M/s. NH SECURITIES LTD., MUMBAI V. ACIT CENT CIR. - 40, MUMBAI

ITA 792/MUM/2008

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 7830 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 1 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-03-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2001-2002
• Appeal Filed On: 05-02-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR P DANIEL

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'B' BENCH, MUMBAI BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO. 792/MUM/2008 (ASSESSMENT YEAR: 2001-02) M/S. NH SECURITIES LTD. ACIT, CENTRAL CIRCLE 40 BHUPEN CHAMBERS, GROUND FLOOR MUMBAI 9, DALAL STREET, FORT VS. MUMBAI 400023 PAN - AAACS 7140 Q APPELLANT RESPONDENT APPELLANT BY: SHRI RAJIV KHANDELWAL RESPONDENT BY: DR. P. DANIEL O R D E R PER B. RAMAKOTAIAH, A.M. THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER OF THE CIT(A)- VII, MUMBAI DATED 16.01.2008. 2. ASSESSEE HAS RAISED THE FOLLOWING TWO GROUNDS: - 1. THE COMMISSIONER OF INCOME-TAX (APPEALS), CENTR AL VII, MUMBAI (HEREINAFTER REFERRED TO AS THE CIT(A)) ERRED IN UP HOLDING THE ACTION OF THE ASSESSING OFFICER IN DISALLOWING LOSS OF RS. 13,39,56,196 & RS.9,483 ON TRANSACTION BACKED BY DELIVERY AND VYAJ BADLA, RESPECTIVELY, ON THE BASIS THAT THE TRANSACTIONS AR E NOT GENUINE IN NATURE. THE APPELLANT CONTEND THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE OBSERVATIONS OF THE CIT(A) IN UPHOLDING THE ACTION OF THE ASSESSING OFFICER IN NOT ALLOWING THE IMPUGNED LOSS ARISEN ON TRANSACTIONS CARRIED OUT IN THE PURSUIT O F BUSINESS, ARE ERRONEOUS, BASELESS AND CONTRARY TO THE PROVISIONS OF LAW. THE CIT(A) OUGHT TO HAVE ALLOWED THE IMPUGNED LOSS ARIS EN ON TRANSACTIONS CARRIED OUT IN THE PURSUIT OF BUSINESS . 2. THE CIT(A) ERRED IN UPHOLDING THE ACTION OF THE ASSESSING OFFICER IN MAKING AN ADDITION OF A SUM OF RS.31,21,932 UNDER S ECTION 41(1) OF THE ACT ON THE GROUND THAT THE LIABILITY HAS CEASED TO EXIST IN THE ABSENCE OF CONFIRMATIONS. THE APPELLANTS CONTENDED THAT THE CIT(A) OUGHT NOT TO HAVE UPHELD THE ACTION OF THE ASSESSING OFFICER AND SHOULD HAVE DELETED THE IMPUGNED ADDITION AFTER CONSIDERING THE FACTS AND C IRCUMSTANCES OF THE CASE. ITA NO. 792/MUM/2008 M/S. NH SECURITIES LTD. 2 3. THE ASSESSEE CLAIMED LOSS IN ITS RETURN OF INCOME F OR A.Y. 2001-02 OF ` 13,39,56,196/- ON ACCOUNT OF LOSS INCURRED ON SHARE TRANSACTIONS ON DELIVERY BASIS AND 9,483/- BEING LOSS ON VYAJ BADLA WHICH WAS DISALLOWED BY THE A.O. FOLLOWING THE REPORT OF THE SEBI AND JPC I N THE KETAN PAREKH CASES. THE CIT(A), UPHELD THE DISALLOWANCE OF THE LOSS. 4. THE LEARNED COUNSEL FILED ELABORATE PAPER BOOK GIVI NG COMPLETE DETAILS OF TRANSACTIONS INVOLVING DELIVERY AND PAYMENT DETA ILS AND MARKET TO MARKET LOSSES, ETC. AND SUBMITTED THAT THE A.O. HAS NOT EX AMINED THE ENTIRE EVIDENCES AVAILABLE WITH HIM AT THE TIME OF PASSING THE ORDER AND SINCE THE ASSESSEE WAS NOT GIVEN MUCH OPPORTUNITY AT THAT POI NT OF TIME THE A.O. PASSED SIMILAR ORDERS IN ALL THE GROUP CASES. IT WA S HIS SUBMISSION THAT THE ASSESSEE WAS IN A POSITION TO SUPPORT THE CLAIM OF LOSS AND FURTHER HE COUNTERED THE OBSERVATIONS OF THE A.O. BY STATING T HAT THE OBSERVATIONS WITH REFERENCE TO PARA 22 IN PAGE 14-16 OF THE ORDER WIT H REFERENCE TO NON- FURNISHING OF INFORMATION WAS NOT CORRECT IN AS MUC H AS THERE WAS NO DISPUTE ON THE ISSUE OF GENUINENESS OR OTHERWISE OF THE LOSS ON ACCOUNT OF TRADING ACTIVITY OF THE ASSESSEE IN THE BLOCK ASSES SMENT AND ON THE CONTRARY THE TRADING ACTIVITY HAS BEEN ACCEPTED IN THE AFORE SAID ASSESSMENT AND ALSO IN THE PAST. FURTHER IT WAS ALSO SUBMITTED THAT MAJ ORITY OF THE SPECULATIVE TRANSACTIONS ARE NOT WITH THE SISTER CONCERNS. HE R EFERRED TO THE STATEMENT SHOWING ANALYSIS OF TRADES EXECUTED ON EXCHANGES AN D PRINCIPLE TO PRINCIPLE TRADE DURING THE RELEVANT PERIOD AND SUBMITTED THAT 99.28% OF THE TRADE TRANSACTIONS HAVE BEEN EXECUTED ON EXCHANGE AND ON THE TRANSACTIONS WITH ASSOCIATE CONCERNS THERE WAS NO LOSS BUT PROFIT. HE COUNTERED ALL THE ARGUMENTS OF THE A.O. AND SUBMITTED THAT THE ASSESS EE HAS PRODUCED BANK STATEMENTS IN ORIGINAL DURING THE COURSE OF ASSESSM ENT PROCEEDINGS AND THEY HAVE SUBMITTED ALL PRIMARY DOCUMENTS BEFORE THE ISS UE OF VARIOUS SHOW CAUSE NOTICES BUT THEY HAVE NOT BEEN CONSIDERED AT ALL. THE LEARNED COUNSEL HAS FILED DETAILED WRITTEN SUBMISSIONS. 5. THE SPECIAL COUNSEL FOR THE REVENUE HAS SUBMITTED T HAT THE ASSESSEE IS PART OF KETAN PAREKH GROUP AND MOST OF THE TRANS ACTIONS ARE DONE WITH GROUP CONCERNS. AFTER PRELIMINARY ARGUMENTS WHEN IT WAS POINTED OUT THAT THE ASSESSING OFFICERS ORDER DOES NOT SPEAK OF THE FACTS AS EXPLAINED BY THE ITA NO. 792/MUM/2008 M/S. NH SECURITIES LTD. 3 COUNSEL AND THE FACTS ON RECORD ARE ENTIRELY DIFFER ENT FROM THE OBSERVATIONS OF THE A.O. IT WAS SUBMITTED THAT MANY OF THE OBSER VATIONS ARE COMMON FOR THE GROUP CONCERNS AND SPECIFIC ENQUIRY ABOUT ASSES SEES TRANSACTIONS WAS NOT MADE. 6. CONSIDERING THE VOLUMINOUS DETAILS FILED BEFORE US SUPPORTING THE ASSESSEES CLAIM AND ON PERUSAL OF THE ORDERS OF TH E A.O. AND THE CIT(A), WE ARE OF THE OPINION THAT THE A.O. HAS DISALLOWED THE CLAMS ON CERTAIN GENERAL PRINCIPLES ABOUT THE KETAN PAREKH GROUP CASES AND O BSERVATIONS OF THE JPC AND SEBI WITHOUT EXAMINING THE INDIVIDUAL DETAILS O F THE ASSESSEE COMPANY FOR THE IMPUGNED YEAR. IN VIEW OF THIS, WE ARE OF T HE OPINION THAT THE MATTER REQUIRES RE-EXAMINATION BY THE A.O. IT IS ALSO NOTI CED THAT IN THE CASE OF SAI MANGAL INVESTRADE LTD. THE COORDINATE BENCH VIDE OR DER DATED 25.11.2009 HAS ACCEPTED THAT THE TRANSACTIONS ARE GENUINE AND THE LOSS CLAIMED PERTAINS TO VALUATION OF STOCK AT COST OR NET REALI SABLE VALUE AND ACCORDINGLY THE GROUNDS OF THE ASSESSEE WERE ALLOWED. IN VIEW O F THIS FINDING OF FACT IN ANOTHER GROUP CONCERN, WE ARE OF THE OPINION THAT T HE A.O. SHOULD EXAMINE THE NATURE OF THE TRANSACTION UNDERTAKEN BY THE ASS ESSEE WITHOUT GETTING AFFECTED/PERSUADED BY THE OBSERVATIONS OF THE SEBI AND JPC, UNLESS THEY ARE APPLICABLE TO THE FACTS IN ASSESSEE CASE. IT IS ALSO BROUGHT TO OUR NOTICE THAT THERE WAS SPECIAL AUDIT CONDUCTED OF ASSESSEE S TRANSACTIONS AND THE REPORT WAS NOT PLACED ON RECORD. THE A.O. IS DIRECT ED TO CONSIDER THE ISSUES AFRESH IN THE LIGHT OF THE FACTS ON RECORD AND NEED LESS TO SAY THAT THE ASSESSEE SHOULD BE GIVEN OPPORTUNITY BEFORE DECIDIN G THE ISSUES. FOR THIS PURPOSE THE ORDERS OF THE A.O. AND CIT(A) ON THIS I SSUE ARE SET ASIDE AND THE ASSESSMENT IS RESTORED BACK TO THE A.O. TO CONSIDER IT AFRESH AFTER EXAMINING THE FACTS AND ACCORDING TO THE LAW. 7. GROUND NO. 2 PERTAINS TO THE ISSUE OF ADDITION OF A SUM OF ` 31,21,932/- UNDER SECTION 41(1) OF THE I.T. ACT ON THE GROUND THAT THE LIABILITY HAS CEASED TO EXIST IN THE ABSENCE OF CON FIRMATIONS. 8. THE LEARNED COUNSEL SUBMITTED THAT THE A.O. WAS NOT CORRECT IN MAKING THE ADDITION WHEN ASSESSEE WAS LIABLE TO PAY THE AMOUNT BUT COULD NOT SUBMIT CONFIRMATIONS DUE TO ADVERSE MARKET COND ITIONS. IT WAS HIS SUBMISSION THAT FOLLOWING THE DECISION OF THE HON'B LE BOMBAY HIGH COURT IN ITA NO. 792/MUM/2008 M/S. NH SECURITIES LTD. 4 THE CASE OF CIT VS. CHASE BRIGHT STEEL LTD. 177 ITR 128 PROVISIONS OF SECTION 41(1) CANNOT BE APPLICABLE TO CURRENT YEAR SINCE AS SESSEE HAS NOT WRITTEN BACK ANY AMOUNT TO THE P & L ACCOUNT. WITHOUT GOING INTO THE MERITS OF THE ISSUE WE ARE OF THE OPINION THAT THIS ISSUE CAN BE RE-EXAMINED BY THE A.O. SINCE THE ISSUE OF QUANTIFICATION OF LOSS IS RESTOR ED TO THE FILE OF THE A.O. VIDE GROUND NO. 1. ASSESSEE IS FREE TO MAKE SUBMISSION I NCLUDING FILING OF CONFIRMATIONS IN ORDER TO SORT OUT THE CONTENTIONS. THE A.O. SHOULD EXAMINE THE ISSUE BOTH ON FACTS AS WELL AS APPLICABLE LAW B EFORE MAKING ANY DISALLOWANCE/ADDITION UNDER THIS HEAD. WITH DIRECTI ON THE ISSUE IN GROUND NO. 2 IS RESTORED TO THE FILE OF THE A.O. 9. A.O. SHOULD GIVE REASONABLE OPPORTUNITY TO THE ASSE SSEE TO MAKE ITS SUBMISSIONS. AFTER EXAMINING THE TRANSACTIONS AND A LSO VERIFYING WHETHER THE LOSS INCURRED IS ALSO COVERED BY THE PROVISIONS OF SECTION 73 BEING SPECULATIVE IN NATURE. THESE ASPECTS SHOULD BE EXAM INED THOROUGHLY AFTER GIVING DUE OPPORTUNITY TO THE ASSESSEE. 10. IN THE RESULT, APPEAL IS ALLOWED FOR STATISTICAL PU RPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH MARCH 2011. SD/- SD/- (D. MANMOHAN) (B. RAMAKOTAIAH) VICE PRESIDENT ACCOUNTANT MEMBER MUMBAI, DATED: 30 TH MARCH 2011 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) CENTRAL VII, MUMBAI 4. THE CIT CENTRAL !, MUMBAI CITY 5. THE DR, B BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P