2019 (11) TMI 629 - AT - Income Tax

Gain from sale and purchase of shares and mutual funds - STCG on sale of shares / mutual fund - HELD THAT - As decided in own case 2018 (3) TMI 210 - ITAT MUMBAI AR fairly conceded that the amount of STCG earned by the assessee included certain intra-day gains / losses which were in the nature of speculation and hence were required to be excluded while arriving at figures of STCG. Therefore, at the outset, we direct Ld. AO to exclude the same from the figures of STCG and treat the same as speculation in nature. We concur with the stand of Ld. AR that the short term capital gains earned by the assessee was assessable under the head Capital Gains only subject to adjustment as envisaged above. Disallowance of foreclosure expenses - AO held that the assessee failed to prove that applicable TDS has been deducted and paid for, therefore, even if the above expenditure are allowable u/s 37 (1), still the same needs to be disallowed u/s 40(a)(ia) - HELD THAT - We note that it is settled law that res judicata does not apply to tax matter. Hence learned counsel s reference to earlier and subsequent proceedings are not at all relevant here. We note that the aforesaid sum of ₹ 57,42,28,508/- inter alia represents the balance in the loan accounts which have been closed pursuant to realisation of assets secured from the borrower after incurring the various expenditure. We note that no detail was submitted before the assessing officer. Assessing officer had no occasion to examine the details including the various entries subsequent to which this amount has been arrived at. Learned CIT-A has in summary manner allowed the assessee's appeal. He has never referred to any detail submitted by the assessee. It is also accepted by the learned counsel of the assessee that the details as claimed by him to be submitted before the learned CIT-A were not filed as additional evidence nor the same were remanded to the assessing officer. In these facts in our considered opinion the interest of justice demands that this issue be remitted to the file of assessing officer.

Summary

Issues:
1. Treatment of gain from sale and purchase of shares and mutual funds.
2. Disallowance of foreclosure expenses.

Treatment of gain from sale and purchase of shares and mutual funds:
The Appellate Tribunal ITAT Mumbai addressed the issue of treatment of gain from sale and purchase of shares and mutual funds in the appeals by the Revenue against the orders of the learned CIT(A) for A.Y. 2010-11 & 2011-12. The Tribunal referred to a decision by ITAT in the assessee's own case for earlier years, where it was adjudicated that certain intra-day gains/losses should be excluded while arriving at figures of Short Term Capital Gains (STCG). The Tribunal upheld that the short term capital gains earned by the assessee were assessable under the head Capital Gains only, subject to adjustments as directed. The Tribunal emphasized the principle of consistency and ruled in favor of the assessee, stating that the revenue is debarred from taking fluctuating stands on similar facts in different assessment years. The Tribunal concurred with the stand of the learned AR and upheld the order of the learned CIT(A) due to identical facts and the absence of any reversal by the Hon'ble Jurisdictional High Court.

Disallowance of foreclosure expenses:
Another issue raised for A.Y. 2010-11 was the disallowance of foreclosure expenses of a specific amount. During the assessment proceedings, the Assessing Officer noted that the assessee had debited miscellaneous expenses to its profit and loss account, including foreclosure charges of a significant amount. The Assessing Officer requested detailed information regarding the nature of these expenses, but found the submission by the assessee vague and lacking specific details. Consequently, the Assessing Officer disallowed the claimed expenses under section 37 of the Income Tax Act, adding the amount back to the income of the assessee. The Assessing Officer also considered disallowing the expenses under section 40(a)(ia) for failure to prove the deduction and payment of applicable TDS. However, the learned CIT(A) decided in favor of the assessee, accepting the explanation provided that the losses booked as 'foreclosure expenses' were allowable. The Tribunal, after hearing both parties, decided to remit the issue back to the assessing officer for a detailed examination, directing the assessee to submit all necessary details for reconsideration.

---