EYEQUE INVESTMENTS & TRADINGT CO. P. LTD, MUMBAI V. ITO 9(1)(3), MUMBAI

ITA 8792/MUM/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 83729 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 8 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-09-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 17-09-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 28-12-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VIJAY KUMAR BORA
• Keywords: Transactions in derivatives; Speculation loss; Condonation of delay
• Section: 43(5)

Judgement Text

, , , , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E, MUMBAI .., ! , ' , # BEFORE SHRI I.P.BANSAL, JM AND SHRI RAJENDRA, AM ITA NO8792 /MUM/2011 (A.Y. 2007-08) EYEQUE INVESTMENTS & TRADING CO. PVT. LTD. 502, EXQTIQUE, 17 TH ROAD, KHAR (WEST), MUMBAI 400052 PAN:AAACE0903F THE ITO 9(1)3, AAYKAR BHAVAN, M.K.ROAD, MUMBAI 400 020 ( $% / // / APPELLANT) ' ' ' ' / VS. ( ()$%/ RESPONDENT) $% * + * + * + * + /APPELLANT BY : NONE ()$% * + * + * + * + /RESPONDENT BY : SHRI VIJAY KUMAR BORA ' * ,-' / / / / DATE OF HEARING : 17.09.2014 ./0 * ,-' / DATE OF PRONOUNCEMENT : 17.09.2014 1 1 1 1 / / / / O R D E R PER I.P.BANSAL (JM) : THIS IS AN APPEAL FILED BY THE ASSESSEE. IT IS DI RECTED AGAINST ORDER PASSED BY LD. CIT(A)-19, MUMBAI DATED 02/02/2011 FOR ASSES SMENT YEAR 2007-08. GROUNDS OF APPEAL READ AS UNDER: THE LEARNED A.O ERRED IN: 1. LOSS OF RS.35,82,423/- BE CONSIDERED AS BUSINESS IN COME. 2. INTEREST SHOULD BE ALLOWED IN FULL. 2. THE APPEAL IS BELATEDLY FILED WITH A DELAY OF 2 15 DAYS. THE ASSESSEE HAS SUBMITTED AN APPLICATION FOR CONDONATION OF DELAY WHICH IS SUPPORTED BY AN AFFIDAVIT FILED BY ONE OF THE DIRECTORS NAMELY PRE MBALA BHIRYA. IT IS MENTIONED IN THE AFFIDAVIT THAT HER HUSBAND SHRI BHOJ BIJLANI HAD EXPIRED ON 25/01/2010 AND THE DEPOSER WAS SUFFERING FROM PARALYSIS. THE BUSINESS ACTIVITY OF THE COMPANY WAS CLOSED DOWN AFTER THE DEATH OF HER HUSB AND AND ENTIRE STAFF RESIGNED FROM THE COMPANY. THE ORDER PASSED BY LD. CIT(A) WAS RECEIVED BY HER ON 28/03/2011 AND SINCE SHE WAS NOT CONVERSANT E ITHER WITH INCOME TAX MATTER OR BUSINESS ACTIVITY, SHE DID NOT TAKE ANY ACTION. AFTER FEW MONTHS SHE ITA NO8792 /MUM/2011 (A.Y. 2007-08 ) 2 VISITED NEW DELHI FOR STAYING WITH HER RELATIVES WHERE THE PAPERS WERE SHOWN TO THE OLD CHARTERED ACCOUNTANT OF THE COMPANY WHO A DVISED HER TO FILE THE APPEAL AND ACCORDINGLY THE DELAY WAS OF 215 DAYS. IT IS FURTHER MENTIONED THAT DELAY WAS UNINTENTIONAL AND MAY BE CONDONED. 3. ON THE ISSUE OF CONDONATION OF DELAY WE HAVE HEA RD LD. DR WHO OPPOSED THE REQUEST OF THE ASSESSEE AND SUBMITTED THAT THE ASSESSEES EXPLANATION GIVEN FOR CONDONATION OF DELAY SHOULD NOT BE ACCEPTED. 