MANISH P. GANDHI, MUMBAI v. ACIT 25(3), MUMBAI

ITA 5290/MUM/2008 | 2005-2006
Pronouncement Date: 29-07-2011 | Result: Partly Allowed

Appeal Details

RSA Number 529019914 RSA 2008
Assessee PAN AACPG3600N
Bench Mumbai
Appeal Number ITA 5290/MUM/2008
Duration Of Justice 2 year(s) 11 month(s) 7 day(s)
Appellant MANISH P. GANDHI, MUMBAI
Respondent ACIT 25(3), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 29-07-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted B
Tribunal Order Date 29-07-2011
Date Of Final Hearing 26-07-2011
Next Hearing Date 26-07-2011
Assessment Year 2005-2006
Appeal Filed On 21-08-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH B MUMBAI BEFORE SHRI R.S.SYAL(A.M) AND SHRI N.V.VASUDEVA N(J.M) ITA NO.5290/MUM/2008(A.Y. 2005-06) SHRI MANISH P. GANDHI 2302 OBEROI PARK TOWER-A NEAR SAMTA NAGAR KANIVALI (E) MUMBAI 400 101. PAN: AACPG 3600N (APPELLANT) VS. THE ACIT 25(3) C-11 BLDG. ROOM NO.308 PRATYAKSH KAR BHAVAN BANDRA KURLA COMPLEX BANDRA (E) MUMBAI 51. (RESPONDENT) ITA NO.6430/MUM/2009(A.Y.2006-07) THE ACIT 25(3) C-11 BLDG. ROOM NO.308 PRATYAKSH KAR BHAVAN BANDRA KURLA COMPLEX BANDRA (E) MUMBAI 51. (APPELLANT) VS. SHRI MANISH P. GANDHI 2302 OBEROI PARK TOWER-A NEAR SAMTA NAGAR KANIVALI (E) MUMBAI 400 101. PAN: AACPG 3600N (RESPONDENT) ASSESSEE BY : S/SHRI K.SHIVRAM / SANJAY PARIKH REVENUE BY : SHRI ABANI KANTA NAYA K DATE OF HEARING : 26/07/2011 DATE OF PRONOUNCEMENT : ____________ ORDER PER N.V.VASUDEVAN J.M ITA NO.5290/M/08 IS AN APPEAL BY THE ASSESSEE AGAI NST THE ORDER DATED 11/6/2008 OF CIT(A) 25 MUMBAI RELATING TO ASSESSMENT YEAR 2005-06 WHILE ITA NO.6430/M/09 IS AN APPEAL BY THE REVENUE AGAINST THE ORDER DATED 29/9/2009 OF CIT(A)-35 MUMBAI RELATIN G TO ASSESSMENT YEAR ITA NO.5290/MUM/2008(A.Y. 2005-06) ITA NO.6430/MUM/2009(A.Y.2006-07) 2 2006-07. WE SHALL FIRST TAKE UP FOR CONSIDERATION APPEAL BY THE ASSESSEE FOR ASSESSMENT YEAR 2005-06 IN ITA NO.5290/M/08. 2. THE ASSESSEE IN THIS CASE IS AN INDIVIDUAL. THE ASSESSEE FILED RETURN OF INCOME FOR ASSESSMENT YEAR 2005-06 WHEREIN HE DECL ARED INCOME FROM LONG TERM CAPITAL GAIN(LONG TERM CAPITAL GAINS) AND SHOR T TERM CAPITAL GAIN(STCG) AS FOLLOWS: II. INCOME FROM CAPITAL GAINS LONG TERM CAPITAL GAIN (FROM 1/4/2004 TO 30/9/2004) 1 850 732 LESS:EXEMPT U/S.10(36) BEING (BSE 500 SCRIP) 1 850 732 NIL LONG TERM CAPITAL GAIN (FROM 1/4/2004 TO 31/3/2005) 2 079 230 LESS: EXEMPT U/S.112 2 079 230 NIL SHORT TERM CAPITAL GAIN (FROM 1/4/2004 TO 30/9/2004) 1.119.956 SHORT TERM CAPITAL GAIN (FROM 1/10/2004 TO 31/3/2005) 3 857 123 4 977 080 3. THE QUESTION BEFORE THE AO WAS AS TO WHETHER THE INCOME DECLARED BY THE ASSESSEE UNDER THE HEAD INCOME FROM CAPITAL GAI N HAS TO BE ASSESSED AS INCOME FROM BUSINESS OR INCOME FROM CAPITAL GAIN. WHILE DECIDING THIS ISSUE THE AO HAS REFERRED TO THE TRANSACTION AND THE PROF IT MADE BY THE ASSESSEE AS FOLLOWS: IN THE RETURN OF INCOME ASSESSEE HAS DECLARED INCO ME FROM BUSINESS AND PROFESSION AT RS.7 47 743/- INCOME FROM CAPITA L GAINS UPTO 30.9.04 RS. 13 66 398/- SHORT TERM CAPITAL GAINS AF TER 1.10.2004 AT RS.17 92 538/- AND INCOME FROM OTHER SOURCES AT RS .36 014/-. ITA NO.5290/MUM/2008(A.Y. 2005-06) ITA NO.6430/MUM/2009(A.Y.2006-07) 3 IN THE INCOME AND EXPENDITURE ACCOUNT FILED ALONG W ITH THE RETURN OF INCOME ASSESSEE HAS CREDITED THE FOLLOWING AMOUNTS: PROFITS FROM TRADING IN SHARES (EQUITY) 57 903.74 LOSS FROM TRADING IN SHARES (F&O) - 9 21 146.78 SHORT TERM CAPITAL GAINS (1/4/2004 TO 30/9/2004) 13 66 398 SHORT TERM CAPITAL GAINS (1/10/2004 TO 31/3/2005) 17 92 538 LONG TERM CAPITAL GAINS UPTO 30/9/04 3 752 SAVING BANK INTEREST 566.85 DIVIDEND ON SHARES 74 325/- BANK FIXED DEPOSIT INTEREST 2196/- PPF INTEREST 32 163 ICICI BOND INTEREST 1 751/- TOTAL 4. THE FURTHER DESCRIPTION OF THE TRANSACTION IN T HE ORDER OF ASSESSMENT IS AS FOLLOWS: IN ADDITION TO THIS AS SHOWN IN THE STATEMENT OF S HORT TERM CAPITAL GAINS FROM 1/4/04 TO 30/9/04 ASSESSEE HAS PURCHASED 104311 NUMBER OF SHARES FOR RS.2 70 43 150.39 AND SOLD THE SAME FOR RS. 2 84 09 548.64/- THEREBY EARNING A PROFIT OF RS. 1 3 66 398.25. THESE SCRIPS PERTAINED TO 34 COMPANIES AND TOTAL NO. OF T RANSACTIONS DONE BY THE ASSESSEE WERE 56. FURTHER AS SHOWN IN THE STA TEMENT OF SHORT TERM CAPITAL GAINS FROM 1/10/04 TO 31/3/05 ASSESSEE HAS PURCHASED 447383 NUMBER OF SHARES FOR RS. 3 28 07 877.21/- AN D SOLD THE SAME FOR RS. 3 46 00 415.54/- THEREBY EARNING A PROFIT O F RS. 17 92 538.33. THESE SCRIPS PERTAINED TO 82 COMPANIES AND TOTAL NO . OF TRANSACTIONS DONE BY THE ASSESSEE WERE 173. 