The Dy. CIT., Circle-4(1)(1), Ahmedabad V. M/s. Suraj Limited, Ahmedabad

ITA 1052/AHD/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 4981 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-05-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2009-2010
• Appeal Filed On: 01-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIKRAM S SHARMA
• Assessee Lawyers: G C PIPARA
• Keywords: Speculation loss; Wrong claim; Corroborative evidences; Set aside
• Section: 271(1)(c)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER & MS. MADHUMITA ROY, JUDICIAL MEMBER ./ITA NO.1052/AHD/2017 ( / ASSESSMENT YEAR : 2009-10) DCIT CIRCLE-4(1)(1) AHMEDABAD / VS. M/S.SURAJ LIMITED SURAJ HOUSE VIDYANAGAR SOCIETY ASHRAM ROAD, USMANPURA AHMEDABAD ./ ./ PAN/GIR NO. : AAICS 9693 L ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI VIKRAM S. SHARMA, SR.DR / RESPONDENT BY : SHRI G.C. PIPARA, AR / DATE OF HEARING 06/05/2019 !'# / DATE OF PRONOUNCEMENT 14 /05/2019 / O R D E R PER PRADIP KUMAR KEDIA, AM: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTAN CE OF THE REVENUE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-XIV, AHMEDABAD [CIT(A) IN SHORT] DATED 02/05/2012 IN THE MATTER OF ASSESSMENT ORDER UNDER S.143(3) OF THE INCOME TAX A CT, 1961 (HEREINAFTER REFERRED TO AS 'THE ACT') DATED 17/11 /2011 RELEVANT TO ASSESSMENT YEAR (AY) 2009-10. 2. THE SOLITARY GROUND OF APPEAL RAISED BY THE R EVENUE READ AS UNDER:- ITA NO.1052/AHD/2017 DCIT VS. M/S.SURAJ LIMITED ASST .YEAR - 2009-10 - 2 - WHETHER THE LD. CIT(A) IOS RIGHT IN LAW AND ON FAC TS IN DELETING THE PENALTY LEVIED OF RS.73,62,856/- U/S.2 71(1)(C) OF THE IT ACT. 3. BRIEFLY STATED, THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE AY 2009-10 IN QUESTION DECLARING TOTAL LOSS AT RS.1,23 ,79,101/-. THE ASSESSING OFFICER INTER ALIA NOTICED IN THE QUANTUM PROCEEDINGS THAT ASSESSEE HAS CLAIMED BUSINESS LOSS OF RS.2,45,42,85 3/- ON ACCOUNT OF PURCHASE AND SALES OF SHARES. THE ASSESSING OFFICE R INVOKED EXPLANATION TO SECTION 73 AND TREATED THE AFORESAID LOSS FROM PURCHASE AND SALES OF SHARES AS SPECULATIVE LOSS. THE ASSESSING OFFICER CONSEQUENTIALLY DENIED SET OFF OF SUCH LOSS AGAINST NON-SPECULATIVE INCOME IN TERMS OF EXPLANATION TO SECTION 73 OF THE ACT. THE ASSESSIN G OFFICER ALSO ALLEGED FURNISHING OF INACCURATE PARTICULARS OF INCOME TO T HE EXTENT OF RS.2,45,42,853/- TOWARDS WRONG CLAIM IN BREACH OF E XPLANATION TO SECTION 73 AND ACCORDINGLY IMPOSED PENALTY U/S.271( 1)(C) OF THE ACT AT THE RATE OF 100% ON TAX SOUGHT TO BE EVADED OWING T O WRONG SET OFF OF LOSSES. THE PENALTY WAS QUANTIFIED AT RS.73,62,85 6/- UNDER S.271(1)(C) OF THE ACT 4. AGGRIEVED BY THE IMPOSITION OF PENALTY, THE ASS ESSEE PREFERRED APPEAL BEFORE THE CIT(A). THE CIT(A) AFTER TAKING NOTE OF VARIOUS SUBMISSIONS MADE ON BEHALF OF THE ASSESSEE FOUND M ERIT IN THE PLEA FOR NON-APPLICABILITY OF SECTION 271(1)(C) OF THE ACT I N THE FACTS AND CIRCUMSTANCES OF THE CASE. THE OPERATIVE PARA OF T HE ORDER OF THE CIT(A) ADJUDICATING THE ISSUE IN FAVOUR OF ASSESSEE READS AS UNDER: ITA NO.1052/AHD/2017 DCIT VS. M/S.SURAJ LIMITED ASST .YEAR - 2009-10 - 3 - I HAVE CAREFULLY CONSIDERED THE PENALTY ORDER ALON G WITH THE ASSESSMENT ORDER U/S, 143(3). CLT(A)'S ORDER AND TH E SUBMISSION FILED BY THE APPELLANT. IT IS NOTICED THAT THE AC) HAS NOT Q UESTIONED THE DETAILS OF-SALE AND PURCHASE OF SHARES. IN THE AUDITED ACCO UNTS FOR