Income Tax Appellate Tribunal - Kolkata
Mugneeram Bangur & Co., Kolkata vs Assessee on 21 November, 2011
आयकर अपीलीय अधीकरण, Ûयायपीठ - " ǒव" कोलकाता,
IN THE INCOME TAX APPELLATE TRIBUNAL "B" BENCH: KOLKATA
(सम¢)Before ौी एस. भी. मेहरोऽा, लेखा सदःय एवं/and ौी महावीर िसंह, Ûयायीक सदःय)
[Before Shri S. V. Mehrotra, AM & Sri Mahavir Singh, JM]
आयकर अपील संÉया / I.T.A No. 1234/Kol/2009
िनधॉरण वषॅ/Assessment Year: 2004-05
Mugneeram Bangur & Co. Vs. Commissioner of Income-tax-XII, Kolkata
(PAN:AAFFM 2991 K)
(अपीलाथȸ/Appellant) (ू×यथȸ/Respondent)
&
आयकर अपील संÉया / I.T.A No. 1099/Kol/2008
िनधॉरण वषॅ/Assessment Year: 2004-05
Deputy Commissioner of Income-tax, Vs. Mugneeram Bangur & Co.
Circle-35, Kolkata.
(अपीलाथȸ/Appellant) (ू×यथȸ/Respondent)
&
C.O. No.85/Kol/2008
In आयकर अपील संÉया / I.T.A No. 1099/Kol/2008
िनधॉरण वषॅ/Assessment Year: 2004-05
Mugneeram Bangur & Co. Vs. Deputy Commissioner of Income-tax,
Circle-35, Kolkata.
(Cross Objector) (Respondent)
Date of hearing: 21.11.2011
Date of pronouncement: 13.01.2012
For the Assessee: S/Shri Soumen Adak & Navin Verma
For the Revenue: Shri Niraj Kumar
आदे श/ORDER
Per Mahavir Singh, JM ( महावीर िसंह, Ûयायीक सदःय)
सदःय First appeal by assessee for AY 2004-05 is arising out of revision order of CIT-XII, Kolkata in No. CIT-XII/Tech/263/08-09/1501-1503 dated 31.03.2009. Another appeal by revenue and cross objection by assessee are arising out of order of CIT(A)-XX, Kolkata in No.222/CIT(A)-XX/A.C. Circle-35/2007-08/Kol dated 18.03.2008. Assessment was framed by 2 ITA 1234/K/2009, ITA 1099/K/2008 & CO 85/K/2008 Mugneeram Bangur & Co. A.Y.04-05 ACIT, Circle-35, Kolkata for Assessment Year 2004-05 u/s. 143(3) Income Tax Act, 1961(hereinafter referred to as "the Act") vide his order dated 29.12.2006. For the sake of brevity and clarity, we dispose of both these appeals and cross objection by this consolidated order.
2. First we take up ITA No. 1234/K/2009 (assessee's appeal). The sole issue in this appeal of assessee is against revision order of CIT passed u/s. 263 of the Act. For this, assessee raised following nine grounds:
"1. That on the facts and in the circumstances of the case, the impugned order passed u/s 263 is grossly arbitrary and bad in law in relation to the issues raised and adjudicated therein and needs to be summarily deleted.
2. That on the facts and in the circumstances of the case, the Learned Commissioner of Income Tax -- XII, Kolkata (here-in-after referred to as Ld.CIT) was not justified in initiating proceedings u/s 263 of the Income Tax Act, 1961 as the order passed by the Assessing Officer(here-in-after referred to as A.O.) was not erroneous as all the materials and explanations were produced before the A.O. during the course of assessment proceedings u/s 143(3) of the Act.
3. That on the facts and in the circumstances of the case, the Ld. CIT was not justified in initiating proceedings u/s 263 of the Act for mere change of opinion as the A.O. had duly considered all the materials during the course of Assessment Proceedings.
4. That on the facts and circumstances of the case, the report of the DVO received after completion of assessment proceedings u/s 143(3) is null and void and hence proceedings u/s 263 initiated on the basis of such report is bad in law.
5. That on the facts and circumstances of the case, the assessment proceedings completed u/s 143(3) based on the valuation report as submitted by the appellant is not erroneous for initiation of revision proceedings u/s 263 of the Income Tax Act, 1961.
6. That on the facts and in the circumstances of the case, the Ld. CIT was not justified and erred in holding that revised return filed by the appellant alongwith valuation report is not valid u/s 139(5) as the same was filed after completion of proceedings u/s 143(1) of the Act.
7. That on the facts and in the circumstances of the case, the Ld. CIT was not justified and erred in law in holding that the reference made to DVO by A.O is in accordance with Section 55A of the Act as the appellant did not file any valuation report of the registered valuer alongwith the original return.
8. That on the facts and in the circumstances of the case, the reference made to DVO by the A.O. u/s 55A during the course of assessment proceedings u/s. 143(3) is not in accordance with the law and hence order passed by DVO is bad in law.
9. That on the facts and in the circumstances of the case, the Ld. CIT was not justified in directing the A.O. to compute Income from House Property in respect of those properties from which the appellant had not received any rent.
3 ITA 1234/K/2009, ITA 1099/K/2008 & CO 85/K/2008 Mugneeram Bangur & Co. A.Y.04-05
3. Brief facts leading to above issue are that assessee filed its return of income on 01.11.2004 at a total loss of Rs.2,59,080/-. Return was selected for scrutiny by issuing notice u/s. 143(2) of the Act on 17.08.2005, served on 19.08.2005. This return was processed u/s. 143(1) of the Act on 29.03.2006. Subsequently, return was revised on 30.03.2006 recomputing the loss on the basis of registered valuer's report. In revised return, assessee computed loss at Rs.7,99,258/- including capital loss on sale of asset at Rs.6,81,683/-. Assessment was completed by AO u/s. 143(3) of the Act vide order dated 29.12.2006. Subsequently, CIT-XII, Kolkata issued show cause notice u/s. 263 of the Act, on receipt of valuation report of DVO on 06.12.2007, vide show cause notice No. CIT/Kol-XII/Tech/263/07-08.1213 dated 09.02.2009 stating the reason that the case was referred to the DVO during assessment proceedings and as per DVO's report there is a difference in sale value, cost of improvement with fair market value substantially with the valuation made by your valuer by Rs.49,63,371/-, Rs.9,04,335/- and Rs.6,01,986/- respectively, resulting into under assessment while framing assessment u/s. 143(3) dated 29.12.2006. Hence, the assessment order is erroneous and prejudicial to the interest of revenue. The CIT revised the assessment on following three grounds:
i) That no valuation report was filed along with original return, whereas the revised return filed u/s.139(5) along with valuation report is not a valid revised return in terms of section 139(5) of the Act.
ii) That in terms of section 55A (b)(ii) of the Act, the AO has option to refer to the matter to DVO and AO was correct in referring the same because there is no valuation report by the registered valuer furnished along with the original return of income.
iii) Hence, on receipt of DVO's report on 06.12.2007, there is difference in sale value, cost of improvement and fair market value with the DVO and value done by assessee's valuer by Rs.49,63,371/-, Rs.9,04,335/- and Rs.6,01,986/-, thereby resulting it to under assessment and, therefore, assessment is erroneous and prejudicial to the interest of revenue.
In term of the above, the CIT revised the assessment framed by AO u/s. 143(3) dated 29.12.2006, directing the AO to compute the long term capital gain on the basis of valuation report of DVO and also compute house property income of 11 units located at 65, Sir Hari Ram Goenka Street, Kolkata in terms of section 23(3) of the Act after giving option to the assessee to opt one out of his 12 properties as self occupied. The assessment order framed u/s. 143(3) of the Act dated 29.12.2006 was set aside. Aggrieved, assessee came in appeal before us.
4. The first aspect in respect to revision of assessment order argued by Ld. Counsel is that the revised return filed by the assessee is a valid revised return. We find that original return of 4 ITA 1234/K/2009, ITA 1099/K/2008 & CO 85/K/2008 Mugneeram Bangur & Co. A.Y.04-05 income was filed on 01.11.2004 which was within the due date as per section 139(1) of the Act, and this was processed u/s. 143(1) of the Act on 29.03.2006 and further this was revised on 30.03.2006 in terms of section 139(5) of the Act. The CIT as well as CIT, DR, both contended that this revised return is not in terms of section 139(5) of the Act as this was filed after completion of assessment u/s. 143(1) of the Act and moreover, the assessee has declared same loss and there is no omission on the part of the assessee which he wants to remove by filing revised return of income. Hence, CIT, DR Shri Niraj Kumar contended that the revised return is not a valid return in the eyes of law. The Ld. Counsel Shri Naveen Verma argued that processing u/s 143(1) of the Act is no assessment as held by many High Courts and assessee has substantially changed its returned loss, returned originally higher loss due to inadvertence. He also brought to our notice that assessment proceedings by issuing notice u/s 143(2) of the Act was started before processing u/s 143(1) of the Act and notice u/s 143(2) was dated 17.08.2005. He narrated the fact the assessee filed original return disclosing Long Term Capital Loss of Rs.1,20,25,795/- but subsequently, in the revised return Long Term Capital Loss was reduced at Rs.6,81,683/- as computed on the basis of fair market value as on 01.04.1981 as determined by the registered valuer and copy of the same was filed with the revised return before the AO. Hence, it cannot be said that the revised return is not a valid revised return. And once, revised return is a valid return, subsequent proceedings i.e. reference to DVO for computing fair market value of the assets sold as on 01.04.1981 is not valid as per law and as per the decision of Hon'ble High Courts.
5. We find that the assessee filed its return of income for the relevant assessment year 2004-05 on 01.11.2004, on due date as prescribed u/s. 139(1) of the Act, which was processed u/s. 143(1) of the Act on 29.03.2006. However, notice u/s. 143(2) of the Act was issued on 17.08.2005, which was duly served on assessee on 19.08.2005, and return of income was selected for scrutiny assessment. The assessee filed revised return of income on 30.03.2006 computing a smaller long term capital loss on the basis of registered valuer's report before completion of assessment u/s. 143(3) of the Act. Now the question arises whether the revised return filed u/s. 139(5) of the Act within the prescribed time limit on 30.03.2006 is a valid revised return or not? After going through the provisions of the Act, we find that the liability to pay income tax is founded on sections 4 and 5 of the Act, which are charging sections. Section 143 and others are machinery sections to determine the amount of tax payable. These sections contain various modes for making assessments. A reading of section 143(1)(a) of the Act 5 ITA 1234/K/2009, ITA 1099/K/2008 & CO 85/K/2008 Mugneeram Bangur & Co. A.Y.04-05 makes it clear that giving of intimation in terms of that provision was without prejudice to the provisions of section 143(2) of the Act. Once a notice u/s. 143(2) of the Act has been issued there was no scope for the AO either to make prima facie adjustments on the basis of return of income filed or issue an intimation u/s. 143(1)(a) of the Act. The language used in section 143(1)(a) plainly states that an intimation could be issued without prejudice to section 143(2) of the Act but not that a notice u/s. 143(2) of the Act could be issued without prejudice to section 143(1)(a) of the Act. The omission made by legislature to issue a notice u/s. 143(2) of the Act without prejudice to an intimation u/s. 143(1)(a) of the Act, while specifically providing that the issuance of an intimation u/s. 143(1)(a) of the Act would be without prejudice to section 143(2) of the Act was deliberate, because of the difference in the nature of jurisdictions to be exercised by the AO under these two provisions. The jurisdiction u/s. 143(1)(a) of the Act was a summary one, whereas jurisdiction u/s. 143(2) of the Act precedes an assessment or what has been described in the provision a regular assessment. This view has been held by Hon'ble Calcutta High Court in the case of Modern Fibotex India Ltd. Vs. DCIT (1995) 212 ITR 496 (Cal). Hon'ble Gujarat High Court in the case of Gujarat Poly-AVS Electronics Ltd. Vs. DCIT (1996) 222 ITR 140 (Guj) and Hon'ble Calcutta High Court in Pieco Electronics & Electricals Ltd. Vs. DCIT (1990) 236 ITR 702 (Cal) has clearly interpreted the provisions that after issuance of a notice u/s. 143(2) of the Act, it was not open to the AO to, make assessment or to pass an order u/s. 143(1)(a) of the Act but he has to frame assessment u/s. 143(3) of the Act. Further, this view has been approved by Hon'ble Supreme Court in CIT Vs. Gujarat Electricity Board (2003) 260 ITR 84 (SC) where it has been held that it is not open to the revenue to issue intimation u/s. 143(1)(a) of the Act after notice for regular assessment is issued u/s. 143(2) of the Act. Hon'ble Supreme Court noted the intention of legislature that where the summary procedure u/s. 143(1) of the Act has been adopted, there should be scope available for the revenue, either suo moto or at the instance of the assessee to make a regular assessment u/s. 143(3) of the Act after issuing a notice u/s. 143(2) of the Act. But converse is not available, a regular assessment proceedings having been commenced u/s. 143(2) of the Act, there is no need for a summary assessment u/s. 143(1)(a) of the Act. Hon'ble Delhi High Court has gone further in the case of CIT Vs. Punjab National Bank (2001) 249 ITR 763 (Del.) wherein it is held that where an intimation was sent to the assessee u/s. 143(1)(a) of the Act and, thereafter, the AO has issued notice u/s. 143(2) of the Act, any change in the said intimation, if permissible, has to be effected in the assessment order u/s. 143(3) of the Act and not by exercising power u/s. 154 of the Act to rectify such intimation issued u/s. 143(1)(a) of the Act.
6 ITA 1234/K/2009, ITA 1099/K/2008 & CO 85/K/2008 Mugneeram Bangur & Co. A.Y.04-05 It means once action u/s. 143(2) of the Act is initiated, no proceedings u/s. 143(1)(a) of the Act or 154 of the Act can be taken up till 143(3) of the Act is passed.
6. In the present case before us also, the facts are very clear that for framing assessment u/s. 143(3), the AO has already issued notice u/s. 143(2) of the Act and thereafter, acted on the return of income and processed the same u/s. 143(1) of the Act. In view of the above judgments, particularly of Hon'ble Apex Court in the case of Gujarat Electricity Board (supra), the intimation issued by the AO in this case is not a valid intimation and hence, revise return filed by assessee is a valid revised return. For this, we have another reason that the assessee while filing revised return has substantially changed/reduced its losses from Rs.1,20,25,795/- to Rs.6,81,683/- on the basis of registered valuer's report, which was filed along with the revised return of income. Hence, we treat the revised return of income filed by assessee as a valid revised return filed within the prescribed time of section 139(5) of the Act.
7. Now, we have hold the revised return filed by assessee as a valid revised return, what will be the consequence of reference to DVO u/s. 55A of the Act by revenue. The brief facts relating to this issue are that the assessee filed its revised return of income showed the cost of this property at Rs.96.78 lacs. For the purpose of computation of capital gains, the AO determined the value at Rs.80 lacs in original assessment and that was upheld by CIT(A). The CIT, however, initiated proceedings u/s.263 of the Act for revising the order of AO in order to reduce the cost of the property as on 01.04.1981. The assessee challenged the very reference to valuation for estimating fair market value as on 01.04.1981. Ld. Counsel for the assessee before us referred to the provisions as contained in section 55A of the Act and stated that section 55A of the Act contains two clauses, clause (a) and clause (b). According to him, under clause (a) reference can be made for determination of fair market value, if in the opinion of the Assessing Officer, the fair market value claimed by the assessee, on the basis of the report of the valuer is less than the fair market value. In all other cases i.e. in cases where the estimate of fair market value is not accompanied by the report of a Registered Valuer then only reference could be made under clause (b) of Section 55A of the Act. He further explained that Clause (a) of Section 55A of the Act is not applicable for determining cost of acquisition and clause (b) is applicable only when the estimate of Fair Market Value is not accompanied by the report of a Registered Valuer. He narrated the facts that in the present case, since the assessee has acquired the capital asset before 01-04-1981, it choose to opt for the fair market value as on 01-04-1981 as the Cost of Acquisition in accordance with the provisions of Sub-section (2) of Section 55 of 7 ITA 1234/K/2009, ITA 1099/K/2008 & CO 85/K/2008 Mugneeram Bangur & Co. A.Y.04-05 the Act. Further, the estimate of fair market value as on 01-04-1981 accompanied by the report of a Registered Valuer was filed with the revised return of income. Reference under clause (a) of Section 55A of the Act can only be made if fair market value claimed by the assessee is lower than the actual fair market value in the opinion of the Assessing Officer. But, in the present case, since the assessee has adopted fair market value as the cost of acquisition, taking a lower fair market value would only lead to increase in the amount of Capital Gains. Thus, even if the fair market value adopted by the assessee is lower than the actual fair market value, reference under clause (a) of Section 55 of the Act would not have any meaning. In such cases, reference can only be made under sub clause (ii) of clause (b) of Section 55A of the Act, which is possible only if the estimate of fair market value is not supported by the report of an approved valuer. The fact that reference for the purpose of determining cost of acquisition cannot be made uncle clause (a) or clause (b)(i) is also supported by the departmental Circular no 96 dated 25.11.1972 as reported in (1973) 91 ITR 1 (St.) 17. The Ld. Counsel for the assessee also referred to the decision of Hon'ble Gujarat High Court in the case of Hiaben Jayantilal Shah Vs. ITO & Anr. (2009) 310 ITR 31 (Guj).
8. We find that Hon'ble Gujarat High Court in the case of Hiaben Jayantilal Shah (supra) has held that the reference made by AO u/s. 55A of the Act to DVO for determining the fair market value of property as on 01.04.1981 as declared by assessee is supported by estimate of registered valuer was higher than that estimate made by DVO, in that case there is no opinion of the AO that fair market value is lower as claimed by assessee and hence it was not to be disturbed. This reasoning was given by Hon'ble High Court because prescribed parameters were fulfilled. Finally, Hon'ble High Court vide para 10 and 11 has held as under:
"10. Under cl. (a) of s. 55A of the Act the AO is entitled to make the reference to the Valuation Officer in a case where the value of the asset as claimed by the assessee is in accordance with the estimate made by the registered valuer, if the AO is of the opinion that the value so claimed is less than the fair market value. In any other case, as provided under cl. (b) of s. 55A of the Act, the AO has to record an opinion that (i) the fair market value of the asset exceeds the value of the asset as claimed by the assessee by more than such percentage or by more than such an amount as may be prescribed; or (ii) having regard to the nature of the asset and other relevant circumstances , it is necessary to make such a reference.
11. As can be seen from the communication dated nil (Annex. D) from respondent No.2 - DVO to the petitioner insofar as the fair market value of the property as on 1st April, 1981 is concerned, the petitioner had claimed the same at a sum of Rs.6,25,000/- as per registered valuer's report. Therefore, the AO was required to form an opinion that the value so claimed is less than the fair market value. The estimated value proposed by the DVO is shown at Rs.3,97,000/-, which is less than the fair market value shown by the 8 ITA 1234/K/2009, ITA 1099/K/2008 & CO 85/K/2008 Mugneeram Bangur & Co. A.Y.04-05 assessee as on 1st April, 1981. Therefore, cl. (a) of s. 55A of the Act cannot be made applicable. Clause (b) of s. 55A of the Act can be invoked only in any other case, namely when the value of the asset claimed by the assessee is not supported by an estimate made by a registered valuer. In the facts of the present case, cl. (b) of s. 55A of the Act also cannot be invoked. Therefore, there is no question of having recourse to sub-cl. (ii) of cl.
(b) of s. 55A of the Act."
In the present case also the fair market value adopted by DVO at Rs.4,72,370/- is lower than the fair market value adopted by assessee, on the basis of registered valuer's report, at Rs.77,47,750/- and in our view, as held by Hon'ble Gujarat High Court in the case of Hiaben Jayantilal Shah (supra) cl. (a) of s. 55A of the Act cannot be made applicable because the estimate value proposed by DVO is less than the fair market value disclosed by assessee as on 1.4.1981. Similarly, clause (b) of s. 55A of the Act also cannot be invoked because for invoking cl. (b) of this section is possible only when value claimed by assessee is not supported by an estimate made by registered valuer. This is not the case here and assessee's revised return of income is accompanied by a registered valuer's report for adopting fair market value as on 1.4.1981. In view of the above, we are of the view that the reference made u/s. 55A of the Act is not as per law in view of decision of Hon'ble Gujarat High Court in the case of Hiaben Jayantilal Shah (supra).
9. Another aspect for revision of assessment was that the AO has to compute income from house property, in respect of the properties from the assessee has not received any rent and kept vacant. Ld. Counsel for the assessee stated that complete information before the AO was available at the time of framing of assessment in respect to 11 units of house property at 65, Hari Ram Goenka St., and assessee has disclosed notional value u/s. 23(2) of the Act at NIL in its computation of income and AO while adjudicating this issue has accepted the notional value at NIL from these units. Once the entire information is before the AO, and AO has formed opinion, no revision is possible in respect to assessment framed u/s. 143(3) of the Act.
10. In view of the above facts and case law referred by Ld. Counsel of Hon'ble Supreme Court in the case of Malabar Industrial Co. Ltd. Vs. CIT (2000) 243 ITR 83 (SC), which is applicable to the facts of this case. Hon'ble Supreme Court has considered the phrase 'prejudicial to the interest of the revenue', and interpreted that it has to be read in conjunction with an erroneous order passed by the AO and every loss of revenue as a consequence of an order of AO, it cannot be treated as prejudicial to the interest of revenue. Hon'ble Supreme Court discussed example, where the AO adopted once of the courses permissible in law and it 9 ITA 1234/K/2009, ITA 1099/K/2008 & CO 85/K/2008 Mugneeram Bangur & Co. A.Y.04-05 has resulted in loss of revenue, or where two views are possible and he has taken one view with which the Commissioner does not agree, it cannot be treated that the assessment order is erroneous so as to prejudicial to the interest of revenue unless the view taken by AO is unsustainable in law. We have gone through the judgment of Hon'ble Supreme Court in the case of Malabar Industrial Co. Ltd. (supra) and find that this phrase 'prejudicial to the interest of revenue', where one of the possible views is taken by the AO, has been interpreted as under:
"The phrase "prejudicial to the interests of the Revenue" has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the Revenue. For example, when an Income-tax Officer adopted one of the courses permissible in law and it has resulted in loss of Revenue; or where two views are possible and the Income-tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue, unless the view taken by the Income-tax Officer is unsustainable in law. It has been held by this court that where a sum not earned by a person is assessed as income in his hands on his so offering, the order passed by the Assessing Officer accepting the same as such will be erroneous and prejudicial to the interests of the Revenue. Rampyari Devi Saraogi v. CIT [1968] 67 ITR 84 (SC) and in Smt. Tara Devi Aggarwal v. CIT [1973] 88 ITR 323 (SC)."
11. In view of the above facts and circumstances, discussion carried out, we are of the considered view that the CIT has erred in exercising jurisdiction u/s. 263 of the Act for revising the assessment framed by AO u/s. 143(3) of the Act as the assessment is neither erroneous nor prejudicial to the interest of revenue. Hence, we quash the revision order passed by CIT u/s. 263 of the Act and appeal of the assessee is allowed.
12. Now, we are taking ITA No.1099/K/2008 (Revenue's appeal). The sole issue in this appeal of revenue is against the order of CIT(A) in deleting the disallowance on account of expenses. For this, revenue raised following ground no.1:
"1. Ld. CIT(A) erred both in facts and in law in deleting Rs.7,42,027/- without appreciating the arguments of the A.O and the materials brought on record by the A.O. during the course of assessment."
13. Brief facts are that the AO during the course of assessment proceedings noted that the assessee during the year under consideration was engaged in the activity of construction/renovation of house property and assessee's business of share trading was stalled. He also noted that the assessee firm has purchased shares worth Rs.9200/- and sold debentures worth Rs.138/-. In view of these facts, the AO disallowed the expenditures incurred on account of travelling and conveyance, office maintenance, miscellaneous expenses, rent, interest to 10 ITA 1234/K/2009, ITA 1099/K/2008 & CO 85/K/2008 Mugneeram Bangur & Co. A.Y.04-05 partners, electricity charges. Aggrieved assessee preferred appeal before CIT(A), who allowed the claim of assessee vide para 2.2 of his appellate order as under:
"2.2. The rival contentions have been considered carefully.
The Appellant during the previous year 2003-04 had sold Debentures worth Rs.138/- from out of an opening stock of debentures of Rs.4,634/-, leaving a closing stock of debentures of Rs.4,550/-. The Appellant had also purchased shares valuing Rs.9200/- and had a closing stock of shares valuing Rs.28,42,011/-. From these facts, it is obvious that the Appellant had continued to carry on its business of trading in shares and government Securities. The Appellant firm, though its sales are nominal, still continues to hold a large value of shares as closing stock. The judgments of the Apex Court's in the case of Tetron Chemicals Ltd. and S.P. Balasubramanium cited supra which held that even a single transaction constitutes an adventure in the nature of business supports the case of the Appellant. The judgment of the Jurisdictional lHigh Court of Kolkata in the case of Lakshmi Narayan Board Mills Private Ltd., the judgment of the Hon'ble Allahabad High Court in the case of Inderchand Hari Ram, and the decision of the Hon'ble ITAT in the case of Mokul Finance (P) Ltd. all support the contention of the Appellant.
In view of the above facts and the judicial ratio cited above, it is concluded that the Appellant had carried out the business of trading in Shares and Government Securities and is, therefore, entitled to allowance of the expenditures claimed under the head 'Business' other than the legal and professional charges of Rs.1,09,150/- incurred in relation to improvement of title and/or transfer of capital asset, which is to be allowed under the head 'Income from Capital Gains'. The genuineness of the expenditures claimed, not being in doubt; the AO is directed to allow the expenditures under the head 'Business'. The addition of Rs.7,42,027/- is, therefore, deleted."
14. We find that the AO has categorically recorded that the assessee has made purchases of shares worth Rs.9200/- and also sold debentures worth Rs.138/- during the relevant financial year. The assessee originally is in the business of sale and purchase of shares and it has continued this business. We find that now before us revenue could not contend how the assessee's business is discontinued or during the year no transaction has been carried out in relation to trading. Once this is not controverted, we find no infirmity in the order of CIT(A) and in view of reasoning given in appellate order, we uphold the same. This issue of revenue's appeal is dismissed.
15. In cross objection, the assessee also raised following two effective grounds:
"1. That on the facts and in the circumstances of the case, the Ld. CIT(A) erred and was grossly unjustified in not considering the Ground No.4 raised before the Ld. CIT(A) stating that the A.O. has not made any addition/modification or alteration to the long term loss, arising from the sale of property, admitted by the assessee.
2. Without prejudice to the Ground No.1 taken hereinabove, the Ld. CIT(A) erred and was grossly unjustified in not confirming the action of the A.O., regarding reference to valuation officer, as invalid since the assessment for the A.Y. 2004-05 being completed pending receipt of the report of the Departmental Valuation Officer.
11 ITA 1234/K/2009, ITA 1099/K/2008 & CO 85/K/2008 Mugneeram Bangur & Co. A.Y.04-05
16. The first and second grounds are raised qua the issue of reference to DVO u/s. 55A of the Act. We find that we have already answered this issue while adjudicating the appeal filed by the assessee against the revision order passed by CIT u/s. 263 of the Act, wherein we have already allowed the claim of the assessee, these two grounds of C.O. of assessee has become infructuous and dismissed.
17. In the result, the appeal of the revenue and C.O of assessee are dismissed and assessee's appeal in ITA No. 1234/Kol/2009 is allowed.
18. Order pronounced in open court on 13.01.2012.
Sd/- Sd/-
ौी एस. भी. मेहरोऽा, लेखा सदःय वीर िसंह, Ûयायीक सदःय
महावी
महावीर
(S. V. Mehrotra) (Mahavir Singh)
Accountant Member Judicial Member
तारȣख)
तारȣख) Dated 13th January, 2012
(तारȣख
वǐरƵ िनǔज सिचव Jd.(Sr.P.S.)
आदे श कȧ ूितिलǒप अमेǒषतः- Copy of the order forwarded to:
1. अपीलाथȸ/APPELLANT - Mugneeram Bangur & Co., 21, Strand Road, Kolkata-70 001.
2 ू×यथȸ/ Respondent, DCIT, Circle-35, Kolkata
3. आयकर किमशनर (अपील)/ The CIT(A), Kolkata
4. आयकर किमशनर/CIT, Kolkata
5. वभािगय ूितनीधी / DR, Kolkata Benches, Kolkata स×याǒपत ूित/True Copy, आदे शानुसार/ By order, सहायक पंजीकार/Asstt. Registrar.