M/s. Raja Industries, Mehsana V. The ACIT.,Cent.Circle-1(4), Ahmedabad

ITSSA 146/AHD/2012

• Counselvise Citation: [2016] 122 COUNSELVISE.COM (IT) 1543 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 11 month(s) 11 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 16-02-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 28-12-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 05-03-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: R I PATEL
• Assessee Lawyers: S N SOPARKAR
• Keywords: Unexplained expenditure; Business income
• Section: 143(3); 153A; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH (BEFORE SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER & SHRI KUL BHARAT, JUDICIAL MEMBER) IT(SS)A NOS: 141 & 146/AHD/2012 (ASSESSMENT YEAR: 2009-10) M/S. RAJA INDUSTRIES NANDASAN ROAD, AT: KUNDAL, KADI, DIST. MEHSANA. V/S ACIT, CENTRAL CIRCLE-1(4), AHMEDABAD (APPELLANT) (RESPONDENT) ACIT, CENTRAL CIRCLE-1(4), AHMEDABAD V/S M/S. RAJA INDUSTRIES NANDASAN ROAD, AT: KUNDAL, KADI, DIST. MEHSANA. (APPELLANT) (RESPONDENT) PAN: AADFR2054G APPELLANT BY : SHRI S.N. SOPARKAR, A.R. RESPONDENT BY : SHRI R.I. PATEL, CIT/DR ( )/ ORDER DATE OF HEARING : 28-12-2015 DATE OF PRONOUNCEMENT : 16 -02-2016 IT(SS)A NOS. 141 & 146/AHD/2012 . A.Y. 2009-20 10 2 PER ANIL CHATURVEDI, ACCOUNTANT MEMBER 1. THESE TWO APPEALS, OF WHICH ONE IS FILED BY THE ASS ESSEE AND THE OTHER IS FILED BY THE REVENUE, ARE AGAINST THE ORDER OF CIT( A)-I, AHMEDABAD DATED 28.12.2011 FOR A.Y. 2009-10. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON RECORD ARE AS UNDER. 3. ASSESSEE IS A PARTNERSHIP FIRM STATED TO BE ENGAGED IN THE BUSINESS OF COTTON GINNING & COTTON SEEDS CRUSHING. A SEARCH ACTION U/ S. 132 OF THE ACT WAS CONDUCTED IN THE CASE OF RAJA GROUP ON 05.02.2009. A WARRANT OF AUTHORIZATION U/S. 132 WAS ALSO ISSUED IN THE CASE OF ASSESSEE. THE ASSESSEE THEREAFTER ELECTRONICALLY FILED ITS RETURN OF INCOM E FOR A.Y. 2009-2010 ON 28.09.2009 DECLARING TOTAL LOSS OF RS. 29,10,824/-. THEREAFTER THE ASSESSMENT WAS FRAMED U/S. 143(3) R.W.S. 153B VIDE ORDER DATED 30.12.2010 AND THE TOTAL INCOME WAS DETERMINED AT RS. 1,68,84,590/-. AGGRIEV ED BY THE ORDER OF A.O., ASSESSEE CARRIED THE MATTER BEFORE LD. CIT(A) WHO VIDE ORDER DATED 28.12.2011 GRANTED SUBSTANTIAL RELIEF TO THE ASSESS EE. AGGRIEVED BY THE AFORESAID ORDER OF LD. CIT(A), ASSESSEE & REVENUE ARE NOW IN APPEAL BEFORE US. THE GROUNDS RAISED BY THE REVENUE IN IT( SS)A NO. 141/AHD/2012 READS AS UNDER:- 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DIR ECTING THE ASSESSING OFFICER TO DELETE THE ADDITION MADE ON ACCOUNT OF UNACCOUNTED STOCK OF RS. 10,72,280/-. 2. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DIR ECTING THE ASSESSING OFFICER TO DELETE THE ADDITION MADE ON ACCOUNT OF QUALITY ALLO WANCE OF RS. 33,25,929/-. 3. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DIR ECTING THE ASSESSING OFFICER TO DELETE THE ADDITION MADE ON ACCOUNT OF BROKERAGE OF RS. 75,92,072/-. IT(SS)A NOS. 141 & 146/AHD/2012 . A.Y. 2009-20 10 3 4. ON THE OTHER HAND THE GROUNDS RAISED THE ASSESSEE I N IT(SS)A NO. 146/AHD/2012 READS AS UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE T HE LD. CIT(A) ERRED IN NOT ACCEPTING ASSESSEES CLAIM THAT THE LOSS INCURRED I N TRADING OF EQUITY SHARES WAS BUSINESS LOSS AND FURTHER ERRED IN TREATING IT AS A LOSS UNDER THE HEAD CAPITAL GAINS. WE FIRST TAKE UP REVENUES APPEAL IN IT(SS)A NO. 141/AHD/2012 5. 1 ST GROUND IS WITH RESPECT TO DELETION ON ACCOUNT OF U NACCOUNTED STOCK OF RS. 10,72,280/-. 