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Income Tax Appellate Tribunal, DELHI BENCH `D’ NEW DELHI
Before: SHRI CHANDRA MOHAN GARG & SHRI L.P. SAHU
This appeal by the revenue has been filed against the order of the CIT(A), Meerut dated 4.9.2012 in Appeal No. 343/2008-09 for assessment year 2006-07.
Ground No. 1 & 2 of the revenue
Apropos ground no. 1, ld. DR submitted that the CIT(A) has erred in holding that the assessment order is bad in law as so called other order was merely an untenable and concocted story which is non-cognizable and had no legal sanctity. Assessment year: 2006-07 3. Learned counsel of the assessee supported the impugned order and submitted that it was a very bad practice to substitute a new order in the place of earlier order which has been passed on the back of the assessee which was not only bad in law but void ab initio.
On careful consideration of the above, we note that the CIT(A) concluded the issue in favour of the assessee with following observations:-
“4.3. Decisions and reason therefor: Before I adjudicate upon the issue, it is important to mention that the ITO, Ward 1(2), Meerut was called upon vide this office letter No.226 dated 26.12.2011 to attend the appellate proceedings on 28.12.2011 with case records. The ITO informed by her letter dated 28.12.2011 that the case stood transferred to the ACIT, Circle 1, Meerut. The case records in one volume was called for from the ACIT, Circle 1.
The allegation made through the Grounds of Appeal is serious. The AR has placed on record a copy the assessment order of the ITO, Ward 1(2), Meerut dated 19.12.2008 in which returned income has been accepted. It is duly signed by the AO and bears his seal. It also bears DCR No.151/230. Demand of Rs.26,380/- raised through this order has been paid for which the AR has placed copy of challan dated 10.1.2009 on record. The order under appeal is yet another order of the same date which bears the same DCR No. on the demand notice. The signatures of the ITO on both the orders match. In view of these facts, the allegations made by the AR appear to be correct. The CIT, Meerut may look into these facts. The order under appeal is held to be bad in law.”
Assessment year: 2006-07 5. In view of above, we are of the opinion that if the alleged order bears same DCR No.151/380 on the subsequent demand notice, then it may safely be inferred that allegations made by the ld. AR are correct that the Assessing Officer erred in framing the second order of the same date which was prejudicial to the assessee in comparison to earlier order. We may point out that the conduct of the Assessing Officer was dignified and judicious and the CIT(A) rightly held that second order under appeal is bad in law. The CIT(A) was also quite balanced and justified in drawing attention of CIT, Meerut to this serious issue. We are unable to see any reason to interfere with the impugned order and we uphold the same on this issue. Ground no. 1 & 2 of the revenue are dismissed.
Ground no. 3 of the revenue
We have heard arguments of both the sides and carefully perused the relevant material placed on record before us. Learned Departmental Representative replied that the earlier assessment order passed by the Assessing Officer on the same date was a part of record, hence, there was no additional evidence which attracts provisions of Rule 46A and the assessee never filed any additional evidence during first appellate proceedings.
On careful consideration of rival submissions and vigilant perusal of the impugned order, we note that the assessee did not file any application under Rule 46A of the Rules seeking admission and consideration of any additional 3 Assessment year: 2006-07 evidence. The so-called earlier assessment order was in fact a matter of revenue record which cannot be said to be additional evidence, thus ground no. 3 of the revenue being devoid of merits is dismissed.
Ground no.4 of the revenue
Apropos ground no. 4, ld. DR pointed out that the CIT(A) wrongly held that valid service of notice u/s 143(2) of the Act was under serious doubt and order under appeal is bad in law. Learned Departmental Representative submitted that first notice was returned unserved on 28.9.2007 and on the same date, another notice was served by affixture by the Inspector.
Learned counsel of the assessee supported the impugned order and has drawn our attention to para 5.2 of the first appellate order.
On careful consideration of above, at the outset, we note that the CIT(A) decided the issue in favour of the assessee with following findings:-
“5.2 Decision and reasons therefor:
I have perused the material on record. The assessment record shows that a notice under section 143(2) dated 27.9.2007 sent by speed post was returned unserved as per the noting of the postal staff dated 28.9.2007 on the envelope. Yet another notice of the same date is found on record which is shown as served by affixture by an ITI on 28.9.2007 on the last known address. The same is denied by the AR. The AR has placed on record a copy of his petition dated 17.11.2008 duly received in the ITO’s office wherein he has raised his objections that notice under section 143(2) was not served within 12 months and, hence, the assessment proceedings were bad in law. In the order under appeal, the AO has not dealt with this objection. He has only 4 Assessment year: 2006-07 stated that notice was issued on 27.9.2007 and was duly served. In the order in which he has accepted the returned income, the A.O. has not mentioned the fact of service at all. In view of the circumstances of the proceedings, the valid service of notice within time comes under serious doubt.”
In view of above, when the Assessing Officer himself went wrong in holding valid service of notice and did not decide the legal objection of the assessee, the CIT(A) was quite balanced and justified in holding that the valid service of notice within time comes under serious doubt as the Assessing Officer has not brought out any fact on record to support valid service of notice on the assessee. Hence, we are unable to see any valid reason to interfere with the conclusion of the CIT(A) on this issue and we uphold the same. Accordingly, ground no. 4 of the revenue being devoid of merits is dismissed.
