The ITO, Ward-8(4), Ahmedabad V. Wealth First Prortfolio Manager Pvt.Ltd., Ahmedabad

ITA 902/AHD/2011

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9735 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 3 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-07-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 06-07-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 25-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DINESH SINGH
• Assessee Lawyers: MUKESH M PATEL
• Keywords: Business income; Depreciation; Business expenditure
• Section: 143(3); 145; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD (BEFORE SHRI ANIL CHATURVEDI, A.M. & S. S. GODARA, J.M.) I.T. A. NO. 902/AHD/2011 (ASSESSME NT YEAR: 2007-08) THE I.T.O., WARD-8(4), AHMEDABAD V/S WEALTH FIRST PORTFOLIO MANAGER PVT. LTD., CAPITAL HOUSE, 10, PARAS-II, NR. PRAHLADNAGAR GARDEN, OFF. S.G. HIGHWAY, AHMEDABAD 380051 (APPELLANT) (RESPONDENT) PAN: AABCD4580C APPELLANT BY : SHRI DINESH SINGH, SR. D.R RESPONDENT BY : SHRI MUKESH M. PATEL, A.R. ( )/ ORDER DATE OF HEARING : 06-07-2015 DATE OF PRONOUNCEMENT : 10 -07-2015 PER ANIL CHATURVEDI, ACCOUNTANT MEMBER 1. THIS APPEAL FILED BY THE ASSESSEE IS AGAINST THE OR DER OF CIT(A)-XIV, AHMEDABAD DATED 25.01.2011 FOR A.Y. 2007-08. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON RECORD ARE AS UNDER. ITA NO 902/A HD/2011 . A.Y. 2007-08 2 3. ASSESSEE IS A COMPANY STATED T BE ENGAGED IN THE BU SINESS OF MUTUAL FUND BROKERAGE AND PORTFOLIO MANAGEMENT SERVICES. ASSESS EE FILED ITS RETURN OF INCOME FOR A.Y. 2007-08 ON 22.09.2007 DECLARING TOT AL INCOME OF RS. 1,12,895/-. THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER THE ASSESSMENT WAS FRAMED UNDER SECTION 143(3) VIDE ORDER DATED 3 0.12.2009 AND THE TOTAL INCOME WAS DETERMINED AT RS. 32,68,500/-. AGGRIEVE D BY THE ORDER OF A.O., ASSESSEE CARRIED THE MATTER BEFORE LD. CIT(A) WHO V IDE ORDER DATED 25.01.2011 GRANTED SUBSTANTIAL RELIEF TO THE ASSESS EE. AGGRIEVED BY THE AFORESAID ORDER OF LD. CIT(A), REVENUE IS NOW IN AP PEAL BEFORE US AND HAS RAISED THE FOLLOWING GROUNDS:- 1. THE LD. CLT(A)-XLV, AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN ALLOWING THE BOOK RESULTS REJECTED BY THE ASSESSING OFFICER BY INVOKI NG THE PROVISIONS OF SECTION 145(3) OF THE ACT. 2. THE LD. CIT(A)-XIV, AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN DIRECTING TO SET OFF AGAINST THE CURRENT YEAR'S EXPENDITURE/LOSS AS PER THE PROFIT & LOSS ACCOUNT AND ALSO ACCEPT THE RETURNED INCOME OF RS. 1,12,895/- DECLAR ED BY THE ASSESSEE. SINCE THERE IS NO JUSTIFICATION FOR IGNORING THE BUSINESS EXPENDIT URE, THE GROUNDS RELATING TO THE TREATMENT OF KEY MAN INSURANCE RECEIPT OF RS.30,00, 000/-AND THE ALLEGED SPECULATION PROFIT OF RS.2,68,500/-BECOME ACADEMIC IN NATURE. 