ACIT, CHENNAI V. S.Ramamirtham, CHENNAI

ITA 998/CHNY/2011

• Counselvise Citation: 99821714 RSA 2011
• Duration Of Justice: 3 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-09-2011
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2006-2007
• Appeal Filed On: 06-06-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SANJAY V R DESHMUKH
• Keywords: Date of conversion
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI BEFORE DR. O.K.NARAYANAN, VICE-PRESIDENT AND SHRI HARI OM MARATHA, JUDICIAL MEMBER ITA NO.998(MDS)/2011 ASSESSMENT YEAR: 2006-07 THE ASSISTANT COMMISSIONER OF INCOME-TAX, COMPANY CIRCLE V(3), CHENNAI. VS. SHRI S.RAMAMIRTHAM, 19/13, P.S.SIVASAMY SALAI, MYLAPORE, CHENNAI-600004. PAN AADPR3069J. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SANJA Y V.R.DESHMUKH, JCIT RESPONDENT BY : SHRI Y.SRIDHAR , C.A. DATE OF HEARING : 14 TH SEPTEMBER, 2011 DATE OF PRONOUNCEMENT : 15 TH SEPTEMBER, 2011 O R D E R PER DR.O.K.NARAYANAN, VICE-PRESIDENT: THIS APPEAL IS FILED BY THE REVENUE. THE RELEVAN T ASSESSMENT YEAR IS 2006-07. THE APPEAL ARISES OUT OF THE ASSESSMENT COMPLETED UNDER SECTION 143(3) OF THE IN COME-TAX ACT, 1961. - - ITA NO.998 OF 2011 2 2. THE FIRST GROUND RAISED BY THE REVENUE IN THIS APPEAL IS THAT THE COMMISSIONER OF INCOME-TAX(APPEA LS) HAS ERRED IN RESTRICTING THE DISALLOWANCE MADE BY THE A SSESSING OFFICER UNDER SECTION 14A INVOKING THE PROVISIONS O F RULE 8D AND IN HOLDING THAT THE PROVISIONS ARE NOT APPLICABLE T O THE RELEVANT ASSESSMENT YEAR. THE COMMISSIONER OF INCOME-TAX(AP PEALS) IS JUSTIFIED IN HOLDING THAT RULE 8D IS NOT RETROSPECT IVE IN OPERATION. THEREFORE, HE HAS RIGHTLY HELD THAT DISALLOWANCE CA NNOT BE MADE ON THE BASIS OF RULE 8D. THE SAID DECISION OF THE COMMISSIONER OF INCOME-TAX(APPEALS) IS UPHELD. 3. BUT, ALTERNATIVELY, THE QUANTUM OF DISALLOWANCE WAS DETERMINED BY THE COMMISSIONER OF INCOME-TAX(APPEAL S) AT 2% OF THE EXEMPTED INCOME. IN OUR CONSIDERED VIEW, TH E QUANTUM DETERMINED BY THE COMMISSIONER OF INCOME-TAX(APPEAL S) IS VERY LOW. TO BE FAIR AND REASONABLE, WE INCREASE THE DI SALLOWANCE TO 5% OF THE EXEMPTED INCOME. 4. THE NEXT GROUND RAISED BY THE REVENUE IS THAT T HE COMMISSIONER OF INCOME-TAX(APPEALS) HAS ERRED IN DE LETING THE ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT O F UNDISCLOSED VALUE OF STOCK. THE ASSESSING OFFICER HAS OBSERVED - - ITA NO.998 OF 2011 3 THAT THE ASSESSEE HAS SHOWN INCREASE IN STOCK VALUE IN THE RELEVANT PREVIOUS YEAR ON THE GROUND THAT THE ASSES SING AUTHORITY HAD CONVERTED THE INVESTMENTS MADE BY THE ASSESSEE TO CLOSING STOCK FOR THE ASSESSMENT YEAR 2003-04. ON THE BASI S OF THE DETAILS OF THE UNSOLD STOCK CALLED FOR BY THE ASSES SING AUTHORITY, HE HELD THAT THE DIFFERENCE OF ` 26,07,238/- BETWEEN THE BOOK FIGURE AND THE DETAILS FURNISHED BY THE ASSESSEE IS TO BE ADDED BACK. THE SAME WAS ADDED. THIS ADDITION HAS BEEN DELETED BY THE COMMISSIONER OF INCOME-TAX(APPEALS). 5. WE EXAMINED THE CASE. IT IS A FACT THAT IN THE COURSE OF THE ASSESSMENT FOR THE ASSESSMENT YEAR 20 03-04, THE ASSESSING OFFICER HAD CONVERTED THE SHARES HELD BY THE ASSESSEE AND DISCLOSED AS INVESTMENTS, TO STOCK IN TRADE ON A PARTICULAR DATE. ON THAT GROUND THE ASSESSING AUTH ORITY MADE AN ADDITION OF ` 2,04,60,300/- TO THE STOCK VALUE, BEING THE DIFFERENCE BETWEEN THE COST PRICE AND MARKET VALUE ON CONVERSION DATE. ONCE THE INVESTMENT FIGURE HAS BE EN CONVERTED INTO TRADING STOCK FIGURE, IT IS NOT PROP ER TO MAKE ANOTHER ADDITION FOR THE IMPUGNED ASSESSMENT YEAR O N THE SAME SET OF SHARES. THIS IS BECAUSE OF THE REASON THAT THE ASSESSING - - ITA NO.998 OF 2011 4 OFFICER HAS NOT MADE ANY ADVERSE FINDING AGAINST TH E VALUATION ADOPTED IN THE CASE OF THE SHARES. THEREFORE THE C OMMISSIONER OF INCOME-TAX(APPEALS) HAS RIGHTLY DELETED THE SAID ADDITION. 6. IN RESULT THE APPEAL FILED BY THE REVENUE IS PA RTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF HEARING ON THURSDAY, THE 15 TH OF SEPTEMBER, 2011 AT CHENNAI. SD/- SD/- (HARI OM MARATHA) (DR. O.K.NARAYANAN) JUDICIAL MEMBER VICE-PRESIDENT CHENNAI, DATED THE 15 TH SEPTEMBER, 2011. V.A.P. COPY TO: (1) APPELLANT (2) RESPONDENT (3) CIT (4) CIT(A) (5) D.R. (6) G.F.