Ground no. 5 of the revenue
Apropos ground no. 5 of the revenue, ld. DR submitted that the CIT(A) was not justified and he grossly erred in holding that the income earned by the assessee on sale and purchase transactions of shares was capital gain ignoring the frequency of the transactions of shares, its volume and continuity. Ld. DR supported the action of the Assessing Officer and placed his reliance on the various orders and judgements including judgment of Hon’ble Jurisdictional High Court of Delhi in the case of CIT vs Sahara India Housing Corp. Ltd. (2012) 81 CCH 0063 (Del H.C.). Assessment year: 2006-07 13. Ld. AR strongly supported the impugned order of CIT(A) and also placed reliance on the judgment of Hon’ble Jurisdictional High Court of Delhi in the case of CIT vs Jubilant Securities Pvt. Ltd. 333 ITR 445 (Delhi) and judgment of Hon’ble Gujarat High Court in the case of CIT vs Rewa Shankar A. Kothari 283 ITR 338 (Guj).
On careful consideration of the above rival submissions and dicta laid down by Hon’ble High Court of Delhi in the case of CIT vs Jubilant Securities P. Ltd. (supra), firstly we observe that the first appellate authority granted relief to the assessee with following conclusion:-
“6.4. Decision and reasons therefor: I have carefully considered the reasons discussed by the A.O. in the impugned order for assessing the gain on the sale of shares as profits and gain of business as against Capital gains claimed by the assessee. The A.O. has observed in the Assessment order as under: a. During the year the Assessee has made 97 transactions of the sale and purchase of shares through Kotak Securities and 370 transactions through Alankit Assignments Ltd. In this way the Assessee might have been busy in the b. business of sale and purchase through out the year . c. Apart from this the Assessee was also regularly doing Future Trading of the shares. From the Income shown by the Assessee under different d. head of Income it is observed that the main source of income of the Assessee is from the sale and purchase of shares. e. Therefore, the Income shown by the Assessee from the trading of shares is the business income and not a Long Term or Short Term Capital gain as claimed by the Assessee but a business Income. Thus, after going through the above observations of the AO it is quite obvious that he has converted the head of business in a very casual way and has not brought on record any concrete material 6 Assessment year: 2006-07 for the view which he has taken in the assessment. I have also gone through the explanations and submissions of the AR. The assessee did not record the investments in his accounts by way of stock-in-trade. The assessee has declared the value of the shares on cost basis. On the other hand, the stock in trade is always valued on the principle of lower of the cost of market value and the valuation loss is allowed to be deducted in the computation of business income. The AO has not brought on record any material to show that the assessee valued the shares at the end of the previous year by following the principle of lower of the cost or market value and valuation loss, if any. I also note that the assessee had not claimed the Securities Transactions Tax (STT). Even though the A.O. treated the appellant to be dealer in shares, AO did not allow the rebate u/s 88 E of the Act . In this factual back ground, I find that when the assessee could get benefit of valuation loss or rebate u/s 88 E , the A.O. did not regard the appellant to be a dealer in shares. I find also that the assessee’s conduct all through was uniform. The assessee accounted for the investments in his books at cost and no valuation loss was accounted for by the assessee nor any deduction was claimed. Being an investor the assessee did not claim Rebate u/s 88E and the income was disclosed under the head “Capital Gains”. In none of the past assessments the assessee was considered to be a dealer in shares by the Revenue and Income from sale of shares, was assessed in the past under the Head “Capital Gains” and not as profit and gains of business. Thus, considering all the reasons and facts and legal position I hold that the profit realized by the Assessee on purchase and sale of shares was assessable under the head Capital Gains. The AO shall assess such capital gains in accordance with Section 48 of the Act and he will grant statutory deductions/exemptions and re compute the income under the head “Capital Gains as per law. Since I have held that the Income was assessable under the Head “Capital Gains “and not as “Profit and gains of business” the assessee will not be entitled to claim rebate u/s 88E of the Act. The AO shall accordingly recompute income under the head “Capital Gains” and recompute the sum payable or refundable as per Computation. Ground No.3 is disposed of accordingly.” Assessment year: 2006-07 15. In view of above, the CIT(A) rightly evaluated the conduct of the assessee as well as facts and circumstances of the case in the light of treatment given by the assessee regularly showing investments in shares at purchase value and taking them as investments. Furthermore, the assessee had not claimed the Securities Transaction Tax (SIT) and specially when the assessee could get the benefit of valuation loss or rebate u/s 88E of the Act, the Assessing Officer can not label the assessee as dealer in shares and thus income derived therefrom cannot be treated as business income. The dicta laid down by Hon'ble High Court in the case of Jubilant (supra) was followed and the CIT(A) granted relief to the assessee on justified and correct appreciation of fact and we are unable to see any valid reason to interfere with the same. Accordingly, ground no. 5 of the revenue also fails.
In the result, appeal of the revenue is dismissed.
Order pronounced in the open court on 04.12.2015.