6. DURING THE COURSE OF SEARCH PROCEEDINGS ON COMPARIS ON OF THE STOCK DETAILS AS PROVIDED BY THE ASSESSEE AND THE PHYSICAL STOCK TAKEN DURING THE COURSE OF SEARCH ON 05.02.2009 EXCESS STOCK OF RS. 16,99,3 60/- IN CASE OF REFINED KAPASIA OIL AND DEFICIT STOCK OF RS. 14, 15,560/- I N THE CASE OF KAPASIA WASH TEL WAS FOUND. THE AFORESAID DISCREPANCIES IN STOCK WERE APART FROM THE DIFFERENCE OF STOCK AMOUNTING TO RS. 53,72,920/- IN CASE OF SHANKAR KAPAS THE ASSESSEE WAS ASKED TO EXPLAIN THE DISCREPANCY A ND ALSO TO EXPLAIN AS TO HOW IT WAS COVERED BY THE DISCLOSURE OF RS. 60 LACS TOWARDS EXCESS STOCK MADE BY THE ASSESSEE. THE SUBMISSIONS OF THE ASSESS EE WITH RESPECT TO STOCK OF REFINED KAPASIA TEL WAS NOT ACCEPTED FOR THE REA SON THAT IT WAS FOUND EXCESS DURING THE COURSE OF SEARCH AND ACCORDINGLY THE SAME WAS ADDED TO THE VALUE OF EXCESS STOCK OF REFINED KAPASIA TEL VA LUE OF RS. 53,72,920/- THAT WAS DISCLOSED WITH RESPECT TO SHANKAR KAPAS. A.O AC CORDINGLY MADE ADDITION OF RS. 70,72,280/- (53,72,920 + 16,99,360) AND AFTER GIVING THE CREDIT OF DISCLOSURE OF RS. 60 LACS MADE DURING THE COURSE OF SEARCH ADDED THE DIFFERENCE OF RS. 10,72,280/-AS INCOME. AGGRIE VED BY THE ORDER OF A.O., IT(SS)A NOS. 141 & 146/AHD/2012 . A.Y. 2009-20 10 4 ASSESSEE CARRIED THE MATTER BEFORE LD. CIT(A) WHO D ELETED THE ADDITION MADE BY THE A.O HOLDING AS UNDER:- 4.2 . I HAVE CAREFULLY CONSIDERED THE ASSESSMENT .O RDER AND SUBMISSION FILED BY THE APPELLANT. DURING THE COURSE OF SEARCH AT APPELLANT 'S PREMISES, STOCK OF REFINED KAPASIA TEL WAS FOUND FOR 1,79,562 KGS AS AGAINST BOOK STOC K OF 1,40,042 KGS WHICH RESULTED INTO EXCESS STOCK OF 39,520 KGS. FURTHER, STOCK OF KAPAS IA WASH TEL WAS FOUND FOR 1,36,415 KGS AS AGAINST BOOK STOCK OF 1,71,804 KGS WHICH RESULTE D INTO SHORTAGE OF STOCK OF 35,389 KGS. THE APPELLANT HAS EXPLAINED THAT AS PER PREVAILING PRACTICE OF COUNTING THE STOCK, EVERY MORNING AT 8.00 AM, STOCK OF KAPASIA WASH TEL BEING RAW MATERIAL AND REFINED KAPASIA TEL BEING FINISHED GOODS LYING IN TANKS IS CONSIDER ED AND AFTER CONSIDERING THE STOCK COUNTED IN IMMEDIATELY PRECEDING DAY, ENTRY FOR RAW MATERIAL CONSUMPTION AND FINISHED GOODS PRODUCED DURING PRECEDING DAY IS ENTERED IN S TOCK REGISTER IN VERY NEXT DAY. IT WAS ALSO EXPLAINED THAT FACTORY OF APPELLANT IS WORKING IN TWO SHIFTS OF 12 HOURS I.E. FROM MORNING 8.00 AM TO EVENING 8.00 PM AND SECOND SHIFT FROM 8.00-PM TO NEXT DAY MORNING 8.00 AM AND DURING THE COURSE OF SEARCH, ST OCK WAS INVENTORIED_AT 8.00 PM IN THE EVENING. THE ASSESSING OFFICER HAS ISSUED SHOW CAUSE NOTICE FOR BOTH SHORTAGE AND EXCESS STOCK. IT WAS EXPLAINED BY THE APPELLANT THA T STOCK ISSUED FOR PRODUCTION ON THE DATE OF SEARCH WAS 78,748 KGS AND WHEN THE STOCK WA S TAKEN BY AUTHORISED OFFICER AT THE TIME OF SEARCH, ONE 'SHIFT WAS ALREADY COMPLETED, WHICH MEANS THAT HALF OF THE STOCK ISSUED FOR PRODUCTION COMES TO APPROXIMATE 39,374 K GS. ENTRY FOR CONSUMPTION IN BOOKS IS PASSED BY APPELLANT ON NEXT DAY AND IF QUANTITY OF CONSUMPTION FOR FIRST SHIFT FOR 39,374 IS REDUCED FROM BOOK STOCK OF 1,71,804 KGS, STOCK A S PER BOOKS WOULD COME TO 1,32,430 AS AGAINST PHYSICAL STOCK OF 1,35,415 KGS. THE EXPLANA TION OF APPELLANT REGARDING SHORTAGE OF STOCK HAS BEEN ACCEPTED BY AO AND NO ADDITION IS MADE. WHILE COMING TO THIS CONCLUSION, AO HAS ALSO STATED THAT IN SUPPORT OF H IS ARGUMENT APPELLANT HAS SUBMITTED COPIES OF DAILY STOCK REGISTER AND DAILY PRODUCTION REPORT. THE SIMILAR EXPLANATION-WAS ALSO GIVEN FOR FINISHED GOODS BY APPELLANT, WHICH I S NOT ACCEPTED BY THE AO. AS RAW MATERIAL ISSUED FOR PRODUCTION ON THE DAY OF SEARCH WAS 78,748 KGS, AS REFERRED HEREIN ABOVE, PRODUCTION OF FINISHED GOODS ON THE DAY OF SEARCH WAS 77,578 KGS WHICH IS DULY RECORDED IN PRODUCTION REGISTER WHICH IS NOT DISPUT ED BY THE AO. IN THE CASE OF APPELLANT COUNTING OF STOCK OF FINISHED GOODS WAS TAKEN AT 8. 00 PM IN THE EVENING WHEREIN FIRST IT(SS)A NOS. 141 & 146/AHD/2012 . A.Y. 2009-20 10 5 SHIFT WAS ALREADY OVER WHICH MEANS THAT APPROXIMATE LY HALF PRODUCTION WOULD HAVE BEEN COMPLETED WHICH COMES TO 38,789 KGS. AS APPELLANT I S RECORDING PRODUCTION AS WELL AS CONSUMPTION IN BOOKS OF ACCOUNT ON VERY NEXT DAY, A ND IF THE FIGURE OF PRODUCTION OF 38,789 KGS IS ADDED TO BOOK STOCK OF 1,40,042 KGS B EING OPENING STOCK AS ON THE DATE OF SEARCH, BOOK STOCK AT THE TIME OF RECORDING STOCK B Y AUTHORISED OFFICER IN THE EVENING WOULD WORK OUT TO 1,78,831 KGS AS AGAINST PHYSICAL STOCK OF 1,79,562 KGS AND THERE WILL BE MINOR DIFFERENCE OF 731 KGS. ON CAREFUL CONSIDER ATION OF ENTIRE DETAILS, AO HAS NOT DISPUTED DAILY STOCK REGISTER AND DAILY PRODUCTION REGISTER MAINTAINED BY APPELLANT. MANUFACTURING OF FINISHED GOODS BEING REFINED KAPAS IA TEL FROM RAW MATERIAL BEING