4. BOTH THE GROUNDS RAISED BY THE REVENUE ARE INTERCON NECTED AND THEREFORE THEY ARE CONSIDERED TOGETHER. 5. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, A.O NO TICED THAT ASSESSEE HAS ENTERED INTO PURCHASE AND SALE TRANSACTIONS OF GILT AND IT TO BE NOT A REGULAR BUSINESS ACTIVITY OF THE ASSESSEE. HE ALSO NOTICED THAT FOR ASSESSMENT YEAR 2003-04, THE LOSS INCURRED BY THE ASSESSEE WAS DISA LLOWED UNDER EXPLANATION TO SECTION 73 OF THE ACT. HE WAS THEREF ORE OF THE VIEW THAT THE ITA NO 902/A HD/2011 . A.Y. 2007-08 3 TRANSACTIONS ENTERED INTO BY THE ASSESSEE DURING TH E YEAR WERE ALSO OF SPECULATIVE NATURE AND ACCORDINGLY CONSIDERED THE P ROFIT ON SALE OF THE GILT AS SPECULATIVE PROFIT. HE FURTHER NOTICED THAT DURIN G THE YEAR ASSESSEE HAD RECEIVED RS. 30 LACS ON REDEMPTION OF KEYMAN INSUR ANCE POLICY WHICH WAS CONSIDERED AS BUSINESS RECEIPTS BY THE ASSESSEE . HE WAS OF THE VIEW THAT THE AFORESAID RECEIPT WAS NOT REGULAR RECEIPT OF TH E ASSESSEE AND IT COULD NOT BE CONSIDERED FROM BUSINESS ACTIVITY. HE ACCORDINGL Y, FROM THE TOTAL INCOME THAT WAS SHOWN BY ASSESSEE, REDUCED THE PROFIT ON S ALE OF GILT AND RECEIPT OF KEYMAN INSURANCE AND WORKED OUT THE LOSS FROM BUSIN ESS ACTIVITY OF RS. 39,06,293/-. HE WAS OF THE VIEW THAT THE LOSS AS WO RKED OUT BY HIM AFTER THE AFORESAID ADJUSTMENTS WAS NOT JUSTIFIABLE LOOKING T O THE FACTS AS WELL AS THE NATURE OF THE BUSINESS ACTIVITIES CARRIED ON BY THE ASSESSEE. HE WAS ALSO OF THE VIEW THAT THE EXPENDITURE CLAIMED BY THE ASSESS EE WERE NOT COMMENSURATE WITH THE RECEIPTS SHOWN BY THE ASSESSE E. HE ACCORDINGLY REJECTED THE BOOK RESULTS OF THE ASSESSEE BY INVOKI NG THE PROVISIONS OF SECTION 145 OF THE ACT AND THEREAFTER CONSIDERED TH E PROFIT ON SALE OF GILTS AS SPECULATIVE INCOME AND KEYMAN INSURANCE TO BE T AXABLE. AGGRIEVED BY THE ORDER OF A.O., ASSESSEE CARRIED THE MATTER BEFO RE LD. CIT(A) WHO AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY HOLDING AS UNDER:- 6.I HAVE CAREFULLY CONSIDERED THE OBSERVATIONS OF T HE A.O. AND THE REASONS RELIED UPON BY HIM FOR REJECTING THE BOOK RESULTS INVOKING THE PRO VISIONS OF SECTION 145 AND ASSESSING THE TOTAL INCOME OF THE APPELLANT COMPANY AT RS.32, 68,500/- AS AGAINST ITS RETURNED INCOME OF RS.1,12,895/-. I HAVE ALSO GIVEN DUE CONS IDERATION TO THE ELABORATE SUBMISSIONS, MADE BY THE APPELLANT. ON CONSIDERATIO N OF THE TOTALITY OF THE FACTS OF THE APPELLANT'S CASE, I AM OF THE VIEW THAT THE A.O. WA S NOT JUSTIFIED IN INVOKING THE PROVISIONS OF SECTION 145 AND IN REJECTING THE APPE LLANT'S BOOK RESULTS AND FURTHER HOLDING THAT THE ENTIRE EXPENSES OF THE APPELLANT, INCLUDING ESTABLISHMENT EXPENSES, ITA NO 902/A HD/2011 . A.Y. 2007-08 4 PERSONNEL EXPENSES, INTEREST AND DEPRECIATION WERE NOT COMMENSURATE WITH THE INCOMES EARNED BY THE APPELLANT DURING THE YEAR. THE PROVIS