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.
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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."
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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
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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
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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.).
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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
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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."
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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'
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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
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