KAPASIA WASH TEL IS CONTINUOUS PROCESS AND FOR SUCH PROCESS PIPELINES FOR BATH CAW MATERIAL AND-FINISHED GOODS ARE INTERCONNECTED WITH EACH OTHER. THE AO HAS ACCEPTED THE PLEA OF THE APPELLANT REGARDING SHORTAGE OF STO CK AS SUCH SHORTAGE WAS WORKED OUT ONLY BECAUSE STOCK FOUND DURING THE COURSE OF SEARC H WAS COUNTED AT 8.00 PM EVENING WHICH WAS COMPARED WITH OPENING STOCK OF RAW MATERI AL IN THE BOOKS WITHOUT GIVING EFFECT OF CONSUMPTION MADE DURING THE DAY UPTO 8.00 PM AND IF SUCH ADJUSTMENT IS PROVIDED, NO MATERIAL SHORTAGE WOULD WORK OUT. AND EVEN AO HAS NOT MADE THIS ADDITION ON THE GROUND THAT STOCK BEING 'WORK-IN-PROGRESS AN D IN THE PIPELINE OF FINISHED GOODS CANNOT BE MEASURED. THE APPELLANT IS FOLLOWING SIMI LAR METHOD OF COUNTING AND RECORDING BOOK STOCK FOR FINISHED GOODS AS EXPLAINE D HEREIN ABOVE AND EXCESS STOCK OF FINISHED GOODS IS WORKED ONLY BECAUSE STOCK COUNTED WAS AT 8.00 PM IN THE EVENING WAS COMPARED WITH OPENING STOCK WITHOUT GIVING EFFECT O F PRODUCTION MADE DURING THE DAY WHICH THOUGH WAS ACCEPTED IN CASE OF RAW MATERIAL. AS ENTIRE PLEA OF APPELLANT IS SUPPORTED BY EVIDENCES AND WHEN A.O HIMSELF IS ACCE PTING PART PLEA REGARDING RAW MATERIAL CONSUMPTION THERE IS NO REASON FOR NOT ACC EPTING PLEA REGARDING PRODUCTION OF FINISHED GOODS AS METHOD OF KEEPING STOCK FOR BOTH THE PRODUCTS ARE SIMILAR AND WHEN FINISHED GOODS ARE COUNTED AS ON THE DATE OF SEARCH IN THE EVENING WHEREAS BOOK STOCK DOES NOT INCLUDE PRODUCTION DURING THE DAY, EFFECT OF SUCH PRODUCTION OUGHT TO HAVE BEEN GIVEN BY THE A.O. WITH REGARD TO SHORTAGE OF STOCK OF 35,389 KGS AND EXCESS STOCK OF 39,520 KGS, PARTNER OF THE APPELLANT IN HIS STATEMENT DATED 28TH APRIL, 20 09 HAS STATED THAT NET RESULT OF BOTH SHORTAGE AND EXCESS IS ONLY 4,131 KGS WHICH CAN BE CONSIDERED AS COVERED BY DISCLOSURE IT(SS)A NOS. 141 & 146/AHD/2012 . A.Y. 2009-20 10 6 MADE ON 9 TH MARCH, 2009. THE REASON FOR NETTING BOTH SHORTAGE AND EXCESS STOCK WITH EACH OTHER WAS EXPLAINED BY APPELLANT IN ITS WRITTE N SUBMISSION BY STATING THAT AS STOCK FOUND DURING THE COURSE OF SEARCH WAS COUNTED IN TH E EVENING WAS COMPARED WITH OPENING STOCK OF BOTH THE MATERIALS WITHOUT GIVING EFFECT TO CONSUMPTION OF RAW MATERIAL AND PRODUCTION OF FINISHED GOODS DURING DAY TIME. I T WAS EXPLAINED THAT RAW MATERIAL WAS FOUND SHORT ONLY BECAUSE THOUGH SAME WAS ISSUED FOR CONSUMPTION, SAME WAS NOT REDUCED FROM OPENING STOCK OF THE DAY AS PER METHOD OF KEEPING STOCK RECORDS AS EXPLAINED IN PRECEDING PARA. THE FINISHED GOODS WAS FOUND IN EXCESS ONLY BECAUSE FINISHED GOODS PRODUCED DURING THE DAY WAS NOT INCR EASED IN BOOKS, AS EXPLAINED HEREIN ABOVE. THE PLEA OF APPELLANT IS ACCEPTABLE FOR THE REASONS STATED HEREIN ABOVE. IN THE RESULT IN CASE OF APPELLANT THERE REMAINS MINOR DIF FERENCE OF EXCESS STOCK OF 731 KGS WHICH WORKS CUT TO RS. 31,433 WHICH IS COVERED BY E XCESS DISCLOSURE MADE IN SHANKAR KAPAS FOR RS. 6,27,080, WHICH IS ALSO ACCEPTED BY A O IN ASSESSMENT ORDER. IN THE RESULT, ADDITION FOR RS.10,72,280 MADE BY THE ASSESSING OFF ICER FOR EXCESS STOCK IS DELETED. 7. AGGRIEVED BY THE ORDER OF LD. CIT(A), REVENUE IS N OW IN APPEAL BEFORE US. 8. BEFORE US, LD. D.R. POINTED TO THE FINDINGS OF A.O AND SUPPORTED HIS ORDER. ON THE OTHER HAND LD. A.R. REITERATED THE SUBMISSIO NS MADE BEFORE A.O AND LD. CIT(A) AND SUBMITTED THAT WHEN A.O HAS ACCEPTED THE ENTIRE PROCESS OF ISSUANCE OF RAW MATERIAL, COUNTING OF RAW MATERIAL , RECORDING THE STOCK IN BOOKS AND STOCK BEING WORK IN PROGRESS IN PIPELINE, HE WAS NOT JUSTIFIED IN NOT ACCEPTING THE SIMILAR PROCESS OF REGARDING FINI SHED GOODS MORE PARTICULARLY WHEN THE ENTIRE PROCESS IS CORRELATED WITH EACH OTHER. HE THUS SUPPORTED THE ORDER OF LD. CIT(A). 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ISSUE IN THE PRESENT CASE IS WITH RESPE CT TO ADDITION ON ACCOUNT OF UNACCOUNTED STOCK. WE FIND THAT LD. CIT(A) WHILE DE CIDING THE ISSUE IN IT(SS)A NOS. 141 & 146/AHD/2012 . A.Y. 2009-20 10 7 FAVOUR OF THE ASSESSEE HAS NOTED THAT A.O HAS NOT D ISPUTED DAILY STOCK AND DAILY PRODUCTION REGISTER WHICH ARE MAINTAINED BY T HE ASSESSEE AND THAT THE MANUFACTURING OF FINISHED GOODS BEING REFINED KAPAS IA TEL FROM THE RAW MATERIAL BEING KAPASIA WASH TEL IS A CONTINUOUS PRO CESS AND FOR SUCH PROCESS PIPELINE FOR BOTH RAW MATERIAL AND FINISHED GOODS A RE INTERCONNECTED WITH EACH OTHER. HE HAS FURTHER NOTED THAT A.O HAS ACCEP TED THE PLEA OF THE ASSESSEE REGARDING SHORTAGE OF STOCK WAS WORKED OUT ONLY BECAUSE STOCK FOUND DURING THE COURSE OF SEARCH WAS COUNTED AT 8. 