IONS OF SEC. 145(3) OF THE I. T. ACT READ AS UNDER:- 'WHERE THE ASSESSING OFFICER IS NOT SATISFIED ABOU T THE CORRECTNESS OR COMPLETENESS OF THE ACCOUNTS OF THE ASSESSEE, OR WH ERE THE METHOD OF ACCOUNTING PROVIDED IN SUB-SECTION 1 OR ACCOUNTING STANDARDS A S NOTIFIED UNDER SUB-SECTION 2, HAVE NOT BEEN REGULARLY FOLLOWED BY THE ASSESSEE, THE AS SESSING OFFICER MAY MAKE AN ASSESSMENT IN THE MANNER AS PROVIDED IN SEC. 144.' IT IS PERTINENT TO NOTE THAT IN HIS ENTIRE ORDER T HE A.O HAS NOT POINTED OUT ANY DEFECTS IN THE BOOKS OF ACCOUNTS OR IN THE ACCOUNTI NG METHOD OR STANDARDS FOLLOWED BY THE APPELLANT. I FIND THAT THE BOOKS OF ACCOUNTS HAVE B EEN DULY AUDITED BY THE CHARTERED ACCOUNTANT WHO HAS ALSO SUBMITTED HIS TAX AUDIT REP ORT U/S.44AB. THE A.O. HAS NOT CONTROVERTED ANY OF THE OBSERVATIONS IN THE SAID AU DIT REPORT. IT HAS BEEN CATEGORICALLY HELD IN THE FOLLOWING JUDICIAL PRONOUNCEMENTS THAT, 'WHERE NO DISCREPANCY IN THE BOOKS OF ACCOUNTS IS POINTED OUT BY THE A.O., THE ASSESSE E'S BOOKS CANNOT BE REJECTED:' (I) PYARELAL MITTAL V/S. ACIT- 291ITR 214 (GAU.) (II) PUSHPANJALI DYEING & PRINTING MILLS P. LTD. V/S. JCIT- 72 TTJ 886 (AHD.) I THEREFORE HOLD THAT THE ACTION OF THE A.O. IN REJ ECTING THE BOOK RESULT IS CLEARLY NOT WARRANTED IN LAW AND ON FACTS OF THE CASE. 7. HAVING GONE THROUGH THE APPELLANT'S PAPER BOOK F ILED BEFORE ME, I FIND THAT IN THE ASSESSMENT ORDERS FOR THE PRECEDING THREE YEARS A.Y S. 2003-04, 2005-06 AND 2006-07 WHERE SCRUTINY ASSESSMENTS WERE UNDERTAKEN, BARRING SOME NOMINAL DISALLOWANCES, THE ENTIRE EXPENDITURE AS CLAIMED BY THE APPELLANT WAS DULY ALLOWED. I FIND FORCE IN THE APPELLANT'S CONTENTION THAT THE BUSINESS EXPENDITUR E INCURRED BY THE APPELLANT DURING THE YEAR WAS NOT ONLY ALLOWABLE, BUT ALSO REASONABLE AN D JUSTIFIED FOR EARNING ITS BUSINESS INCOME. THIS IS LOGICALLY REFLECTED BY THE GROWTH I N THE BROKERAGE INCOME WHICH ROSE FROM RS.34.04 LAKHS IN THE PRECEDING FY 2005-06 TO RS.64.30 LAKHS IN THE CURRENT FY 2006-07 AND FURTHER TO RS.164.19 LAKHS IN THE SUBSE QUENT FY 2007-08. EVEN THE REIMBURSEMENT INCOME WHICH WAS RS.20.76 LAKHS IN TH E PRECEDING YEAR ROSE TO RS.50.37 LAKHS DURING THE YEAR UNDER CONSIDERATION. AS IS EV IDENT FROM THE ANNUAL ACCOUNTS FILED ITA NO 902/A HD/2011 . A.Y. 2007-08 5 BEFORE ME FOR THE THREE YEARS FYS 2005-06, 2006-07 AND 2007-08, THE RISE IN EXPENDITURE IS LOGICALLY JUSTIFIED BY THE CORRESPONDING RISE IN INCOMES. 