SHANKAR NAIR, MUMBAI v. ACIT RG 25(3), MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E MUMBAI BEFORE SHRI R.K. PANDA (AM) AND SMT. ASHA VIJAYARAG HAVAN (JM) ITA NO.1254/MUM/2009 ASSESSMENT YEAR- 2005-06 SHRI SHANKAR NAIR GOKUL GAGAN THAKUR VILLAGE DATTANI PARK KANIVALI (E) MUMBAI-400 101 PAN-AAAPN 7527P VS. THE ACIT RANGE 25(3) PRATYAKSHAKAR BHAVAN BANDRA-KURLA COMPLEX BANDRA MUMBAI-400 050 (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI PHEROZE A DHANBHOORA RESPONDENT BY: SHRI D. SONGATE O R D E R PER ASHA VIJAYARAGHAVAN (JM) THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED A GAINST THE ORDER DATED 15.12.2008 PASSED BY THE LD. CIT(A)-XXV FOR T HE ASSESSMENT YEAR 2005-06. 2. THE ASSESSEE IS AN INDIVIDUAL AND DURING THE YEA R HAS SHOWN BUSINESS INCOME SHORT TERM AND LONG TERM CAPITAL G AIN AND INCOME FROM OTHER SOURCES. THE ASSESSING OFFICER HAD TREATED TH E SHORT TERM CAPITAL GAINS ON SALE OF SHARES AMOUNTING TO RS. 13 77 156/ - AS BUSINESS INCOME. 3. ON FURTHER APPEAL THE LD. CIT(A) UPHELD THE AO S ACTION OF TAXING THE PROFITS FROM TRANSACTION IN SECURITIES AS BUSIN ESS INCOME INSTEAD OF CAPITAL GAINS. ITA NO. 1254/M/09 2 4. AGGRIEVED ASSESSEE PREFERRED AN APPEAL BEFORE U S. THE LD. COUNSEL FOR THE ASSESSEE SHRI PHEROZE A DHANBHOORA MADE APPLICATION FOR ACCEPTING ADDITIONAL EVIDENCE WHICH IS AS FOLLO WS: THE ISSUE INVOLVED IS THE TREATMENT OF PROFIT ON S ALE OF SHARES AS SHORT TERM CAPITAL GAIN OR AS BUSINESS INCOME. THE AO HAS STATED IN THE ASSESSMENT ORDER THAT : THE ASSESSEE HAS BORROWED UNSECURED LOANS ADVANCES AND FUND TAKEN FROM ICICI DIRECT.COM WHICH WAS UTILIZED FOR THE BUSINESS/SHARE TRANSACTIONS. THE AO WITHOUT GIVING ANY FURTHER OPPORTUNITY TO TH E APPELLANT AND THE CIT(A) ALSO DISAGREEING WITH THE SUBMISSION S MADE BY THE APPELLANTS AUTHORISED REPRESENTATIVES LAXM IDAS & CO C.A AND WITHOUT CONTROVERTING THE EXPLANATIONS GIVEN BY THE APPELLANT CAME TO AN ERRONEOUS CONCLUSION THAT THE APPELLANT HAD BORROWED MONEYS FOR THE PURPOSE OF PU RCHASE OF SHARES. ANOTHER ISSUE IS THAT THE AO HAS HELD THAT: ASSESSEE HAS MAINTAINED FULL OFFICE INFRASTRUCTURE FOR THE PURPOSE OF CARRYING OUT OF BUSINESS OF SHARE TR ADING AND HAS DEBITED EXPENSES UNDER VARIOUS HEADS SUCH A S SALARY COMMUNICATION EXPENSES CONVEYANCE BOOKS AND PERIODICALS PRINTING AND STATIONERY COMPUTER AND INTERNET EXPENSES BANK CHARGES PROFESSIONAL FEES WHICH THOUGH INCURRED FOR THE PURPOSES OF SHARE TRA DING ACTIVITIES HAVE BEEN SHOWN AS INCURRED TOWARDS EARN ING OF BANK INTEREST DEBENTURE INTEREST AND COMPENSATI ON. THAT CIT(A) HAS NOT CONSIDERED THE SUBMISSIONS OF T HE APPELLANTS A.R. AND HAS WITHOUT CONTROVERTING THE A.RS SUBMISSIONS MADE A BALD AND ERRONEOUS STATEMENT THA T THE APPELLANT IS RUNNING HIS OPERATIONS FROM A FULL FLE DGED OFFICE. IN ACTUAL FACT THE EXPENSES CLAIMED BY THE APPELL ANT IN THE PROFIT AND LOSS ACCOUNT ARE TOWARDS LETTING OUT COM MERCIAL PREMISES AT NAIR BUSINESS CENTRE JAI SANTOSHI MATA NAGAR BETWEEN ITC GRAND MARATHA & IMPORT WAREHOUSE SAHAR INTERNATIONAL AIRPORT ROAD ANDHERI(E) MUMBAI-400 099 TO HIGH PARRA CONSTRUCTIONS PVT. LTD FOR WHICH THE APP ELLANT RECEIVED BUSINESS CENTRE COMPENSATION INCOME OF RS. 80 000/- IN F.Y. 2004-05 (FOR THE PERIOD 1 ST AUG. 2004 TO ITA NO. 1254/M/09 3 31.3.2005) AND EXPENSES CLAIMED HAD NO RELATION TO THE PURCHASE OR SALE OF THE SHARES BY THE APPELLANT. THE DOCUMENTS NOW SOUGHT TO BE FILED ARE AS UNDER A ND THE REASON FOR FILING SUCH DOCUMENTS ARE AS MENTIONED A LONGSIDE THERETO: 1. CONTRACT NOTE DT. 31.3.2005 ICICI DIRECT.COM SHOWIN G AMOUNT RS. 1 23 452.70 AS DUE TO THEM FOR THE PURCH ASE TRANSACTION DONE AND NOT A LOAN RECEIVED. 2. VOUCHERS SHOWING BUSINESS CENTRE COMPENSATIION INC OME RECEIVED FROM HIGH PARRA CONSTRUCTIONS PVT. LTD. 5. THE LD. COUNSEL FOR THE ASSESSEE FURTHER SUBMITT ED THAT THE DOCUMENTS AS EXPLAINED ABOVE CLEARLY SUPPORT THE CA SE OF THE ASSESSEE AND GO TO THE ROOT OF THE MATTER AND HENCE IN THE I NTEREST OF JUSTICE THE ADDITIONAL EVIDENCE IS TO BE ADMITTED. 6. THE LD. DEPARTMENTAL REPRESENTATIVE HAD NO OBJEC TION FOR THE SAME. WE THEREFORE ADMIT THE ADDITIONAL EVIDENCE R ELYING ON THE DECISIONS IN THE CASE OF RAJNISH INDUSTRIES VS. ITO AND PATNA BENCH OF ITAT IN THE CASE OF ABHAY KUMAR SHROFF. IN THE CASE OF ABHAY KUMAR SHROFF 63 ITD 144 WHEREIN IT HAS BEEN HELD AS FOL LOWS: IT WAS THAT THE ASSESSEE AS A MATTER OF RIGHT COUL D NOT FILE OR FILED THEM BEFORE THE TRIBUNAL AS A MATTER OF COURS E. IF THE ASSESSEE PRODUCES SOME DOCUMENTS AT THE APPROPRIATE TIME THEY HAVE TO BE TAKEN INTO CONSIDERATION SUBJECT OF COURSE TO ALL JUST EXCEPTIONS SUCH AS THEIR RELEVANCE ETC. IF NOT DONE AT THE ASSESSMENT STAGE THE ADMISSION OF DOCUMENTS HA S TO BE GOVERNED BY RULE 46A OF THE I.T. RULES 1962 IF PR ODUCED FOR THE FIRST TIME BEFORE THE FIRST APPELLATE AUTHORITY . HAVING MISSED THE BUS AND THE MATTER HAVING TRAVELLED TO T HE TRIBUNAL THE ADMISSION OF DOCUMENTS IS TO BE GOVER NED BYRULE 29 OF THE APPELLATE TRIBUNAL RULES. HENCE I F THE DOCUMENTS SOUGHT TO BE ADMITTED EVEN AT THE SECOND APPELLATE STAGE ARE OF A NATURE AND QUANTITATIVELY SUCH THAT THEY RENDERASSISTANCE TO THE TRIBUNAL IN PASSING ORDERS OR ARE REQUIRED TO BE ADMITTED FOR ANY OTHER SUBSTANTIAL CAUSE IT ITA NO. 1254/M/09 4 WOULD RATHER BE THE DUTY OF THE TRIBUNAL TO ADMIT T HEM. THEREFORE IF THE RECEIPT OR ADMISSION OF ADDITIONA L EVIDENCE IS VITAL AND ESSENTIAL FOR THE PURPOSE OF CONSIDERATIO N OF THE SUBJECT MATTER OF APPEAL AND TO ARRIVE AT A FINAL A ND ULTIMATE DECISION THE TRIBUNAL IS AMPLY EMPOWERED TO ADMIT ADDITIONAL EVIDENCE UNDER RULE 29. THEREFORE THE TRIBUNAL HAD TO ADMIT ADDITIONAL EVIDENCE PRODUCED BY THE ASSESSEE SINCE THAT WAS VITAL AND ESSENTIAL FOR RENDERING JUSTICE AND IN DE CIDING APPEALS. HOWEVER IT WAS NECESSARY TO GIVE THE DEPA RTMENT A REASONABLE OPPORTUNITY OF REBUTTING IT ACCORDING TO THE PRINCIPLE OF NATURE JUSTICE AND FOR THAT PURPOSE TH E MATTER WAS RESTORED TO THE FILE OF THE AO. FOLLOWING THE RATIO OF THE ABOVE SAID DECISION WE REMIT THE ISSUE BACK TO THE FILE OF THE AO FOR GIVING A REASONABLE OPPORTUNITY TO THE ASSESSEE TO PRODUCE BEFORE THE AO ALL THE EVIDENCES AND THEREAFTER THE AO SHALL DECIDE THE ISSUE IN ACCORDANCE WITH LAW. 7. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THIS 25 TH DAY OF FEBRUARY 2011 SD/- SD/- ( R.K. PANDA) (ASHA VIJAYARAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI DATED 25 TH FEBRUARY 2011 RJ COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT-CONCERNED 4. THE CIT(A)-CONCERNED 5. THE DR E BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR I.T.A.T MUMBAI ITA NO. 1254/M/09 5 DAT E INITIALS 1 DRAFT DICTATED ON: 23 . 02 .201 1 SR. PS/PS 2. DRAFT PLACED BEFORE AUTHOR: 23 .02.2011 ______ SR. PS/PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER: _________ ______ JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER: _________ _____ _ JM/AM 5. APPROVED DRAFT COMES TO THE SR. PS/PS: _________ ______ SR. PS/PS 6. KEPT FOR PRONOUNCEMENT ON: _________ ______ SR. PS/PS 7. FILE SENT TO THE BENCH CLERK: _________ ______ SR. PS/PS 8. 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK: DATE ON WHICH FILE GOES TO AR _________ ______ 10 . DATE OF DISPATCH OF ORDER: _________ ______