00 P.M. WHICH WAS COMPARED WITH OPENING STOCK OF RAW MATERIAL IN THE BOOKS WITHOUT GIVING THE EFFECT OF CONSUMPTION MADE DURING THE DAY UP TO 8.00 P.M. AND IF SUCH ADJUSTMENT IS PROVIDED, NO MATERIAL SHORTAGE WOULD BE WORKED OUT. HE HAS FURTHER NOTED THAT THE SHORTAGE OF STOCK AND EXCESS STOCK IF CONSIDERED TOGETHER WOULD RESULT IN EXCESS OF ONLY 4131 KG. WH ICH CAN BE CONSIDERED TO HAVE BEEN COVERED BY THE DISCLOSURE MADE BY THE ASS ESSEE. BEFORE US, REVENUE HAS NOT POINTED OUT ANY FALLACY IN THE FIND INGS OF LD. CIT(A). IN VIEW OF THE THESE FACTS, WE FIND NO REASON TO INTER FERE WITH THE ORDER OF LD. CIT(A) AND THUS THE GROUND OF REVENUE IS DISMISSED. GROUND NO. 2 IS WITH RESPECT TO ADDITION ON ACCOUNT OF QUALITY ALLOWANCE OF RS. 33,25,928/- 10. ON COMPARISON THE PROFIT AND LOSS ACCOUNT, AO NOTIC ED THAT ASSESSEE HAS DEBITED QUALITY ALLOWANCE EXPENSES RS. 33,25,928/ -. HE ALSO NOTICED THAT THERE WAS AN INCREASE IN EXPENDITURE AS COMPARED TO THE SAME IN IMMEDIATELY PRECEDING ASSESSMENT YEAR. THE ASSESSEE WAS ASKED TO JUSTIFY THE INCREASE BUT THE SUBMISSION OF THE ASSESSEE WAS NOT FOUND ACCEPTABLE TO THE A.O. HE THEREFORE HELD THAT IN THE ABSENCE OF A NY EVIDENCE OR IT(SS)A NOS. 141 & 146/AHD/2012 . A.Y. 2009-20 10 8 JUSTIFICATION, THE CLAIM OF EXPENDITURE CANNOT BE A LLOWED. HE ACCORDINGLY DISALLOWED RS. 33,25,928/- BY HOLDING IT TO BE UNEX PLAINED AND UNSUPPORTED EXPENDITURE. AGGRIEVED BY THE ORDER OF A.O., ASSESS EE CARRIED THE MATTER BEFORE LD. CIT(A) WHO DELETED THE ADDITION MADE BY THE A.O HOLDING AS UNDER:- 6.2 I HAVE CAREFULLY CONSIDERED THE ASSESSMENT ORDE R AND THE ABOVE SUBMISSION MADE BY THE ASSESSEE. THE ASSESSING OFFICER HAS MADE DISALL OWANCE OF QUALITY ALLOWANCE FOR RS 33,25,928 TREATED IT AS UNEXPLAINED EXPENDITURE AND FOR MAKING SUCH DISALLOWANCE HE HAS OBSERVED THAT IN IMMEDIATELY PRECEDING YEAR,' NO EX PENDITURE WAS CLAIMED. THE APPELLANT HAS CLAIMED THAT, IT DEALS WITH A SEASONAL COMMODIT Y AND QUALITY DEPENDS MOSTLY ON WEATHER CONDITION. WHEN THE QUALITY OF RAW COTTON I S DETERIORATED DUE TO BAD WEATHER AND UNSEASONAL RAINS, THE FINISHED GOODS PRODUCED ARE N OT UP TO GOOD QUALITY AND WHEN GOODS SUPPLIED ARE NOT ACCORDING TO REQUIREMENT OF BUYER, APPELLANT HAS PAID THE QUALITY ALLOWANCE WHICH IS SUPPORTED BY DEBIT NOTES. THE AP PELLANT BEING IN BUSINESS OF COTTON GINNING AND COTTON SEED CRUSHING, QUALITY OF PRODUC TION DEPENDS ON RAW MATERIAL RECEIVED BY IT AND SAME CANNOT BE COMPARABLE TO YEA R TO YEAR BASIS. THE APPELLANT HAS CLAIMED QUALITY ALLOWANCE OF RS 8,99,804 IN A.Y. 20 07-2008 WHICH HAS BEEN ALLOWED BY ASSESSING OFFICER WHILE PASSING ASSESSMENT ORDER U/ S 153A OF THE ACT. THE DETERIORATION OF FINISHED GOODS HAS LED TO QUALITY ALLOWANCE GIVEN B Y APPELLANT TO ITS CUSTOMERS/DEBTORS AND SUCH EXPENDITURE IS SUPPORTED BY THIRD PARTY EV IDENCES AND DULY RECORDED IN BOOKS-OF ACCOUNT RESPECTIVE DEBTORS ACCOUNTS AND SUCH ACCOUN TS ARE DULY AUDITED BY AUDITOR. THE ACCOUNTS ARE PAID/SETTLED ON THE BALANCE AMOUNT AFT ER CREDIT OF SUCH QUALITY ALLOWANCE. THE EXPENDITURE CLAIMED IS ONLY 0.46% OF TURNOVER' AND EVEN AO HAS NOT DISPUTED BOOK RESULTS SHOWN BY APPELLANT HENCE ADDITION MADE BY A O ON PRESUMPTION THAT NO SUCH EXPENDITURE WAS INCURRED IN EARLIER YEAR IS NOT TEN ABLE. EVEN, APPELLANT HAS SETTLED ONGOING DISPUTES WITH THE DEBTORS REGARDING QUALITY ALLOWANCES IN CURRENT YEAR ONLY WHICH IS EVEN CLEARLY REFLECTED IN LEDGER ACCOUNT O F QUALITY ALLOWANCE WHICH HAS ALSO RESULTED INTO INCREASE IN EXPENDITURE. FURTHER, EVE N HON'BLE SUPREME COURT IN CASE OF S.A. BUILDERS VS. CIT 288 ITR 1 HAS OBSERVED THAT R EVENUE CANNOT JUSTIFIABLY CLAIM TO PUT IN ARMCHAIR OF A BUSINESSMAN AND DECIDE WHAT IS REA SONABLE EXPENDITURE HAVING REGARD IT(SS)A NOS. 141 & 146/AHD/2012 . A.Y. 2009-20 10 9 TO THE CIRCUMSTANCES OF THE CASE. IN THE PRESENT CA SE, APPELLANT HAS GIVEN QUALITY DISCOUNT TO MAINTAIN A GOOD RELATION WITH ITS CUSTOMER AND E NTIRE EXPENDITURE IS SUPPORTED BY THIRD PARTY EVIDENCES HENCE SAME CANNOT BE TREATED AS UNE XPLAINED EXPENDITURE. CONSIDERING THE SAME, DISALLOWANCE MADE BY A.O IS DELETED. THE RELATED GROUND OF APPEAL IS ALLOWED. 