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Income Tax Appellate Tribunal, “A”
Before: SHRI MAHAVIR PRASAD, JM & SHRI S. RIFAUR RAHMAN, AM
IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, MUMBAI BEFORE SHRI MAHAVIR PRASAD, JM & SHRI S. RIFAUR RAHMAN, AM आयकरअपीलसं./ I.T.A. No. 5298/Mum/2017 (निर्धारणवर्ा / Assessment Year: 2009-10) DCIT Cir 6(1)(1), M/s Agarwal Textiles R. No. 563, Industries Pvt. Ltd. Aayakar Bhavan, Suit No. 226 Bussa बिधम/ M. K. Road, Industrial Premises Vs. Mumbai-400 020 Century Bazar lane, Prabhadevi, Mumbai- 400 025 स्थायीलेखासं./जीआइआरसं./PAN No. AAACA3872F (अपीलाथी/Appellant) (प्रत्यथी / Respondent) : & C.O. No. 176/Mum/2019 (निर्धारणवर्ा / Assessment Year: 2009-10) M/s Agarwal Textiles DCIT Cir 6(1)(1), R. No. 563, Industries Pvt. Ltd. Aayakar Bhavan, Suit No. 226 Bussa बिधम/ M. K. Road, Industrial Premises Vs. Mumbai-400 020 Century Bazar lane, Prabhadevi, Mumbai- 400 025 (अपीलाथी/Appellant) (प्रत्यथी / Respondent) : अपीलाथीकीओरसे/ Appellant by : Shri Anandi Varma, DR प्रत्यथीकीओरसे/Respondentby : Shri Mandar Vaidya, AR
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सुनवाईकीतारीख/ : 07.11.2019 Date of Hearing घोषणाकीतारीख / : 22.01.2020 Date of Pronouncement आदेश / O R D E R Per S. Rifaur Rahman (Accountant Member): The present appeal as well as cross objection have been filed by the revenue as well as assessee against the order of Ld. Commissioner of Income Tax (Appeals) - 12 in short referred as ‘Ld. CIT(A)’, Mumbai, dated 05.05.17 for Assessment Year (in short AY) 2009-10 respectively.
Since, the facts raised in the appeal filed by the revenue as well as C.O. filed by the assessee are identical, therefore for the sake of convenience; they are clubbed, heard and disposed of by this consolidated order.
At the outset, we notice that assessee filed CO with delay of 214 days and in this respect, assessee filed affidavit explaining
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only during the hearing on 6th June 2019 and it was pointed out that he could file cross objection for non-adjudication on merit by Ld. CIT(A) and in case the issue of jurisdiction u/s 147 is to be decided against the assessee, the assessee would be prejudiced despite of having meritorious case on merits.
On the other hand, Ld. DR objected the submission of assessee for delay of filing CO and filed a detail note in this regard, which is reproduced below:-
It is said that the law of limitation is enshrined in the maxim that it is for the general welfare that a period be put to litigation. Rules of limitation are not meant to destroy the rights of the parties, rather the idea is that every legal remedy must be kept alive for a legislatively fixed period of time.. Delay can be condoned only if there is no gross negligence or deliberate inaction or lack of bona fide. Secondly, assessee should furnish acceptable and cogent reasons sufficient to condone delay. These are the pre- requisites for condoning delay.
The test whether or not a cause is sufficient is to see whether it could have been avoided by the party by the 4 I.T.A. No. 5298/Mum/2017 & CO 176/Mum/2019 M/s Agarwal Textiles Industries Pvt. Ltd.
exercise of due care and attention. In other words, whether it is bona fide cause, inasmuch as nothing shall be deemed to be done bona fide or in good faith which is not done with due care and attention. When there is reasonable ground to think that the delay was occasioned otherwise than a bona fide conduct, then the APPELLATE AUTHORITY should lean against acceptance of the explanation. Just because there is merit in the appeal filed by the assessee, any amount of delay, however, negligently caused, cannot be condoned. Non-filing of app2al before the APPELLATE AUTHORITY, before the end of limitation period, creates a vested right in favour of the Revenue. As a result of not filing of an appeal by an assessee, Department, gets a legitimate and undisputed right over the tax-revenue accruing to it in pursuance of the order of the AO. This right cannot be disturbed in a light-hearted manner.
