Income Tax Appellate Tribunal - Mumbai
Dcit Cc 7(1), Mumbai vs Panther Fincap & Management Services ... on 3 December, 2018
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCHES "C", MUMBAI
BEFORE SHRI B.R. BASKARAN (AM) AND SHRI RAM LAL NEGI (JM)
ITA No. 1529/MUM/2017
Assessment Year: 2003-04
The Dy. Commissioner of Income M/s Panther Fincap &
Tax - Central Cir. 7(1), Management Services Ltd.,
R. No. 653, 6th Floor, 9, Bhupen Chambers,
Aayakar Bhavan, M.K. Road, Vs. Ground Floor, Dalal Street, Fort,
Mumbai - 20 Mumbai - 400023
PAN: AAACP3045P
(Appellant) (Respondent)
Revenue by : Dr. P. Daniel (DR)
Assessee by :
Shri Neel Khandelwal (AR)
Date of Hearing: 06/09/2018
Date of Pronouncement: 03/12/2018
ORDER
PER RAM LAL NEGI, JM
This appeal has been filed by the revenue against the order dated 05.12.2016 passed by the Ld. Commissioner of Income Tax (Appeals)-49, Mumbai, for the assessment year 2003-04, whereby the Ld. CIT (A) has partly allowed the appeal filed by the assessee against assessment order dated 17.02.2006 passed u/s 143 (3) of the Income Tax Act, 1961 (for short 'the Act').
2. Brief facts of the case are that the assessee a limited company engaged in the business of trading in shares and securities, filed its return of income for the assessment year under consideration declaring loss at Rs. 14,15,94,890/-. Since, the case was selected for scrutiny, notice u/s 143 (2) and 142 (1) were issued and served on the assessee. In response to the said notices, the authorized representative of the assessee appeared before the AO and submitted the details called for. It was noticed that the assessee had claimed 2 ITA No. 1529/MUM/2017 Assessment Year: 2003-04 loss of Rs. 2,83,04,031/- due to fall of market rate of shares. The AO disallowed the loss claimed by the assessee for the reasons that the shares on which the loss has been arrived at are the same which were involved in the securities scam of 2001 in which the assessee company was involved as a group company of Ketan Parekh Group. Accordingly, AO added back the said amount to the income of the assessee. The assessee challenged the assessment order inter alia on the ground that the AO has wrongly made the disallowance of loss of Rs. 2,83,04,031/- claimed by it. The Ld. CIT (A) following the order of the ITAT for the A.Y. 2002-03, 2004-05 and earlier assessment years allowed this ground of appeal of the assessee and deleted the aforesaid addition. Against the said findings of the Ld. CIT (A), the revenue is in appeal before the Tribunal.
3. The revenue has challenged the impugned order passed by the Ld. CIT (A) on the following ground:-
"On the facts and circumstances of the case and in law, the Ld. CIT (A) erred in deleting the addition made to the returned income of the assessee on account of non allowance of loss amounting to Rs. 2,83,04,031/- on account of shares and securities without appreciating the facts that the assessee is barred from doing any business in shares by the SEBI i.e. the regulatory authority for share & securities business."
4. There is a delay of 31 days in filing the present appeal. The Ld. Departmental Representative (DR) submitted before us that since the concerned officer was pre occupied in certain urgent matters, the appeal could not be filed within the limitation period. The Ld. DR further submitted that since the delay is not intentional or inaction on the part of the department, the same may be condoned and the revenue may be allowed to argue the case on merits. The Ld. counsel for the assessee did not oppose the submissions made by the Ld. DR. Since, the delay is not inordinate and the Ld. DR has explained the sufficient cause for not presenting the appeal within the limitation period, 3 ITA No. 1529/MUM/2017 Assessment Year: 2003-04 we condone the delay and allowed the Ld. DR to argue the case on behalf of the department.
5. The Ld. Departmental Representative (DR) relying on the assessment order passed by the AO submitted that since the assessee was barred from doing any business in shares by the SEBI, the Ld. CIT (A) wrongly deleted the addition made by the AO. Therefore, the impugned order is liable to be set aside.
6. On the other hand, the Ld. counsel for the assessee submitted that the ITAT, Mumbai has decided the identical issue in favour of the assessee in the assessee's own case for the A.Y. 2001-02, 2002-03, 2004-05 holding that the assessee has incurred genuine loss in share transactions and directed the AO to treat the transactions as genuine. The Ld. counsel further contended that since the findings of the Ld. CIT (A) are based on the orders of the ITAT in the assessee's own cases above referred, there is no merit in the appeal of the revenue.
7. We have heard the rival submissions and also perused the material on record in the light of the contentions of the parties. The only grievance of the revenue is that the Ld. CIT (A) has wrongly deleted the disallowance made by the AO by holding the transaction of share trading as bogus. We have gone through the order passed by the Ld. CIT(A) and notice that the Ld. CITs (A) has based his findings on the decisions of the ITAT rendered in the assesse's own case pertaining to the earlier assessment years. The relevant paras of the Ld. CIT (A) read as under:
"6.3.3 I find that the appellant is in the business of trading in shares and securities and during the year, the sale and purchase of shares have come to a halt following the order of SEBI to stop trading operations. During the year, the loss of Rs 28,304.031/- from trading in shares is the net effect of gain/loss arising from sale of shares by the lenders on invocation of pledged shares and 4 ITA No. 1529/MUM/2017 Assessment Year: 2003-04 from the mark-to-market loss, on the valuation of stock of shares as on 31.03.2003. In this regard, I find that the ITAT 'J' Bench Mumbai, while deciding the appeal in the case of the appellant company for AY: 2001-02 in Appeal No. 1TA No.7278/Mum/2007 vide order dated 17.04.2013 have held that the transactions entered during the year under consideration, which have resulted into losses to the assesse, are genuine and not bogus after making following observations:. . .
" 9. We have considered the rival submissions and perused the orders Of the lower authorities and the material evidences brought on record in the form of Paper Book. We have also the benefit of going through the report of the JPC. though major points have already been highlighted by the AO in his assessment order and considered by the Id, CIT(A) in his appellate order The entire issue revolves around the loss of the assessee which are two-fold i.e. delivery based and non delivery based transactions in shares. We have also the benefit of the order of the Tribunal in the case of Sai Mangal Investrade Ltd. which has been relied upon by the ld. CIT 9A) and the Tribunal has decided that case in ITA No. 4229/Mum/2007. The ld. CIT (A) has upheld the findings of the AO on the ground that the assessee has not furnished details in support of its losses. However, we find that list of brokers and confirmations were filed before the lower authorities.
9.1 A perusal of the details of the broker show that the assessee has given full name and address along with Permanent Account Number of each broker with his confirmation. The said details can be found at pages 87 to 91 of the Paper Book. The AO in his remand report dt. 20.1.2007 exhibited at page 302 of the Paper Book has also accepted that copies of documents were filed before the AO including scrip-wise details and broker-wise details of profit or loss of the transaction. In his remand report, the AO has 5 ITA No. 1529/MUM/2017 Assessment Year: 2003-04 categorically statd that the primary details of these transactions were already filed before the AO apart from production of ledger of speculation account. Therefore, it cannot be said that the assessee did not file any detail to substantiate its claim. The entire rejection of the explanation of the assessee is based upon the fact that during the year under consideration the stock market has crashed resulting into the constitution of Joint Parliamentary Committee which in its report has suggested that the Ketan Parekh group have indulged in tranactions in such a manner by which the soruces of funds and its application were concealed and such circuitous tranactions have resulted into the crash of the stock market . This alone cannot be guiding factor to discard the claim of the losses of the assessee. The allegation of the Revenue authorities that by indulging in such transactions, the Ketan Parekh group entities have evaded tax. We do not find any merit on this allegation for the simple reason that what benefit the present assessee could have derived by incurring a staggering loss of Rs. 1826 crores. Consdiering the entire nature of transaction, it can be said that the assessee has done certain transaction which may be in violation of the guidelines of the SEBI but at the same time it cannot be said that the transactions are not genuine and bogus.
9.2 The Tribunal in the case of Sal Mangal Investrade (supra) ' has decided the Issue in favour of the assesse. The Tribunal at para 6 page 10 held as under.
Provisions of Income Tax are very clear. The disallowances can be made on the basis of facts of the case. The facts of the case are that the assesse has filed each and every details asked for by the AO. Therefore, as per provisions of 'law, the assessee has successfully proved that the transactions entered by the assessee are genuine. Not single evidence has been placed on record by the AO to prove a particular transaction is not genuine.
6 ITA No. 1529/MUM/2017Assessment Year: 2003-04 9.3 Further at para 8.1 page 11 held as under:
In the present case, as stated above, the AO has not denied the claim of the assessee for want of details but on the basis of finding of other authorities i.e. SEBI and JPC. In our considered view, the AO was not justified in denying the claim of the basis of the report of JPC or SEBI which was in respect of KPG. The AO should have drawn his conclusion on the basis of the details and on the basis of the facts of the present case in hand.
9.4 On identical facts, the Hon'ble High Court of Bombay in the case of CIT vs. Jayant N. Parekh, in ITA No. 145 of 2011 has dismissed the appeal of the Revenue holding that the findings of the Tribunal are findings of fact and hence calls for no interference.