11. AGGRIEVED BY THE ORDER OF LD. CIT(A), REVENUE IS NOW IN APPEAL BEFORE US. 12. BEFORE US, LD. D.R. SUPPORTED THE ORDER OF A.O AND FURTHER SUBMITTED THAT IN THE ABSENCE OF ANY EVIDENCE AND JUSTIFICATION FOR I NCREASE IN EXPENDITURE AS COMPARED TO THAT OF EARLIER YEAR, A.O WAS FULLY JUS TIFIED IN MAKING THE DISALLOWANCE. LD. A.R. ON THE OTHER HAND REITERATED THE SUBMISSIONS MADE BEFORE A.O AND LD. CIT(A) AND SUPPORTED THE ORDER O F LD. CIT(A). 13. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT LD. CIT(A) WHILE DECIDING THE ISSUE IN FAVOUR OF THE ASSESSEE HAS GIVEN A FINDING THAT THE ASSESSEE HAD CLAIMED SIMILAR EXPENDITURE IN A.Y. 07-08 WHICH WAS ALLOWED BY THE A.O. IN THE ASSESSMENT ORDER PASSED U/S. 153A OF THE ACT AND FURTHER THE D ETERIORATION OF FINISHED GOODS HAD LED TO QUALITY ALLOWANCE THAT WAS GIVEN B Y THE ASSESSEE TO ITS CUSTOMERS AND SUCH EXPENDITURE WAS SUPPORTED BY THI RD PARTY EVIDENCES AND WERE DULY RECORDED IN THE BOOKS OF ACCOUNTS AND THE EXPENDITURE CLAIMED WAS ONLY 0.46% OF TURNOVER AND THEREFORE THE EXPEND ITURE COULD NOT HAVE BEEN TREATED AS UNEXPLAINED EXPENDITURE. BEFORE US, REVENUE HAS NOT BROUGHT ANY MATERIAL ON RECORD TO CONTROVERT THE FI NDINGS OF LD. CIT(A) NOR COULD POINT OUT ANY FALLACY IN HIS FINDINGS. IN VIE W OF THE AFORESAID FACTS, WE FIND NO REASON TO INTERFERE WITH THE ORDER OF LD. C IT(A) AND THUS THE GROUND OF REVENUE IS DISMISSED. IT(SS)A NOS. 141 & 146/AHD/2012 . A.Y. 2009-20 10 10 GROUND NO. 3 IS WITH RESPECT TO DELETION OF ADDITIO N MADE ON ACCOUNT OF BROKERAGE OF RS. 75,92,072/-. 14. ON PERUSING THE PROFIT AND LOSS ACCOUNT, AO NOTICED THAT ASSESSEE HAS CLAIMED EXPENDITURE OF RS. 1,08,56,370/- BEING 0.38 % OF TURNOVER AS BROKERAGE EXPENSES. HE ALSO NOTICED THAT IN THE IMM EDIATE PRECEDING YEAR, THE BROKERAGE EXPENSES WAS 48,99,326/- BEING 0.11% OF THE TURNOVER AND THUS THE EXPENDITURE HAS DRASTICALLY INCREASED AS C OMPARED TO EARLIER YEARS. THE ASSESSEE WAS ASKED TO JUSTIFY THE INCREASE IN E XPENSES. THE SUBMISSIONS OF THE ASSESSEE WAS NOT FOUND ACCEPTABLE TO THE A.O . HE THEREFORE CONSIDERED 0.27% (0.38% - 0.11%) OF SALES OF RS. 28 1,18,78,744/- AS BEING NOT JUSTIFIABLE AND ACCORDINGLY MADE ADDITION OF RS . 75,92,072/-. AGGRIEVED BY THE ORDER OF A.O., ASSESSEE CARRIED THE MATTER B EFORE LD. CIT(A) WHO DELETED THE ADDITION MADE BY THE A.O HOLDING AS UND ER:- 7.2 I HAVE CAREFULLY CONSIDERED THE ASSESSMENT ORDE R AND SUBMISSION FILED BY ' APPELLANT. THE ASSESSING OFFICER HAS COMPARED RATIO OF BROKERA GE EXPENDITURE TO TURNOVER OF CURRENT YEAR WITH IMMEDIATELY PRECEDING YEAR AND OB SERVED THAT APPELLANT HAS INCURRED SUBSTANTIALLY HIGHER EXPENDITURE THOUGH TURNOVER HA S BEEN REDUCED. THE ASSESSING OFFICER HAS PROPORTIONATELY DISALLOWED BROKERAGE EX PENDITURE OF RS 75,92,072 APPLYING RATIO OF BROKERAGE EXPENDITURE TO TURNOVER OF 0.11% OF A.Y. 2008-2009 IN CURRENT ASSESSMENT YEAR. THE APPELLANT HAS EXPLAINED THAT C LAIM OF BROKERAGE EXPENSES IS SUPPORTED BY THIRD PARTY EVIDENCES AND PAYMENT IS M ADE BY APPELLANT AFTER DEDUCTED TDS FROM SUCH' BROKERAGE EXPENSES WHICH ARE NOT DISPUTE D BY ASSESSING OFFICER AND HENCE ADDITION SIMPLY ON THE BASIS OF COMPARISON OF EXPEN DITURE CANNOT BE MADE. THE APPELLANT HAS ALSO EXPLAINED THAT EXPENDITURE INCLUDES BROKER AGE PAID ON PURCHASES FOR RS 11,47,666/- AND SAME HAS BEEN PAID TO PROCURE BETT ER QUALITY OF RAW MATERIAL FOR PRODUCTION OF CROP AS QUALITY OF PRODUCTION OF KAPA S BEING RAW MATERIAL HAS BEEN DETERIORATED DURING THE YEAR DUE TO BAD WEATHER CON DITION. WITH REGARDS TO BROKERAGE ON SALE, APPELLANT HAS CLAIMED THAT IN A.Y. 2009-2010, THERE WAS DRASTIC FALL IN THE IT(SS)A NOS. 141 & 146/AHD/2012 . A.Y. 2009-20 10 11 PRODUCTION OF COTTON ALL OVER THE COUNTRY AND SELLING WAS DIFFICULT IN LOCAL