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ACIT, Circle-33(1), New Delhi Vs. Sh. Amarjeet Singh Sethi, T-2336, Faiz Road, Karol Bagh New Delhi-110005
October, 13th 2014
             IN THE INCOME TAX APPELLATE TRIBUNAL
                  DELHI BENCH : `A ' : NEW DELHI

          BEFORE SHRI R.S. SYAL, ACCOUNTANT MEMBER
                              AND
           SHRI GEORGE GEORGE K., JUDICIAL MEMBER

                              ITA No.3123/Del /2013
                           Assessment Year : 2009-2010


     ACIT, Circle-33(1),         Vs.       Sh. Amarjeet Singh Sethi,
     New Delhi                             T-2336, Faiz Road, Karol Bagh
                                           New Delhi-110005


      (Appellant)                      (Respondent)



             Appellant by :      Ms. Y. Kakkar, DR
             Respondent by:      Shri Gurjeet Singh Ananad, C.A.

                                    ORDER

PER SHRI GEORGE GEORGE K, JM:


1.    This appeal at the instance of the Department is directed against the

CIT(A)'s order dated 28.02.2013. The relevant Assessment Year is 2009-10.

2.    The solitary issue that arises for our consideration is whether the CIT(A)

is justified in deleting the addition amounting to Rs.51,28,109/- made by the

Assessing Officer on account of loss suffered on sale of shares.

3.    The assessee is an individual. He is in the business of providing services

in the field of Aviation Industries, retail trading of Fabrics and dealing in sale

and purchase of shares For the assessment year in dispute, the assessee has filed
                                                                       ITA No.3123/Del /2013
                                                                 Assessment Year : 2009-2010
                                                                                               2



return of income on 30.9.2009, declaring total income of Rs.31,49,345/-. The

assessment was taken up for scrutiny by issuing of notice u/s 143(2) of the I.T.

Act, 1961 and scrutiny assessment u/s 143(3) of the Act was completed vide

order dated 14.12.2011 fixing the total income of Rs.82,78,280/-. In scrutiny

assessment completed, the Assessing Officer had added the loss suffered on

account of trading of shares amounting to Rs.51,28,109/-.

3.1   The brief facts with reference to the addition of Rs.51,28,109/- are

follows.




      In the course of assessment proceedings, the Assessing Officer noticed

that the assessee has suffered loss of Rs.51,28,109/- on purchase and sales of

shares. This loss was treated as a business loss by the assessee and was debited

to P&L a/c. According to the Assessing Officer, this loss only could be adjusted

against profit on share transaction. Therefore, vide orders sheet entry dated

02.12.2011, assessee was show caused why the said loss on purchase and sale of

shares transaction should not be disallowed. Since there is no compliance on the

hearing date, the Assessing Officer disallowed the loss suffered on account of

purchase and sale of shares amounting to Rs.51,28,109 and added the same to

the income of the assessee.

4.    The assessee being aggrieved, filed an appeal before the CIT(A). The

CIT(A) after taking taken into consideration the assessee's submission and the

material filed before the Assessing Officer held that the loss on account of sale
                                                                       ITA No.3123/Del /2013
                                                                 Assessment Year : 2009-2010
                                                                                               3



of shares is to be treated as a business transaction. The relevant finding of the

CIT(A) reads as follows:-

      "8.......
      8.1.......
      8.2 On perusal of material on record, I find that the appellant
      had started the business of dealing in shares in the financial year
      2007-08 relevant to assessment year 2008-09 and from this activity
      the appellant earned profit of Rs.7,73,143/- which was shown as
      business income and was taxed at a maximum tax rate of 30% in
      terms of scrutiny assessment completed u/s 143(3) of the Income-
      tax Act, 1961. It was stated that the appellant had sold most of the
      shares within a short interval during the financial year 2007-08
      relevant to assessment year 2008-09, but as the prices of the shares
      dipped down, he had retained some shares in a hope that prices
      would go up at least to the extent of the price at which the
      appellant had purchased these shares. However, when the
      appellant lost all hopes to get the price recovered, he ultimately
      sold the remaining shares at loss of Rs.51,28,190/- during the
      assessment year under consideration. I find that the shares on
      which profit of Rs.7,73,143/- was earned in assessment year 2008-
      09 and shares on which the appellant suffered a loss of
      Rs.51,28,109/- in the assessment year under consideration i.e.
      2009-10 were purchased from the same broker and almost at the
      same time. When the appellant had declared income from dealing
      in shares as business income in assessment year 2008-09, the
      Assessing Officer accepted the details filed by the appellant and
      assessed the same under the head "income from business and
      profession" in scrutiny assessment u/s 143(3) of the Income-tax
      Act, 1961. On the similar facts and identical nature of activity, in
      the scrutiny assessment for the year under consideration the
      Assessing Officer did not accept the details filed by the appellant,
      where an identical and similar activity resulted in loss from trading
      of shares. Without conducting any proper enquiry or without
      bringing any adverse material on record, addition cannot be made
      only on the basis that the appellant declared loss from the trading
      activity of shares. The Assessing Officer did not appreciate and
      examine the details filed by the appellant and record the reasons
      for not accepting the loss from the trading activity of shares shown
      by the appellant. When income from the share trading activity has
      been accepted by the Assessing Officer in the scrutiny of earlier
                                                                        ITA No.3123/Del /2013
                                                                  Assessment Year : 2009-2010
                                                                                                4



