The Revenue has preferred this appeal invoking Section 260A of the Income Tax Act, 1961 (hereinafter referred to as 'the Act', for sake of brevity) to challenge the order dated 15th October 2010 of the Income Tax Appellate Tribunal, Ahmedabad BenchB in ITA No.902/Ahd/2006. 2.0 Appellant has raised following two questions formulated in the memorandum of appeal, as substantial question of law.
“[A] Whether the Appellate Tribunal is right in law and on facts in not appreciating the facts of the case that by showing the value of the shares as opening stock at a much higher price and closing stock at a much lower price in Profit & Loss Account the assessee has concealed his real taxable income; it is a colorable device of the assessee to avoid tax liability?
[B] Whether the Appellate Tribunal is right in law and on facts in not appreciating that there was no transaction at all during the relevant period and the assessee has merely shown the value of the shares as opening stock and closing stock in Profit & Loss Account and thus avoided tax liability on his real taxable income?”
3.0 We have heard learned counsel Mrs. Mauna Bhatt for the appellant.
4.0 The respondent assessee while filing his return of income for the Assessment Year 200203, declared his total income to be Rs.1,39,467/ and showed the shares of Mardia Chemicals Limited as stockintrade. The assessee was the promoter of Mardia Chemicals Limited, which had taken loan from ICICI Bank Limited and while securing that loan, the assessee had given undertaking to the Bank that the shares in question would not be transferred, assigned, pledged or disposed of in any manner and no encumbrance thereon would be created. The Assessing Officer was of the view that mere entry in the books of account was not determinative to treat the shares as stockintrade. According to him, the assessee had thereby concealed the real nature of the assets. The Officer recast the profit and loss account and reworked the net profit putting it at Rs.25,20,236/ as against the figure of loss shown by the assessee. The assessment was under Section 143(3) of the Act and was completed on 30th March 2005.
4.1 The assessee filed appeal before the CIT(A)III, Ahmedabad, who by order dated 23rd January 2006 allowed the appeal of the assessee. The findings of the Appellate Commissioner were twofold. Firstly, he recorded that the assessee had converted his investment of shares into stockintrade in the income year 199798 and accordingly in the corresponding assessment year 199899 the shares were shown in the books of account as stockintrade. Further and secondly, the Commissioner (Appeals) held on merits that eventhough the undertaking was given by the assessee before the ICICI Bank Limited, it in no way curtailed the right of the assessee to convert his investment into stockin trade.
4.2 The Commissioner (Appeals) directed the Assessing Officer to withdraw the consequential disallowances. The Tribunal considered the issue in the appeal preferred by the Revenue and confirmed the decision of the Commissioner (Appeals) by the impugned order. The Income Tax Tribunal recorded its findings as under:
“Admittedly the shares of Mardia Chemicals Ltd. were converted into stockintrade by the assessee in the assessment year 199899. For that assessment year, the Assessing Officer framed the assessment under section 143(3) wherein he accepted the conversion of shares of Mardia Chemicals Ltd. into stockintrade. In the subsequent assessment years, i.e. upto assessment year 200102 also, the assessments were framed under section 143(3) of the Act. These being the facts and circumstances, we are of the view that Learned Commissioner of Income Tax (Appeals) rightly took the view that in the assessment year under appeal, the Assessing Officer has no jurisdiction to disallow the assessee's claim.”
5.0 From the facts on record, it transpired that the shares in question were treated by the assessee in the Assessment Year 199899 as stockin trade. The Assessment for that year was finalized and the conversion of shares into stockintrade remained unquestioned. For the subsequent assessment years also the assessment was finalized in accordance with law, and the books of account of the assessee reflected same position with regard to those shares treated as stockintrade. In that background, the Commissioner (Appeals) and the Tribunal both rightly concluded that the Assessing Officer had lost his jurisdiction to question the showing of shares as stockintrade, as such position was obtained since Assessment Year 199899 and the department had accepted in the subsequent years also. Once the assessment under Section 143(3) of the Act is completed for particular assessment year, it would raise a valid presumption that all the transactions reflected in the books of account of the assessee during the previous year had been scrutinized and checked.
6.0 In above view, no infirmity is seen in the findings and conclusion recorded by the Tribunal in its impugned order. They are proper and justified. In the facts of the case, no substantial question of law arises for consideration of this Court. The present Tax Appeal, therefore, cannot be entertained in absence of any substantial question of law.
7.0 Accordingly, this Tax Appeal is dismissed.
Amit [V. M. SAHAI, J.] [N. V. ANJARIA, J.]