MARKETS DUE TO HIGHER RATES AND IMPORT OF GOODS WAS CHEAPER THAN PRICES PREVAILING IN MARKET AND IN SUCH SITUATION, APPELLANT HAS PAID HIGHER BROKERAGE TO MAKE SALE OF FINISHED GOODS. OTHERWISE, APPELLANT WOULD NOT BE ABLE TO SALE FINI SHED GOODS IN LOCAL MARKET. THE APPELLANT HAS ALSO EXPLAINED THAT INDIA'S COTTON EX PORTS FELL OVER 95% YEAR-ON-YEAR TO 75,000 BALES ON SLUGGISH OVERSEAS DEMAND AND THE RE ASON FOR FALL IN EXPORT IS THAT OVERSEAS TRADERS WERE NOT READY TO BUY SINCE PRICES FIXED BY THE GOVERNMENT WERE HIGHER AS COMPARED TO PRICES OFFERED BY THE OTHER COUNTRIE S AND TO OVERCOME SUCH SITUATION AND WITHOUT PILLING UP THE FINISHED GOODS, BROKERAGE HA D TO BE PAID AT A HIGHER RATE BY THE APPELLANT. THE APPELLANT HAS ALSO SUBMITTED A NUMBE R OF NEWS PAPER ARTICLES IN SUPPORT OF ITS EXPENDITURE AND CLAIM. ON CAREFUL CONSIDERATION OF ENTIRE DETAILS, THE PAY MENT MADE BY APPELLANT IS AFTER DEDUCTING TDS, SUPPORTED BY THIRD PARTY EVIDENCES A ND NONE OF THE PARTIES TO WHOM APPELLANT HAS MADE PAYMENT IS RELATED PARTY COVERED . U/S40A(2)(B). THE ASSESSING OFFICER HAS.NOT QUESTIONED GENUINENESS OF THE ENTIRE EXPEND ITURE BUT DISALLOWED EXPENDITURE ON SIMPLE REASON THAT RATIO OF BROKERAGE EXPENDITURE H AS BEEN INCREASED IN CURRENT YEAR. THE ASSESSING OFFICER HAS EVEN NOT REJECTED BOOK RE SULT SHOWN BY APPELLANT. THE REASON FOR REDUCTION IN SALE WAS VERY WELL EXPLAINED BY AP PELLANT THAT RATES OF COTTON PREVAILING IN INTERNATIONAL MARKETS WERE CHEAPER AS COMPARED T O THE PRICES PREVAILING IN INDIAN MARKETS. THE PAYMENT OF BROKERAGE BOTH ON PURCHASE AND SALE IN CURRENT ASSESSMENT YEAR AT HIGHER RATES WAS BECAUSE .OF DIFFICULTY IN MAKIN G SALES BY APPELLANT FOR THE REASONS EXPLAINED HEREIN ABOVE-AND ENTIRE CLAIM OF APPELLAN T IS SUPPORTED BY VARIOUS ARTICLES/NEWS PAPER CUTTING SUBMITTED BY APPELLANT WHICH SUGGEST THAT SALE OF COTTON IN LOCAL MARKET WAS VERY DIFFICULT IN AY. 2009-2010 DU E TO VARIOUS REASONS BEING QUALITY OF FINISHED GOODS AND RATE. ENTIRE EXPLANATION REGARDI NG HIGHER BROKERAGE PAYMENT IN COMPARISON OF EARLIER YEAR IS FULLY EXPLAINED BY AP PELLANT AND CONTENTING OF APPELLANT THAT INSPITE OF REDUCTION IN SALE, APPELLANT HAS TO PAY HIGHER COMMISSION TO MAKE SALE OF FINISHED GOODS IS SUPPORTED BY TENABLE MATERIAL HEN CE DISALLOWANCE MADE BY AO SIMPLY ON THE BASIS OF COMPARISON OF RATIO OF EXPENDITURE IS UNCALLED FOR. AS HELD IN PARA 5.2 HEREIN ABOVE, REVENUE CANNOT JUSTIFIABLY CLAIM TO P UT IN ARMCHAIR OF A BUSINESSMAN AND DECIDE WHAT IS REASONABLE EXPENDITURE HAVING REGARD TO THE CIRCUMSTANCES OF THE CASE. IT(SS)A NOS. 141 & 146/AHD/2012 . A.Y. 2009-20 10 12 THE DECISION OF HON'BLE RAJASTHAN HIGH COURT IN THE CASE OF LAXMI ENGINEERING INDUSTRIES VS. ITO (298 ITR 203) AND DECISION OF .T HE HON'BLE DELHI HIGH COURT DECISION IN THE CASE OF CIT VS. DEVAYHI BEVERAGES LTD, (296 ITR 41) RELIED UPON BY APPELLAN T SUPPORTS THE CONTENTION OF IT WHEREIN COURTS HAVE C ONSISTENTLY HELD ASSESSING OFFICER CANNOT ASSUME THE ROLE OF BUSINESSMAN AND DECIDE WH AT SHOULD HAVE BEEN THE APPROPRIATE QUANTUM OF EXPENDITURE. IN THE CIRCUMST ANCES, THE ADDITION MADE BY ASSESSING OFFICER FOR BROKERAGE EXPENSES FOR RS. 75 ,92,072/- IS DELETED. 15. AGGRIEVED BY THE ORDER OF LD. CIT(A), REVENUE IS NOW IN APPEAL BEFORE US. 16. BEFORE US, LD. D.R. SUPPORTED THE ORDER OF A.O. LD. A.R. ON THE OTHER HAND REITERATED THE SUBMISSIONS MADE BEFORE A.O AND LD. CIT(A) AND SUPPORTED THE ORDER OF LD. CIT(A). 17. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT LD. CIT(A) WHILE GRANTING THE RELIEF HAS GIVEN A FINDING THAT THE CLAIM OF BROKERAGE EXPENSES IS SUPPORTED B Y THIRD PARTY EVIDENCES AND THE PAYMENT HAVE BEEN MADE AFTER DEDUCTION OF T DS FROM SUCH BROKERAGE EXPENSES AND THE ADDITION HAS BEEN MADE S IMPLY ON THE BASIS OF COMPARISON OF EXPENDITURE. HE HAS FURTHER GIVEN A F INDING THAT NONE OF THE PARTIES TO WHOM ASSESSEE HAS MADE PAYMENTS WERE REL ATED PARTY COVERED U/S. 40A (2B) OF THE ACT AND THE A.O HAS NOT QUESTI ONED THE GENUINENESS OF ENTIRE EXPENDITURE. HE HAS FURTHER GIVEN A FINDING THAT THE ENTIRE EXPLANATION REGARDING HIGHER BROKERAGE PAYMENT IN COMPARISON TO EARLIER