KETAN JETHALAL SANGHOI, MUMBAI v. ITO WD 4(1)(2), MUMBAI

ITA 455/MUM/2009 | 2004-2005
Pronouncement Date: 22-12-2010 | Result: Allowed

Appeal Details

RSA Number 45519914 RSA 2009
Assessee PAN AAHPS4976Q
Bench Mumbai
Appeal Number ITA 455/MUM/2009
Duration Of Justice 1 year(s) 11 month(s) 2 day(s)
Appellant KETAN JETHALAL SANGHOI, MUMBAI
Respondent ITO WD 4(1)(2), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 22-12-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted A
Tribunal Order Date 22-12-2010
Date Of Final Hearing 11-05-2010
Next Hearing Date 11-05-2010
Assessment Year 2004-2005
Appeal Filed On 20-01-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A : MUMBAI BEFORE SHRI D.K. AGARWAL (JM) AND SHRI RAJENDRA SINGH (AM) ITA NO. 455/MUM/2009 ASSESSMENT YEAR : 2004-05 SHRI KETAN JETHALAL SANGHOI 1/12 BINDRA NIWAS 83 J.P. ROAD ANDHERI (W) MUMBAI-400 058. ..( APPELLANT ) P.A. NO. (AAHPS 4976 Q) VS. INCOME TAX OFFICER WARD 4(1)(2) AAYAKAR BHAVAN M.K. ROAD CHURCHGATE MUMBAI-400 020. ..( RESPONDENT ) APPELLANT BY : SHRI PRADEEP SAGAR RESPONDENT BY : SHRI SU MEET KUMAR O R D E R PER D.K. AGARWAL (JM). THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER DATED 26.11.2008 PASSED BY THE LD. CIT(A) FOR T HE ASSESSMENT YEAR 2004-05. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE ASSESSEE AN INDIVIDUAL DERIVES INCOME AS A SHARE SUB-BROKER FILED RETURN DECLARING TOTAL INCOME OF RS.1 64 004/-. DURING THE COURSE OF ASSE SSMENT PROCEEDING IT WAS OBSERVED BY THE ASSESSING OFFICER THAT T HE ASSESSEE IN THE P&L ACCOUNT HAS DEBITED AN AMOUNT OF RS.4 82 985 /- ON ACCOUNT OF BAD DEBTS. THE ASSESSEE WAS ASKED TO FURNISH ALL THE D ETAILS RELATING TO SUCH BAD DEBTS AND JUSTIFY THE CLAIM. IN RE SPONSE THE ITA NO.455/M/09 A.Y:04-05 2 ASSESSEE FURNISHED THE COMPOSITION OF BAD DEBTS NAMELY CHET NA SHAH RS.1 56 946/- AND RAJU SHAH RS.3 26 038/-. THE ASSESSEE HAS ALSO FILED COPY OF LEDGER ACCOUNTS OF THE ABOVE DEBTORS FOR T HE PERIOD 1.4.2000 TO 31.3.2004. THE ASSESSEE ALSO FURNISHED THE D ETAILS OF BROKERAGE EARNED DURING FINANCIAL YEAR 2000-01 FRO M THE TRANSACTION IN SHARES MADE WITH THE ABOVE PARTIES I.E. CHETNA SHAH RS.80 524/- AND RAJU SHAH RS.20 415/-. THE ASSESSEE FURTHER SUBMITT ED THAT THE TOTAL BROKERAGE EARNED ON THE TRANSACTIONS WITH THE A BOVE PARTIES WAS OFFERED FOR TAXATION IN FINANCIAL YEAR 2000-01 DURIN G WHICH THE INCOME WAS EARNED. IT WAS FURTHER SUBMITTED BY THE ASSESSEE THAT WITHOUT PREJUDICE TO THE CLAIM OF BAD DEBTS THE SAME MAY BE ALL OWED AS BUSINESS LOSS U/S.28 OF THE ACT. HOWEVER THE ASSESSING OFFICER AFTER CONSIDERING THE ASSESSEE'S SUBMISSION HAS ALLOWED THE BAD DEB TS OF RS.1 00 939/- (RS.80524/- + RS.20415/-) AND DID NOT A LLOW THE BALANCE AMOUNT OF RS.3 82 046/- AS LOSS ON THE GROUND THAT THE ASSESSEE HAS ENTERED INTO TRANSACTION OF SHARES WITH CHETNA SHAH AND RAJU SHAH WITHOUT COLLECTING MARGIN MONEY WHICH RESULTE D IN RESULTANT BAD DEBTS AND THE ASSESSEE HAS ALSO VIOLATED THE PROVISION S OF SEBI. THEREFORE HE DISALLOWED BAD DEBTS/BUSINESS LOSS RS.3 82 046/- AND COMPLETED THE ASSESSMENT AT AN INCOME OF RS.5 46 040/- VI DE ORDER DATED 30.6.2006 PASSED U/S.143(3) OF THE ACT. ON AP PEAL THE LD. CIT(A) WHILE HOLDING THAT THE APPELLANT HAS NOT VIOL ATED THE PROVISIONS OF SEBI HENCE EXPLANATION TO SEC.37 IS NOT APPLICABLE AGREED WITH THE ASSESSING OFFICERS FINDINGS AND CONFIRMED THE DISALLOWANCE OF RS.3 82 046/-. 3. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A) T HE ASSESSEE IS IN APPEAL BEFORE US CHALLENGING IN ALL THE GROUNDS THE SU STENANCE OF DISALLOWANCE OF RS.3 82 046/- MADE U/S.36(2)/28 OF THE ACT. ITA NO.455/M/09 A.Y:04-05 3 4. AT THE TIME OF HEARING BOTH PARTIES HAVE AGREED THAT THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISI ON OF THE SPECIAL BENCH OF THE TRIBUNAL IN DCIT VS. SHREYAS S. MO RAKHIA IN ITA NO.3374/MUM/2004 FOR ASSESSMENT YEAR 1998-99 DATED 16.7 .2010. THE LD. COUNSEL FOR THE ASSESSEE HAS ALSO PLACED ON RECORD T HE COPY OF THE SAID ORDER OF THE TRIBUNAL. 5. HAVING CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSING THE MATERIAL AVAILABLE ON RECORD WE FIND THAT THERE IS NO DISPUTE THAT THE ASSESSEE HAS SHOWN THE AMOUNT OF BROKERA GE ARISING FROM SUCH TRANSACTION OF SHARES AS INCOME. 6. IN SHREYAS S. MORAKHIA SINCE REPORTED IN (2010) 5 ITR (TRIB.) 1 (MUMBAI) [SB] IT HAS BEEN HELD AT PLACITUM 33 AS UNDE R : 33. KEEPING IN VIEW ALL THE FACTS OF THE CASE AND THE LEGAL POSITION EMANATING FROM THE VARIOUS JUDICIAL PRONOUNCEMENTS AS DISCUSSED ABOVE WE ARE OF THE VI EW THAT THE AMOUNT RECEIVABLE BY THE ASSESSEE WHO IS A SHARE BROKER FROM HIS CLIENTS AGAINST THE TRANSACT IONS OF PURCHASE OF SHARES ON THEIR BEHALF CONSTITUTES DEBT WHICH IS A TRADING DEBT. THE BROKERAGE/COMMISSION INCOME ARISING FROM SUCH TRANSACTIONS VERY MUCH FORMS PART OF THE SAID DEBT AND WHEN THE AMOUNT OF SUCH BROKERAGE/COMMISSION HAS BEEN TAKEN INTO ACCOUNT IN COMPUTATION OF INCOME OF THE ASSESSEE OF THE RELEVA NT PREVIOUS YEAR OR ANY EARLIER YEAR IT SATISFIES THE CONDITION STIPULATED IN SECTION 36(2)(I) AND THE ASSESSEE IS ENTITLED TO DEDUCTION U/S 36(1)(VII) BY WAY OF BAD DEBTS AFT ER HAVING WRITTEN OFF THE SAID DEBTS FROM HIS BOOKS OF ACCOUNT AS IRRECOVERABLE. WE THEREFORE ANSWER TH E QUESTION REFERRED TO THIS SPECIAL BENCH IN THE AFFI RMATIVE THAT IS IN FAVOUR OF THE ASSESSEE. IN THE ABSENCE OF ANY DISTINGUISHING FEATURE BROUGHT O N RECORD BY THE REVENUE WE RESPECTFULLY FOLLOWING THE ABOVE DECISION H OLD THAT THE ASSESSEE IS ENTITLED TO THE DEDUCTION OF RS.3 82 046/- U/S. 36(1)(VII) BY ITA NO.455/M/09 A.Y:04-05 4 WAY OF BAD DEBTS AND ACCORDINGLY THE GROUNDS TAKEN BY THE ASSESSEE ARE ALLOWED. 7. IN THE RESULT THE ASSESSEE'S APPEAL STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 22.12.2010. SD/- SD/- (RAJENDRA SINGH) ( D.K. AGARWAL ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI DATED: 22.12.2010. JV. COPY TO: THE APPELLANT THE RESPONDENT THE CIT CONCERNED MUMBAI THE CIT(A) CONCERNED MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR ITAT MUMBAI.