5. AS CAN BE SEEN FROM THE ABOVE DETAILS CULLED OUT BY THE AO IN THE ORDER OF ASSESSMENT THE DETAILS DO NOT TALLY WITH T HE STATEMENT OF TOTAL INCOME UNDER THE HEAD INCOME FROM CAPITAL GAINS FI LED BY THE ASSESSEE WHICH WE HAVE REFERRED TO IN THE EARLIER PART OF TH IS ORDER. THE TRANSACTIONS CARRIED OUT BY THE ASSESSEE DURING THE PREVIOUS YEA R WHICH WERE FILED ITA NO.5290/MUM/2008(A.Y. 2005-06) ITA NO.6430/MUM/2009(A.Y.2006-07) 4 ALONGWITH THE COMPUTATION OF THE TOTAL INCOME IS AT PAGE 108 & 109 OF THE PAPER BOOK. A PERUSAL OF THE PAPER BOOK FILED IN I TA NO.6430/M/09 SHOWS THAT THE ASSESSEE HAD DEALT IN SHARES OF ABOUT 35 C OMPANIES. THE TOTAL NUMBER OF SCRIPS PURCHASED BY THE ASSESSEE WAS 9571 80 FOR A SUM OF RS. 6 39 45 234/-. THE SAID SCRIPS WERE SOLD BY THE AS SESSEE FOR A SUM OF RS. 6 79 20 977/- RESULTING IN A GAIN OF RS. 38 57 123/ -. THIS IS THE STATEMENT OF STCG FROM 1/10/2004 TO 31/3/2005 FILED BY THE AS SESSEE. SIMILARLY THE LONG TERM CAPITAL GAINS FROM 1/4/2004 TO 30/9/2004 WAS IN RESPECT OF THREE COMPANIES IN WHICH TOTAL PURCHASE WAS 16485 SHARES OF THE VALUE OF RS. 31 75 760/- WHICH WERE SOLD FOR RS. 50 38 355/- RES ULTING IN NET LONG TERM CAPITAL GAINS OF RS. 18 50 732/-. THE STATEMENT OF LONG TERM CAPITAL GAINS FROM 1/10/2004 TO 31/3/2005 SHOWS THAT THE ASSESSEE PURCHASED SHARES OF SIX COMPANIES TOTALING 27200 FOR A PRICE OF RS. 11 79 152/-. THEY WERE SOLD FOR A SUM OF RS. 32 66 290/- RESULTING IN A G AIN OF RS. 20 79 230/-. IT CAN THUS BE SEEN THAT THE NUMBER OF TRANSACTIONS T HE QUANTITY OF PURCHASES AND SALES AS WELL AS VALUE AS DECLARED BY THE ASSES SEE AND AS CONSIDERED BY THE AO ARE TOTALLY DIFFERENT. 6. THE AO WAS OF THE VIEW THAT THE ASSESSEE WAS CAR RYING ON BUSINESS OF TRADING IN SHARES AND IN THIS REGARD RELIED ON SEVE RAL JUDICIAL PRONOUNCEMENTS BESIDES CIRCULAR OF THE CBDT NAMELY CIRCULAR NO.4/2007 DATED 15/6/2007. IN THE LIGHT OF THE PRINCIPLES EM ERGING FROM THOSE DECISIONS THE AO CONCLUDED THAT THE INCOME RETURNE D BY THE ASSESSEE UNDER THE HEAD INCOME FROM CAPITAL GAINS HAS TO BE ASSESS ED UNDER THE HEAD INCOME FROM BUSINESS. SINCE THE INCOME WAS CONSIDE RED AS INCOME FROM BUSINESS THE CLAIM OF EXEMPTION OF LONG TERM CAPIT AL GAINS MADE BY THE ASSESSEE WAS ALSO DENIED. ITA NO.5290/MUM/2008(A.Y. 2005-06) ITA NO.6430/MUM/2009(A.Y.2006-07) 5 7. ON APPEAL BY THE ASSESSEE THE CIT(A) CONFIRMED T HE ORDER OF THE AO. IN DOING SO THE CIT(A) ALSO CONSIDERED THE TRANSACT IONS AS DONE BY THE AO IN THE ORDER OF ASSESSMENT. 8. AGGRIEVED BY THE ORDER OF THE CIT(A) THE ASSESSE E HAS PREFERRED THE ITA NO.5290/M/08 BEFORE THE TRIBUNAL. 9. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT SINCE FACTS AND FIGURES HAVE NOT BEEN PROPERLY CONSIDERED BY THE AO AND CIT (A) AND THEIR ULTIMATE CONCLUSIONS ON THE QUESTION WHETHER THE INCOME IN QUESTION WAS INCOME FROM BUSINESS OR INCOME FROM CAPITAL GAINS IS ERRON EOUS. 10. WE HAVE CONSIDERED THE SUBMISSIONS AND ARE OF T HE VIEW THAT THE STAND TAKEN BY THE ASSESSEE IS WELL FOUNDED. IN TH IS REGARD WE FIND THAT COURTS HAVE LAID DOWN PRINCIPLES FOR DECIDING THE Q UESTION AS TO WHEN INCOME FROM SALE OF SHARES CAN BE SAID TO BE INCOME FROM BUSINESS. THE FOLLOWING ARE SOME OF THE IMPORTANT DECISIONS IN TH IS REGARD: (A) WHETHER A TRANSACTION OF SALE AND PURCHASE OF SHARE S WERE TRADING TRANSACTIONS OR WHETHER THEY WERE IN THE NATURE OF INVESTMENTS IS MIXED QUESTION OF LAW AND FACT. LEARNED CIT(A) VS. HOLCK LARSEN 60 ITR 67 (SC). (B) IT IS POSSIBLE FOR AN ASSESSEE TO BE BOTH AN INVEST OR AS WELL AS A DEALER IN SHARES. WHETHER A PARTICULAR HOLDING IS B Y WAY OF INVESTMENT OR FORMED PART OF STOCK IN TRADE IS A MA TTER WHICH IS WITHIN THE KNOWLEDGE OF THE ASSESSEE AND IT IS FOR THE ASSESSEE TO PRODUCE EVIDENCE FROM HIS RECORDS AS TO WHETHER HE MAINTAINED ANY DISTINCTION BETWEEN SHARES WHICH WERE HOLD BY HIM A S INVESTMENTS AND THOSE HOLD AS STOCK IN TRADE. (CIT VS. ASSOCIAT ED INDUSTRIAL DEVELOPMENT CO. LTD. 82 ITR 586 (SC). (C) TREATMENT IN THE BOOKS BY AN ASSESSEE WILL NOT BE C ONCLUSIVE. IF THE VOLUME FREQUENCY AND REGULARITY WITH WHICH TRANSAC TIONS ARE CARRIED OUT INDICATE SYSTEMATIC AND ORGANIZED ACTIV ITY WITH PROFIT ITA NO.5290/MUM/2008(A.Y. 2005-06) ITA NO.6430/MUM/2009(A.Y.2006-07) 6 MOTIVE THEN IT WOULD BE A CASE OF BUSINESS PROFITS AND NOT CAPITAL GAIN. CIT VS. MOTILAL HIRABHAI SPG. AND WVG. CO. L TD. 113 ITR 173 (GUJ); RAJA BAHADUR VISWSHWARA SINGH VS. CIT 41 IT R 685 (SC). (D) PURCHASE WITHOUT AN INTENTION TO RESELL WHERE THEY ARE SOLD UNDER CHANGED CIRCUMSTANCES WOULD BE CAPITAL GAINS. CIT V S. PKN 60 ITR 65 (SC). PURCHASE WITH AN INTENTION TO RESELL WOULD RENDER THE GAIN PROFIT ON SALE BUSINESS PROFIT DEPENDING ON THE CIR CUMSTANCES OF THE CASE LIKE NATURE AND QUANTITY OF ARTICLE PURCHASED NATURE OF THE OPERATION INVOLVED. SAROJ KUMAR MAZUMDAR VS. CIT 3 7 ITR 242 (SC). (E) NO SINGLE FACT HAS ANY DECISIVE SIGNIFICANCE AND TH E QUESTION MUST DEPEND UPON THE COLLECTIVE EFFECT OF ALL THE RELEVA NT MATERIALS BROUGHT ON RECORD. JANKI RAM BAHADUR RAM VS. CIT 5 7 ITR 21 (SC). 11. THE APPLICATION OF THE PRINCIPLES AS SET OUT AB OVE WILL REQUIRE REEXAMINATION OF THE CORRECT FACTS THAT PREVAILS IN THE CASE OF THE ASSESSEE. SINCE THE REVENUE AUTHORITIES HAVE PROCEEDED ON WR ONG FACTS AND FIGURES WE DEEM IT FIT AND PROPER TO SET ASIDE THE ORDER O F THE CIT(A) AND REMAND THE ISSUE TO THE AO FOR FRESH CONSIDERATION IN ACCORDAN CE WITH LAW AFTER TAKING INTO CONSIDERATION THE CORRECT FACTS. THUS GROUND NO.1 TO 4 RAISED BY THE ASSESSEE IN ITS APPEAL ARE ALLOWED FOR STATISTICAL PURPOSES. 12. IN GROUND NO.5 & 6 THE ASSESSEE IS AGGRIEVED BY THE ACTION OF THE AO IN DETERMINING THE INCOME FROM HOUSE PROPERTY IN RESPE CT OF KANDIVILI AND PUNE PROPERTIES DESPITE THE FACT THAT THE SAME OUG HT TO HAVE BEEN CONSIDERED AS SELF OCCUPIED PROPERTY AND INTEREST I NCOME DETERMINED AT RS. NIL. THIS GROUND CAN BE CONVENIENTLY DISPOSED OFF TOGETHER WITH GROUND NO.4 OF REVENUES APPEAL FOR AY 06-07. ON THIS ISSUE WE FIND THAT IN A.Y 2006-07 ON THE VERY SAME ISSUE THE CIT(A) HAS HELD AS FOLLO WS: ITA NO.5290/MUM/2008(A.Y. 2005-06) ITA NO.6430/MUM/2009(A.Y.2006-07) 7 8. INCOME FROM HOUSE PROPERTY:- 8.1 THE A.O NOTICED FROM THE BALANCE SHEET THAT THE APP ELLANT WAS OWNING THREE FLATS NAMELY FLAT AT CHALLENGER TOWER (KANDIVALI) FLAT AT PUNE AND FLAT AT OBEROI PARK VIEW (KANDIVAL I) AND THE APPELLANT WAS LIVING IN CHALLENGER TOWER FLAT. HE FURTHER NOTICED THAT IN THE STATEMENT OF TOTAL INCOME THE APPELLAN T HAD OFFERED ONLY HOUSE PROPERTY INCOME IN RESPECT OF FLAT AT PU NE AT RS. 50 000/- NET OF DEDUCTION U/S. 24 AS PER ASSESSMEN T ORDER FOR A.Y 2004-2005. THUS THE AO FOUND THAT THE APPELLA NT DID NOT OFFER ANY NOTIONAL INCOME IN RESPECT OF FLAT AT OBE ROI PARK VIEW KANDIVALI. HE FURTHER FOUND THAT FOR A.Y 2005-06 T HE NOTIONAL INCOME FROM THE ABOVE HOUSE PROPERTY WAS ESTIMATED AT RS. 1 LAC AFTER DEDUCTION U/S. 24 AND THE SAME WAS CONFIR MED ON APPEAL BY CIT(A). HE THEREFORE ASSESSED NOTIONAL ERENT OF RS.1 10 000/- FROM OBEROI PARK VIEW PROPERTY AND FU RTHER ASSESSED RS. 75 000/- IN RESPECT OF PUNE FLAT CONSI DERING THE RISE IN THE RENTAL VALUE. 8.2 AT THE TIME OF HEARING THE THE REPRESENTATIVE SUBM ITTED THAT THE APPELLANT DID NOT OFFER ANY INCOME IN RESPECT OF FL AT AT OBEROI PARK VIEW KANDIVALI AS THE POSSESSION WAS NOT YET RECEIVED AS ON 31/3/2006. HE FURTHER SUBMITTED THAT THIS WAS A LSO EXPLAINED TO THE AO BUT SINCE THE ADDITION WAS MADE IN THE LAST YEAR AND CONFIRMED BY CIT(A) THE AO REPEATED THE S AME ADDITION. HE SUBMITTED THAT THE ABOVE FLAT WAS BOO KED IN THE YEAR 2004 AND POSSESSION OF THE SAID FLAT WAS RECEI VED AFTER 31/3/2006 AND THE APPELLANT PAID THE LAST INSTALMEN T IN THE MONTH OF FEBRUARY 2006. HE ALSO FILED A COPY OF TH E LEDGER ACCOUNT FOR PAYMENT OF THE LAST INSTALMENT IN FEBRU ARY 2006. HE SUBMITTED THAT THE APPELLANT OCCUPIED THE ABOVE FLAT IN THE MONTH OF JANUARY2007 AND THEREFORE THERE IS NO NO TIONAL INCOME TO BE ASSESSED FROM THE SAID PROPERTY FOR TH IS YEAR. REGARDING THE PUNE FLAT HE SUBMITTED THAT THE NOT IONAL INCOME COULD BE ASSESSED ONLY ON THE BASIS OF MUNICIPAL VA LUATION AND THE SAME CANNOT BE VARIED FROM YEAR TO YEAR CONSIDE RING THE INCREASE IN THE MARKET VALUE UNLESS THE MUNICIPAL V ALUATION WAS ALSO INCREASED. HE SUBMITTED THAT EVEN IF THE MUNI CIPAL VALUATION IS ADOPTED THE VALUATION WOULD BE MUCH L ESS THAN RS. 50 000/- BUT THE APPELLANT ADMITTED RS. 50 000/- ON ESTIMATE BASIS WHICH IS REASONABLE AND THERE IS NO NECESSIT Y FOR DISTURBING THE SAME. ITA NO.5290/MUM/2008(A.Y. 2005-06) ITA NO.6430/MUM/2009(A.Y.2006-07) 8 8.3 AFTER CONSIDERING THE SUBMISSIONS I FIND THAT THE AO HAS MADE THE ADDITION MERELY BECAUSE SUCH ADDITION WAS MADE IN THE EARLIER YEAR AND CONFIRMED BY THE CIT(A). A PERUS AL OF BALANCE SHEET OF THE APPELLANT AS ON 31/3/2006 SHOWS THAT T HE VALUE OF THE FLAT IN OBEROI PARK VIEW IS SHOWN AT RS. 76 17 180/- UNDER THE HEAD FIXED ASSETS AND AS ON 31/3/2005 THE V ALUE OF THE FLAT WAS SHOWN AT RS.58 58 908/-. BOTH THESE BALAN CE SHEETS ARE AVAILABLE WITH THE AO FORMING PART OF THE ACCOM PANYING STATEMENTS FILED WITH THE RETURN OF INCOME. THUS I T IS CLEAR THAT THE APPELLANT WAS MAKING PAYMENT DURING THIS YEAR T OWARDS COST OF CONSTRUCTION OF THE ABOVE FLAT AND THE FINAL PAY MENT WAS MADE ONLY IN THE MONTH OF FEBRUARY 2006 AS PER THE LEDG ER ACCOUNT COPY. IN THE CIRCUMSTANCES I ACCEPT THE PLEA OF T HE REPRESENTATIVE THAT POSSESSION OF THE LAT WAS NOT RECEIVED TILL THE END OF THE YEAR AND THE SAME WAS RECEIVED ONLY IN T HE NEXT YEAR AND CONSEQUENTLY THERE IS NO JUSTIFICATION FOR ADDI TION RS. 1 10 000/- TOWARDS NOTIONAL RENT FROM THE ABOVE FLA T AND THE SAME IS DELETED. REGARDING THE PUNE PROPERTY I AC CEPT THE PLEA OF THE REPRESENTATIVE THAT NOTIONAL RENT IS TO BE D ETERMINED ON THE BASIS OF MUNICIPAL VALUATION AND IT CANNOT BE E NHANCED BASED ON THE GENERAL INCREASE IN THE MARKET VALUE. AS CONTENDED BY THE REPRESENTATIVE IF THE MUNICIPAL V ALUATION IS ADOPTED THE NOTIONAL RENT MIGHT BE LESS THAN RS. 5 0 000/- AND THE APPELLANT HAS ALREADY OFFERED RS. 50 000/- ON E STIMATE BASIS AND THEREFORE THERE IS NO NECESSITY TO DISTURB TH E SAME. I THEREFORE DIRECT THE AO TO ACCEPT THE NOTIONAL REN T OF RS. 50 000/- AFTER DEDUCTION U/S. 24 AS ADMITTED BY THE APPELLANT. IN AY 05-06 THE ASSESSEE CLAIMED FLAT NO.2302 OBR OI PARK VIEW TOWER AS SELF OCCUPIED PROPERTY WHEREAS IN A.Y 2006-07 THE PUNE PROPERTY HAS BEEN CLAIMED AS SELF OCCUPIED PROPERTY. MOREOVER THE F ACTS AS STATED BY THE ASSESSEE IN AY 06-07 WAS RAISED FOR THE FIRST TIME IN THAT YEAR ONLY. SINCE NEW FACTS HAVE BEEN RAISED IN AY 06-07 CONTRARY TO FACTS IN AY 05-06 WE DEEM IT FIT AND PROPER TO SET ASIDE THE ORDER OF TH E CIT(A) ON THIS ISSUE IN BOTH THE AYS AND DIRECT THE AO TO EXAMINE THE CORRE CT FACTS AND CONSIDER THE ISSUE AFRESH. WE SET ASIDE THE ISSUE TO THE AO FO R FRESH EXAMINATION IN ACCORDANCE WITH LAW AFTER ASCERTAINING THE CORRECT FACTS. ITA NO.5290/MUM/2008(A.Y. 2005-06) ITA NO.6430/MUM/2009(A.Y.2006-07) 9 13. THE OTHER GROUNDS OF APPEAL IS WITH REGARD TO C HARGING OF INTEREST WHICH IS PURELY CONSEQUENTIAL. 14. IN THE RESULT THE APPEAL BY THE ASSESSEE IS TR EATED AS ALLOWED FOR STATISTICAL PURPOSES. ITA 6430/M/09:REVENUES APPEAL: 15. IN THIS ASSESSMENT YEAR THE VERY SAME ISSUE AS TO WHETHER INCOME DECLARED BY THE ASSESSEE UNDER THE HEAD INCOME FROM CAPITAL GAIN OR INCOME FROM BUSINESS HAS TO BE DETERMINED. THIS GRIEVANCE IS PROJECTED BY THE REVENUE IN GROUND NO.1 BY IT BEFORE THE TRIBUNAL. IN THIS YEAR THE CONCLUSIONS WERE ARRIVED AT BY THE AO BY FOLLOWING THE ORDER OF THE AO IN 2005-06. THE CIT(A) HOWEVER HELD THAT THE INCOME I N QUESTION WAS INCOME FROM CAPITAL GAIN. WE ARE OF THE VIEW THAT THE ISS UE NEEDS TO BE READJUDICATED IN THE LIGHT OF THE DECISION THAT MIG HT BE ARRIVED AT BY THE AO IN THE SET ASIDE PROCEEDINGS IN A.Y. 2005-06. WE THEREFORE SET ASIDE THE ORDER OF THE CIT(A) AND REMAND THE ISSUE TO AO FOR FRESH CONSIDERATION. BOTH PARTIES WERE AGREEABLE FOR THIS COURSE OF ACTION. 16. THE ISSUE RAISED BY THE REVENUE IN GROUND NO.2 WITH REGARD TO DISALLOWANCE UNDER SECTION 14A HAS ALSO TO BE DECID ED AFRESH IN THE LIGHT OF THE JUDICIAL PRONOUNCEMENTS OF THE HONBLE BOMBAY H IGH COURT ON THE ISSUE. HENCE THE SAME IS REMANDED TO THE AO FOR FRESH CON SIDERATION. 