YEARS HAS BEEN FULLY EXPLAINED. BEFORE US, REVENUE COULD NOT CONTR OVERT THE FINDINGS OF 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 GROUND OF REVE NUE IS DISMISSED. IT(SS)A NOS. 141 & 146/AHD/2012 . A.Y. 2009-20 10 13 18. IN THE RESULT, THE APPEAL OF REVENUE IS DISMISSED. NOW WE TAKE UP ASSESSEES APPEAL IN IT(SS)A NO. 146/AHD/2012 THE ISSUE IS TREATMENT OF LOSS ON SH ARES. 19. ON PERUSING THE PROFIT AND LOSS ACCOUNT, A.O NOTICE D THAT ASSESSEE HAS DEBITED RS. 69,05,134/- AS SHARE PROFIT AND LOSS A CCOUNT. HE ALSO NOTICED THAT THE SHARE TRADING WAS NOT THE BUSINESS OF THE ASSESSEE AND THE SHARES THAT WERE STATED TO HAVE BEEN SOLD ON WHICH ASSESSE E HAD INCURRED LOSS WERE HELD AS INVESTMENTS IN EARLIER YEARS. HE WAS THERE FORE OF THE VIEW THAT THE LOSS INCURRED ON SALE OF SHARES THAT WERE HELD AS I NVESTMENTS WAS IN THE NATURE OF CAPITAL LOSS AND THEREFORE CANNOT BE ALLO WED TO BE SET OFF AGAINST THE BUSINESS INCOME AND ACCORDINGLY DENIED THE SET OFF OF LOSS OF RS. 69,05,134/-. AGGRIEVED BY THE ORDER OF A.O., ASSESS EE CARRIED THE MATTER BEFORE LD. CIT(A) WHO UPHELD THE ORDER OF A.O HOLDI NG AS UNDER:- 5.2 I HAVE CAREFULLY CONSIDERED THE ASSESSMENT ORDE R AND SUBMISSION FILED BY THE APPELLANT. THE APPELLANT HAS CLAIMED LOSS FROM SALE OF SHARES FOR RS. 69,05,134 AS BUSINESS LOSS WHICH- HAS BEEN TREATED AS CAPITAL LO SS BY ASSESSING OFFICER MAINLY RELYING ON TAX AUDIT REPORT WHEREIN IT HAS BEEN MENTIONED T HAT APPELLANT IS ENGAGED IN THE BUSINESS OF COTTON GINNING AND COTTON SEEDS CRUSHIN G AND THERE IS NO MENTION REGARDING SHARE TRADING ACTIVITY. THE AO HAS ALSO STATED THAT IN EARLIER YEARS APPELLANT HAS SHOWN SHARES PURCHASED AS INVESTMENT HENCE SUCH LOSS IS C APITAL LOSS AS PER PROVISION OF SECTION 74 OF THE ACT. 5.2.1 ON THE OTHER HAND, APPELLANT HAS ARGUED THAT AS SHA RES WERE PURCHASED WITH INTENTION OF CARRYING ON TRADING, LOSS ARISING FROM SALE OF SUCH SHARES WAS TREATED AS BUSINESS LOSS. IT WAS FURTHER ALLEGED BY APPELLANT THAT THOUGH THERE IS NO MENTION OF SHARE TRADING AS BUSINESS ACTIVITY IN TAX AUDIT REPORT, S AME AUDITOR IN NOTES TO FINAL ACCOUNTS IT(SS)A NOS. 141 & 146/AHD/2012 . A.Y. 2009-20 10 14 HAS SPECIFICALLY MENTIONED THAT APPELLANT HAS ALSO CARRIED OUT BUSINESS IN SHARES. WITH REGARD TO OBSERVATION OF AO THAT AS SHARES WERE HEL D AS INVESTMENT IN A.Y. 2008-09, PROFIT/LOSS IS TAXABLE UNDER THE HEAD CAPITAL GAIN, APPELLANT HAS STATED THAT TREATMENT GIVEN IN BOOKS OF ACCOUNT IS NOT THE ONLY DETERMINA TIVE FACTOR REGARDING NATURE OF THE TRANSACTIONS. 5.2.2 ON FURTHER VERIFICATION OF THE FACTS, IT IS NOTICED THAT DURING THE YEAR UNDER CONSIDERATION, THE APPELLANT HAS CLAIMED ADMINISTRA TIVE EXPENSES TO THE TUNE OF RS.5,62,98,366/- IN THE PROFIT AND LOSS ACCOUNT. TH E DETAILS OF ADMINISTRATIVE EXPENSES REVEALED THAT LOSS ON ACCOUNT OF SHARE TRANSACTIONS AMOUNTING TO RS.69,05,134/- IS DEBITED UNDER THE HEAD ADMINISTRATIVE EXPENSES. DUR ING APPELLATE PROCEEDINGS, THE APPELLANT WAS ASKED TO FILE THE ANNUAL ACCOUNTS FOR THE FINANCIAL YEAR 2006-07 AND 2007- 08. FROM THE ANNUAL ACCOUNTS OF F.Y.2006-07, IT IS OBSERVED THAT THE TRANSACTION OF SHARES WAS TREATED AS INVESTMENT BY THE APPELLANT. THE CLOSING STOCK OF VARIOUS SHARES AMOUNTING TO RS.10,36,260/- WERE SHOWN UNDER THE HE AD INVESTMENTS IN THE BALANCE-SHEET AS ON 31.03.2007. LIKE-WISE IN THE F.Y.2007-08, THE CLOSING STOCK OF SHARES WAS SHOWN AS INVESTMENT, AMOUNTING TO RS.81,87,730/- IN THE BALA NCE-SHEET AS ON 31-03.2008. THE STATEMENT OF COMPUTATION OF INCOME WAS ALSO VERIFIE D DURING APPELLATE PROCEEDINGS. THE COMPUTATION OF INCOME STATEMENT FOR THE A.Y.2008-09 (F.Y.2007-08) REVEALED THAT PROFIT ON TRANSACTIONS OF SHARES AMOUNTING TO RS.48,187/- WAS CONSIDERED AS SHORT TERM CAPITAL GAIN BY THE APPELLANT. FROM THE FACTS MENTIONED ABO VE, IT IS ABSOLUTELY CLEAR THAT THE APPELLANT WAS TREATING THE SHARE TRANSACTIONS AS IN VESTMENT AND ACCORDINGLY, THE INTENTION OF THE APPELLANT WAS TO HOLD THE SHARES A S INVESTMENT ONLY. 5.2.3 THE APPELLANT WAS ALSO ASKED TO SUBMIT THE LEDGER A CCOUNT OF PROFIT AND LOSS INCURRED ON SHARE TRANSACTIONS DURING THE F.Y.2008- 09 I.E. THE A.Y.2009-10 WHICH IS THE YEAR UNDER CONSIDERATION. ON VERIFICATION OF LEDGER ACCOUNT OF SHARE TRANSACTIONS, IT IS NOTICED THAT THE APPELLANT PASSED JOURNAL ENTRIES O N 31.03.2009 I.E. THE LAST DAY OF THE F.Y.2008-09, TO TREAT THE CAPITAL LOSS ON SHARES AM OUNTING TO RS.69,52,698/- AS BUSINESS LOSS AND TO GET SET OFF AGAINST THE BUSINESS PROFIT OF OTHER BUSINESSES. 