M/s/ Torrent Finance Ltd., Ahmedabad V. The ACIT.,Circle-8, Ahmedabad

CO 145/AHD/2012

• Counselvise Citation: [2015] 123 COUNSELVISE.COM (IT) 1343 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 1 month(s) 13 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 16-10-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 01-10-2015
• Assessment Year: 1997-1998
• Appeal Filed On: 03-09-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S N SOPARKAR
• Assessee Lawyers: NARENDRA SINGH
• Keywords: Business income; Period of limitation; Question of law; Speculation loss
• Section: 143(3); 56

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH (BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER & SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER) ITA NO: 1466/AHD/12 & C.O. NO. 145/AHD/2012 (ASSESSMENT YEAR: 1997-98) THE A.C.I.T., CIRCLE-8, AHMEDABAD V/S M/S. TORRENT FINANCE LTD. (AMALGAMATED WITH TORRENT PRIVATE LTD.) TORRENT HOUSE, NR. DINESH HALL, OPP. ASHRAM ROAD, AHMEDABAD (APPELLANT) (RESPONDENT) M/S. TORRENT FINANCE LTD. (AMALGAMATED WITH TORRENT PRIVATE LTD.) TORRENT HOUSE, NR. DINESH HALL, OPP. ASHRAM ROAD, AHMEDABAD V/S THE A.C.I.T., CIRCLE-8, AHMEDABAD (APPELLANT) (RESPONDENT) PAN: AAACT 5459R APPELLANT BY : SHRI NARENDRA SINGH, SR. D .R. RESPONDENT BY : SHRI S.N. SOPARKAR, A.R. ( )/ ORDER ITA NO. 1466/A /12 & C.O. NO. 145/A/12 . A.Y. 1997-98 2 DATE OF HEARING : 01-10-201 5 DATE OF PRONOUNCEMENT : 16-10-2015 PER ANIL CHATURVEDI, ACCOUNTANT MEMBER 1. THIS APPEAL OF REVENUE AND C.O OF ASSESSEE ARE AGA INST THE ORDER OF CIT(A)-XIV, AHMEDABAD DATED 25.04.2012 FOR A.Y. 199 7-98. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON RECORD ARE AS UNDER. 3. ASSESSEE IS A COMPANY STATED TO BE ENGAGED IN THE B USINESS OF TRADING OF SHARES. ASSESSEE FILED ITS RETURN OF INCOME FOR A. Y. 1997-98 ON 30.11.1997SHOWING TOTAL LOSS OF RS.11,76,10,593/- A ND THEREAFTER ASSESSEE FILED REVISED STATEMENT OF TOTAL INCOME SHOWING LOS S OF RS. 8,23,70,792/-. SUBSEQUENTLY THE ASSESSMENT WAS FRAMED U/S. 143(3) VIDE ORDER DATED 13.03.2000 WHEREIN THE DIVIDEND INCOME OF RS. 67,87 ,702/- WAS TAXED UNDER THE HEAD INCOME FROM OTHER SOURCES AND THE BUSINE SS LOSS OF RS. 8,23,70,792/- WAS TREATED AS SPECULATION LOSS AS AGAINST THE BUSINESS LOSS CLAIMED BY THE ASSESSEE AND THE CLAIM OF ASSESSEE T O ADJUST THE DIVIDEND INCOME AGAINST THE LOSS WAS REJECTED. AGGRIEVED BY THE ORDER OF A.O., ASSESSEE PREFERRED APPEAL BEFORE LD.CIT(A) WHO VIDE ORDER DATED 16.03.2001 CONFIRMED THE ORDER OF A.O. AGAINST THE ORDER OF LD. CIT(A), ASSESSEE PREFERRED APPEAL BEFORE TRIBUNAL WHO VIDE ORDER DATED 25.06.2006 UPHELD THE ORDER OF LD.CIT(A) AND DISMISSED THE APP EAL OF THE ASSESSEE. A.O THEREAFTER INITIATED PENALTY PROCEEDINGS U/S. 271(1 )(C) AS HE WAS OF THE VIEW THAT ASSESSEE WAS NOT LEGALLY ENTITLED TO SET OFF T HE DIVIDEND INCOME AGAINST THE OTHER LOSSES. HE THEREFORE HELD THAT ASSESSEE H AD FURNISHED INACCURATE ITA NO. 1466/A /12 & C.O. NO. 145/A/12 . A.Y. 1997-98 3 PARTICULARS OF INCOME AND THAT THE ASSESSEE WAS LIA BLE FOR PENALTY U/S. 271(1)(C) OF THE ACT AND THEREFORE BY ORDER DATED 3 0.03.2011 LEVIED PENALTY OF RS. 29,18,711/-. AGGRIEVED BY THE ORDER OF A.O ., ASSESSEE CARRIED THE MATTER BEFORE LD. CIT(A) WHO VIDE ORDER DATED 25.04 .2012 DELETED THE PENALTY. AGGRIEVED BY THE ORDER OF LD. CIT(A), REVE NUE IS NOW IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWING GROUNDS:- 1. THE LD. COMMISSIONER OF INCOME-TAX (APPEALS)-XIV, A HMEDABAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE PENALTY OF RS.29,18,71 1/- LEVIED U/S 271(1)(C) OF THE ACT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. COMMISSIONER OF INCOME- TAX (APPEALS)-XIV, AHMEDABAD OUGHT TO HAVE UPHELD T HE ORDER OF THE ASSESSING OFFICER. 3. IT IS THEREFORE, PRAYED THAT THE ORDER OF THE LD. C OMMISSIONER OF INCOME-TAX (APPEALS)-XIV, AHMEDABAD MAY BE SET-A-SIDE AND THAT OF THE ORDER OF THE ASSESSING OFFICER BE RESTORED. 4. THE ASSESSEE IN C.O HAS RAISED THE FOLLOWING GROUN DS:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE RESPON DENT'S CASE, THE LEARNED CIT(A) HAS ERRED IN REJECTING THE RELEVANT GROUND OF APPEA L RAISED BEFORE HIM BY THE RESPONDENT COMPANY TO THE EFFECT THAT THE IMPUGNED ORDER PASSED BY THE ASSESSING OFFICER U/S. 271(1)(C) OF THE INCOME-TAX ACT IS VOI D AND DESERVES TO BE QUASHED FOR THE REASON THAT IT HAS BEEN PASSED BEYOND THE STATUTORY PERIOD OF LIMITATION PRESCRIBED U/S. 275 OF THE INCOME-TAX ACT, 1961. WE PROCEED TO DISPOSE OF REVENUES APPEAL IN ITA NO. 1466/AHD/2012. 5. A.O NOTICED THAT ASSESSEE HAD EARNED DIVIDEND INCO ME OF RS. 67,87,702/- AND HAD LOSS OF RS. 8.23 CRORE AND HAD ADJUSTED THE DIVIDEND INCOME AGAINST THE LOSS. A.O WHILE FRAMING THE ASSESSMENT TREATED THE LOSS AS SPECULATION ITA NO. 1466/A /12 & C.O. NO. 145/A/12 . A.Y. 1997-98 4 LOSS AND THE SET OFF OF DIVIDEND INCOME WAS DENIED BY HIM AS HE WAS OF THE VIEW THAT THE SET OFF WAS NOT PERMISSIBLE AS PER LA W AND HE THEREFORE CONCLUDED THAT ASSESSEE HAS FURNISHED INACCURATE PA RTICULARS OF INCOME AND LEVIED PENALTY U/S. 271(1)(C) OF THE ACT. IN APPEAL , THE PENALTY LEVIED BY A.O WAS DELETED BY LD. CIT(A) BY HOLDING AS UNDER:- 3.3I HAVE CAREFULLY CONSIDERED THE PENALTY ORDER AN D THE SUBMISSION MADE BY THE APPELLANT DURING THE COURSE OT APPELLATE PROCEEDING S. THE APPELLANT HAD SHOWN BUSINESS LOSS AND HAD ADJUSTED THE DIVIDEND INCOME ON THE SAME. THE A. O. HELD THE LOSS AS SPECULATION LOSS BY APPLYING THE PROVISIONS OF SECTION 73 AND DID NOT ALLOW THE SET OFF OF DIVIDEND AGAINST THE SPECULATION LOSS. THE APPELLANT HAS SUBMITTED T HAT IT HAS PREFERRED APPEAL AGAINST THE ORDER OF ITAT IN H IGH COURT OF GUJARAT. THE HON'BLE HIGH COURT OF GUJARAT HAS ADMITTED THE APPE AL AND HAS ALSO FRAMED QUESTION OF LAW. IT HAS FURTHER BEEN SUBMITTED BY THE APPELL ANT THAT THE ITAT, AHMEDABAD IN SUBSEQUENT DECISION IN THE CASE OF SPARE STOCK HOLD ING PVT. LTD. (SUPRA) HAS HELD THAT THE DIVIDEND INCOME CAN BE SET OFF AGAINST