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Income Tax Appellate Tribunal, MUMBAI BENCH “H”, MUMBAI
Before: SHRI C.N. PRASAD & SHRI RAJESH KUMAR
Per Rajesh Kumar, Accountant Member:
The present appeal has been preferred by the assessee against the order dated 08.11.2016 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment year 2006-07.
The various grounds raised
by the assessee are as under: “I. First Ground of Appeal:
1. The Commissioner of Income Tax (Appeals) erred in confirming the validity of the Order passed by the assessing Officer u/s 154 of the Income Tax Act.
2. He failed to appreciate that:
a) The order under section 154 was not signed by the assessing officer and was not a valid order. b) The notice under section 154 was served on the appellant after the date of 2 M/s. Madhav Stock Vision P. Ltd. the order under section 154. c) Copy of the remand report was not given to the appellant. d) No reasonable opportunity of being heard was given by the Assessing Officer and the Commissioner of Income Tax (Appeals) to the appellant. e) Disallowance of rebate u/s 88E on some items is not a matter of adjustment allowed u/s 154. f) The order under section 154 was invalid and without jurisdiction.
3. The appellant prays that the order under section 154 be treated as null and void and be quashed. Without prejudice to the above II. Second Ground of Appeal 1. The Commissioner of Income Tax (Appeals) erred in confirming the disallowance of rebate u/s 88E twice on short term capital gains of Rs. 6,79,160
2. He failed to appreciate that the appellant had not claimed the rebate u/s 88E on short term capital gain in the return of income and yet the assessing officer disallowed the same in the order u/s 154.
3. The appellant prays that disallowance of rebate u/s 88E on short term capital gains be deleted.
Without prejudice to the above
III. Third Ground of Appeal 1. The CIT(A) has erred in confirming the disallowance of rebate u/s 88E on the following incomes:
Assessment Year : 2006-07 Previous Year ended: 31/03/2005 Status: Company PAN : AABCM 8845M
Particulars Amount (In Rs.) Brokerage Income 5,80,242 Interest 2,87,319 Other Income 29,019
2. He failed to appreciate that disallowance of rebate on the above income was unjustified
Appellant prays that disallowance of rebate u/s 88E be deleted.”
3. The only issue pressed at the time of hearing by the Ld. A.R. is that the Ld. CIT(A) has erred in confirming the validity of order passed under section 154 of the Act without
3 M/s. Madhav Stock Vision P. Ltd. appreciating the fact that disallowance of rebate u/s 88E of the Act is a debatable issue and could not have been subject matter of order passed under section 154 of the Income Tax Act.
The facts in brief are that the assessee filed the return of income on 22.11.2006 declaring income of Rs.1,18,95,712/-. The case of the assessee was selected for scrutiny and notices under section 143(3) and 143(2) of the Act were duly issued and served upon the assessee. The assessee was engaged in the business of share trading and has earned income by way of share trading profit and short term capital gain etc. The income of the assessee during the year comprised of brokerage income of Rs.5,80,242/- , share trading profit Rs. 2,10,58,009/- and short term capital gain on share of Rs.6,79,160/-. The assessment was completed vide order dated 16.09.08 passed under section 143(3) of the Act by assessing the income of Rs.1,25,79,870/- by making various disallowances. Thereafter, the AO passed a rectification order under section 154 of the Act on the ground that excess rebate under section 88E has been allowed to the assessee and thus withdrawing the rebate under section 88E on the total amount of income credited to the profit & loss account by way brokerage and other incomes aggregating to Rs.15,75,740/-. Thereafter, the assessee preferred an appeal before the Ld. CIT(A).
The Ld. CIT(A) dismissed the appeal of the assessee by observing and holding as under:
4 M/s. Madhav Stock Vision P. Ltd. “I have considered the stand of the AO as well as the written submissions of the appellant. The provision of section 88E states that where the total of income of an assessee in a previous year includes any income, chargeable under the head, “Profits & Gains of Business or Profession”, arising from taxable security transactions, he shall be entitled to deductions prescribed under conditions laid u/s.88E(2) of IT Act, 1961. It is observed that the appellant had not disclosed the income in respect of transactions on which STT is paid under the head “Income from Business or Profession”, thus, the assessee has not fulfilled the conditions prescribed u/s.88E(i) of the IT Act, 1961 and had made a wrong claim of rebate u/s. 88E in the return of income. Accordingly, the AO was justified in rectifying the order on denying the rebate u/s.88E of the Act, 1961. Accordingly ground nos.4 & 5 are hereby Dismissed.”
The Ld. A.R. vehemently submitted before us that the assessee is engaged in the business of share trading and brokerage business and during the year derived income by way of share brokerage of Rs.5,80,242/-, share trading profit of Rs.2,10,58,009/- and short term capital gain of Rs.6,79,160/-. The Ld. A.R. invited our attention to statement of total income of the assessee for the year containing details of incomes derived during the year from the business and capital gain as filed at page No.17 of the paper book. The ld counsel also invited our attention to security transaction tax paid during the year of Rs.45,18,667/- and rebate claimed to the tune of Rs.35,68,713/- which was claimed only to the extent of tax on the income of the assessee other than the short term capital gain. Thus, the Ld. A.R. submitted that the assessee while computing the income for the year suo-moto restricted the rebate under section 88E to Rs.35,68,713/- only. The Ld. A.R. submitted that the disallowances made in the return of income were also of the items of incomes such as brokerage and other income, interest and other income were business income and therefore, the assessee submitted that the issue sought to be rectified by the assessee in the order
5 M/s. Madhav Stock Vision P. Ltd. under section 154 of the Act qua disallowing the rebate in respect of Rs.15,75,740/- which comprised of brokerage and other income of Rs.5,80,242/-, interest of Rs.2,87,319/-, other income of Rs.29,019/- and short term capital gain on sale of Rs.6,79,160/- is a debatable issue and thus could not have been subject matter of rectification under section 154 of the Act as there is no mistake apparent on the face of the order. Therefore, the order passed by the Ld. CIT(A) confirming the order of AO under section 154 is wrong and against the provision of law and should be reversed.
Whereas the Ld. D.R., on the other hand, requested before the Bench that it should be set aside to the file of the AO to pass the order afresh after taking the submissions and contentions of the assessee into account.
We have heard the rival submissions and perused the records including the impugned order. The undisputed facts of the case are that the assessee is engaged in the business of share brokerage business, share trading and investments in shares and securities. During the year, the assessee derived income by way of brokerage of Rs.5,80,242/-, share trading profit of Rs.2,10,58,009/- and short term capital gain of Rs.6,79,160/-. The assessment was framed by order dated 16.09.08 passed under section 143(3) assessing the income of Rs.1,25,79,870/-. The AO, thereafter, noticed that there are certain items of incomes which were credited in the profit and loss account which are narrated as under: Particulars Amount (In Rs.)
6 M/s. Madhav Stock Vision P. Ltd. Brokerage Income 5,80,242 Interest 2,87,319 Other Income 29,019 Short term capital gain 6,79,160 Total 15,75,740 According to the AO, the assessee has paid security transaction tax to the tune of Rs.45,18,667/- and has claimed deduction under section 88E in respect of security transaction tax paid. However, according to the AO, STT attributable to the earning of the above incomes of Rs.15,75,740/- is required to be withdrawn under section 154 of the Act. The said order was upheld by the Ld. CIT(A) by observing that assessee has not disclosed income in respect of transactions on which STT under the head income from business and profession and thus has not fulfilled the condition prescribed under section 88E(i) of the Act and thus claimed a wrong deduction and ultimately dismissed the appeal of the assessee. Now without going into the merits of the case, we would like to deal with the matter on technical and legal issue. We find merit in the contention of the Ld. A.R. that the provision of section 154 of the Act should be resorted in order to rectify an apparent mistake but not the issues which are debatable one. We find from the records before us that during the year assessee has paid STT of Rs.Rs.45,18,667/- whereas the rebate was claimed only to the extent of Rs.35,68,713/- on its own. In our opinion, there is no mistake apparent on the face of the order passed by Ld. CIT(A) on the basis of which the AO concluded that the rebate under section 88E is wrongly allowed in respect of 4 items of income as have been 7 M/s. Madhav Stock Vision P. Ltd. stated above. In our opinion, the issue sought to be rectified under section 154 of the Act was debatable and not apparently wrong. Especially in view of the facts that the assessee itself restricted the claim under section 88E to Rs.35,68,713/-as against the actual STT paid of Rs.45,18,667/-. Under these facts and circumstances, we are of the view that the order passed by Ld. CIT(A) upholding the order passed by AO under section 154 of the Act is wrong and can not be sustained. We accordingly set aside the order of Ld. CIT(A). The order passed by the AO under section 154 of the Act is also wrong and is quashed as the issue involved is debatable and could not be subject matter of the rectification proceedings. There is no need to decide the issue on merit as we have adjudicated the technical issue in favour of the assessee.
In the result, the appeal of the assessee is partly allowed. Order pronounced in the open court on 10.04.2018.