5.2.4 THE APPELLANT WAS ALSO ASKED TO SUBMIT THE DETAILS SEPARATELY FOR LOSS ON SHARE TRANSACTIONS BOOKED AS WELL AS LOSS ON ACCOUNT OF V ALUATION OF CLOSING INVENTORY OF SHARES. ON VERIFICATION OF THE DETAILS FILED BY THE APPELLANT IN THIS REGARD, REVEALED THAT IT(SS)A NOS. 141 & 146/AHD/2012 . A.Y. 2009-20 10 15 THE APPELLANT HAS GENERATED PROFIT OF RS.3,88,537/- ON THE SHARE TRANSACTIONS DURING THE YEAR UNDER CONSIDERATION. THE APPELLANT BY PASSING THE JOURNAL ENTRIES ON 31.03.2009 ACCOUNTED FOR THE NOTIONAL LOSS ON VALUATION OF CLO SING INVENTORY OF SHARES AMOUNTING TO RS. 72,93,725/-. 5.2.5 AS PER THE PROVISIONS OF THE I.T. ACT, 1961, THE IMPUGNED CAPITAL LOSS CAN ONLY BE CARRIED FORWARD FOR SET OFF AGAINST CAPITAL GAIN IN FUTURE BUT IT CANNOT BE SET OFF AGAINST ANY OTHER BUSINESS INCOME. HAD THE APPELLANT CONTIN UED TO TREAT THE SHARE TRANSACTIONS AS INVESTMENT, WHICH WAS BEING DONE BY HIM IN THE F.Y. 2006-07 AND F.Y.2007-08, THEN THE APPELLANT WOULD HAVE PAID TAX ON SHORT TERM CAPITAL GAIN ON SHARE TRANSACTIONS OF RS.3,88,537/- DURING THE YEAR UNDER CONSIDERATION. THE APPELLANT WOULD NOT BE ENTITLED FOR LOSS IN THE VALUE OF CLOSING INVENTORY OF SHARE S AMOUNTING TO RS.72,93,725/- WHICH WAS WRONGLY CLAIMED BY HIM BY CHANGING THE TREATMEN T OF SHARES FROM INVESTMENT TO TRADING IN SHARES ON THE LAST DAY I.E. 31.03.2009 O F THE YEAR UNDER CONSIDERATION. 5.2.6 FURTHER, MAIN BUSINESS OF THE APPELLANT IS TH AT OF COTTON GINNING AND CRUSHING OF COTTON SEEDS. IT IS ALSO APPARENT FROM ANNUAL ACCOU NT FILED BY THE APPELLANT THAT TURNOVER FROM ITS MAIN BUSINESS BEING COTTON GINNING AND CRU SHING OF COTTON SEEDS IS RS. 281.19 CRORES AS AGAINST WHICH TURNOVER FROM SALE OF SHARE S IS VERY NOMINAL. THUS, ON FACTS AND CIRCUMSTANCES OF APPELLANT'S CASE, AS STATED HEREIN ABOVE, DISALLOWANCE OF BUSINESS LOSS IN SHARES MADE BY AO IS CONFIRMED. THE RELATED GROU ND OF APPEAL IS DISMISSED. 20. AGGRIEVED BY THE ORDER OF LD. CIT(A), ASSESSEE IS NOW IN APPEAL BEFORE US. 21. BEFORE US, LD. A.R REITERATED THE SUBMISSIONS MADE BEFORE A.O AND LD. CIT(A) AND FURTHER SUBMITTED THAT THE AUDITOR IN TH E NOTES TO FINAL ACCOUNTS HAS MENTIONED THAT THE ASSESSEE HAD CARRIED OUT THE BUSINESS IN SHARES AND THEREFORE THE LOSS INCURRED ON SALE OF SHARES WAS R IGHTLY SET OFF AGAINST THE BUSINESS INCOME. LD. D.R. ON THE OTHER HAND SUPPORT ED THE ORDER OF A.O AND LD. CIT(A) AND FURTHER SUBMITTED THAT IN F.YS.06-07 & 07-08, ASSESSEE HAS TREATED THE SHARES AS INVESTMENTS AND IN A.Y. 08-09 THE PROFIT EARNED ON SALE IT(SS)A NOS. 141 & 146/AHD/2012 . A.Y. 2009-20 10 16 OF SHARES WAS TREATED AS SHORT TERM CAPITAL GAINS A ND IN SUCH A SITUATION, THE LOSS ON SALE OF SHARES WHICH WERE TREATED AS INVEST MENT BY THE ASSESSEE IN EARLIER YEARS WAS RIGHTLY DENIED THE CLAIM OF SET O FF. HE THUS SUPPORTED THE ORDER OF A.O AND LD. CIT(A). 22. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT LD. CIT(A) WHILE DECIDING THE ISSUE AGAINST THE ASSESSEE HAS GIVEN A FINDING THAT ASSESSEE HAS TREA TED THE SHARES TRANSACTION AS INVESTMENTS IN F.Y. 06-07 & 07-08 AND THE ASSESS EE BY PASSING A JOURNAL ENTRY ON 31.03.2009 ACCOUNTED FOR THE NOTIONAL LOSS OF VALUE OF CLOSING INVENTORY OF SHARES. BEFORE US, ASSESSEE COULD NOT CONTROVERT THE FINDINGS OF LD. CIT(A). IN VIEW OF THE AFORESAID FACTS, WE FIN D NO REASON TO INTERFERE WITH THE ORDER OF LD. CIT(A) AND THUS THE GROUND OF ASSESSEE IS DISMISSED. THUS THE APPEAL OF ASSESSEE IS DISMISSED. 23. IN THE RESULT, THE APPEAL OF REVENUE AND ASSESSEE A RE DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 16 - 02 - 2016. SD/- SD/- (KUL BHARAT) (ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: 16/02/2016 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. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AH MEDABAD