8. IN VIEW OF THE ABOVE, I DO NOT FIND ANY JUSTIFIC ATION ON THE PART OF FOR THE A.O. TO HAVE IGNORED THE LOSS OF RS.6,37,793/- AS REFLECTED IN T HE APPELLANT'S PROFIT & LOSS A/C, WHICH AROSE ON ACCOUNT OF THE INCREASED BUSINESS EXPENDIT URE CLAIMED BY THE APPELLANT. ONCE IT IS HELD THAT THE SAID LOSS IS REQUIRED TO BE CONSID ERED IN THE COMPUTATION OF THE APPELLANT'S TOTAL INCOME, SINCE THERE IS NO JUSTIFICATION FOR I GNORING THE BUSINESS EXPENDITURE, THE GROUNDS RELATING TO THE TREATMENT OF KEY MAN INSURA NCE RECEIPT OF RS.30,00,000/- AND THE ALLEGED SPECULATION PROFIT OF RS.2,68,500/- BECOME ACADEMIC IN NATURE. THIS IS SO, BECAUSE EVEN IF SUCH RECEIPTS ARE CARVED OUT SEPARA TELY AS HELD BY THE A.O., THEY WOULD STILL BE ELIGIBLE TO BE SET OFF AGAINST THE CURRENT YEAR'S EXPENDITURE/LOSS AS PER THE PROFIT & LOSS ACCOUNT. IN THE CIRCUMSTANCES, THE A.O. IS DIR ECTED TO ACCEPT THE RETURNED INCOME OF RS.1,12,895/- DECLARED BY THE APPELLANT. 6. AGGRIEVED BY THE AFORESAID ORDER OF LD. CIT(A), REV ENUE IS NOW IN APPEAL BEFORE US. 7. BEFORE US, LD. D.R. STRONGLY SUPPORTED THE ORDER OF A.O. ON THE OTHER HAND, LD. A.R. REITERATED THE SUBMISSIONS MADE BEFORE A.O AND LD. CIT(A) AND FURTHER SUBMITTED THAT THE PROVISION OF EXPLANATION TO SECTION 73 WAS NOT APPLICABLE TO THE ASSESSEE. HE FURTHER SUBMITTED TH AT AS PER SECTION 28 (VI) THE AMOUNT RECEIVED UNDER KEYMAN INSURANCE POLICY H AS TO BE CONSIDERED AS INCOME CHARGEABLE UNDER THE HEAD PROFIT AND GAINS O F BUSINESS AND PROFESSION OF THE ASSESSEE AND THE ASSESSEE HAS THE REFORE RIGHTLY TREATED IT AS PROFIT AND GAINS OF BUSINESS. HE FURTHER SUBMITTED THAT NO DISALLOWANCE OF EXPENDITURE HAS BEEN MADE BY THE REVENUE DEPARTMENT IN PRECEDING ASSESSMENT YEARS AND IN SUBSEQUENT YEARS AND IN SUP PORT OF WHICH HE ALSO PLACED ON RECORD THE COPY OF THE ASSESSMENT ORDERS FOR A.Y. 2009-10 TO 2012-13. HE THUS SUPPORTED THE ORDER OF LD. CIT(A). ITA NO 902/A HD/2011 . A.Y. 2007-08 6 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT LD. CIT(A) HAS NOTED THAT IN THE ABSENCE OF ANY DEFECTS IN THE BOOKS OF ACCOUNTS OR THE ACCOUNTING METHOD OR STANDARD FO LLOWED BY THE ASSESSEE AND WHEN THE BOOKS OF ACCOUNTS HAVE BEEN AUDITED BY CHARTERED ACCOUNTANTS AND IN THE ABSENCE OF ANY ADVERSE FINDI NG, THE BOOKS OF ACCOUNTS CANNOT BE REJECTED U/S. 145. LD. CIT(A), F URTHER, AFTER CONSIDERING THE ASSESSMENT ORDERS FOR PRECEDING YEARS HAS NOTED THAT THE BUSINESS EXPENDITURE INCURRED BY THE ASSESSEE WERE NOT ONLY ALLOWABLE BUT WERE ALSO REASONABLE AND JUSTIFIED IN VIEW OF THE GROWTH IN T HE INCOME SHOWN BY THE ASSESSEE AND THAT THERE WAS NO JUSTIFICATION ON THE PART OF A.O TO HAVE IGNORED THE LOSS SHOWN BY THE ASSESSEE. BEFORE US, REVENUE HAS NOT BROUGHT ANY MATERIAL ON RECORD TO CONTROVERT THE FINDINGS O F LD. CIT(A). IN VIEW OF THE AFORESAID FACTS, WE FIND NO REASON TO INTERFERE WITH THE ORDER OF LD. CIT(A) AND THUS THE GROUNDS OF REVENUE ARE DISMISSE D. 9. IN THE RESULT, THE APPEAL OF REVENUE IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 10- 07 - 201 5. SD/- SD/- (S.S. GODARA) (ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD. TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD.