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Income Tax Appellate Tribunal, “A” BENCH, AHMEDABAD
Before: SMT. ANNAPURNA GUPTA & SHRI SIDDHARTHA NAUTIYAL
PER SIDDHARTHA NAUTIYAL - JUDICIAL MEMBER:
This appeal has been filed by the Revenue against the order passed by the Ld. Commissioner of Income Tax (Appeals), (in short “Ld. CIT(A)”), National Faceless Appeal Center (in short “NFAC”), Delhi vide order dated 22.12.2022 passed for Assessment Year 2016-17.
The Revenue has taken the following grounds of appeal:-
“1. Whether the Ld. CIT(A) has erred in law and on facts in not treating the closing stock in share trading account of shares as Rs.2,04,33,825/- as per P & L account and hence the deleting the consequential disallowance of carry forward of loss of Rs.1,45,39,008/- without appreciating the facts of the case.
2. Whether the Ld. CIT(A) has erred in law and on facts in not providing opportunity to the AO to the understand and counter the view of the assessee and accepted the version of the assessee without giving findings on merit.
The appellant craves leave to amend or alter any ground or add a new ground, which may be necessary.
ACIT vs. Suresh Shantilal Jain Asst.Year –2016-17 - 2–
It is, therefore, prayed that the order of Ld. CIT(A) may be set aside and that of the Assessing Officer be restored.” 3. The brief facts of the case are that the assessee is engaged in the business of trading in shares. The assessment order was passed under Section 143(3) of the Act on 08.12.2018. However, subsequently the Assessing Officer rectified the assessment order under Section 154 of the Act in which the Assessing Officer held that on scrutiny of Profit & Loss Account of the assessee, it is observed that the closing stock shares was taken as Rs. 58,94,817/- while computing net loss, but as per monthly summary of share trading account, closing stock of shares was Rs. 2,04,33,825/-. Thus, closing stock in Profit & Loss Account has shown loss to the tune of Rs. 1,45,39,008/- (Total loss eligible for carrying forward was reduced from Rs. 3,27,63,458/- to Rs. 1,82,24,450/-).
4. In appeal, before Ld. CIT(A) the assessee submitted that there is an apparent mistake in the 154 order passed by Ld. Assessing Officer since the Ld. Assessing Officer has picked up the closing stock figure of Rs. 2,04,33,825/- which consists of loss incurred for a sum of Rs. 1,45,39,008/- and closing stock of Rs. 58,94,817/-. The assessee submitted that a sum of Rs. 1,45,39,009/- is nothing but loss incurred in share trading business during the year and therefore, he submitted that the disallowance of carry forward of loss of Rs. 1,45,39,008/- on account of difference in closing stock of shares is only on account of mis-appreciation of the assessee’s set of facts. In light of the submissions made by the assessee and the detailed explanation given by the assessee during the course of appellate proceedings, the Ld. CIT(A) allowed the appeal of the assessee with the following observations:-
ACIT vs. Suresh Shantilal Jain Asst.Year –2016-17 - 3–
“4.1 I have gone through the facts of the case, grounds of appeal and submissions made in this regard. The assessee is engaged in the business of trading in shares. The assessee had filed return of income for F.Y. 2015-16 u/s. 139(1) on 11.10.2016 showing total income to be NIL. Further, the assessee declared loss of Rs. 3,27,63,458/- in the return of income. The main ground of appeal is the outstanding amount of Rs.2,04,33,825 in share trading account as closing stock and hence consequent disallowance of carry forward of loss of Rs. 1,45,39,008/-. 4.2 In this regard, the appellant was requested to furnish the following detail to enable the office to dispose of grounds of appeal of the appellant vide letter dated 15.12.2022. “The rectification is done by the AO because the appellant is not able to reconcile the closing stock mentioned at Rs. 5894817/- with the difference in the sale and purchase of shares at Rs. 20433825/-. The AO has taken the figure net of sale after its purchase [ purchase of shares- sale of shares] as the closing stock. Whereas you have taken closing stock at Rs. 5894817/-. Please tell why the action of the AO is wrong when closing stock is normally balance of purchases sales.” 