Saroj Poddar, New Delhi V. ITO, Ward- 14(4), New Delhi

ITA 7508/DEL/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 5151 (ITAT-DELHI)
• Duration Of Justice: 5 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-02-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2015-2016
• Appeal Filed On: 12-09-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: H K CHAUDHARY
• Assessee Lawyers: PREM LATA BEHEN
• Keywords: Opportunity of being heard; Transactions in derivatives
• Section: 133(6)

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI G BENCH, NEW DELHI BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER, AND MS SUCHITRA KAMBLE, JUDICIAL MEMBER ITA NO. 7508/DEL/2019 [A.YS 2015-16] SAROJ PODDAR, VS. ITO S-6, PARADISE PLAZA, WARD 14(4), ALAKNANDA SHOPPING COMPLEX, NEW DELHI - 110002 ALAKNANDA NEW DELHI 110 019 PAN NO: ADRPP 9683 L [APPELLANT] [RESPONDENT] DATE OF HEARING : 18.02.2020 DATE OF PRONOUNCEMENT : 19.02.2020 ASSESSEE BY : SMT. PREM LATA BEHEN, SR. ADV. REVENUE BY : SHRI H. K. CHAUDHARY, CIT-DR ORDER PER N.K. BILLAIYA, ACCOUNTANT MEMBER, THIS APPEAL BY THE ASSESSEE IS PREFERRED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-36, NEW DELHI DATED 15.07.2019 PERTAINING TO ASSESSMENT YEAR 2015-16. 2 2. THE SUM AND SUBSTANCE OF THE GRIEVANCE OF THE ASSESSEE IS THAT THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF LOSS OF RS. 43,02,811/- CLAIMED BY THE ASSESSEE ON ACCOUNT OF M TO M CHARGES. 3. THE REPRESENTATIVES OF BOTH THE SIDES WERE HEARD AT LENGTH AND THE CASE RECORDS CAREFULLY PERUSED. 4. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE APPELLANT RETURNED INCOME OF RS. 5,85,140/-, E FILING HER RETURN OF INCOME ON 22.09.2015. THE RETURN WAS SELECTED FOR SCRUTINY ASSESSMENT THROUGH CASS AND THE REASON FOR SELECTION WAS ON ACCOUNT OF SUSPICIOUS SALE TRANSACTION IN SHARES OF PENNY STOCK. STATUTORY NOTICES WERE, ACCORDINGLY, ISSUED AND SERVED UPON THE ASSESSEE. 5. IN HER RETURN OF INCOME, THE APPELLANT HAS SHOWN PROFIT FROM SALE AND PURCHASE OF SHARES. THE TRADING AND PROFIT AND LOSS ACCOUNT SHOWS OPENING STOCK OF SHARES AT RS. 50,98,155/-, SALE OF SHARES AT RS. 6,62,93,238/- AND PURCHASES OF RS. 5,47,45,648/-. THE NET PROFIT WAS AT RS. 39,22,272/- WHICH INCLUDED DIVIDEND, SALARY, INTEREST INCOME AND RENTAL INCOME AND NET TAXABLE INCOME WAS RETURNED AT RS. 5,85,140/-. 3 6. DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS DEBITED TO PROFIT AND LOSS ACCOUNT RS. 43,02,811/- ON ACCOUNT OF M TO M CHARGES. THE ASSESSEE WAS ASKED TO EXPLAIN THE DEBIT. 7. IN HER REPLY, THE ASSESSEE EXPLAINED THE NATURE OF MARK TO MARK LOSS ON ACCOUNT F&O TRADING. PURSUANT TO THE SUBMISSIONS AND DETAILS FURNISHED BY THE ASSESSEE, THE ASSESSING OFFICER ISSUED NOTICE U/S 133(6) OF THE INCOME-TAX ACT, 1961 [HEREINAFTER REFERRED TO AS 'THE ACT'] TO R.K. STOCKHOLDING PVT LTD WHO IS THE BROKER OF THE ASSESSEE. THE BROKER WAS ASKED TO EXPLAIN AND FURNISH SCRIPT WISE DETAILS OF THE TRANSACTIONS DONE BY THE ASSESSEE. 8. THE BROKER FURNISHED REQUISITE DETAILS. THEREAFTER, THE ASSESSING OFFICER ONCE AGAIN ASKED FOR CLARIFICATION IN RESPECT OF MARK TO MARK PAYMENTS RECEIVED BY STOCK BROKER FROM THE ASSESSEE. 9. IN HIS REPLY, THE STOCK BROKER EXPLAINED THAT MARK TO MARK PAYMENTS RECEIVED BY THEM IS IN THE BANK ACCOUNT WHICH WAS PROVIDED BY THE BROKER TO THE ASSESSEE AT THE TIME OF OPENING OF ACCOUNT AND AS A RUNNING LEDGER, THE BROKER EXPLAINED THAT THEY NEVER POST THE PAYMENT RECEIVED FROM THE CLIENT AS MARK TO MARK BECAUSE THEY DO NOT 4 KNOW WHAT TRADE OR WHAT POSITION THE CLIENT IS GOING TO CREATE IN EXCHANGE. IT WAS EXPLAINED THAT THEY WORK AS A BROKER BETWEEN THE EXCHANGE AND THE CLIENT AND AS EXCHANGE GIVES THEM THE FILE FOR THE MARK TO MARK PAY, THEY ALSO DEBIT THE CLIENT ACCOUNT AND TRANSFER IT TO THE EXCHANGE ON NEXT WORKING DAY AND THE SAME IS THE CASE OF PAY ,OUT OF WHICH THE BROKER GETS FROM THE EXCHANGE WHICH IS CREDITED IN THE CLIENT ACCOUNT ON THE SAME DAY. 10. THEREAFTER, THE ASSESSING OFFICER PROCEEDED BY REFERRING TO THE REPORT OF THE DGIT, INV, KOLKATA WHICH WAS IN RESPECT OF PENNY STOCK AND LIST OF BENEFICIARIES. THE ASSESSING OFFICER FOUND THAT THE ASSESSEE HAS ALSO DEALT IN ONE OF THE PENNY STOCK REFERRED TO IN ITS INVESTIGATION REPORT AND WHICH RELATES TO CRESSANDA SOLUTIONS LTD, WHICH HAPPENS TO BE ONE OF THE PENNY STOCK AND ACCORDINGLY, DISALLOWED HE ENTIRE CLAIM OF LOSS OF RS. 43,02,811/-. 11. A CAREFUL PERUSAL OF THE ASSESSMENT ORDER SHOWS THAT THE ASSESSING OFFICER HAS MIXED UP THE LOSSES UNDER MARK TO MARK F&O TRADING AND LOSS FROM SCRIPT OF CRESSANDA SOLUTIONS LTD. IN OUR UNDERSTANDING OF THE FACTS, THE ASSESSEE HAS INCURRED TWO KINDS OF LOSSES ONE ON ACCOUNT OF MARK TO MARK IN F & O AND THE OTHER ON SALE AND PURCHASE OF SHARES OF CRESSANDA SOLUTIONS LTD. A PERUSAL OF THE 5 ASSESSMENT ORDER DOES NOT BIFURCATE THESE LOSSES AND THE ASSESSING OFFICER HAS MIXED UP BOTH THE LOSSES AND HAS TREATED THE ENTIRE LOSS ON ACCOUNT OF PENNY STOCK. 12. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE VEHEMENTLY STATED THAT COMPLETE DOCUMENTARY DETAILS WERE FURNISHED BEFORE THE ASSESSING OFFICER AND ALSO BEFORE THE LD. CIT(A), BUT BOTH OF THEM DID NOT CARE TO LOOK INTO THE DETAILS AND HAVE SIMPLE GONE BY THE REPORT OF THE INVESTIGATION WING KOLKATA. 13. WE FIND FORCE IN THE CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE. NOT ONLY THE ASSESSING OFFICER BUT ALSO THE FIRST APPELLATE AUTHORITY HAS COMPLETELY IGNORED THE FACT THAT LOSS ON ACCOUNT OF MARK TO MARK TRADING AND LOSS IN RESPECT OF CRESSANDA SOLUTIONS LTD ARE IN RESPECT OF TWO CATEGORIES AND THE SAME CANNOT BE MIXED UP. SINCE THE FACTS ARE NEITHER CLEARLY COMING OUT OF THE ASSESSMENT ORDER NOR FROM THE ORDER OF THE FIRST APPELLATE AUTHORITY, WE DEEM IT FIT TO RESTORE THE ENTIRE ISSUE TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING OFFICER IS DIRECTED TO EXAMINE THE DETAILS AND TO THEN BIFURCATE THE LOSS INTO M AND M SEGMENT AND SHARES TRADING SEGMENT AS PER THE DETAILS FURNISHED BY THE ASSESSEE AND ALSO BY HER STOCK BROKER. THEREAFTER, THE ASSESSING 6 OFFICER SHALL DECIDE THE ISSUE AFRESH AFTER AFFORDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 14. IN THE RESULT, THE APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 19.02.2020. SD/- SD/- [SUCHITRA KAMBLE] [N.K. BILLAIYA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 19 TH FEBRUARY, 2020 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR, ITAT, NEW DELHI