17. GROUND NO.3 WITH REGARD TO ACCRUAL OF INCOME O N 8% GOI BONDS WAS DECIDED BY THE CIT(A) AS FOLLOWS: 7.2 AT THE TIME OF HEARING THE REPRESENTATIVE SU BMITTED THAT THE INTEREST AS PER SCHEME OF GOI BONDS WOULD ACCRUE O N 30 TH JUNE AND ITA NO.5290/MUM/2008(A.Y. 2005-06) ITA NO.6430/MUM/2009(A.Y.2006-07) 10 31 ST DECEMBER OF EVERY YEAR AND INTEREST ACCRUED AND RE CEIVED AS ON 31/12/2005 WAS OFFERED FOR TAXATION AND THE INTERES T FOR THE PERIOD FROM 1/4/2006 TO 31/3/2006 WOULD ONLY ACCRUE ON 30 TH JUNE AS PER THE SCHEME AND THEREFORE THE APPELLANT HAS NOT AC COUNTED FOR THE SAME AND THE SAID INTEREST IS OFFERED FOR TAXATION AS AND WHEN ACCRUED AND DUE TO THE APPELLANTS WIFE. HE SUBMITTED THAT AS PER THE SCHEME OF GOI BONDS THE APPELLANT HAS THE RIGHT TO RECEIV E THE INTEREST ONLY ON 30 TH JUNE AND THEREFORE THE AO WAS NOT JUSTIFIED IN B RINING TO TAX THIS AMOUNT. 7.3 I HAVE CONSIDERED THE SUBMISSIONS OF THE REPRE SENTATIVE AND THE STAND OF THE AO. THE AO HAS NOT INCORPORATED THE E XPLANATION OF THE APPELLANT ON THIS POINT IN THE ASSESSMENT ORDER. A S CONTENDED BY THE REPRESENTATIVE IF THE SCHEME OF GOI BONDS PROVIDE FOR PAYMENT OF INTEREST ON 30 TH JUNE AND 31 ST DECEMBER THE RIGHT TO RECEIVE THE AMOUNT ACCRUES ONLY ON THESE DATES. WITHOUT A LEGA LLY ENFORCEABLE RIGHT IT CANNOT BE SAID THAT THE INCOME HAS ACCRUE D. AS THE INTEREST RELATING TO THE PERIOD 1/1/2006 TO 31/3/2006 WAS NO T YET ACCRUED AS ON 31/3/2006 BUT WOULD ACCRUE ONLY ON 30 TH JUNE 2006 I DIRECT THE AO TO DELETE THE ADDITION AND THE SAME WILL BE BROU GHT TO TAX IN THE NEXT YEAR ON ACCRUAL BASIS. 18. WE ARE OF THE VIEW THAT THE FINDINGS OF THE CI T(A) ARE PROPER AND CALLS FOR NO INTERFERENCE. 19. ISSUE RAISED IN GROUND NO.4 HAS ALREADY BEEN DE CIDED WHILE DECIDING THE APPEAL OF THE ASSESSEE ON IDENTICAL IN ASSESSME NT YEAR 2005-06 IN GROUND NO.5 & 6. 20. IN THE RESULT THE APPEAL BY THE REVENUE IS PAR TLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH JULY 2011. SD/- SD/- (R.S.SYAL ) (N.V.VASUDEVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI DATED. 29 TH JULY .2011 ITA NO.5290/MUM/2008(A.Y. 2005-06) ITA NO.6430/MUM/2009(A.Y.2006-07) 11 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CITY CONCERNED 4. THE CIT(A)- CONCERNED 5. THE D.RB BENCH. (TRUE COPY) BY ORDER ASST. REGISTRAR I TAT MUMBAI BENCHES MUMBAI. VM. ITA NO.5290/MUM/2008(A.Y. 2005-06) ITA NO.6430/MUM/2009(A.Y.2006-07) 12 DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 26/7/11 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 27/7/11 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 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER