Gujarat High Court
Commissioner Of Income Tax Central - Ii vs Jay Enterprises....Opponent(S) on 4 March, 2014
Author: Sonia Gokani
Bench: Akil Kureshi, Sonia Gokani
O/TAXAP/142/2014 ORDER
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
TAX APPEAL NO. 142 of 2014
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COMMISSIONER OF INCOME TAX CENTRAL - II....Appellant(s)
Versus
JAY ENTERPRISES....Opponent(s)
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Appearance:
MRS MAUNA M BHATT, ADVOCATE for the Appellant(s) No. 1
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CORAM: HONOURABLE MR. JUSTICE AKIL KURESHI
and
HONOURABLE MS. JUSTICE SONIA GOKANI
Date : 04/03/2014
ORAL ORDER
(PER : HONOURABLE MS. JUSTICE SONIA GOKANI) The challenge is to the order of the Income Tax Appellate Tribunal dated 18th October 2013. The present Tax Appeal is preferred by the Revenue raising the following questions of law:-
"1. Whether the Appellate Tribunal has substantially erred in deleting the addition of Rs.20,52,928/-, made on account of loss disallowed in MCX Division?
2. Whether the Appellate Tribunal has substantially erred in deleting the addition of Rs.30,42,215/- being interest on unsecured loan?
3. Whether the Appellate Tribunal has substantially erred in deleting the addition of Rs.51,983/- being penalty expenses?"Page 1 of 4
O/TAXAP/142/2014 ORDER
2. We have heard learned Senior Counsel Mr. Manish Bhatt for the Revenue and examined the record.
3. So far as the first question is concerned, we notice that the Assessing Officer had disallowed the loss claimed in MCX transaction. When this was challenged before the C.I.T. (Appeals), it had deleted such addition. On the ground that since the issue is covered by assessee's own case for the assessment year 2006-07, the Tribunal also held the issue in favour of the assessee. We have noticed that for the assessment year 2006-07, when the matter was carried before this court in Tax Appeal No. 45 of 2011, this court has considered the issue and held as under:
"As regards the first point advanced by the Revenue, we find that during original assessment proceedings the Assessing Officer himself had accepted the position that the assessee had maintained quantitative details and that the general profit was on the higher side. We further find that in remand report also, the Assessing Officer could not justify the lump-sum addition other than making a short statement that addition was justified on books, vouchers, etc. as produced before him. In such circumstances, both the Commissioner of Income Tax (Appeals) and the Tribunal below deleted the lump-sum addition in the absence of any basis on the part of the Assessing Officer and even after holding that competitive details were maintained and the general profit was favourable. In such circumstances, we are of the opinion that the Tribunal below rightly refused to interfere with the finding recorded by the Commissioner of Income Tax (Appeals) which is based on appreciation of evidence on record. As regards the second ground, it appears that the Assessing Officer did not deny the fact that the assessee is a bullion merchant and has a terminal of MCX as a member. It also appears from the record that the loss arose on account of dealing in commodities ordinarily dealt in by the assessee in its business. In such circumstances, we find that both the Commissioner of Income Tax (Appeals) and the Tribunal below held that these transactions were of an integrated nature and were entered into to guard against future losses and, therefore, came within the exception to Section 43(5) of the Act.
In such circumstances, we find that the Tribunal below was quite justified in Page 2 of 4 O/TAXAP/142/2014 ORDER upholding the finding recorded by the Commissioner of Income Tax (Appeals) that the loss could not be said to be a speculation loss. We find that no substantial question of law is involved on the above question."
The first question, therefore, needs to be answered accordingly in favour of the assessee and against the Revenue, and as such, deserves no consideration.
4. The second issue pertains to deletion of addition of interest on the unsecured loan to the tune of Rs. Rs.30.42 lakhs (rounded of). The assessee had diverted the amount from the Head Office to the MCX Division under the head unsecured loan, and in MCX Division, the assessee had suffered a loss to the tune of Rs.20.52 lakhs (rounded of). The Assessing Officer was convinced that since the assessee did not charge any interest to the MCX Division on the unsecured loan diverted from the Head Office, it had added the said amount. On perusal and consideration, the CIT (Appeals) deleted the entire addition made by the Assessing Officer following earlier decision of its own.
5. The Tribunal confirmed the view of CIT (Appeals) as in the case of assessee for the year 2006-07 it had upheld the view of the CIT (Appeals) by deleting the addition made on account of interest on unsecured loan. Revenue is unable to point out as to whether such issue was carried to the High Court in the earlier year. However, considering all these facts, the Tribunal held that the total amount diverted from the Head Office to the MCX Division under the head of unsecured loan was to the very Division of the assessee, and was for the purpose of business transaction and the said fund. was not advanced to any parties for non-interest bearing activities. Both the authorities correctly appreciated the issue, since the amount was diverted to its own business division and in absence of any diversion outside for activities not bearing interest. Such addition, therefore, could not have been confirmed. Accordingly, the issue deserves no further consideration.
Page 3 of 4O/TAXAP/142/2014 ORDER
6. The third question pertains to disallowance of penalty expenses on shortage of sum of Rs.51,983/-. It was contended before the CIT (Appeals) that penalty expenses were levied on business transactions, and not for violation of the statute. The CIT (Appeals) had accordingly deleted the penalty on the ground that such proceedings had not crystalized.
7. The Tribunal on the ground that the nature of penalty was not explained by the Assessing Officer held that the penalty was on the business transaction and not for violation of statute concurring with CIT (Appeals). This issue also does not require any consideration only on the smallness of assessment. Tax Appeal resultantly deserves no consideration and accordingly dismissed.
(AKIL KURESHI, J.) (MS. SONIA GOKANI, J.) sndevu Page 4 of 4