I.T.O. 9(2)(3), MUMBAI V. NATRAJ FINANCIAL & SERVICES PVT. LTD., MUMBAI

ITA 7269/MUM/2011

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 7073 (ITAT-MUMBAI)
• Duration Of Justice: 6 year(s) 7 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-06-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 08-03-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 27-10-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUMAN KUMAR
• Assessee Lawyers: N M PORWAL
• Keywords: Business income; Business expenditure; Additional evidence; Speculation loss
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH B, MU MBAI BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO. 7269/MUM/2011 (ASSESSMENT YEAR- 2008-09) ITO- 9(2)(3), R. NO. 225, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-20. VS. M/S NATRAJ FINANCIAL & SERVICES PVT. LTD. 12/D-1, ESTEE JEEJAY CO-OP. HSG. SOC., SAI BABA NAGAR, BORIVALI(W), MUMBAI-400092 PAN: AABCN3770A (APPELLANT) (RESPONDENT) REVENUE BY : SHRI SUMAN KUMAR (DR ) ASSESSEE BY : SHRI N.M. PORWAL (AR) DATE OF HEARING 30.05.2018 DATE OF PRONOUNCEMENT 22.06.2018 ORDER UNDER SECTION 254(1) OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER: 1. THIS APPEAL BY REVENUE IS DIRECTED AGAINST THE ORDE R OF LEARNED COMMISSIONER (APPEALS)-20, MUMBAI DATED 23 RD AUGUST 2011 FOR ASSESSMENT YEAR 2008-09, WHICH ARISES FROM THE ASSE SSMENT ORDER PASSED BY ASSESSING OFFICER UNDER SECTION 143(3) DATED 27 TH OF DECEMBER 2010. 2. BRIEF FACTS OF THE CASE ARE THAT ASSESSEE IS A PRIV ATE LIMITED COMPANY AND IS IN THE BUSINESS OF INVESTMENT AND IN DEALING IN SHARES AND SECURITIES. ASSESSEE-COMPANY FILED ITS RETURN OF INCOME FOR ASS ESSMENT YEAR 2008- 09 ON 29 TH SEPTEMBER 2008 DECLARING NIL INCOME. THE ASSESSMEN T WAS COMPLETED ON 27 TH DECEMBER 2010 UNDER SECTION 143(3). THE ASSESSING OFFICER WHILE PASSING THE ASSESSMENT ORDER NOTED TH AT THE ASSESSEE HAS SHOWN LOSS IN SHARE TRANSACTION OF RS. 57,77,584/- WHICH IS MORE THAN THE INCOME BY WAY OF BROKERAGE INTEREST, SHORT-TERM CAP ITAL GAIN, LONG-TERM CAPITAL GAIN AND OTHER INCOME. THEREFORE, THE GROSS TOTAL INCOME OF THE ASSESSEE CONSIST MAINLY OF INCOME WHICH IS CHARGEAB LE UNDER THE HEAD ITA NO. 7269/M/2011- M/S NATRAJ FINANCIAL & SERVICES PVT. L TD. 2 CAPITAL GAIN AND INCOME FROM OTHER SOURCES WAS REJE CTED BY THE ASSESSING OFFICER. THE ASSESSING OFFICER TREATED TH E ENTIRE LOSS FROM PURCHASE AND SALE OF SHARES AS SPECULATION LOSS A ND BY INVOKING THE EXPLANATION IN SECTION 73 OF THE ACT NOT ALLOWED TH E SET OFF OF LOSS FROM BUSINESS INCOME. ON APPEAL BEFORE LD. COMMISSIONER (APPEALS), THE ASSESSEE WAS ALLOWED THE SET OFF OF SAID LOSS BY TR EATING IT AS BUSINESS LOSS AND NOT SPECULATIVE LOSS. THEREFORE, AGGRIEVED BY T HE ORDER OF LD. COMMISSIONER (APPEALS) THE REVENUE HAS FILED THE PR ESENT APPEAL BEFORE THIS TRIBUNAL. THE REVENUE HAS RAISED FOLLOWING GRO UNDS OF APPEAL; (I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED COMMISSIONER(APPEALS) ERRED IN NOT APPRECIA TING THE CORRECT WORKING OF TAXABLE INCOME WORKED BY ASSESSING OFFIC ER AS PER EXPLANATION TO SECTION 73 WHERE IN SPECULATION LOSS EXCEEDS THE INCOME COMPUTED UNDER THE HEAD OTHER SOURCES AND CAPITAL G AIN. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, TH E LEARNED COMMISSIONER (APPEALS), WHILE GIVING RELIEF UNDER S ECTION 73, HAS WRONGLY CONSIDERED ADDITION OF LONG-TERM CAPITAL LO SS OF RS. 63,38,617/- IN COMPUTATION OF CROSS TOTAL INCOME. (II) THE APPELLANT PRAYS THAT ORDER OF COMMISSIONER (APP EALS) ON THE GROUND BE SET ASIDE AND THAT OF ASSESSING OFFICER B E RESTORED. 3. WE HAVE HEARD LEARNED DR FOR THE REVENUE AND THE LE ARNED AR FOR THE ASSESSEE AND PERUSED THE MATERIAL AVAILABLE ON RECO RD. THE LD. DR FOR THE REVENUE SUPPORTED THE ORDER OF THE ASSESSING OFFICE R. THE LD DR FURTHER SUBMITS THAT THE LD COMMISSIONER (APPEALS) WITHOUT GIVING THE OPPORTUNITY TO THE ASSESSING OFFICER ACCEPTED THE R EVISE COMPUTATION OF INCOME. THE REVISED COMPUTATION FURNISHED BY THE AS SESSEE BEFORE LD COMMISSIONER (APPEALS) WAS DIFFERENT THAN THE COMPU TATION FURNISHED DURING THE ASSESSMENT PROCEEDINGS. NO REMAND REPORT WAS SOUGHT BY LD COMMISSIONER (APPEALS) BEFORE ACCEPTING THE FRESH C OMPUTATION OF INCOME UNDER DIFFERENT HEAD. IN SUPPORT OF HIS SUBM ISSIONS THE LD DR FOR ITA NO. 7269/M/2011- M/S NATRAJ FINANCIAL & SERVICES PVT. L TD. 3 THE REVENUE RELIED ON THE DECISION OF TRIBUNAL IN Y UCCA FINVEST (P) LTD VS DCIT [2006] 101ITD 403(MUM). ON THE OTHER HAND T HE LD. AR FOR THE ASSESSEE SUPPORTED THE ORDER OF LD. COMMISSIONER (A PPEALS). THE LD. AR FOR THE ASSESSEE FURTHER SUBMITS THAT THE LD. COMMI SSIONER (APPEALS) WAS SATISFIED WITH THE COMPUTATION OF INCOME FURNISHED BY ASSESSEE AND THAT THE COMMENT OF ASSESSING OFFICER WAS NOT REQUIRED. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF THE PAR TIES AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE ASSESS ING OFFICER DURING THE ASSESSMENT PROCEEDING WHILE GOING THROUGH THE PROFI T & LOSS ACCOUNT NOTED THAT THE ASSESSEE HAS SHOWN THE FOLLOWING INC OME. BROKERAGE INCOME -- 90,371 DIVIDEND INCOME -- 46,123 INTEREST -- 21,99,848 BANK INTEREST -- 7,397 LTC LOSS -- (-)63,38,617 STC GAIN -- 18,80,973 OTHER INCOME -- 1,42,000 INTEREST ON I.T -- 1,159 _____________ (-)9,70,746 (GROSS TOTAL INCOME EXCLUDING SHARE TRADING) THE ASSESSING OFFICER FURTHER NOTED THE SHARE TRADI NG BUSINESS; THE ASSESSEE HAS SHOWN THE DEALING OF SHARES IN THE FOL LOWING MANNER: PURCHASE OF SHARES 50,86,48,965 SALE OF SHARES 50,23,64,099 LOSS (ON ACCOUNT OF MISAPPROPRIATION OF INVESTMENT) 6,68,400 CLOSING STOCK 36,65,837 EXPENSES 17,27,289 GROSS LOSS 57,77,584 DEPN. AS PER I.T. ACT. 7,62,866 51,18,07,520 51,18,07,520 5. ON THE BASIS OF ABOVE OBSERVATION, THE ASSESSING OF FICER ASKED THE ASSESSEE AS TO WHY PROVISION OF SECTION 73 BE NOT A PPLY AS LOSS FROM PURCHASE AND SALE OF SHARE OF RS. 32,87,429/- ALONG WITH BUSINESS EXPENDITURE OF RS. 24,90,154/- AGGREGATING TO RS. 5 7,77,584/-. THE ASSESSEE FURNISHED ITS REPLY AND CONTENDED THAT THE TOTAL INCOME OF THE ITA NO. 7269/M/2011- M/S NATRAJ FINANCIAL & SERVICES PVT. L TD. 4 ASSESSEE CONSIST MAINLY INCOME CHARGEABLE UNDER THE HEAD INCOME FROM OTHER SOURCES AND CAPITAL GAIN. THE ASSESSEE IS ALSO ENGAGED IN GRANTING OF LOANS AND ADVANCES AS ITS PRINCIPLE BUS INESS, THEREFORE, DEEMING FICTION UNDER SECTION 73 OF THE ACT IS NOT APPLICABLE ON THE ASSESSEE. THE CONTENTION OF ASSESSEE WAS NOT ACCEPT ED BY ASSESSING OFFICER. THE ASSESSING OFFICER TREATED THE LOSS AS SPECULATION LOSS UNDER DEEMING FICTION IN EXPLANATION TO SECTION 73 AND NO T ALLOWED SET OFF OF AGAINST THE BUSINESS INCOME. 