4.3 The assesse submitted his reply with submission dated 20.12.2022 as follows:- This is to explain that the assessee maintains only Share Trading A/c for the business of Trading of Shares by crediting share trading account when the Broker credit assessee's ledger at the time of generation of bill for the transaction done during a day and whose net amount comes to payable to the assessee and similarly debit the share trading account when the broker debit the assessee's ledger at the time of generation of bill for the transaction done during a day and whose net amount comes to receivable from the assessee in their books of accounts. However, at the end of the year, whatever stock lye with the assessee which is held in his Demat account is taken as closing stock for the year and such stock is debited as closing stock shown as Inventory in Balance Sheet by crediting profit and loss account and accordingly the net result of the share business is arrived at. “Accordingly, debit balance of share trading account at the end of the year consists of stock on hand and loss incurred, if any during the year on share trading activity. I am submitting Holding of M/s. Motilal Oswal Securities Ltd and M/s. Prudent Broking Services Pvt Ltd. as on 31.03.2016 from which it can be seen that the total stock was Rs. 58,94,877/- being 9,45,796/- held in Demat statement of Motilal Oswal Securities Ltd and Rs. 49,49,021/- held in Demat statement of M/s. Prudent Broking Services Pvt Ltd. Thus, debit balance of share trading A/c of Rs. 2,04,33,825/- is nothing but loss incurred of Rs. 7,45,39,008/- and closing stock of Rs. 58,94,877/- Thus, the total purchases of Rs. 72.55,87,737/- is inclusive of closing stock of Rs. 58,94,877/- held on 31.03.2016 and Rs. 12,55,87.73/- Rs. 58.94.817 = Rs. 77,96,92,920/- value of shares are sold for Rs. 70,57,53,977/- as shown in credit side
ACIT vs. Suresh Shantilal Jain Asst.Year –2016-17 - 4– of Share Trading A/c and net result will be Rs. 11,96,92,920 - Rs. 10 51.53,911 = Rs. 1,45,39,009 is nothing but loss incurred on Share Trading business during the year. I am again submitting share trading ledger for your ready reference. In view of the above, it is submitted that the disallowance of carry forward of loss Rs. 7,45,39,008/- on account of difference in closing stock of shares as contended by the AO which is actually misunderstood by him without considering any submission on this account given during the proceedings is thus without any substance and requires to be deleted.” (Emphasis supplied) 4.4 This office concurs with the above submission of the appellant and the addition made is directed to be deleted. The Ground No.2 of the appeal is allowed.
In, nutshell the appeal is Allowed.”
5. The Department is in appeal before us against the aforesaid order passed by the Ld. CIT(A), allowing the appeal of the assessee. Before us, the primary contention of the Ld. D.R. is that the order passed by Ld. CIT(A) is a non-speaking order and he has simply accepted the contention put forth by the assessee during the course of appellate proceedings.
On going through the facts of the instant case, we observe that the Ld. D.R. has not pointed out to any infirmity in the order passed by the Ld. CIT(A), while allowing the appeal of the assessee. It is observed that during the course of appellate proceedings before Ld. CIT(A), the assessee had filed detailed written submissions explaining the anomaly in the 154 order passed by the Ld. Assessing Officer, in which the Assessing Officer had mistakenly taken the closing stock figure from the share trading account of the assessee. The assessee had filed detailed written submissions pointing out the inaccuracy in the order passed by the Ld. Assessing Officer under Section 154 of the Act and Ld. CIT(A), after taking into consideration the submissions filed by the assessee, allowed the appeal of the assessee.
ACIT vs. Suresh Shantilal Jain Asst.Year –2016-17 - 5– Accordingly, looking into the instant facts we find no infirmity in the order of Ld. CIT(A) so as to call for any interference.
In the result, the appeal of the Department is dismissed. This Order pronounced in Open Court on 10/04/2024