In that case the Tribunal in its order dt. 6.8.2010 has recorded the fact that the lower authorities had not disallowed the speculation loss for want of documents but only on the ground that the Respondent was involved in the security scam of 2001. Moreover, at the time of hearing before the Tribunal the Respondent assessee were asked to explain the entries appearing in the bank statement alongwith supporting documents to support its claim. The Respondent assessee took the Tribunal through the Paper Book pertaining details of broker-wise speculation profit and loss and explained the entries. On the basis of the above explanation, the Tribunal was satisfied that the speculation loss incurred by the assessee was genuine. We find that the facts and circumstances of the present case are identical with the facts of the aforesaid discussed case in as much as in the present case also the assessee has successfully explained the transactions by bringing on scrip-wise details of profit or loss and also broker-wise details of profit or loss for transactions not backed by delivery (speculation transaction). So far as delivery based transactions are concerned, the loss is explained to be due to the diminution in the value of stock as on the close of the financial year, as the method of 7 ITA No. 1529/MUM/2017 Assessment Year: 2003-04 accounting of the assessee is to value the closing stock at cost or market price whichever is less. This is further substantiated with the fact that most of the shares were pledged with financial institutions and were sold by such institutions by invoking them in subsequent year. It would not be out of place to mention that the lower authorities have not examined any broker questioning the nature of transactions done with the assessee. Even in the Remand report, the AO has not rejected the explanation of the assessee.
9.5 After considering all the above stated facts in the light of the material evidences brought on record and the decision of the Tribunal and the Hon'ble Jurisdictional High court in our considerate view, the transactions entered during the year under consideration which have resulted into losses to the assessee are genuine and not bogus. We accordingly direct the AO to treat the said transactions as genuine transactions."
6.3.4 In the same order, the ITAT has allowed the appeal of the appellant company for A.Y. 2002-03 (ITA No. 193/Mum/2008) and A.Y. 2004-05 (ITA No. 369/Mum/2008) on the ground of disallowance of loss by treating the share transactions as not genuine in nature. I find that the facts of the case for the A.Y. 2003-04 are the same as in AYrs. 2001-02, 2002-03 and 2004-05 for which the appeal have been decided as above by the ITAT, by holding the share transactions as genuine. The A.O. has relied on the findings given by the AO in A.Y. 2002-03 and A.Y. 2001-02 that the share transactions were not genuine to hold that the loss arising in A.Y. 2003-04 on shares, which were pat of shares involved in the scam, were not genuine. No specific evidence or material has been brought on record to show that the loss of Rs. 2,83,04,031/- has arisen due to non-genuine transactions during the year. The loss has arisen on account of mark to market loss 8 ITA No. 1529/MUM/2017 Assessment Year: 2003-04 and on sale of pledged shares by banks, which cannot be said to non- genuine.
Therefore, in view of the finding of the ITAT in the case of appellant, for A.Yrs. 2001-02, 2002-03 and 2004-05, treating the share transactions as genuine transactions, the disallowance of loss of Rs. 2,83,04,031/- of transactions, is found to be without any merit or justification. Accordingly, the addition of Rs. 2,83,04,031/- is deleted."
8. As pointed out by the Ld. CIT (A), the facts and the issue involved in the present appeal are identical to the facts and the issues involved in the assessee's own case ITA No. 7278/Mum/2007 for the A.Y. 2001-02, ITA No. 193/Mum/2008 for the A.Y. 2002-03 and ITA No. 369/Mum/2008 for the A.Y. 2004-05. The coordinate Bench has already decided the identical issue in favour of the assessee in assessee's own case referred above. Since, the Ld. CIT (A) has deleted the disallowance in this case by following the decision of the coordinate Bench rendered in the assessee's appeals aforesaid, there is no reason to deviate from the view taken by the coordinate Bench. Moreover, the revenue has not pointed out any evidence before us to demonstrate that the facts of the present case are different from the facts of the cases decided by the Tribunal. Hence, we uphold the findings of the Ld. CIT(A) and dismiss the sole ground of the appeal of the revenue.
In the result, appeal filed by the revenue for assessment year 2003-2004 is dismissed.
Order pronounced in the open court on 3rd December, 2018.
Sd/- Sd/-
(B.R. BASKARAN) (RAM LAL NEGI)
ACCOUNTANT MEMBER JUDICIAL MEMBER
मुंबई Mumbai; दिन ुं क Dated: 03/12/2018
Alindra, PS
9
ITA No. 1529/MUM/2017
Assessment Year: 2003-04
आदे श प्रतितिति अग्रेतिि/Copy of the Order forwarded to :
1. अपील र्थी / The Appellant
2. प्रत्यर्थी / The Respondent.
3. आयकर आयक्त(अपील) / The CIT(A)-
4. आयकर आयक्त / CIT
5. दिभ गीय प्रदिदनदि, आयकर अपीलीय अदिकरण, मुंबई / DR, ITAT, Mumbai
6. ग र्ड फ ईल / Guard file.
आदे शानुसार/ BY ORDER, सत्य दपि प्रदि //True Copy// उि/सहायक िंजीकार (Dy./Asstt. Registrar) आयकर अिीिीय अतिकरण, मुंबई / ITAT, Mumbai