THE SPEC ULATION LOSS AND THE APPEAL OF THE DEPARTMENT AGAINST THAT ORDER HAS BEEN REJECTED BY GUJARAT HIGH COURT VIDE ORDER DATED 23/08/2011. A COPY OF THE ORDER HAS ALSO BEEN SUBMITTED BY THE APPELLANT. I HAVE CAREFULLY PERUSED THE SAID ORDER OF THE HON' BLE HIGH COURT. THE HON'BLE COURT HAS DISCUSSED VARIOUS ASPECTS OF THE ISSUE RELATED TO SECTION 73 AND HAS HELD THAT THE RELIANCE PLACED BY THE ITAT ON THE DECISION OF WEST ERN STATE TRADING CO. PVT. LTD. [80 ITR 21 SC] AND KOKANADA RADHASWAMY BANK LTD. [57 ITR 306] WAS PERF ECTLY VALID. IT WAS HELD IN THOSE CASES THAT IF THE SHARE S ARE HELD AS A PART OF THE TRADING ASSETS, THE DIVIDEND FROM THOSE SHARES CAN BE SET O FF AND CLAIMED AGAINST THE LOSS FROM THE BUSINESS. IT HAS BEEN FINALLY HELD THAT DIVIDEN D INCOME WAS INCIDENTAL TO SHARE BUSINESS AND, THEREFORE, IRRESPECTIVE OF THE PROVIS IONS CONTAINED IN SECTION 56 OF THE ACT AND EXPLANATION TO SECTION 73, LOSS SHOULD BE A DJUSTED AGAINST SUCH BUSINESS INCOME. AFTER CONSIDERATION OF ALL ABOVE FACTS, I AM OF THE CONSIDERED OPINION THAT PENALTY U/S. 271(L)(C) IS NOT ELIGIBLE ON THE APPELLANT. FIRST O F ALL, THE APPELLANT HAD DISCLOSED ALL THE RELEVANT FACTS REGARDING THE COMPUTATION OF INC OME, THE INCOME FROM BUSINESS AND ITA NO. 1466/A /12 & C.O. NO. 145/A/12 . A.Y. 1997-98 5 THE DIVIDEND EARNED ON SHARES IN THE RETURN OF INCO ME. NONE OF THE PARTICULARS FURNISHED BY APPELLANT WERE FOUND TO BE FALSE OR IN ACCURATE. THE ASSESSMENT OF BUSINESS LOSS AS SPECULATION LOSS BY APPLYING THE P ROVISIONS OF SECTION 73 WAS MERELY AN OPINION OF THE A. O. AND IT DOES NOT ESTABLISH T HAT THE APPELLANT HAS FURNISHED ANY INACCURATE PARTICULARS. FURTHER, THE FACT THAT THE MATTER HAS TRAVELLED UP TO ITAT, AGAIN SET ASIDE TO THE FILE OF A. O. AND THE FACT T HAT QUESTION OF LAW HAS BEEN ADMITTED BY HON'BLE GUJARAT HIGH COURT ITSELF SHOW THAT THE ISSUE IS CLEARLY DEBATABLE. FURTHER, THERE IS AN OPINION OF THE JURISDICTIONAL HIGH COURT ON THE SAME ISSUE THAT THE INCOME / LOSS CAN BE ADJUSTED AGAINST THE DIVID END INCOME IRRESPECTIVE OF PROVISIONS OF SECTION 56 AND 73. IN THESE CIRCUMSTA NCES, THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF RELIANCE PETRO PRODUCT S PVT. LTD REPORTED IN 322 ITR 158 IS CLEARLY APPLICABLE. ACCORDING TO THE DECISIO N, WHERE THERE IS NO FINDING THAT ANY DETAILS WERE SUPPLIED BY THE ASSESSEE IN ITS RE TURN OF INCOME FOUND TO BE INCORRECT OR ERRONEOUS OR FALSE THERE WAS NO QUESTION OF INVO KING THE PENALTY UNDER SECTION 271 (L)(C). MERE MAKING OF CLAIM, WHICH IS NOT SUSTAINA BLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REGARDI NG THE INCOME OF THE ASSESSEE. CONSIDERING THE ABOVE FACTS AND CIRCUMSTANCES, THE PENALTY IMPOSED BY THE ASSESSING OFFICER IS DELETED AND THE APPEAL IS ALLOWED. 