M/s. Yashmina Investments Pvt. Ltd., New Delhi V. ITO, New Delhi

ITA 1039/DEL/2014

• Counselvise Citation: 103920114 RSA 2014
• Duration Of Justice: 1 year(s) 5 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-07-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC 1
• Next Hearing Date: 01-07-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 21-02-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GAGAN SOOD
• Keywords: Speculation loss

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: SMC NEW DELHI BEFORE SMT DIVA SINGH, JUDICIAL MEMBER I.T.A .NO. - 1039 /DEL/201 4 (ASSESSMENT YEAR - 200 6 - 07 ) YASHMINA INVESTMENTS PVT. LTD., 573, MAIN ROAD, CHIRAG, DELHI, NEW DELHI - 110017. PAN - AAACY0208R (APPELLANT) VS ITO, WARD - 18(4), NEW DELHI (RESPONDENT ) APPELLANT BY NONE RESPONDENT BY SH.GAGAN SOOD, SR.DR ORDER BY THE PRESENT APPEAL THE ASSESSEE ASSAILS THE CORRECTNESS OF THE ORDER DATED 16.12.2013 OF CIT(A) - XXI, NEW DELHI PERTAINING TO 2006 - 07 ASSESSMENT YEAR ON THE GROUND THAT THE PENALT Y IMPOSED BY THE AO U/S 271(1)(C) HAS WRONGLY BEEN UPHELD . 2. NO ONE WAS PRESENT ON BEHALF OF THE ASSESSEE A T THE TIME OF HEARING . H OWEVER CONSIDERING THE MATERIAL AVAILABLE ON RECORD, IT WAS CONSIDERED APPROPRIATE TO PROCEED WITH THE PRESENT APPEAL EX - PARTE QUA THE ASSESSEE APPELLANT ON MERIT AFTER HEARING THE LD. SR. DR. 3. THE RELEVANT FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY DECLARED A LOSS OF RS.16,53,079/ - BY FILING ITS RETURN ON 29.11.2006 . FOR READY - REFERENCE, WE EXTRACT THE RELEVANT FACTS FROM THE PENALTY ORDER ITSELF: - THE ASSESSEE COMPANY FILED ITS RETURN OF INCOME ON 29.11.2006 DECLARING LOSS OF RS.16,53,079. THEREAFTER RE - ASSESSMENT PROCEEDINGS WERE INITIATED WHEN IT WAS OBSERVED THAT THE ASSESSEE HAD DEBITED A CAPITAL LOSS OF RS.22,87,596 ON SALE OF INVESTMENT TO I TS P&L ACCOUNT. SINCE IT WAS A CAPITAL LOSS THEREFORE IT SHOULD HAVE BEEN DISALLOWED. 2. IN ITS REPLY THE ASSESSEE CONTESTED THAT EXPLANATION U/S 73(1) IS NOT APPLICABLE IN ITS CASE AS AFTER EXCLUDING THE SHARE LOSS THE MAIN SOURCE OF INCOME IS HOUSE PRO PERTY, IT HAS BEEN FURTHER SUBMITTED THAT HOWEVER IF YOU ARE NOT SATISFIED WITH THE JUSTIFICATION FILED BY THE ASSESSEE COMPANY THEN THE ASSESSEE COMPANY IS READY TO SURRENDER DATE OF HEARING 01 .0 7 .2015 DATE OF PRONOUNCEMENT 24 .07.2015 I.T.A .NO. - 1039/ DEL/2014 PAGE 2 OF 3 LOSS ON SHARES FOR RS.22,87,595 TO BE TREATED AS SPECULATION LOSS. AFTER CONSID ERING THE REPLY OF THE ASSESSEE, IT WAS FOUND THAT THE JUSTIFICATION GIVEN WAS NOT TENABLE. THE MAIN SOURCE OF ASSESSEE S INCOME WAS NOT HOUSE PROPERTY BUT SALE & PURCHASE OF SHARES DUE TO WHICH IT INCURRED A LOSS. THUS PROVISIONS OF EXPLANATION TO SEC 73 ARE SQUARELY APPLICABLE IN THE CASE. FURTHER THE LOSS TO THE ASSESSEE IS BECAUSE OF SALE OF LONG TERM INVESTMENTS WHICH IMPLIES THAT IT IS A LONG TERM LOSS. CHAPTER VI OF INCOME TAX ACT, 1961 STATES THAT LONG TER M CAPITAL LOSS CAN BE SET OFF ONLY AGAINST A LONG TERM CAPITAL GAIN AND NOT AGAINST INCOME FROM ANY OTHER HAD OF INCOME. THUS THE LONG TERM CAPITAL LOSS OF RS.22,87,596 WAS NOT BE ALLOWED AS DEDUCTION. THUS PENALTY PROCEEDINGS U/S 271(1)(C) WERE INITIATED FOR FURNISHING INACCURATE PARTICULARS OF INCOME. (EMPHASIS PROVIDED) 3.1 . IN VIEW O F THE ABOVE FACTS, NOTICE FOR LEVY OF PENALTY WAS ISSUED. DESPITE THIS FACT, NO ONE WAS PRESENT ON BEHALF OF THE ASSESSEE . SUBSEQUENTLY ANOTHER ATTEMPT WAS MADE . CO NS IDERING THE FACT THAT THE SAME ALSO REMAINED UN - COMPLIED WITH PENALTY U/S 271(1)(C) WAS IMPOSED AMOUNTING TO RS.6,86,280/ - H OLDING THAT THE ASSESSEE HAD FURNISHED INACCURATE PARTICULARS OF INCOME. 