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Income Tax Appellate Tribunal, “E” BENCH, MUMBAI
Assessee by .. Shri. Vimal Punamiya, AR Revenue by .. Shri. B.S. Bist, DR Date of hearing .. 01-12-2016 Date of pronouncement .. 01-12-2016 O R D E R PER MAHAVIR SINGH, JM:
These two cross appeals, one by assessee (in and another by Revenue (in CIT(A)-36, Mumbai in appeal no. CIT(A) -36/AP-274/12-13 dated 28-08-2013. The assessment was framed by DCIT Central Circle 3, Mumbai for the A.Y. 2010-11 vide order dated 14.12.2012 u/s 143(3) of the Income Tax Act, 1961 (hereinafter ‘the Act’).
The only issue in this appeal of assessee in for the A.Y. 2010-11 is as regards to the order of CIT(A) confirming the action of the AO in treating the long-term capital gain declared by assessee as business income and also not allowing long-term capital loss by not admitting additional evidences. For this assessee has raised following grounds: - “
1. The learned CIT(A) had erred in law and on facts by sustaining the long term capital gain of Rs.21,53,983/- as business income.
2. The learned CIT(A) has erred in law in not giving the benefit of inadvertent mistake in filing the return of the income. In place of long term capital loss of Rs.17,14,354/- the appellant had shown by mistake long term capital gain of Rs.21,53,983/- as mentioned in prayer (a) of this grounds of appeal.”
2 &6521/Mum/2013 3. Briefly stated facts are that the assessee during the year under consideration engaged in the business of dealing in shares and also investment. The assessee is a salaried employee with Lawrence Dyes & Petrochemicals P. Ltd. Further, the assessee declared long-term capital gain to the tune of Rs.21,53,983/- on sale of shares and claimed the same as exempt. According to AO, the assessee is engaged in only one activity i.e. activity of earning profit through sale and purchase of shares be it intraday trading or purchase and sale of shares within short period or long period through trading market. Accordingly, he treated the long term capital gains declared by assessee as business income. The AO also not admitted the claim made by assessee in respect of long-term capital loss of Rs.17,14,354/- by stating that the same cannot be admitted in view of the decision of Hon’ble Supreme Court in the case of Goetz(I) P. Ltd 284 ITR 323 (SC). Aggrieved, assessee preferred the appeal before CIT(A). Before CIT(A), on both the issues, assessee filed additional evidences and stated that while filing the return of income due to inadvertent mistake the gross sale proceeds of shares amounting to Rs.21,53,983/- were shown as long-term capital gain, whereas in actually the assessee has incurred long-term capital loss of Rs.17,14354/-. The assessee filed complete details in respect of purchase and sale of shares for the first time before CIT(A). Accordingly, the CIT(A) did not entertained the claim of the assessee and confirmed the action of the AO on above two issues by observing in Para 6.6. as under: -
6.6. My predecessor CIT(A) has granted relief on carrying forward of business loss for 2009-10. But here the AO has treated the income as business income. He has also not allowed the Long Term Capital Loss based on judgement in case of Goetz(I) P. Ltd.
Aggrieved, now assessee preferred appeal before Tribunal.
At the outset, the learned Counsel for the assessee only requested for setting aside of these two issues back to the file of the AO for the reason that neither AO nor CIT(A) has entertained the claim of the assessee by relying on the decision of Hon’ble Supreme Court in the case of Goetz(I) P. Ltd (supra) and this claim is a legally maintenable claim and assessee is ready to prove his case if opportunity is given to him. On query of the Bench the learned Sr. DR fairly conceded the position.
3 &6521/Mum/2013 5. We have heard the rival contentions and gone through the facts and circumstances of the case. We find that the assessee is entitled to prove his case in respect to the claim of long-term capital gain or capital loss, what is the result from the actual accounts. It is also a fact that the AO could not entertain the claim in view of the decision of Goetz(I) P. Ltd. but we are admitting this claim and directing AO to decide the claim after taking evidences from the assessee as per the provisions of law. This issue of assessee’s appeal is restored back to the file of the AO and the orders of the lower authorities are set aside. Needless to say the AO will decide the issue independently, without being influenced by the earlier order of AO or CIT(A) because the same have set aside and does not exist.
The next issue in Revenue’s appeal in CIT(A) deleting the protective addition of unexplained investment of Rs.44,78,815. For this Revenue has raised following three grounds: - “1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the protective addition of Rs.44,78,815/- made under unexplained investment holding that substantive addition have been made in the hands of M/s Lawrence Dyes & Petrochemicals P. Ltd. when the addition stands deleted in M/s Lawrence Dyes & Petrochemicals P. Ltd by the CIT(A). 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in not clearly bringing out the facts, as to how the Settlement Commission’s order covered the said issue also. 3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in stating that the issue is covered by Settlement Commission order for A.Y. 2010-11 are different.”
At the outset, the learned Counsel for the assessee stated that CIT(A) deleted the addition on the basis that this income has been already considered in the hands of Lawrence Dyes & Petrochemicals P. Ltd. before Settlement Commission. It was argued that Lawrence Dyes & Petrochemicals P. Ltd. admitted that income of Rs.2,2,81,380/- before Settlement Commission, who vide composite order considered this income in the hands of the company where substantive addition was made. It was argued by the learned Counsel that this protective addition was made in the assessee’s hand, which is deleted by CIT(A). When a query was raised by the Bench to the learned Counsel for the assessee, whether he can show the order of Settlement Commission and on this he stated that the issue can be remitted back to the file of the 4 &6521/Mum/2013 AO for verification of this declaration in the hands of Lawrence Dyes & Petrochemicals P. Ltd. before Settlement Commission. On this the learned Sr. DR fairly conceded the position. In view of the above facts we remand this matter back to the file of the AO for verification whether this amount of Rs.44,78,815/-has already been added in the hands of Lawrence Dyes & Petrochemicals P. Ltd. on substantive basis before Settlement Commission or not. In case, this is added in the hands of Lawrence Dyes & Petrochemicals P. Ltd. in the order of Settlement Commission this addition is to be deleted. Appeal of assessee and that of the Revenue both are allowed for statistical purpose.
In the result, the appeal of the assessee and that of the Revenue, both are allowed for statistical purpose. Order pronounced in the open court on 01-12-2016.