE LOSS WAS TREATED AS SPECULATION LOSS. THE LD. AR HAS FILED COPIES OF SCRUTINY ASSESSMENT ORDER U/S 143(3) FOR AY AY 2007 -08 ORDER DATED 20/11/2009 AND 2008-09 DATED 15/12/2010. . IN AY 2007-08, THE AO VIDE PARA 5 OF THE ASSESSMENT ORDER HAS MADE ASSESSMENT AT A LOSS FIGU RE OF RS 54,77,700/- INCLUDING RS 22,41,614/- AS SPECULATION LOSS TO BE CARRIED FORWARD. THE AO FURTHER HAS OBSERVED THAT DURING AY 2008-09, THE APPELLANT HAS SHOWN VARIOUS LOSS. AS PER ASSESSMENT ORDER, THERE IS NO DISALLOWANCE UNDER THE HEADING SPECULATION LOSS ARISING OUT OF SHARE T RANSACTIONSFURTHER,AS PER LAST PAGE OF THE ASSESSMENT ORDER FOR AY 2008-0 9 THE AO HAS MADE ASSESSMENT AT A LOSS FIGURE OF RS 29,46,945/- AND T HERE IS NO FURTHER ADJUSTMENT. THERE IS ALSO NO DISPUTE ON THE FACT THAT THERE WAS NO SCRUTINY ASSESSMENT U/S 143(3) FOR AY 2009-10. THE AO HAS NO T BROUGHT ANY MATERIAL ON RECORD TO SUGGEST THAT ANY ADJUSTMENT I N LOSSES WAS MADE IN AY 2010-11 & 2011-12 BY ANY SCRUTINY ASSESSMENT ORD ER. IN VIEW, OF THESE FACTS, THE LOSSES, INCLUDING SPEC ULATION LOSSES, ALLOWED TO BE CARRIED FORWARD BY THE EARLIER ORDERS , CANNOT BE DISTURBED IN AY 2012-13 WHICH IS UNDER CONSIDERATION. ACCORDINGL Y, THE CLAIM OF BROUGHT FORWARD BUSINESS LOSS OF RS 68,10,902/- (AS REFLECTED IN ABOVE CHART IN THE APPELLANT'S SUBMISSION) FOR AY 2009-10 IS ALLOWED TO BE ADJUSTED AGAINST THE BUSINESS INCOME OF RS 32,99,98 5/-. THE APPELLANT HAS ALREADY COMPUTED SPECULATION LOSS FOR AY 2012-13 AM OUNTING TO RS 22,54,344/- SEPARATELY AND HAS CLAIMED IT TO BE CAR RIED FORWARD TO SUBSEQUENT YEARS, WHICH HAS NOT BEEN DISTURBED BY T HE AO. IF THE AO WANTED TO DISALLOW THE CLAIM OF ADJUSTMENT OF THE A PPELLANT AGAINST THE BROUGHT FORWARD LOSSES OF EARLIER YEARS, HE SHOULD HAVE FIRST TAKEN DECISION REGARDING ADJUSTMENT OF LOSSES IN THOSE PARTICULAR ASSESSMENT YEARS AND THEN SHOULD HAVE TAKEN ANY CONSEQUENTIAL EFFECT IN SUCCEEDING ASSESSMENT ITA NO.7032/M/2016 M/S. POOJA SHARE BROKING PVT. LTD. 4 YEARS WHICH HAS NOT BEEN DONE BY THE AO. ACCORDINGL Y, SUBJECT TO THE VERIFICATION OF ABOVE FACTS AND FIGURES REGARDING C LAIM OF THE BROUGHT FORWARD LOSSES BY THE APPELLANT ON THE ASSESSMENT R ECORD, THE DISALLOWANCE MADE BY THE AO WITH REGARD TO ADJUSTME NT OF BROUGHT FORWARD LOSSES AGAINST THE PRESENT INCOME OF RS 32, 99,985/- CANNOT BE UPHELD AND THEREFORE DIRECTED TO BE DELETED. IN THE RESULT, THIS GROUND OF APPEAL IS ALLOWED. 4. AGGRIEVED BY THE ORDER OF THE LD. CIT(A) THE REV ENUE IS IN APPEAL BEFORE US. 5. HAVING HEARD BOTH THE PARTIES AND LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE, I FIND THAT THE LD. CIT( A) HAS ALLOWED THE BROUGHT FORWARD BUSINESS LOSSES ON THE GROUND THAT IN AY. 2010-11 THERE WERE LOSSES AND THE LOSSES WERE TO BE BROUGHT FORWARD BUSINESS LOSSES FOR A.Y. 2009-10 AND ARE TO BE ADJUSTED AGAI NST BUSINESS OF THIS YEAR. NO CONTRARY EVIDENCE IS BROUGHT BY DEPA RTMENT AGAINST THE FINDING OF THE LD. CIT(A). THEREFORE, I ENDORSE TH E ACTION OF THE LD. CIT(A). 6. IN THE RESULT, DEPARTMENTAL APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 11.12.2017. SD/- (D.T. GARASIA) JUDICIAL MEMB ER MUMBAI, DATED: 11.12.2017. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH ITA NO.7032/M/2016 M/S. POOJA SHARE BROKING PVT. LTD. 5 //TRUE COPY// [ BY ORD ER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.