Palanquin Investments Pvt. Ltd., CHENNAI v. DCIT, CHENNAI

CO 176/CHNY/2009 | 2004-2005
Pronouncement Date: 13-08-2010 | Result: Dismissed

Appeal Details

RSA Number 17621723 RSA 2009
Assessee PAN AAACP4289P
Bench Chennai
Appeal Number CO 176/CHNY/2009
Duration Of Justice 9 month(s) 7 day(s)
Appellant Palanquin Investments Pvt. Ltd., CHENNAI
Respondent DCIT, CHENNAI
Appeal Type Cross Objection
Pronouncement Date 13-08-2010
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted C
Tribunal Order Date 13-08-2010
Date Of Final Hearing 05-08-2010
Next Hearing Date 05-08-2010
Assessment Year 2004-2005
Appeal Filed On 06-11-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL BENCH C CHENNAI BEFORE SHRI ABRAHAM P. GEORGE ACCOUNTANT M EMBER AND SHRI GEORGE MATHAN JUDICIAL MEMBER ..... I.T.A. NO. 1660 / MDS/2009 ASSESSMENT YEAR : 2004-05 THE DY. COMMISSIONER OF INCOME TAX COMPANY CIRCLE V(1) CHENNAI (APPELLANT) V. M/S PALANQUIN INVESTMENTS P. LTD NEW NO. 12 [OLD NO. 71 3 RD MAIN ROAD KASTURBA NAGAR ADYAR CHENNAI 600 020. PAN : AAACP 4289 P (RESPONDENT) C.O. NO. 176 / MDS/2009 (IN I.T.A. NO. 1660 / MDS/2009) ) ASSESSMENT YEAR : 2004-05 M/S PALANQUIN INVESTMENTS P. LTD NEW NO. 12 [OLD NO. 71 3 RD MAIN ROAD KASTURBA NAGAR ADYAR CHENNAI 600 020. PAN : AAACP 4289 P (CROSS OBJECTOR) V. THE DY. COMMISSIONER OF INCOME TAX COMPANY CIRCLE V(1) CHENNAI (RESPONDENT) REVENUE BY : SHRI B. SRINIVAS ASSESSEE BY : SHRI B. RAMAKRISHNAN I.T.A. NO. 1660/MDS/09 C.O. NO. 176/MDS/09 2 O R D E R PER ABRAHAM P. GEORGE ACCOUNTANT MEMBER : THIS APPEAL AND CROSS OBJECTION OF THE REVENUE AND ASSESSEE RESPECTIVELY ARE DIRECTED AGAINST THE ORD ER OF THE LD. CIT(A)-V CHENNAI AND RELATES TO THE ASSESSMENT YEA R 2004-05. 2. GRIEVANCE OF THE REVENUE IS THAT THE LD. CIT(A) HELD THE PROVISIONS OF SECTION 94(8) OF THE INCOME-TAX ACT 1961 [IN SHORT THE ACT] AS NOT APPLICABLE TO THE ASSESSEE DESPITE DECI SION OF THE CO- ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF ACIT VS. M/S MARINE CONTAINER SERVICES [SOUTH] PVT. LTD. IN ITA 384/MDS /2008 DATED 18.7.2008. 3. SHORT FACTS APROPOS ARE THAT ASSESSEE HAD FILED RETURN OF INCOME FOR THE IMPUGNED ASSESSMENT YEAR DECLARING T OTAL INCOME OF RS. 9 10 880/-. BUSINESS OF THE ASSESSEE WAS INVES TMENT AND TRADING IN SHARES. THE RETURNED INCOME COMPRISED OF LONG T ERM CAPITAL GAINS RS. 3 67 213/- SHORT TERM CAPITAL GAINS RS. 6 27 049/- AND I.T.A. NO. 1660/MDS/09 C.O. NO. 176/MDS/09 3 INCOME FROM OTHER SOURCES RS. 1 017/-. SHORT TERM CAPITAL GAIN WAS ARRIVED AT AFTER SETTING OFF SHORT TERM CAPITAL LOS S OF RS. 34 30 444/. ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT ON 1 8.10.2006 ACCEPTING THE RETURNED INCOME. 4. ON 3.3.2008 A NOTICE WAS ISSUED U/S 154 OF THE ACT WHEREIN IT WAS MENTIONED THAT CLAIM OF SHORT TERM CAPITAL LOSS WAS NOT ADMISSIBLE. AT THIS JUNCTURE IT IS NECESSARY TO D WELL UPON THE FACTS RELATING TO SHORT TERM CAPITAL LOSS. ASSESSEE HAD ON 22.2.2004 PURCHASED 462474.282 UNITS OF CHOLA FREEDOM FUND FO R A PRICE OF RS. 85 LAKHS. ON 26.2.2004 IT RECEIVED BONUS UNITS NUMBERING 3 69 979.434. ON 2.3.2004 4 20 603.713 UNITS WERE REDEEMED FOR RS. 43 LAKHS. PROPORTIONATE COST OF THE UNITS REDE EMED BY ASSESSEE WAS WORKED OUT BY ASSESSEE AS RS. 77 30 444/-. AF TER SETTING OFF THE CONSIDERATION OF RS. 43 LAKHS RECEIVED ON REDEM PTION A NET LOSS OF RS. 34 30 444/- RESULTED. THIS WAS CLAIMED BY ASSESSEE AS SHORT TERM CAPITAL LOSS. ASSESSING OFFICER WAS OF THE OP INION THAT THE REDEEMED UNITS COULD BE ORIGINAL UNITS OR BONUS UNI TS. HOWEVER ACCORDING TO HIM EVEN AFTER REDEMPTION 4 11 859.9 99 UNITS WERE AVAILABLE WITH ASSESSEE. THEREFORE IN HIS OPINION LOSS CLAIMED BY I.T.A. NO. 1660/MDS/09 C.O. NO. 176/MDS/09 4 ASSESSEE AS SHORT TERM CAPITAL LOSS WAS NOTIONAL AN D NOT ACTUAL. HE RELIED ON SECTIONS 94(1) 94(4) AND 94(7) OF THE AC T FOR COMING TO A CONCLUSION THAT SUCH LOSS HAD TO BE IGNORED. IN HI S OPINION THIS WAS A MISTAKE APPARENT FROM RECORD APPEARING IN THE ASS ESSMENT ORDER. THOUGH THE ASSESSEE CLARIFIED THAT ITS SHORT TERM C APITAL LOSS WAS CORRECTLY WORKED OUT AND SECTION 94(8) OF THE ACT WHICH APPLIED TO BONUS UNITS WAS NOT APPLICABLE FOR THE IMPUGNED ASS ESSMENT YEAR BUT ONLY FROM THE NEXT ASSESSMENT YEAR ASSESSING O FFICER DID NOT ACCEPT SUCH CONTENTION AND DENIED ITS CLAIM OF SHOR T TERM CAPITAL LOSS. 5. BEFORE THE LD. CIT(A) ARGUMENT OF THE ASSESSEE WAS THAT ASSESSING OFFICER HAD ERRONEOUSLY PRESUMED THAT THE REDEEMED UNITS TO BE PARTLY OUT OF PURCHASED UNITS AND PARTLY OUT OF BONUS UNITS. ACCORDING TO ASSESSEE SECTION 94(1) OF THE ACT REL ATED TO SALE AND TRANSFER OF SECURITIES WHICH WERE SUBSEQUENTLY BOUG HT BACK BY ASSESSEE AND HERE THERE WAS NO SALE OR SUBSEQUENT B UY BACK. REGARDING SECTION 94(4) RELIED ON BY THE ASSESSING OFFICER ARGUMENT OF THE ASSESSEE WAS THAT IT RELATED TO PURCHASES AN D SUBSEQUENT SALE OF SECURITIES WHERE INTEREST AND/OR DIVIDEND WAS RE CEIVED BY I.T.A. NO. 1660/MDS/09 C.O. NO. 176/MDS/09 5 ASSESSEE. ACCORDING TO ASSESSEE SECTION 94(4) OF THE ACT DID NOT BRING WITHIN ITS AMBIT ANY BONUS UNITS. IT WAS FUR THER ARGUED BY ASSESSEE THAT SECTION 94(8) HAD COME INTO OPERATION ONLY FROM ASSESSMENT YEAR 2005-06 AND THEREFORE IT COULD NOT BE RESORTED FOR MAKING ANY DISALLOWANCE FOR THE IMPUGNED ASSESSMENT YEAR. LD. CIT(A) APPRECIATED THESE CONTENTIONS AND HELD THAT RECTIFICATION MADE BY THE ASSESSING OFFICER WAS NOT IN ORDER. HE THEREFORE QUASHED THE RECTIFICATION. 6. NOW BEFORE US THE LD. D.R. SUBMITTED THAT A CO- ORDINATE BENCH OF THIS TRIBUNAL HAD IN THE CASE OF M/S MARIN E CONTAINER SERVICES [SOUTH] PVT. LTD. [SUPRA] HELD THAT SECTIO N 94(8) OF THE ACT THOUGH INTRODUCED W.E.F. 1.4.2005 HAD RETROSPECTIVE OPERATION. THEREFORE ACCORDING TO HIM ASSESSEE HAVING INDULG ED IN BONUS UNIT STRIPPING DIRECTLY CAME WITHIN THE AMBIT OF SECTIO N 94(8) OF THE ACT AND THERE WAS VISIBLE MISTAKE IN THE ASSESSMEN T WHICH COULD BE RECTIFIED U/S 154 OF THE ACT. 7. PER CONTRA THE LD. D.R. SUBMITTED THAT THE HON' BLE APEX COURT IN THE CASE OF CIT VS. M/S WALFORT SHARE AND STOCK BROKERS PVT. LTD. I.T.A. NO. 1660/MDS/09 C.O. NO. 176/MDS/09 6 233 CTR 42 HAD CLEARLY HELD SECTION 94(7) WHICH WAS INSERTED W.E.F. 1.4.2002 TO HAVE ONLY PROSPECTIVE EFFECT. THEREFORE ACCORDING TO HIM SIMILAR INTERPRETATION WAS CALLED FOR WITH REG ARD TO SECTION 94(8) OF THE ACT ALSO AND THEREFORE ASSESSING OFFI CER COULD NOT HAVE CONSIDERED SUCH SECTION TO HAVE RETROSPECTIVE EFFEC T WHEN THE LEGISLATURE HAD SPECIFICALLY GIVEN THE DATE OF EFFE CT AS 1.4.2005. IN ANY CASE ACCORDING TO HIM THIS WAS NOT A MISTAKE APPARENT ON RECORD AND WAS A DEBATABLE ISSUE SINCE IT HAD MANY FACETS OF POSSIBLE ARGUMENTS WHICH COULD NOT BE MET WITH IN AN ORDER U/S 154 OF THE ACT. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS. FIRST AND FOREMOST NECESSITY IS TO LOOK AT THE ORDE R DATED 16.5.2006 OF THE ASSESSING OFFICER DATED 16.5.2008 PASSED U/S 154 OF THE ACT WHICH IS THE SUBJECT MATTER OF THIS APPEAL. ASSESS ING OFFICER HIMSELF IS NOT SURE WHETHER THE REDEEMED UNITS WERE ORIGINA L OR BONUS UNITS. ASSESSING OFFICER HAS PRESUMED TWO THINGS. ONE IS THAT SECTION 94(8) OF THE ACT WHICH CAME INTO STATUTE TH ROUGH FINANCE [NO. 2] ACT 2004 W.E.F. 1.4.2005 HAD RETROSPECTIVE EFFECT. AS PER THE LD. D.R. THE CO-ORDINATE BENCH OF THIS TRIBUNAL HAD HELD IN THE I.T.A. NO. 1660/MDS/09 C.O. NO. 176/MDS/09 7 CASE OF M/S MARINE CONTAINER SERVICES [SOUTH] PVT. LTD. THAT SECTION 94(8) OF THE ACT OPERATED RESTROSPECTIVELY. WITHOU T ENTERING INTO THE CONTROVERSY AS TO WHETHER THIS WAS RETROSPECTIV E OR NOT WE CAN HAVE A LOOK AT THIS SUB-SECTION WHICH IS REPRODUCED HEREUNDER: WHERE (A) ANY PERSON BUYS OR ACQUIRES ANY UNITS WITHIN A PE RIOD OF THREE MONTHS PRIOR TO THE RECORD DATE; (B) SUCH PERSON IS ALLOTTED ADDITIONAL UNITS WITHOUT AN Y PAYMENT ON THE BASIS OF HOLDING OF SUCH UNITS ON SU CH DATE; (C) SUCH PERSON SELLS OR TRANSFERS ALL OR ANY OF THE UNITS REFERRED TO IN CLAUSE (A) WITHIN A PERIOD OF NINE M ONTHS AFTER SUCH DATE WHILE CONTINUING TO HOLD ALL OR AN Y OF THE ADDITIONAL UNITS REFERRED TO IN CLAUSE (B) THEN THE LOSS IF ANY ARISING TO HIM ON ACCOUNT OF SUCH PURCHASE AND SALE OF ALL OR ANY OF SUCH UNITS SHALL BE IGNORED FOR THE PURPOSES OF COMPUTING HIS INCOME CHARGEABLE TO TAX AND NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER I.T.A. NO. 1660/MDS/09 C.O. NO. 176/MDS/09 8 PROVISION OF THIS ACT THE AMOUNT OF LOSS SO IGNORE D SHALL BE DEEMED TO BE THE COST OF PURCHASE OR ACQUISITION O F SUCH ADDITIONAL UNITS REFERRED TO IN CLAUSE (B) AS ARE H ELD BY HIM ON THE DATE OF SUCH SALE OR TRANSFER. SUB-CLAUSE (C) IS CLEAR IN THAT A PERSON HAS TO SEL L OR TRANSFER UNITS REFERRED IN CLAUSE (A). THIS IN OTHER WORDS MEAN U NITS BOUGHT OR ACQUIRED WITHIN A PERIOD OF THREE MONTHS PRIOR TO T HE RECORD DATE. HERE THE ASSESSING OFFICER HIMSELF IS NOT SURE WHET HER THE UNITS SOLD BY ASSESSEE WERE ORIGINAL OR BONUS UNITS. ORDER OF THE ASSESSING OFFICER IS DATED 16.5.2008 AND CASE OF M/S MARINE C ONTAINER SERVICES [SOUTH] PVT. LTD. [SUPRA] RELIED ON BY THE LD. D.R. WAS DECIDED BY THE CO-ORDINATE BENCH ONLY ON 18.7.2008. SO WITHOUT DOUBT WHEN THE ASSESSING OFFICER WAS SEIZED OF THE MATTER WHETHER SECTION 94(8) OF THE ACT HAD RETROSPECTIVE OPERATION OR NOT WAS WITHOUT DOUBT A DEBATABLE ONE. IN OUR OPINION RESORT TO SECTION 154 COULD NOT BE DONE WHERE AN ISSUE IS DEB ATABLE. THE SAID SECTION IS ONLY FOR RECTIFICATION OF A MISTAKE APPARENT ON RECORD. WHAT IS MISTAKE APPARENT ON RECORD HAS TIM E AND AGAIN BEEN CLARIFIED BY THE HON'BLE APEX COURT THROUGH VA RIOUS DECISIONS. I.T.A. NO. 1660/MDS/09 C.O. NO. 176/MDS/09 9 IT HAS TO BE A VERY PATENT MISTAKE STRIKING THE EY E. IT SHOULD NOT BE ONE WHICH HAD TO BE ESTABLISHED BY A LONG DEBATE OR ARGUMENT. IN OUR OPINION ASSESSING OFFICER HAD RESORTED TO SECT ION 154 PROCEEDINGS ON AN ISSUE WHICH WAS NOT AMENABLE TO S UCH PROCEEDINGS. LD. CIT(A) HAD THEREFORE RIGHTLY QU ASHED THE ORDER OF THE ASSESSING OFFICER U/S 154 OF THE ACT. NO IN TERFERENCE IS CALLED FOR. 9. IN THE RESULT APPEAL OF THE REVENUE STANDS DISMI SSED. 10. NOW WE TAKE UP THE CROSS OBJECTION FILED BY THE ASSESSEE. SINE WE HAVE ALREADY HELD THAT RECTIFICATORY PROCEE DINGS U/S 154 OF THE ACT COULD NOT HAVE BEEN RESORTED TO IN THE FACT S AND CIRCUMSTANCES OF THE CASE THE CROSS OBJECTION HAS BECOME INFRUCTUOUS AND STANDS DISMISSED. I.T.A. NO. 1660/MDS/09 C.O. NO. 176/MDS/09 10 11. TO SUMMARIZE THE RESULT BOTH APPEAL OF THE REV ENUE AS WELL AS THE CROSS OBJECTION OF THE ASSESSEE STAND DISMISSED . THE ORDER WAS PRONOUNCED IN THE COURT ON 13.08.201 0. SD/- SD/- (GEORGE MATHAN) (ABRAHAM P . GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI DATED THE 13 TH AUGUST 2010. VL COPY TO: (1) ASSESSEE (2) ASSESSING OFFICER (3) CIT(A)-IV CHENNAI-34 (4) CIT-IX CHENNAI-34. (5) D.R. (6) GUARD FILE