HARSHA L TAHILRAMANI, V. ADDL CIT RG 19(1),

MA 510/MUM/2011

• Counselvise Citation: [2012] 123 COUNSELVISE.COM (IT) 9156 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 7 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 26-09-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: H
• Assessment Year: 2006-2007
• Appeal Filed On: 19-10-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH: MUMBAI BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO, JUDICIAL MEMBER MA NO.510/MUM/2011 ARISING OUT OF ITA NO.5931/MUM/2009 FOR AY 2006-07 SMT. HARSHA L. TAHILRAMANI, 1008/1102 VINAYAK HEIGHTS, NAGIN DUTT ROAD, PALI HILL, BANDRA (W) MUMBAI -400 050 ...... APPLICANT PAN: AAOPT 6988 Q VS THE ADDL. COMMISSIONER OF INCOME-TAX, RANGE 19(1), MUMBAI ..... RESPONDENT APPLICANT BY: SHRI SURESH N. OTWANI RESPONDENT REVENUE BY: SHRI M.K. MEHTA DATE OF HEARING: 27.07.2012 DATE OF PRONOUNCEMENT: 26.09.2012 O R D E R PER VIJAY PAL RAO, JM: THIS MISCELLANEOUS APPLICATION BY THE ASSESSEE IS D IRECTED AGAINST THE ORDER DATED 10TH AUGUST, 2011 OF THIS TRIBUNAL WHER EBY THE APPEAL IN ITA NO.5931 OF 2009 OF THE ASSESSEE WAS DISPOSED OFF. 2. THIS TRIBUNAL WHILE PASSING THE IMPUGNED ORDER O N THE ISSUE OF SHORT- TERM CAPITAL GAIN OR BUSINESS INCOME HAS MADE CERTA IN OBSERVATIONS WITH RESPECT TO THE FUNDS RECEIVED BY THE ASSESSEE AND A CCORDINGLY MATTER WAS REMITTED TO THE RECORD OF THE AO FOR EXAMINATION AN D VERIFICATION ON CERTAIN FACTS AND ARRANGEMENTS BETWEEN THE ASSESSEE AND THE PORTFOLIO MANAGER. BY WAY OF THIS M.A. THE ASSESSEE HAS STATED THAT THIS TRIBUNAL HAS INCORRECTLY CONSIDERED THE FACTS THAT PORTFOLIO MANAGEMENT SCHE ME M/S. MOTILAL OSWAL SECURITIES LTD. HAS GIVEN THE FACILITY OF CREDIT AN D UNPAID PURCHASE PRICE OF SHARES CANNOT BE TAKEN AND TREATED AS USED OF BORRO WED FUNDS BY THE SMT. HARSHA L. TAHILRAMANI MA 510/MUM/2011 2 ASSESSEE, WHICH IS NOT CORRECT, BECAUSE IT IS THE O RIGINAL FIRM DEALING AS BROKER M/S. MOTILAL SECURITIES LTD. (BROKING) AND MOTILAL OSWAL INVESTMENT PVT LTD. (CREDITOR) WHO HAVE GIVEN THIS FACILITY AN D NOT PORTFOLIO MANAGEMENT SCHEME ENTIRY. THE LD. AR OF THE ASSESSEE HAS REFE RRED TO PARA 6.3 OF THE IMPUGNED ORDER OF THIS TRIBUNAL AND SUBMITTED THAT THE TRIBUNAL HAS CONSIDERED A WRONG FACT ABOUT THE CREDIT FACILITY A VAILED BY THE ASSESSEE FROM THE PORTFOLIO MANAGER WHEREAS THE FACILITY WAS AVAI LED FROM THE SEPARATE ENTITY NAMELY MOTILAL OSWAL SECURITIES LTD. ON THE OTHER HAND, THE LD. DR HAS VEHEMENTLY OBJECTED M.A. OF THE ASSESSEE AND SU BMITTED THAT ONCE THE FINDING HAS BEEN GIVEN BY THIS TRIBUNAL ON MERITS O F THIS ISSUE THE SAME CANNOT BE REVIEWED UNDER THE PROCEEDINGS U/S.254(2) . 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS SUBMISSIONS MADE IN THE MISCELLANEOUS APPLICATION. WE HAVE ALS O CAREFULLY PERUSED THE IMPUGNED ORDER DATED 10TH AUGUST, 2011. WE FIND TH AT THIS TRIBUNAL AFTER CONSIDERING THE RIVAL CONTENTIONS, THE FACTS OF THE CASE AND RELEVANT MATERIAL HAS ADJUDICATED THE ISSUE OF CAPITAL GAIN OR BUSINE SS INCOME ARISING FROM SALE AND PURCHASE OF SHARES THROUGH PORTFOLIO MANAG EMENT SERVICE. THE CONCLUDING PART OF THE IMPUGNED ORDER IN PARA 6.3 A S UNDER: 6.3 IN THE GIVEN FACTS AND CIRCUMSTANCES, IF THE PURCHASE AND SALE OF SHARES ARE CARRIED OUT UNDER THE SCHEME OF PORTFOLI O MANAGEMENT THEN THE SAME CANNOT BE TREATED AS TRADING IN SHARE; HOWEVER , IN THE PRESENT CASE, THE PORTFOLIO MANAGER HAS ALSO PROVIDED THE CREDIT FACI LITY TO THE ASSESSEE AND THERE IS NOTHING STIPULATED IN THE TERMS AND CONDIT IONS OF THE AGREEMENT ABOUT THE SAID CREDIT FACILITY AVAILED BY THE ASSESSEE FR OM THE PORTFOLIO MANAGER. THEREFORE, THE TRUE NATURE OF ARRANGEMENTS/TRANSACT IONS OF CREDIT FACILITY BETWEEN THE ASSESSEE AND THE PORTFOLIO MANAGER HAS TO BE VERIFIED AND EXAMINED. IT IS NECESSARY TO FIND OUT AS TO HOW AND WHAT TERMS THE CREDIT FACILITY WAS PROVIDED BY THE PORTFOLIO MANGER AND W HETHER THE REPAYMENT WAS MADE BY THE ASSESSEE ON THE BASIS OF FIXED DURATION OR THE PORTFOLIO MANAGER HAS ADJUSTED THE SALE PROCEEDS AGAINST THE CREDIT F ACILITY PROVIDED BY IT AS WELL AS THE INTEREST CHARGED ON THE SAME AT THE TIME OF LIQUIDATION/SALE OF THE SHARES/STOCK HELD IN THE NAME OF THE ASSESSEE. IN C ASE THE PORTFOLIO MANAGER IS USING ITS OWN FUNDS IN THE NAME OF THE ASSESSEE AND RECEIVING BACK THE SMT. HARSHA L. TAHILRAMANI MA 510/MUM/2011 3 MONEY ON THE SALE OF THE STOCK AND SHARES AND, AFTE R ADJUSTING/RECOVERING ITS OWN MONEY FROM THE SALE PROCEEDS, THE BALANCE IS TR ANSFERRED TO THE ACCOUNT OF THE ASSESSEE; THEN, THE SAID ARRANGEMENT CANNOT BE TERMED AS INVESTMENT THROUGH PORTFOLIO MANAGEMENT SCHEME. RATHER, THERE IS NO FUND OF THE ASSESSEE TO BE MANAGED BY PMS. ACCORDINGLY, THE MA TTER IS REQUIRED A PROPER VERIFICATION AND EXAMINATION TO ASCERTAIN THE TRUE NATURE OF THE ARRANGEMENT BETWEEN THE ASSESSEE AND THE PORTFOLIO MANAGER ABOU T THE CREDIT FACILITY AT THE LEVEL OF THE AO. HENCE, THE MATTER IS SET ASIDE TO THE RECORD OF THE ASSESSING OFFICER TO DECIDE THE ISSUE AFRESH AS PER LAW AND I N THE LIGHT OF OUR ABOVE OBSERVATION AND AFTER CONSIDERING THE CONTENTION OF THE ASSESSEE. THERE IS NO DISPUTE THAT THE ASSESSEE HAS AVAILED T HE CREDIT FACILITY FOR PURCHASE OF SHARES FROM M/S MOTILAL OSWAL AS IT IS MENTIONED IN THE BALANCE SHEET AND ANNEXURE I ATTESTED TO THE BALANCE SHEET FILED BY THE ASSESSEE AT PAGE NO.7 AND 8 OF THE PAPER BOOK. NOW, AT THIS ST AGE, THE ASSESSEE HAS COME-UP WITH NEW FACT THAT THIS CREDIT FACILITY WAS AVAILED BY THE ASSESSEE FROM ANOTHER GROUP CONCERN OF MOTILAL OSWAL