4. AFTER CONSIDERING THE FACTS AVAILABLE ON RECORD AND ALSO THE CONTENTS OF THE AFFIDAVITS WHICH HAVE BEEN REFERRED ABOVE, WE ARE O F THE OPINION THAT THE DELAY SHOULD BE CONDONED. ACCORDINGLY, THE DELAY IS CON DONED. 5. NOTICE OF HEARING WAS SENT TO THE ASSESSEE THR OUGH RPAD AT THE ADDRESS MENTIONED IN FORM NO.36 AS WELL AS MENTIONED IN TH E AFFIDAVIT. HOWEVER, THE NOTICE HAS BEEN RECEIVED BACK FROM THE POSTAL AUTHO RITIES WITH THE REMARK NOT KNOWN. EARLIER ALSO NOTICE SENT TO THE ASSESSEE H AS BEEN RECEIVED BACK FROM THE POSTAL AUTHORITIES. NO NEW ADDRESS HAS BEEN FURNIS HED ON RECORD. IN THIS VIEW OF THE SITUATION, WE PROCEED TO DECIDE THE PRESENT APP EAL EX-PARTE QUA THE ASSESSEE AFTER CONSIDERING THE FACTS AVAILABLE ON RECORD AND AFTER HEARING LD. DR. 6. LD. DR RELIED ON THE ASSESSMENT ORDER AND ORDER PASSED BY LD. CIT(A). 7. THE MAIN ISSUE RAISED BY THE ASSESSEE IN THE PRE SENT APPEAL IS REGARDING LOSS OF RS. 35,82,423/- WHICH IS CONSIDERED BY THE AO AS SPECULATIVE LOSS AND AO HAS ALLOWED THE SAME TO BE CARRIED FORWARD TO THE SUBSEQUENT YEARS. AS AGAINST THIS IT IS THE CLAIM OF THE ASSESSEE THAT THIS LOS S CANNOT BE CONSIDERED TO BE SPECULATIVE LOSS IN VIEW OF THE PROVISIONS OF SECTI ON 43(5) R.W. CLAUSE (D) AND DEFINITION OF ELIGIBLE TRANSACTION. THIS ISSUE HAS BEEN DEALT WITH BY A.O IN THE ASSESSMENT ORDER AS UNDER: IN THE P&L A/C, THE ASSESSEE HAS DEBITED AN AMOUNT OF RS. 35,82,423/- TO THE P&L A/C BEING LOSS ON FUTURES TRADING. THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS WAS ASKED TO FURNISH THE SCRIP WISE DETAILS OF THE SAID LOSS INCURRED ALONG WITH T HE EXPLANATION AS TO WHY THE SAID LOSS SHOULD NOT BE CARRIED FORWARD AS SPECULATION L OSS. ITA NO8792 /MUM/2011 (A.Y. 2007-08 ) 3 IN REPLY THE AUTHORIZED REPRESENTATIVE OF THE ASSES SEE VIDE ITS LETTER DT. 27.11.2009 HAS SUBMITTED AS UNDER: 3. THE ASSESSEE HAS INCURRED LOSS ON FUTURE & OPTI ONS AND DERIVATIVES TRANSACTION. THE DETAILS FOR THE SAME ARE ALREADY ENCLOSED IN PREVIOUS LETTER. THE FUTURE AND OPTIONS ARE IN NATURE OF BUSINESS NO T IN NATURE OF SPECULATION HENCE THE LOSS OF 24.17 LACS ARE BUSINESS LOSS NOT SPECULATION LOSS. THE AFORESAID REPLY OF THE ASSESSEE IS DULY CONSIDE RED BUT IS NOT ACCEPTABLE IN VIEW OF PROVISIONS OF SECTION 73 OF THE I.T. ACT, 1961 W HICH READS AS UNDER: (1) ANY LOSS, COMPUTED IN RESPECT OF A SPECULATION BUSINESS CARRIED ON BY THE ASSESSEE, SHALL NOT BE SET OFF EXCEPT AGAINST PROFI TS AND GAINS, IF ANY OF ANOTHER SPECULATION BUSINESS. A SPECULATIVE TRANSACTION IS DEFINED IN SEC. 43(5) WHICH READS AS UNDER:- (5) SPECULATIVE TRANSACTION MEANS A TRANSACTION IN WHICH A CONTRACT FOR THE PURCHASE OR SALE OF ANY COMMODITY, INCLUDING STOCKS AND SHARES, IS PERIODICALLY OR ULTIMATELY SETTLED OTHERWISE THAN B Y THE ACTUAL DELIVERY OR TRANSFER OF THE COMMODITY OR SCRIPS. FURTHER SUB-CLAUSE (D) TO SEC. 43(5) STATES: D) AN ELIGIBLE TRANSACTION IN RESPECT OF TRADING IN DERIVATIVES REFERRED TO IN CLAUSE (AC) OF SEC. 2 OF THE SECURITIES CONTRACTS (REGULAT ION) ACT, 1956 (42 OF 1956) CARRIED OUT IN A RECOGNIZED STOCK EXCHANGE SHALL NO T BE DEEMED TO BE A SPECULATIVE TRANSACTION. THE DEFINITION & MEANING OF ELIGIBLE TRANSACTION HA S BEEN GIVEN IN THE EXPLANATION TO THE SEC. 43(5)(D) OF THE I.T. ACT, 1961. THE AUTHO RIZED REPRESENTATIVE OF THE ASSESSEE DID NOT FILE ANY REPLY EVIDENCING THAT IT HAS NOTHI NG TO OFFER IN THIS REGARD. IN THE ABSENCE OF THE COMPLIANCE BY THE ASSESSEE AND ANY R EPLY FILED, THE LOSS OF RS. 35,82,423/- CLAIMED ON ACCOUNT OF FUTURES TRADING I S DISALLOWED AS SPECULATION LOSS & ALLOWED TO BE CARRIED FORWARD TO THE SUBSEQU ENT YEAR TO BE ADJUSTED AGAINST ANY SPECULATION PROFIT. PENALTY PROCEEDINGS U/S. 2 71(1)(C) ARE SEPARATELY INITIATED BY ISSUING NOTICE U/S. 274 OF THE I.T. ACT, 1961. 7.1 AS IT CAN BE SEEN FROM THE ABOVE, THE AO IS NOT REFUSING THAT THE TRANSACTIONS ENTERED INTO BY THE ASSESSEE ARE NOT I N RESPECT OF FUTURE TRADING. HE HAS SIMPLY DISALLOWED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT AUTHORIZED REPRESENTATIVE OF THE ASSESSEE DID NOT FILE ANY REP LY WHICH ITSELF SHOW THAT THE ASSESSEE HAS NOTHING TO OFFER. THEREFORE, FOR WANT OF NECESSARY DETAILS THE AO HAS REJECTED SUCH CLAIM OF THE ASSESSEE. IT IS NOWHERE WRITTEN IN THE ASSESSMENT ORDER THAT AO HAD ASKED FOR SUCH DETAILS . THE CL AIM OF THE ASSESSEE COULD NOT BE DISALLOWED SIMPLY FOR THE REASON THAT ASSESSEE DID NOT FILE NECESSARY DETAILS UNLESS ASSESSEE IS ASKED TO FURNISH DETAILS AS REQU IRED BY THE A.O. THE ASSESSMENT ORDER IS COMPLETELY SILENT ABOUT THE QU ERY ASKING THE ASSESSEE TO FURNISH FURTHER DETAILS AS THE ASSESSEE HAD SUBMITT ED THE REPLY TO THE AO. LD. CIT(A) HAS ALSO UPHELD THE ACTION OF AO SIMPLY FOR THE REASON THAT THE TRANSACTIONS OF THE ASSESSEE ARE ULTIMATELY SETTLE D OTHER THAN BY WAY OF ACTUAL ITA NO8792 /MUM/2011 (A.Y. 2007-08 ) 4 DELIVERY OR TRANSFER OF THE COMMODITY OR SCRIPS. T HE ADJUDICATION BY LD. CIT(A) OF THE ISSUE IS AS UNDER: 5. IT IS SUBMITTED BY THE AUTHORIZED REPRESENTATIV E THAT THE MAIN OBJECT OF THE COMPANY IS TO DEAL IN SHARES AND GRANTING OF LOANS. THE LOSS INCURRED ON TRADING IN FUTURES AND OPTIONS AND DERIVATIVES IS A BUSINESS L OSS. IT IS SUBMITTED THAT AO ERRED IN APPLYING S. 73 OF THE ACT, WHEN FUTURES AND OPTI ONS ARE IN THE NATURE OF BUSINESS AND NOT IN THE NATURE OF SPECULATION. 6. THE SAID EXPLANATION HAS BEEN CONSIDERED. THE AP PELLANT IS STATED TO BE IN THE BUSINESS OF TRADING IN SHARES INCLUDING TRADING IN FUTURES AND OPTIONS. SECTION 43 PROVIDES DEFINITION OF CERTAIN TERMS RELEVANT TO TH E HEAD OF INCOME FROM PROFIT AND GAINS OF BUSINESS OR PROFESSION. SUB SECTION (5) OF S. 43 DEFINES THE EXPRESSION SPECULATIVE TRANSACTION TO MEAN A TRANSACTION IN WHICH A CONTRACT FOR THE PURCHASE OR SALE OF ANY COMMODITY, INCLUDING STOCKS AND SHAR ES IS PERIODICALLY OR ULTIMATELY SETTLED THEN BY ACTUAL DELIVERY OR TRANSFER OF THE COMMODITY OR SCRIPTS. WHEN THE APPELLANT IS CARRYING OUT TRANSACTION IN WHICH THE CONTRACT FOR PURCHASE OR SALE IS SETTLED OTHERWISE THEN BY ACTUAL DELIVERY, THE SAME HAS TO BE TREATED AS SPECULATIVE. THEREFORE, I DECLINE TO INTERFERE WITH THE ACTION O F THE AO IN TREATING THE LOSS ARISING FROM SUCH TRANSACTION AS FROM SPECULATION BUSINESS. GROUND I IS DISMISSED. 6.2 IT CAN BE SEEN FROM THE ORDER OF AO AS WELL AS LD. CIT(A) THAT THE ISSUE HAS NOT BEEN CONSIDERED IN THE RIGHT PERSPECTIVE. THER EFORE, WE ARE OF THE OPINION THAT THIS ISSUE IS REQUIRED TO BE SENT BACK TO THE FILE OF AO WITH A DIRECTION TO RE- ADJUDICATE THE SAME AS PER LAW AFTER OBTAINING NECE SSARY DETAILS FROM THE ASSESSEE. ACCORDINGLY, GROUND NO.1 IS ALLOWED FOR STATISTICAL PURPOSES IN THE MANNER AFORESAID. 7. THE OTHER ISSUE RAISED IN GROUND NO.2 IS REGARDI NG ALLOWABILITY OR OTHERWISE OF INTEREST. THIS GROUND HAS ALSO BEEN DISALLOWED ON ACCOUNT OF ABSENCE OF DETAILS. SINCE WE ARE RESTORING THE MAIN ISSUE TO THE FILE OF AO THIS ISSUE IS ALSO RESTORED BACK TO THE FILE OF AO WITH A DIRECTION T O RE-ADJUDICATE THE SAME AS PER LAW AFTER GIVING THE ASSESSEE A REASONABLE OPPORTUN ITY OF HEARING. WE DIRECT ACCORDINGLY. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS CONSIDERED TO BE ALLOWED FOR STATISTICAL PURPOSES IN THE MANNER AFORESAID. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 17.09. 2 014. 1 * ./0 2'3 17.09.2014 / * : SD/- SD/- (RAJENDRA) (I.P.BANSAL) ' ' ' ' / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI; 2' DATED : 17 TH SEPT. 2014. ITA NO8792 /MUM/2011 (A.Y. 2007-08 ) 5 VM. 1 * (,; < ;0, 1 * (,; < ;0, 1 * (,; < ;0, 1 * (,; < ;0,/ COPY OF THE ORDER FORWARDED TO : 1. $% / THE APPELLANT 2. ()$% / THE RESPONDENT. 3. =() / THE CIT, MUMBAI. 4. = / CIT(A)-13, MUMBAI 5. ;@: (,' , , / DR, ITAT, MUMBAI 6. :A B / GUARD FILE. 1' 1' 1' 1' / BY ORDER, );, (, //TRUE COPY// C CC C/ // /D D D D (DY./ASSTT. REGISTRAR) , , , , / ITAT, MUMBAI