Condonation of delay, though an equitable relief, however, cannot be accorded merely on sympathy or compassion and the grounds offered have to be evaluated to test whether the party in default had been guilty of conscious and deliberate inaction, culpable negligence and inexcusable indifference to the period of limitation mandatorily prescribed by law. Adopting
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a liberal view in condoning delay is one of the guiding principles in the realm of belated appeals, but liberal approach cannot be equated with a licence to file appeals at will-disregarding the time limits fixed by the statutes. No doubt that assessees are entitled to wait until the last date of the limitation for filing of the appeal, but when they allow the limitation to expire and come forward with a explanation enumerating reasonable causes for not filing the appeal within the time prescribed under the statute, then the causes, so shown, must establish that because of some event or circumstances arising before limitation expired. By not filing appeal in time before the appellate authority, assessee had allowed the State to believe that it had a vested right in its favour. Rights of the Sovereign are as important as that of the tax-payers. In matter of condonation of delay both have to show a sufficient cause which a prudent person can believe. In the case under consideration same is absent.
I this respect, Ld. DR relied upon various judgments in support of its arguments and lastly prayed that delay condonation application should not be permitted.
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Considered the rival submission and material placed on record, we notice that assessee has not filed cross appeal or cross objection against the order filed by the department and only during the appellate proceedings, it realized that it should file CO and since the delay in filing CO is already explained by the assessee through affidavit and it has already explained the reasons for such delay, which according to us, reasonable cause. Therefore, we condone the delay.
The brief facts of the case are that assessee is engaged in trading of silk yarn and fabrics and trading in securities and derivative securities. Assessee filed its return of income on 30.09.09 declaring total loss of Rs. 1,25, 38,35,120/-. Thereafter assessee has filed revised return of income on 30.03.11 revising the total loss of Rs. 1,25,41,63,342/-. The return was processed u/s 143(1) of the Act. Subsequently, the case was selected under CASS and notice u/s 143(2) and 142(1) of the Act were issued and served on the assessee. In the original assessment, AO made disallowance u/s 14A and determined the total taxable income at loss of Rs. 1,25,38,35,120/-.
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AO issued notice u/s 148 on 24.03.14. When assessee requested for reasons for reopening and asked the AO to treat the return of income filed electronically as the return of income filed u/s 148 of the AO. The AO communicated the reasons for reopening and the objections filed by the assessee are rejected vide letter dated 23.03.15 by the AO. Further, AO noticed that assessee had investment in quoted shares in the assessment year 2008-09 to the tune of Rs. 1,84,93,52,185/- which had been fully liquidated in the AY 2009-10. It is further noticed that assesse had debited a sum of Rs. 1,25,05,47,463/- as loss on the sale of shares of stock-in-trade and claimed the loss as business loss. AO observed that assessee has converted its investment held in shares amounting to Rs. 1,84,93,52,185/- into stock-in-trade and declared a long term capital gain of Rs. 98,07,816/- on such conversion which it set off against the short term capital loss incurred by it. Subsequently, the assessee sold these shares which are stock-in-trade and incurred a loss Rs. 1,25,05,47,463/-, which it treated as business loss. According to the AO, assessee is eligible to treat the loss incurred by the assessee as long term
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capital loss and assessee is not eligible to treat this transaction as business loss and further he observed that the gross total income of the assessee is a loss of which 99% loss due to sale /purchase of other business shares. Therefore, it is speculation loss which cannot be allowed as business loss. Accordingly, he disallowed the claim of loss claimed by the assessee.
Aggrieved by the above order of AO, assessee preferred appeal before Ld. CIT(A) and submitted a detail submission before him. In this regard, Ld. CIT(A) has extracted the detail submission which are at page no. 4 to 15 of its order and it is relevant to note that Ld. CIT(A) has given an opportunity to AO to represent the case before him, which AO has failed to utilize. After considering the detail submission of the assessee, Ld. CIT(A) allowed the appeal of the assessee on reopening of the assessment as below:-
6.2 I have carefully perused the facts. After careful perusal, it is seen from the paper book that the Appellant has furnished the details of capital gain which arose on account of treatment of investment into stock in trade vide letter dated 31.10.2011. Therefore,
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it cannot be said that the AO has not verified this fact. Even during the reassessment proceedings, the AO has changed his stand and issued show cause on different issues, ie speculation (as per provision to explanation of section 73 of the Act). The AO could not establish the basis of which the reassessment proceedings has been initiated since it was found that transfer of shares are on account of treatment of shares by the appellant from investment to stock in trade. And this fact was not found to be false. Therefore, there was no proper reason found for reopening the assessment. Accordingly, I find force in the submission of the appellant. Therefore, ground no. 1 is allowed.
Therefore, the other grounds were not adjudicated as the Ld. CIT(A) has dismissed the reopening of assessment.
