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Asstt.Commissioner of Income Tax, Circle-I, Meerut. Vs. M/s K.S. Gupta & Sons, 138-A, Shastri Nagar, Meerut.
December, 08th 2015
I.T.A. No. 6019/D/2012
Assessment year: 2006-07

                    IN THE INCOME TAX APPELLATE TRIBUNAL
                        DELHI BENCH `D' NEW DELHI

     BEFORE SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER
                             AND
         SHRI L.P. SAHU, ACCOUNTANT MEMBER

                               I.T.A.No.6019/Del/2012
                              Assessment Year : 2006-07
Asstt.Commissioner of Income Tax,          vs M/s K.S. Gupta & Sons,
Circle-I, Meerut.                              138-A, Shastri Nagar,
                                                Meerut.
                                                (PAN: AAGHK4832E)
(Appellant)                                    (Respondent)
                            Appellant by: Ms Ritu Sharma, Sr. DR
                           Respondent by : Shri K. Sampath, Advocate
                                    Date of Hearing: 29.10.2015
                            Date of pronouncement: 04.12.2015

                             ORDER

PER CHANDRAMOHAN GARG, J.M.

       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

2.     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.




                                          1
I.T.A. No. 6019/D/2012
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.

4.     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."




                                        2
I.T.A. No. 6019/D/2012
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

6.     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.

7.     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
I.T.A. No. 6019/D/2012
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

8.     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.

9.     Learned counsel of the assessee supported the impugned order and has

drawn our attention to para 5.2 of the first appellate order.


10.    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
I.T.A. No. 6019/D/2012
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."


11.    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

12.    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.).


                                        5
I.T.A. No. 6019/D/2012
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).

14.    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.
      b.       In this way the Assessee might have been busy in the
      business of sale and purchase through out the year .
      c. Apart from this the Assessee was also regularly doing Future
      Trading of the shares.
      d.       From the Income shown by the Assessee under different
      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
I.T.A. No. 6019/D/2012
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." 7 I.T.A. No. 6019/D/2012 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. 16. In the result, appeal of the revenue is dismissed. Order pronounced in the open court on 04.12.2015. Sd/- Sd/- (L.P. SAHU) (C.M. GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 4th December, 2015 `GS' 8 I.T.A. No. 6019/D/2012 Assessment year: 2006-07 Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4.CIT(A) 5. DR Asstt. Registrar 9
 
 
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