      assessment year i.e. 2008-09, it implies that the Assessing Officer
      would have examined the evidence filed by the appellant before
      concluding that the appellant earned profit on sale purchase of
      shares. In my opinion, the same reasoning and view point also
      should have been applied to the scrutiny assessment for the year
      under consideration, unless and until, on the basis of material
      available on record and on the scrutiny and analysis of the same,
      the Assessing Officer gave a finding as to why he is not accepting
      the loss shown by the appellant. From the record, it is seen that the
      appellant is not into speculative share transactions as the shares so
      purchased were delivered and subsequently traded. In view of this
      discussion, for a similar and identical nature of business activity,
      since the appellant suffered a loss, in such activity, the Assessing
      Officer was not justified in taking a different view for the year
      under consideration. In view of the above discussion, I hold that
      the Assessing Officer was not justified in disallowing the loss of
      Rs.51,28,109/- suffered by the appellant on sale of shares.
      Accordingly, the impugned addition of Rs.51,28,109/- made by the
      Assessing Officer is deleted."



5.    The Revenue being aggrieved is in appeal before us. The Ld. D.R.

submitted that there is nothing on record to suggest that the assessee is engaged

in the business of trading of shares. It was stated by the ld. D.R. that as per 3CD

report submitted by the assessee, it had only mentioned aviation services

business as assessee's business activities. Therefore, it was submitted that

CIT(A) has erred in concluding that the loss on account of trading of shares is to

be disallowed, while computing the profit and loss of business. On the other

hand, the ld. A.R. reiterated the submissions made before the Income Tax

Authority and supported the finding of the CIT(A).
                                                                        ITA No.3123/Del /2013
                                                                  Assessment Year : 2009-2010
                                                                                                5



6.    We have heard rival submission and perused the material on record. It is

not disputed that the assessee had started the business of trading in shares from

A.Y. 2007-08. For A.Y. 2007-08, assessee had earned profit of Rs.7,73,143/-

which has been declared as "business income" and had accordingly taxed at

maximum margin rate of tax i.e. at 30%. When the department had accepted the

stand of the assessee in the immediately preceding assessment year namely A.Y.

2008-09 (i.e. assessee had disclosed profits on trading of shares as business

income) the department cannot take an inconsistent stand in the current

assessment year for identical item of income. The CIT(A) in the impugned order

had categorically found that the profits on sale of shares amounting to

Rs.7,73,143/- declared as business income in the A.Y. 2008-09 and the shares of

which the assessee has suffered a loss of Rs.51,28,109/- in the assessment year

under consideration were purchased from the same broker and almost at the

same time. It was also held by the CIT(A) that the business activities for the

A.Ys. 2008-09 and 2009-10 with reference to trading in shares were identical.

This finding of the CIT(A) has not been dispelled by the Revenue by placing on

record any material/documents.

6.1   Before concluding, it is to be mentioned that the ld. D.R. submitted that as

per tax audit report in Form 3CD report, assessee has not mentioned trading in

shares as part of his business activities. Mere non mentioning of all business

carried on by the assessee in Form 3CD may not lead the A.O., forming an
                                                                        ITA No.3123/Del /2013
                                                                  Assessment Year : 2009-2010
                                                                                                6






opinion that the dealing in shares was not amounting to business activity. The

A.O. has to deal with substance of the activities carried on by the assessee and

may not be unduly influence by the procedural technicalities. If this omission of

non mentioning of business activity in tax audit report is to be taken as a grave,

then the A.O. cannot have contrary view by holding "loss from shares" as non

business income, while continuing to tax income from "trading fabric' as

business income when both the activities were not mentioned in Form 3CD

report. For the aforesaid reasons, we see no merits in the contentions raised by

the Revenue. Therefore, we uphold the order of the CIT(A) as correct and in

accordance with law and no interference is called for. It is ordered accordingly.

7.    In the result, the appeal of the Revenue is dismissed.

      The decision was pronounced in the open court on 10th October, 2014.

    Sd/-                                                Sd/-
 (R.S. Syal)                                      (GEORGE GEORGE K.)
Accountant Member                                     Judicial Member

Dated: 10th October, 2014.

Aks/-
Copy forwarded to
1.    Appellant
2.    Respondent
3.    CIT
4.    CIT(A)
5.    DR
                                                 Dy. Registrar, ITAT, New Delhi

 
 
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