Aggrieved with the above order, revenue has preferred the appeal before us on the grounds mentioned herein below:-
"On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in holding that re- assessment made under section 147 as invalid as the details were submitted at the time of original assessment for verification without appreciating the fact that a particular issue when brought to the notice
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of the assessing officer and the assessing officer found that ground is valid for reopening."
"On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred treating the reason for reopening being different than the show cause notice issued during the reassessment proceedings, without appreciating the facts that the assesses was well aware of the reassessment, as copy of reasons for reopening was provided to the assessee and the objection raised for reopening was also disposed off."
"On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition made without discussing the same on merit."
The Appellant prays that the order of the CIT (Appeals) on the above grounds be set aside and that of the AO be restored.
The Appellant craves leave to amend or alter any ground or to submit additional new ground, which may be necessary.
The grounds raised by the department is mainly on reopening of assessment and the same are considered for adjudication.
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Before us, Ld. DR brought to our notice the finding of Ld. CIT(A) at para no. 6.2 of its order and submitted that Ld. CIT(A) observed that all the details relevant for assessment were submitted at the time of original assessment for verification and further he observed that the reasons for reopening being different than the show cause notice issued during re-assessment proceedings, he submitted that both the above observations are without appreciating the fact that particular issue when brought to the notice of AO and the same was found to be valid ground for reopening. He brought to our notice page no. 156 of the paper book in which AO has communicated the reasons for reopening and he submitted that assessee has claimed the loss of sale of the shares as business loss, whereas AO has clearly brought on record to demonstrate that it is long term capital loss and further he brought to our notice that assessee has claimed excessive relief. Further he brought to our notice page no. 92 of the paper book which is original assessment order in 12 I.T.A. No. 5298/Mum/2017 & CO 176/Mum/2019 M/s Agarwal Textiles Industries Pvt. Ltd.
which AO has only disallowed u/s 14A of the Act and accepted the return of income filed by the assessee without discussing any other issue. Further he brought to our notice page no. 97 of the paper book which is notice u/s 142(1) in which AO has merely called for regular information relating to assessment proceedings. In this respect, he brought to our notice point no. 24 of the said notice. He further brought to our notice page no. 107 of the paper book which is a letter submitted by the AR of the assessee in response to notice issued u/s 142(1) and he submitted that assessee has not filed any relevant information before the AO on such loss. In this respect, he relied upon the following judgments:-
i) Export Credit Guarantee Corp of India Ltd. Vrs. ACIT (2013) 350 ITR 651 (Bom)
ii) Usha Inttl. Ltd. Vrs. DCIT (2015) 153 ITD 558 (Del)
iii) Rollatainess Ltd. vrs. ACIT (2015) 173 TTJ (Del)
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iv) Greater Mohali Area Development Authority vrs. DCIT (2018) 93 taxman.com 441 (P & H)
v) Ajai Verma vrs. CIT & Anr. (2008) 304 ITR 0030 (Alld) 13. On the other hand, Ld. AR brought to our notice page no. 116 of the paper book in which assessee has submitted before the AO, in the original assessment, a copy of the Board Resolution for conversion of stock-in-trade alongwith a copy of board resolution and relevant sale documents before the AO. Further, he brought to our notice page no. 100 of the paper book in which AO in point no. 21 of the notice u/s 142(1) of the Act has asked the assessee to file inter head /intra head set off of loss if any. In response, assessee has filed the claim before the AO. Ld. AR submitted that in the re-assessment order, AO observed in the reasons of reopening that if it is allowed for carry forward, the assessee will get excessive benefit, but he submitted that this question can be evaluated by the AO in 14 I.T.A. No. 5298/Mum/2017 & CO 176/Mum/2019 M/s Agarwal Textiles Industries Pvt. Ltd.
the subsequent assessment year, not in this assessment year. Since the assessee can set off of loss only in the subsequent years. In this respect, he relied upon the following judgments:-
i) CIT vrs. Manmohan Das (Deceased) (1966) 59 ITR 699 (SC) and ii) State Bank of India vrs. ACIT (WP No. 271 of 2018 alongwith WP No. 278 of 2018) (Bom).