6. BEFORE US, LD. D.R. SUPPORTED THE ORDER OF LD. CIT( A). LD. A.R. ON THE OTHER HAND SUPPORTED THE ORDER OF LD. CIT(A) AND FURTHER SUBMITTED THAT EVEN ON MERITS, THE ISSUE IS COVERED IN FAVOUR OF THE ASSES SEE BY THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. S PHERE STOCK HOLDING PVT. LTD. (IN TAX APPEAL NO. 2583 OF 2009 ORDER DAT ED 23.08.2011). HE ALSO PLACED ON RECORD THE COPY OF THE AFORESAID DECISION . HE THUS SUPPORTED THE ORDER OF LD. CIT(A). 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT CASE IS WITH RESPECT TO THE LE VY OF PENALTY U/S. 271(1)(C) ITA NO. 1466/A /12 & C.O. NO. 145/A/12 . A.Y. 1997-98 6 OF THE ACT ON THE GROUND THAT ASSESSEE WAS NOT ENTI TLED TO ADJUST THE DIVIDEND INCOME AGAINST THE BUSINESS LOSS. WE FIND THAT LD. CIT(A) WHILE DELETING THE PENALTY HAS GIVEN A FINDING THAT ASSES SEE HAD DISCLOSED ALL THE RELEVANT FACTS REGARDING THE COMPUTATION OF INCOME, THE INCOME FROM BUSINESS AND THE DIVIDEND EARNED ON SHARES IN THE R ETURN OF INCOME AND NONE OF THE PARTICULARS FURNISHED BY THE ASSESSEE WERE F OUND TO BE FALSE OR INACCURATE. HE HAS FURTHER NOTED THAT THE ISSUE IS DEBATABLE AS THE MATTER HAD TRAVELED UP TO ITAT, AGAIN SET ASIDE TO THE FILE OF A.O AND THAT THE QUESTION OF LAW BEING ADMITTED BY HONBLE GUJARAT HIGH COURT SHOWS THAT THE ISSUE IS DEBATABLE. THESE FINDINGS OF LD. CIT(A) HAVE NOT BE EN CONTROVERTED BY REVENUE. WE FURTHER FIND THAT ON MERITS, ON IDENTI CAL ISSUE AS TO WHETHER THE DIVIDEND INCOME CAN BE SET OFF AGAINST THE SPECULAT ION LOSS, THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. SPHERE ST OCK HOLDING PVT. LTD. (SUPRA) HAS UPHELD THE VIEW OF LD. CIT(A) AS WELL A S TRIBUNAL THAT THE IRRESPECTIVE OF PROVISIONS CONTAINED IN SECTION 56 OF THE ACT AND EXPLANATION TO 73, LOSS SHOULD BE ADJUSTED AGAINST SUCH BUSINES S INCOME. THE RELEVANT FINDING OF HONBLE HIGH COURT IS REPRODUCED AS UNDE R:- 9. IN THE PRESENT CASE ALSO AS ALREADY REPRODUCED I T HAS BEEN CONSISTENTLY HELD FROM MATERIAL ON RECORD THAT SHARES WERE HELD BY THE ASS ESSEE AS STOCK-IN-TRADE. CIT(APPEALS) AS WELL AS TRIBUNAL THEREFORE, WERE OF THE OPINION THAT DIVIDEND INCOME WAS INCIDENTAL TO SHARE BUSINESS AND THAT THEREFORE, IRRESPECTIVE OF PROVISIONS CONTAINED IN SECTION 56 OF THE ACT AND EXPLANATION TO SECTION 73, LOSS SHOULD BE ADJUSTED AGAINST SUCH BUSINESS INCOME. WE DO NOT FIND ANY SUBSTANTIAL QUESTION OF LAW ARISING. SIMILAR ISSUE IS DISCUSSED BY THE APEX COURT IN ABOVE-MENTIONED CASES. TAX APP EAL IS THEREFORE, DISMISSED. 8. IN VIEW OF THE AFORESAID FACTS AND IN THE ABSENCE O F ANY CONTRARY BINDING DECISION BROUGHT TO OUR NOTICE BY REVENUE, WE FIND NO REASON TO INTERFERE WITH THE ORDER OF LD. CIT(A) AND THUS THE GROUND OF REVENUE IS DISMISSED. ITA NO. 1466/A /12 & C.O. NO. 145/A/12 . A.Y. 1997-98 7 9. IN THE RESULT, THE APPEAL OF REVENUE IS DISMISSED. C.O. NO. 145/AHD/2012 10. BEFORE US, LD. A.R. SUBMITTED THAT HE DID NOT WISH TO PRESS GROUNDS RAISED IN C.O AND THEREFORE THE C.O IS DISMISSED. 11. IN THE RESULT, THE APPEAL OF REVENUE AND C.O OF ASS ESSEE ARE DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 16 - 10 - 201 5. SD/- SD/- (RAJPAL YADAV) (ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,A HMEDABAD