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Income Tax Appellate Tribunal, MUMBAI BENCH “I”, MUMBAI
Before: SHRI D.KARUNAKARA RAO & SHRI SANDEEP GOSAIN
O R D E R PER SANDEEP GOSAIN, JM: The present appeal has been filed by the assessee against the order dated 10.12.2010 passed by the CIT(A)-20, Mumbai thereby dismissing the appeal filed by the assessee and upholding the assessment order dated 21.12.2009 passed by the Assessing Officer (AO) on the following grounds of appeal:
The Ld. Assessing Officer and CIT(A) have erred in fact and in law making addition in stock due to conversion of Rs. 45,284/-.
The Ld. Assessing Officer and CIT(A) have erred in fact and in law making disallowance in long term capital gain of Rs. 2,54,740/-. 3. The Ld. Assessing Officer and CIT(A) have erred in fact and in law making disallowance in expenses of Rs. 8,764/- u/s. 14A r.w.r. 8D of Income Tax Act. 4. The assessee craves right to add, alter or amend any of the grounds of appeal
2. The brief facts of the case are that the assessee-company is engaged in the business of trading in shares and derivative segments.
During the previous year 2006-07,the assessee had shown loss in trading of equity shares and that in derivative (F&O) segment. The assessee vide letter No. ITO/9(2)-1/scrutiny/2009-10 dated 25.09.2009 was further asked to produce the details such as Form No. 10DB for all the eligible transactions, copy of D'mat statement, copy of ledger statement maintained with broker etc. In response assessee filed details as per its letter dated 23.10.2009. However details are not complete.
In order to cross check the genuineness of transactions and holding position of shares as claimed by assessee in it's accounts, information's, such as transaction statement, global report etc were called for from it's depository participant M/s. Kotak Securities Ltd. u/s. 133(6) of the I T Act. The details from M/s. Kotak Securities Ltd. were received on 11.12.2009.
The same were verified by the AO and ultimately total income of the assessee was assessed by order dated 21.12.2009.
Aggrieved by the order of AO the assessee filed an appeal before the CIT(A), however, the CIT(A) after providing an opportunity of hearing to the assessee dismissed the appeal.
Aggrieved by the order of the CIT(A), the assessee filed the present appeal before us on the grounds reproduced hereinabove.
Although the matter was kept for hearing on different dates but nobody appeared before us, therefore, necessary notices through RPAD were sent from time to time on various occasions on the address mentioned by the assessee in Form-36. Even inspite of sending several notices, none-appeared on behalf of the assessee, which shows that the assessee is not interested in pursuing the present appeal, however, considering the interest of justice and considering the fact that the impugned order as well as assessment order are before us and in addition the assessee has also filed his grounds of appeal thereby challenging the impugned order passed by the CIT(A), we are of the considered view that the matter can be decided on merits after evaluating and considering the impugned orders as well as grounds of appeal even in the absence of assessee, therefore, we have decided to decide the appeal on merits.
We have carefully gone through the orders passed by AO. Our finding on grounds of appeal are as under:
Ground No.1 The Ld. Assessing Officer and CIT(A) have erred in fact and in law making addition in stock due to conversion of Rs. 45,284/-. 7. It is undisputed fact that the assessee is a trader in shares, it has closing stock of 790 shares of IVRCL and 176 shares of TCS. The CIT(A) in his decision has observed that the assessee had included therein 40 shares of IVRCL.
“As said before the appellant is a trader in shares. It had closing stock of 790 shares of IVRCL and 176 shares of TCS. The AO observed that the appellant had included therein 40 shares of IVRCL and 76 shares of TCS which were converted from investment into stock in trade. He worked out a sum of Rs. 45,284/- and added as business income on valuing these shares based on the last transaction value before their conversion. The appellant has not stated anything material except merely challenging the addition.” Therefore, the CIT(A) has rightly rejected the said ground and uphold the order of AO, we concur with the finding recorded by CIT(A) as assessee has not proved any document to prove that finding of AO & CIT(A) are wrong. Hence, we uphold the order passed by CIT(A).
Ground No.2:
The Ld. Assessing Officer and CIT(A) have erred in fact and in law making disallowance in long term capital gain of Rs. 2,54,740/-. The appellant is a dealer in shares and also holds shares as investment.
It is the case of the appellant that whenever it was running short of shares of delivery in course of its business of trading in shares it used to convert shares lying as investment into stock-in-trade and replenish them as investment when acquired later. The AO observed that in this manner the appellant had converted 790 shares of IVRCL and 88 original and equal number of bonus shares of TCS from investment to stock in trade. Giving working in the assessment order he computed capital gain u/s 45(2) on account of such conversion at total sum of Rs. 2,54,740/- and added to the income of the appellant.
Being aggrieved by the order of assessment, the assessee merely stated before the CIT(A) that it is the practice of converting the shares held as investment into stock-in-trade. It has not challenged the quantum of capital gain computed. In the absence of any explanation or material to the contrary, the CIT(A) had rightly dismissed the said ground and upheld the order of AO. Therefore, we concur with the finding recorded by the CIT(A) and upheld the same.
Ground No.3:
The Ld. Assessing Officer and CIT(A) have erred in fact and in law making disallowance in expenses of Rs. 8,764/- u/s. 14A r.w.r. 8D of Income Tax Act. The appellant earned dividend of Rs. 5.857 and claimed as exempt u/s 10(34) of the Act. The AO found that the appellant had not added back expenses incurred in relation to exempt income while computing the income returned. Applying the method prescribed under Rule 8D of the Income tax Rules, he worked out Rs. 8.765 as expenditure incurred in relation to exempt income and added back to the income returned.
This ground was also rightly considered by the CIT(A) and rightly held that the application of provision u/s 14A is mandatory and therefore, rightly dismissed the said ground and confirmed the addition.
Considering the aforementioned factual position, we are of the opinion that there is reason to interfere into orders passed by CIT(A). It is a settled proposition in law that Rule 8D does not apply to the AY under considerations. Therefore, we remand this issue to the file of the AO for fresh examination and decision after granting opportunity to the asessee. Thus, this issue is allowed for statistical purpose.
In the result, appeal filed by the Assessee is partly allowed for statistical purpose.
Order pronounced in the open court on this 13thday of January, 2015.