He further brought to our notice page no. 165 of the paper book in which AO observed as below while rejecting the issue of notice u/s 148 of the Act. For the sake of clarity, which is reproduced below:-
It is bring to your notice that, the quality of the reason recorded is not to be questioned or analysed by the assessee in the guise of such an objection. The very jurisdiction under sec. 147 of the Act is open for challenge by the assessee in the regular appellate channels. Therefore, the assessee's present objection seeking a judicial review of the issue which is yet to hatch through the re-assessment proceedings, cannot
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be accepted. I may refer to the following decisions of the Hon. Supreme Court in regard to the point at issue as under:
In Chhugmal Raj Pal v. S.P. Chaliha & Ors. (1971) 79 ITR 603 (SC), which was decided against the Revenue, the Apex Court has held that "AO must give reasons for issuing a notice under section 148. In other words, AO must have some prima facie grounds before him for taking recourse action under section 148. In ITO v. Selected Daluv Band Coal Co. (P) Ltd (1996) 217 ITR 597 (SC), the Apex Court observed that at the stage of issuance of notice under section 148, the only question is whether there was relevant material, on which a reasonable person could have formed the requisite belief.
Again in Raymond Woolen Mills Ltd. vrs. ITO & Ors (1999) 236 ITR 34 (SC), the Apex Court while refusing to interfere with the reassessment proceedings, observed "we have only to see whether there, was prima facie some material on the basis of which the department could reopen the case.
There is no doubt in your case that there is a prima facie' case leading to the reason for the AO to believe that income chargeable to tax has escaped assessment
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and such prima facie reason has been communicated to the assessee.
He further submitted that assessee has filed all the details regarding conversion of shares into stock-in-trade as well as subsequent details of sale of those shares and offered the difference as long term capital gain /business loss as the case may be as per section 45(2) of the Act.
On the objection from Ld. DR on the submission of Ld. AR that this information were not asked by the AO, but assessee has filed themselves for which the Bench has asked DR to file order sheet copy of the assessment record in which whether the above information were submitted by the assessee itself or as asked by the AO. We notice that until today, no such information were brought on record by the Ld. DR, therefore we decide to set aside the objection of Ld DR and proceed to dispose off the appeal.
Considering the rival submission and material placed on record, we notice that assessee has converted the long
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term investment into stock-in-trade during this assessment year and assessee has also offered the long term capital gain on the date of conversion. Subsequently, assessee sold all the shares and incurred a huge loss and as per the records submitted before us, assessee has claimed it as the business loss considering the fact that assessee has treated the above shares which was sold during the year as stock-in-trade. As per the records brought to our notice by Ld. AR, it clearly indicates that all this information of conversion of shares into stock-in-trade were brought to the notice of the AO in the original assessment itself. Considering the fact that all this information was very much available on assessment records and now the AO reopen the assessment on the same set off of information and we rightly notice that Ld. CIT(A) clearly observed that assessee has furnished the details of capital gain which are also on account of treatment of investment into stock-in-trade vide letter dated 31.10.11 before the AO. Therefore, according to Ld. CIT(A), it cannot
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be said that AO has not verified this fact. Since the assessee has filed a copy of Board Resolution and workings of long term capital gain before the AO in the original assessment itself and it substantiates the findings of Ld. CIT(A) that all this information were very much available for the AO in the original assessment to complete. Therefore, in our considered view that the findings of Ld. CIT(A) seems to be in order.
With regard to other observation of Ld. CIT(A) that in the reasons for reopening, AO has not nowhere indicated that the business loss suffered by the assessee can be treated speculation loss and only in the revised assessment order, AO came to the conclusion that this loss can only be speculation loss. Therefore, we are inclined to accept the finding of Ld. CIT(A) that the re-assessment order is only a change of opinion. Accordingly, grounds raised by the revenue stands dismissed.
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With regard to CO filed by the assessee, since we have adjudicated the findings of Ld. CIT(A) in favour of the assessee, therefore the grounds raised by the assessee become infructuous and is thus dismissed. 20. In the net result, the appeal filed by the revenue as well as CO filed by the assessee stands dismissed. Order pronounced in the open court on 22nd Jan 2019. (Mahavir Prasad) (S. Rifaur Rahman) न्याययकसदस्य / Judicial Member लेखासदस्य / Accountant Member मुंबई Mumbai;यदनांक Dated : 22.01.2020 Sr.PS. Dhananjay
आदेशकीप्रनिनिनिअग्रेनर्ि/Copy of the Order forwarded to : 1. अपीलाथी/ The Appellant 2. प्रत्यथी/ The Respondent आयकरआयुक्त(अपील) / The CIT(A) 3. 4. आयकरआयुक्त/ CIT- concerned 5. यवभागीयप्रयतयनयि, आयकरअपीलीयअयिकरण, मुंबई/ DR, ITAT, Mumbai 6. गार्डफाईल / Guard File आदेशधिुसधर/ BY ORDER, .उि/सहधयकिंजीकधर (Dy./Asstt.