4. IN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY, THE CIT (A) TOOK COGNIZANCE OF THE FACT THAT THE ADDITION MADE BY WAY OF A DISALLOWANCE WAS NOT CHALLENGED IN APPEAL B Y THE ASSESSEE. THUS IT WAS CONSIDERED ON FACTS WHERE THE ASSESSEE WHO WAS INVOLVED IN CONSTRUCTION BUSINESS AND WAS NOT A TRADER OR BROKER OF SHARES AS SUCH THE LTCG LOSS COULD BE SET OFF ONLY AGAINST LTCG INCOME FOR WHICH PURPOSE THERE IS A SPECIFIC PROVISION U/S 71(3). THE ISSUE BEING FREE OF DEBATE IT WAS CONCLUDED THAT THE ASSESSEE HAS DELIBERATELY SET UP THE LTCG LOSS AGAINST OTHER INCOME . THE CLAIM THAT IT WAS INADVERTENT MISTAKE WAS NOT ACCEPTED. THE LD. SR. DR RELIES UPON THE IMPUGNED ORDER AND THE PENALTY ORDER. 5. HAVING HEARD THESE SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. I AM OF THE VIEW THAT SIMPLY BECAUSE THE ADDITION MADE WAS NOT CHALLENGED BY THE ASSESSEE AND WAS ACCEPTED BY THE ASSESSEE BY ITSELF DOES NOT LEAD TO THE CONCLUSION THAT THE CLAIM OF THE ASSESSEE WAS NOT BONAFIDE. IT IS FURTHER SEEN THAT ALTHOUGH IN THE PENALTY PROCEE DINGS THE ASSESSEE WAS NOT REPRESENTED. IN THE FINDING ARRIVED AT IN THE PENALTY ORDER HIGHLIGHTED ABOVE AND IN THE FINDING ARRIVED AT IN PARA 3.3 AS SUBSEQUENTLY EXTRACTED IT WOULD SHOW THAT THERE IS INHERENT DEPARTMENTAL CONFUSION ON THE ISSUE AS TO WHAT WAS THE PRIMARY SOURCE OF INCOME OF THE ASSESSEE AS THE LD.CIT(A) CONSIDER E D THE I.T.A .NO. - 1039/ DEL/2014 PAGE 3 OF 3 ASSESSEE PRIMARILY IN CONSTRUCTION BUSINESS AND NOT TRADER. FOR READY - REFERENCE, THE RELEVANT EXTRACT IS REPRODUCED FROM THE IMPUGNED ORDER: - 3.3. I HAVE CONSIDERED THE OR DER OF THE AO AND THE SUBMISSIONS OF THE ASSESSEE AND I DO NOT FIND ANY MERIT IN THE SUBMISSION OF THE ASSESSEE. IT IS A MATTER OF FACT THAT THE ASSESSEE IS INVOLVED IN CONSTRUCTION BUSINESS AND THE ASSESSEE IS NOT A TRADER OR BROKER OF SHARES .. 5.1. BEFORE THE CIT(A) RELIANCE WAS PLACED UPON THE JUDGEMENT OF THE APEX COURT IN THE CASE OF CIT VS RELIANCE PETRO PRODUCTS LTD. 322 ITR 158 (SC). ACCORDINGLY CONSIDERING THE PECULIAR FACTS AND CIRCUMSTANCES OF THE CASE AND THE PRINCIPLE LAID DOW N BY THE APEX COURT IN THE AFORE - SAID JUDGEMENT WHEN CONSIDERED IN THE CONTEXT OF THE FACTS OF THE PRESENT CASE, IT CAN NOT BE SAID TO BE A CASE OF FILING OF ANY INACCURATE PARTICULARS OF INCOME. IT IS A CASE OF AN INADVERTENT MISTAKE AS PER THE CLAIM OF THE ASSESSEE BEFORE THE CIT(A ) AND SIMPLY BECAUSE THE ADDITION WAS NOT CHALLENGED IN THE QUANTUM PROCEEDINGS , IT DOES NOT NEGATIVELY IMPACT THE BONAFIDE OF THE ASSESSEE IN THE PECULIAR FACTS OF THE PRESENT CASE. ACCORDINGLY, C ONSIDERING THE PRINCIPLE LAID DOWN BY THE APEX COURT IN THE CASE OF RELIANCE PETRO PRODUCTS LTD. (CITED SUPRA), THE IMPUGNED ORDER IS SET ASIDE AND THE PENALTY IS DIRECTED TO BE QUASHED. 6 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 2 4 T H OF JULY , 2015. S D / - (DIVA SINGH) JUDICIAL MEMBER DATED: 2 4 /07 /2015 * AMIT KUMAR * COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR I T AT NEW DELHI