6. BEFORE LD. COMMISSIONER (APPEAL), THE ASSESSEE URGE D THAT THE ASSESSING OFFICER ERRONEOUSLY COMPUTED THE GROSS TOTAL INCOME . THE ASSESSING OFFICER COMMITTED MISTAKE DUE TO APPARENT ERROR IN COMPUTATION OF GROSS TOTAL INCOME AS THE BUSINESS INCOME EXCEED NON-BUSI NESS INCOME FROM CAPITAL GAIN AND INCOME FROM OTHER SOURCE. THE ASSE SSEE FURTHER EXPLAINED THAT COMPUTATION OF BUSINESS LOSS OF RS. 67,13,222/- IS ERRONEOUS AND COMPUTATION MISTAKE. THE DISALLOWANCE ON ACCOUNT OF CAPITAL LOSS FROM THEFT OF RS. 6.68 LAKHS AND OTHER DISALLOWANCES, IF SUSTAINED WOULD ONLY REDUCE THE LOSS. THE ASSESSING OFFICER INADVERTENTLY INCREASED THE LOSS AND ALLOWED HIGHER CARRY FORWARD LOSS. IT WAS FURTHER EXPLAINED THAT THE CORRECT BUSINESS LOSS AS PER COM PUTATION OF INCOME ADOPTED BY ASSESSING OFFICER WOULD BE RS. 48,41,946 /- AND NOT OF RS. 67,13,222/- AS COMPUTED BY ASSESSING OFFICER. THE A SSESSEE SUBMITTED THAT NON-BUSINESS INCOME FROM CAPITAL GAIN OF RS. 1 8,80,973/- TOGETHER WITH INCOME FROM OTHER SOURCES OF RS. 34,40,775/- W OULD EXCEED THE BUSINESS LOSS OF RS. 48,41,946/-. THEREFORE, WHEN N ON-BUSINESS INCOME EXCEEDS THE BUSINESS INCOME, THE EXPLANATION TO SEC TION 73 HAS NO APPLICATION. THE LD. COMMISSIONER (APPEAL) AFTER CO NSIDERING THE FRESH COMPUTATION OF INCOME AND THE EXPLANATION FURNISHED BY ASSESSEE OBSERVED THAT GROSS TOTAL INCOME OF ASSESSEE-COMPAN Y MAINLY CONSIST OF INCOME, FALLING UNDER HEAD OTHER THAN PROFIT AND GA IN OF BUSINESS AND ITA NO. 7269/M/2011- M/S NATRAJ FINANCIAL & SERVICES PVT. L TD. 5 PROFESSION. THE INCOME OF ASSESSEE UNDER THE HEAD B USINESS INCOME IS HIGHER THAN THE ASSESSABLE INCOME. THEREFORE, THE D EEMING FICTION IN SECTION 73 WOULD NOT APPLY. THE LD. COMMISSIONER (A PPEAL) ALSO CONCLUDED THAT THE ASSESSEE-COMPANY IS NOT A PART O F ANY GROUP COMPANY AND RATHER TRADED IN SHARE AND SECURITY OF ALL TYPE S OF COMPANIES. THE ASSESSEE EARNED CAPITAL GAIN OF RS. 18,80,793/- TOG ETHER WITH THE INCOME FROM OTHER SOURCES AT RS. 34,40,775/-, WHICH EXCEED THE BUSINESS LOSS OF RS. 48,41,946/-, THEREFORE, THE ASSESSEE IS CLEARLY COVERED BY FIRST EXCEPTION IN EXPLANATION TO SECTION 73 AND DELETED THE DISALLOWANCE OF LOSS. THE LD. DR FOR THE REVENUE FAILED TO BRING AN Y CONTRARY MATERIAL OR LAW TO OUR NOTICE TO TAKE A CONTRARY VIEW. THEREFOR E, WE DO NOT FIND ANY ILLEGALITY OR INFIRMITY IN THE ORDER PASSED BY LD. COMMISSIONER (APPEAL). THE CONTENTION OF LD. DR FOR THE REVENUE IS THAT NO REMAND REPORT WAS SOUGHT FROM ASSESSING OFFICER HAS NO LEGAL FORCE, A S NO FRESH EVIDENCE OR ADDITIONAL EVIDENCE WAS FURNISHED BY THE ASSESSEE. THE ASSESSEE HAS EXPLAINED THE COMPUTATION OF INCOME UNDER DIFFERENT HEAD OF INCOME WHICH WAS APPRECIATED AND ACCEPTED BY LD. COMMISSIO NER (APPEAL). IN THE RESULT, GROUND OF APPEAL RAISED BY REVENUE IS D ISMISSED. THE CASE LAW RELIED BY LD. DR IS NOT HELPFUL TO THE REVENUE. AS WE HAVE SEEN THAT THE LD COMMISSIONER (APPEALS) HAS GIVEN CLEAR FINDINGS THA T DEEMING FICTION IN SECTION 73 IS NOT APPLICABLE ON THE ASSESSEE. 7. IN THE RESULT, APPEAL FILED BY REVENUE IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND DAY OF JUNE 2018. SD/- SD/- (RAJESH KUMAR) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI; DATED 22/06/2018 S.K.PS ITA NO. 7269/M/2011- M/S NATRAJ FINANCIAL & SERVICES PVT. L TD. 6 COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT.REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY/