JEET PRAKASH CHUGANI, MUMBAI V. A.C.I.T.-2(3), MUMBAI

ITA 8509/MUM/2011

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 71784 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: J
• Next Hearing Date: 22-10-2013
• Assessment Year: 2004-2005
• Appeal Filed On: 15-12-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: B P K
• Assessee Lawyers: KESHAV BHUJLE
• Keywords: Business income; Salary income; Opportunity of being heard; Speculation loss; Difference of opinion; Change of opinion
• Section: 147; 145; 148; 154

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL J , BENCH MUMBAI BEFORE SHRI VIJAY PAL RAO , JM & SHRI D.KARUNAKARA RAO, AM ITA NO. 8509 /MUM/201 1 ( ASSESSMENT YEAR :200 4 - 20 05 ) JEET PRAKASH CHUGANI, 7/72, SONA APARTMENTS, MHB COMPLEX, BANDRA RECLAMATION, BANDRA (WEST), MUMBAI - 400 050 VS. ACIT 2(3), MUMBAI - 20 PAN/GIR NO. : A AA CJ 1381 Q ( APPELLANT ) .. ( RESPONDENT ) /ASSESSEE BY : SHRI KESHAV BHUJLE /REVENUE BY : SHRI B.P.K. PANDA DATE OF HEARING : 2 7 TH NOVEMBER , 201 3 DATE OF PRONOUNCEMENT : 2 7 TH NOVEMBER,2013 O R D E R PER D.KARUNAKARA RAO ( A .M.) : TH IS IS AN APPEAL BY THE ASSESS E E AGAINST THE ORDER DATED 20 - 9 - 2011 , PASSED BY THE LEARNED CIT(A) - 6 , MUMBAI FOR THE ASSESSMENT YEAR 200 4 - 20 05 . 2 . THE A SSESSEE IN ITS APPEALS HAS RAISED THE FOLLOWING GROUNDS : - 1. ON FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) [CIT(A)] HAS ERRED IN UPHOLDING THE REOPENING OF THE APPELLANTS ASSESSMENT U/S.148/147 OF THE INCOME TAX ACT. THE REOPENING ASSESSMENT IS BAD IN LAW AND SHOULD, THEREFORE, BE QUASHED. 2. ON FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) [CIT(A)] HAS ERRED IN UPHOLDING THAT THE ASSESSEE IS A TRADER IN SHARES, THEREBY REJECTING THE ASSESSEES CLAIM THAT HE IS AN INVESTOR IN SHARES. ITA NO. 8509 /201 1 2 3. WITHOUT PREJUDICE TO ABOVE, ON FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, WHETHER THE LD. COMMISSIONER OF INCOME TAX (APPEALS) [CIT(A)] HAS ERRED IN U PHOLDING THE AOS TREATMENT IN ADOPTING THE VALUE OF OPENING STOCK AT RS. 12,12,024/ - , WHICH IS THE MARKET VALUE OF THE SHARES AS OF 31.3.2003 AS AGAINST A VALUE OF RS. 21,30,839/ - , WHICH WAS ITS COST REFLECTED IN THE BOOKS BY THE APPELLANT. 3 . BRIEFLY STA TED THE RELEVANT FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN INDIVIDUAL HAVING INCOME FROM SALARY, CAPITAL GAIN AND OTHER SOURCES. THE ASSESSEE FILED ITS RETURN OF INCOME DECLARING TOTAL INCOME AT RS. 20,31,164/ - . THE INCOME WAS ASSESSED UNDER SECTION 143 READ WITH SECTION 147 OF THE ACT AT RS. 25,21,180/ - . THIS IS A CASE WHERE THE SCRUTINY ASSESSMENT WAS NOT DONE BY ISSUING NOTICE UNDER SECTION 142 OF THE ACT. RELEVANT DATES NECESSARY HERE THAT THE RETURN OF INCOME FOR AY 2004 - 05 WAS FILED ON 1 - 10 - 2004 AND THE SAME WAS REVISED ON 30 - 3 - 2005 ; THE DUE DATE OF ISSUANCE OF NOTICE UNDER SECTION 142 IS DATED 30 - 3 - 2006 AND THE NOTICE UNDER SECTION 148 WAS ISSUED ON 31 - 3 - 2009. 4 . GROUND - WISE ADJUDICATION IS GIVEN IN THE FOLLOWING PARAGRAPHS : - 5 . GROUND NO.1 REL ATES TO REOPENING OF THE ASSESSMENT AND ISSUANCE OF NOTICE UNDER SECTION 147/148 OF THE I.T.ACT. IN THIS REGARD, RELYING ON CERTAIN DECISIONS, LEARNED COUNSEL SUBMITTED THAT THE REASONS RECORDED BY THE AO SUGGEST THAT THE PROCEEDINGS UNDER SECTION 154 WOUL D BE SUFFICE AND THERE IS NO NEED FOR INVOKING THE HARSHER PROVISIONS LIKE SECTION 148 OF THE ACT. IN THIS REGARD, HE BROUGHT OUR ATTENTION TO THE REASONS RECORDED BY TH E AO AND ALSO BROUGHT OUR ATTENTION TO THE REVISED COMPUTATION OF INCOME, COPIES OF WHI CH HAVE BEEN FILED AT PAGES 73 & 74 OF THE PAPER BOOK AND ITA NO. 8509 /201 1 3 DEMONSTRATED THAT THE ISSUE MENTIONED IN THE REASONS RECORDED IS RECTIFIABLE ONE UNDER SECTION 154 OF THE ACT. HOWEVER, ON POINTING OUT BY THE BENCH AGAINST THE SAID PROPOSITION OF THE LEARNED AR, H E MENTIONED THAT ON THE GROUND OF CHANGE OF OPINION, THE NOTICE ISSUED UNDER SECTION 148 SHOULD BE BAD IN LAW. FURTHER, HE MENTIONED THAT THERE IS A JUDGMENT OF THE H O N BLE SUPREME COURT IN THE CASE OF ACIT VS. RAJESH JHAVERI STOCK BROKERS PVT. LTD, REPORT ED IN (2007) 291 ITR 500 (SC) , WHICH IS RELEVANT FOR THE PROPOSITION THAT NO OPINION IS FORMED DURING THE PROCEEDINGS UNDER SECTION 143(1) OF THE ACT. THE LEARNED COUNSEL RELIED HEAVILY ON THE SUBMISSIONS MADE DURING THE PROCEEDINGS BEFORE THE LOWER AUTHOR ITIES. 6 . ON THE OTHER HAND, LEARNED DR FOR THE REVENUE RELIED ON THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF ACIT VS. RAJESH JHAVERI STOCK BROKERS PVT. LTD, REPORTED IN (2007) 291 ITR 500 (SC) AND ALSO MENTIONED THAT THE CHANGE OF HEAD OF INCOME FOR TAXING THE CAPITAL GAINS AND SET OFF OF THE SAID LOSS AGAINST THE SALARIED INCOME ARE NOT RECTIFIABLE MISTAKE S . THEREFORE, THEY SHALL NOT FALL IN THE SCOPE OF THE PROVISIONS OF SECTION 154 OF THE ACT. 7 . ON PERUSAL OF THE PAPERS FILED BEFORE U S AS WELL AS THE DECISION CITED ABOVE, WE ARE OF THE OPINION THAT THE GROUND NO. 1 RAISED BY THE ASSESSEE SHOULD NOT BE ALLOWED. ACCORDINGLY, GROUND NO.1 IS DISMISSED AND AGAINST THE ASSESSEE . ITA NO. 8509 /201 1 4 8 . GROUND NO.2 RELATES TO TREATING THE ASSESSEE AS A TRADER IN SHARES AND NOT THE INVESTOR. IN THIS REGARD, LEARNED COUNSEL MENTIONED THAT THE ASSESSEE SINCE THE YEAR 2000 HAS BEEN CON SISTENTLY SHOWING THE ACTIVITY AS CAPITAL GAINS AND REFLECT ED THE IMPUGNED SHARES AS INVESTMENT IN THE BALANCE SHEET. PRIOR TO THAT, TH E ASSESSEE WAS ADMITTEDLY A TRADER. IN THIS REGARD, THE ASSESSEE BROUGHT OUR ATTENTION TO THE BALANCE SHEET, WHEREIN THE SHARES HAVE BEEN SHOWN UNDER THE ACCOUNT STOCK, WHICH ASSESSEE EXPECTS US TO UNDERST AND THEM AS INVESTMENT. IN THIS RESPECT, P AGE 7 0 OF THE PAPER BOOK IS RELEVANT. HE MENTIONED THAT THE CIT(A) WRONGLY APPROVED THE FINDING OF THE AO. WHILE APPROVING THE SAME, THE CIT(A) ANALYZED ONLY THE NUMBER OF TRANSACTIONS IN REGARD TO BOTH PURCHASE AND SALE AND NOT ANY OTHER PARAMETERS, WHICH SHOU LD HAVE BEEN EXAMINED BY THE LOWER AUTHORITIES. NARRATING THE DEPARTMENTAL STAND FOR THE ASSESSMENT YEAR 2002 - 03 & 2003 - 04, THE CIT(A) HAS TAKEN A DECISION THAT FOR THE PRESENT YEAR ALSO THE CLAIM OF THE ASSESSEE MUST BE TREATED AS BUSINESS INCOME AND NOT THE CAPITAL GAINS. FURTHER, IT IS POINTED OUT THAT THE AO AS WELL AS THE CIT(A) HAS DISTURBED THE OPENING STOCK FIGURES AND TOOK THE VALUE AT RS. 12,12,024/ - AS AGAINST THE CLOSING STOCK OF RS. 21,30,839/ - AS DISCLOSED IN BOOKS . AS PER THE COUNSEL OF THE AS SESSEE, THE SAME IS NOT IN TUNE WITH THE DECISION OF THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF MELMOULD CORPORATION V. C IT , REPORTED IN 202 ITR 789 , WHICH IS RELEVANT FOR THE PROPOSITION, THE ITA NO. 8509 /201 1 5 OPENING FIGURES SHOULD NOT BE DISTURBED WHEN METHOD OF VAL UATION WAS CHANGED BY THE REVENUE. 9 . ON THE OTHER HAND, LEARNED DR FOR THE REVENUE MENTIONED THAT THE SAID ORDER OF THE CIT(A) ALTHOUGH NOT COMMENTED ON THE FINAL OUTCOME OF THE DEPARTMENTAL STAND IN FURTHER APPEAL FOR THE A.Y. 2002 - 03 AND EARLIER ASSESS MENT YEARS, HOWEVER, THE FACT REMAINS THAT THE ASSESSEE HAS SHOWN THE CLOSING STOCKS AS UNDER THE HEAD STOCKS AND NOT UNDER THE HEAD INVESTMENT. THE SUBMISSION OF THE LEARNED COUNSEL SHOULD NOT BE SUSTAINED. THERE IS NEED FOR GOING INTO THE BASIC RECOR DS BASED ON WHICH THE BALANCE SHEET IS PREPARED. REGARDING VALUATION, LEARNED DR MENTIONED THAT THE JUDGMENT IN THE CASE OF MELMOULD CORPORATION (SUPRA) IS GIVEN ON THE CONTEXT OF PROVISIONS OF SECTION 145 WHEN ONLY THE METHOD VALUE IS ALTERED AND NOT WHEN THE CHANGE OF HEAD OF INCOME IS MADE. WHEN THE DECISION IS TAKEN FOR TREATING PARTICULAR INCOME IN A DIFFERENT HEAD OF INCOME, CONSEQUENTLY, THE ACCOUNT , IN PRINCIPLE, APPLICABLE TO THE VALUATION OF STOCK SHOULD BE ADOPTED. AS PER HIM, THE SAID JUDGMENT I N THE CASE OF MELMOULD CORPORATION (SUPRA) IS DISTINGUISHABLE BOTH ON FACTS AS WELL AS ON LAW. AS PER THE LEARNED DR, THIS ARGUMENT COVERS GROUNDS NO. 2 & 3 OF THE APPEAL. 10 . WE HEARD BOTH THE PARTIES ON THE ISSUES RAISED IN GROUNDS NO. 2 & 3 OF THE APPEAL . PRIMA FACIE , WE FOUND THAT NOBODY HAS GONE INTO THE DIFFERENT PARAMETERS WHICH DETERMINE THE HEAD OF INCOME WHEN THE ITA NO. 8509 /201 1 6 ASSESSEE HAD INCOME OR LOSS ON SALE OF SHARES. THE REVENUE IS UNDER OBLIGATION TO EXAMINE NOT ONLY THE MANNER OF ACCOUNTING OF THE SAID S HARES IN BOOKS BUT ALSO THE INVESTMENT PATTERNS, TRANSACTION NUMBERS, VOLUMES, FREQUENCY, SOURCE OF INVESTMENTS, DIVIDEND PARTICULARS, CONSISTENCY ISSUES ETC. IT IS NOT CLEAR AS TO WHETHER THE ASSESSEE ENTERED INTO THE SAME SCRIPS REPEATEDLY OR OTHERWISE T O DELVE IN TO THE MOTIVE OF THE ASSESSEE . THERE IS NO CLEAR DISCUSSION IN THE ORDERS ON THE FACTS RELATED TO THE CLAIMS RELATING TO THE SPECULATION LOSS. THE ORDERS OF THE REVENUE ON THESE ISSUES ARE FOUND DEFICIENT ON THE SAID ISSUES . FURTHER, IT IS ALSO N OTICED THAT THE PRINCIPLES OF CONSISTENCY ARE NOT DISCUSSED IN THE IMPUGNED ORDER CONSIDERING THE FACTS OF THE PRESENT CASE. IN THE REMAND ORDER, THE AO NEEDS TO GO INTO THE REASONS FOR TREATING THE SHARE ACTIVITY AS CAPITAL GAINS SINCE THE YEAR 2000. CO NSIDERING THE ABOVE, WE ARE OF THE OPINION THA T THESE TWO GROUNDS SHOULD BE REMANDED TO THE FILES OF THE CIT(A) FOR FRESH FINDING ON THE ISSUES RAISED IN THESE GROUNDS. THE CIT(A) SHALL GRANT REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE BEFORE PAS SING A SPEAKING ORDER ON THE ISSUES RAISED BY THE ASSESSEE. ACCORDINGLY, GROUNDS NO. 2 & 3 ARE ALLOWED FOR STATISTICAL PURPOSES . 11 . RESULTANTLY , APPEAL OF THE ASSESSEE IS ALLOWED PARTLY FOR STATISTICAL PURPOSES. ITA NO. 8509 /201 1 7 ORDER PRONOUNCED IN THE OPEN COURT ON THIS 2 7 TH OF NOV. 201 3 . 2 7 TH 201 3 SD/ - SD/ - ( ) ( VIJAY PAL RAO ( ) ( D.KARUNAKARA RAO ) / JUDICIALMEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED : 2 7 /11/ 2013 /PKM , PS COPY OF THE ORDER FO RWARDED TO : / BY ORDER, ( ASSTT. REGISTRAR) / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / THE CIT(A) - X, MUMBAI. 4. / CIT 5. / DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//