PORTFOL IO MANAGEMENT AND NOT FROM THE PORTFOLIO MANAGER ITSELF. IT IS TO BE NOT ED THAT, IN ANY CASE, THE ASSESSEE HAS NOT USED HIS OWN FUNDS OR EVEN BORROWE D FUNDS FOR PURCHASE OF THE SHARES BUT THE ENTIRE TRANSACTIONS OF SALE A ND PURCHASE WERE DONE ON THE BASIS OF CREDIT FACILITY AVAILED BY THE ASSESSE E. EVEN, THE INTEREST AND OTHER DIFFERENTIAL PAYMENTS WERE ADJUSTED AGAINST T HE SURPLUS FROM THE PURCHASE AND SALE TRANSACTIONS OF THE SHARES. 4. ONCE THE FINDING OF FACT HAS BEEN GIVEN AFTER CO NSIDERING ALL THE RELEVANT MATERIAL FACTS AND EVIDENCE THEN THIS TRIB UNAL CANNOT EXERCISE THE JURISDICTION U/S.254(2) FOR CONSIDERING THE NEW FAC TS, EVIDENCE AS SOUGHT BY THE ASSESSEE IN THE MISCELLANEOUS APPLICATION. EVE N OTHERWISE, THE ALLEGED MISTAKE POINTED OUT BY THE ASSESSEE IN THE MISCELLA NEOUS APPLICATION WOULD NOT GOING TO ANY MATERIAL IMPACT ON THE DECISION AL READY TAKEN BY TRIBUNAL WHEREBY THE MATTER HAS BEEN REMITTED TO THE RECORD OF THE AO FOR FRESH EXAMINATION. 5. THE SCOPE OF SECTION 254(2) IS VERY LIMITED. WH ILE EXERCISING THE JURISDICTION U/S.254(2), IT IS MANDATORY CONDITION THAT SUCH MISTAKES SHOULD SMT. HARSHA L. TAHILRAMANI MA 510/MUM/2011 4 BE APPARENT, MANIFEST AND PATENT AND NOT SOMETHING WHICH COULD BE INVOLVED SERIOUS CIRCUMSTANCES OF DISPUTE OF FACTS OR LAW AND CAN BE ESTABLISHED BY LONG DRAWN PROCESS AND REASONING ON THE POINT TO BE RECTIFIED. A PATENT MISTAKE OR ERROR IS SUCH WHICH DOES NOT REQUIRE ANY ELABORATE DISCUSSION OF EVIDENCE OR ARGUMENTS TO ES TABLISH AND, THEREFORE, THE SAME CAN BE SAID TO BE AN ERROR ON FACE OF THE RECORD AND CAN BE RECTIFIED UNDER THE AMBIT OF SECTION 254(2). IT IS WELL SETT LED PROPOSITION OF LAW THAT SECTION 254(2) DOES NOT CONFER POWER ON THE TRIBUNA L TO REVIEW ITS EARLIER ORDER PASSED ON MERITS. IN THE GARB OF RECTIFICATI ON OF MISTAKE, NO ORDER CAN BE PASSED U/S.254(2) WHICH AMOUNTS TO REVERSAL OF T HE ORDER PASSED AFTER DISCUSSING ALL THE FACTS AND STATUTORY PROVISIONS I N DETAIL. BY WAY OF THIS MISCELLANEOUS APPLICATION THE ASSESSEE IS SEEKING R EVIEW OF THE EARLIER ORDER WHICH IS NOT PERMITTED AND BEYOND THE JURISDICTION OF THIS TRIBUNAL U/S.254(2). IN THE PROCEEDINGS U/S.254(2) NO NEW F ACT, EVIDENCE OR CONTENTION CAN BE ENTERTAINED. ACCORDINGLY, WE DO NOT FIND ANY MERIT IN THE MISCELLANEOUS APPLICATION FILED BY THE ASSESSEE. 6. IN THE RESULT, THE M.A. FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 2 1ST SEPTEMBER, 2012. SD/- (P.M. JAGTAP) ACCOUNTANT MEMBER SD/- (VIJAY PAL RAO) JUDICIAL MEMBER MUMBAI, DATE : 26 TH SEPTEMBER, 2012 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A)-XIX, MUMBAI. 4) THE CIT-XIX, MUMBAI. 5) THE D.R. H BENCH, MUMBAI. 6) COPY TO GUARD FILE. BY ORDER / / TRUE COPY / / ASSTT. REGISTRAR I.T.A.T., MUMBAI *CHAVAN