AY 2008-09 RELEVANT TO AY 2009-10, THE APPELLANT COMPANY HAS D ISCLOSED ALL THE DETAILS OF PURCHASE AND SALE OF SHARES. FURTHER DUR ING THE COURSE OF ASSESSMENT PROCEEDINGS, THE APPELLANT COMPANY HAS F URNISHED ALL THE DETAILS WITH SUPPORTING EVIDENCES IN RESPECT OF PUR CHASE AND SALE OF SHARES FROM WHICH IT HAS SUFFERED LOSS OF RS, (-) 2 .45.42.853/-. IN VIEW OF THE ABOVE FACTS AND SUBMISSION, IT IS CLEAR THAT TH E-LOSS OF RS. (-) 2.45.42,853/- INCURRED-ON PURCHASE AND SALE OF SHAR ES HAS BEEN TREATED BY THE AO AS SPECULATIVE BUSINESS LOSS AS PER THE D EEMING PROVISIONS OF EXPLANATION TO SECTION 73 OF THE ACT AND NOT BECAUS E OF FURNISHING OF INACCURATE PARTICULARS OF INCOME. THE AR OF THE APPELLANT IS CONTENDED THAT NO PENALT Y IS WARRANTED ON ADDITIONS / DISALLOWANCES MADE SOLELY IN VIEW OF DE EMING PROVISIONS OF THE LAW. HE ALSO RELIED ON THE JUDICIAL PRONOUNCEME NTS IN CASE OF ARCTIC INVESTMENT PVT. LTD. (DELHI HC) (ITA NO. 264/2009). CIT VS. AURIC INVESTMENT & SECURITIES LTD. 163 TAXMAN 533 7310 IT R 121 (DELHI HC) AND CIT VS. S.P.K. STEELS PVT. LTD. 270 ITR 156 (MP HC). HON'BLE ITAT MUMBAI ALSO DECIDED ON THE SAME LINES IN THE CASE OF LENIENT FINVEST P. LTD. MUMBAI VS ASSESSEE IN ITS O RDER DATED 22 JUNE. 2016 IN ITA~'ISIO.L017/MUM/20L3 (A.Y.:2001 -02. THE TRIBUNAL DECIDED THAT MERELY TREATING THE BUSINESS LOSS AS SPECULATI ON LOSS BY THE AO DOCS NOT AUTOMATICALLY WARRANT INFERENCE OF CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. IT CONCLUDED AS UNDER: ' 6. WE FIND FROM THE ABOVE FACTS THAT THE AO DID N OT AGREE WITH THE CLAIM OF THE ASSESSEE THAT THE LOSS CLAIMED BY THE ASSESSEE AS TRADING LOSS IS ACTUALLY SPECULATION LOSS IN VIEW O F APPLICATION OF EXPLANATION TO SECTION 73 OF THE ACT AND THIS LOSS OF RS. 50,12.977/- IS ALLOWED TO BE CARRIED FORWARD FOR SE T OFF OF SPECULATION PROFITS IN ANY SUBSEQUENT YEAR. WE FIND THAT ALL THE FACTS AND FIGURES ARE AVAILABLE ON RECORD AND THE D ISALLOWANCE OF LOSS IS DUE TO WRONG INTERPRETATION OF EXPLANATION TO SECTION 73 OF THE ACT BY VIRTUE OF WHICH THE SAME IS TREATED A S SPECULATION LOSS. WE ARE OF THE VIEW THAT MERELY TREATING THE B USINESS LOSS AS SPECULATION LOSS BY THE AO DOES NOT AUTOMATICALLY W ARRANT INFERENCE OF CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE ITA NO.1052/AHD/2017 DCIT VS. M/S.SURAJ LIMITED ASST .YEAR - 2009-10 - 4 - PARTICULARS OF INCOME, PARTICULARLY WHEN THE ASSESS EE HAS FURNISHED FULL DETAILS OF PURCHASE AND SALES OF SHA RES. EVEN OTHERWISE, WE ARE OF THE VIEW THAT THE AO HIMSELF I S NOT SURE OF THE CHARGE FOR LEVY OF PENALTY WHETHER THE SAME IS FOR CONCEALMENT OF INCOME OR FOR FURNISHING OF INACCURA TE PARTICULARS OF INCOME. IN VIEW OF THE ABOVE, WE SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND DELETE THE PENA LTY IMPOSED ON THE ASSESSEE.' HENCE, IT IS THE SETTLED LEGAL POSITION THAT MERELY TREATING THE BUSINESS LOSS AS SPECULATION LOSS BY THE AO DOCS NOT AUTOMAT ICALLY WARRANT INFERENCE OF CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME, PARTICULARLY WHEN THE ASSESS EE HAS FURNISHED FULL DETAILS OF PURCHASE AND SALES OF SHARES. IN VIEW OF THIS DISCUSSION AND FACTS OF THE APPELLANT'S CASE THE AO IS DIRECTED TO DELETE THE PENALTY. ACCORDINGLY, THE APPEAL IS ALLOWED. 5. AGGRIEVED BUY THE REVERSAL OF PENALTY BY THE CIT (A), THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 6. THE LD.DR FOR THE REVENUE RELIED UPON THE ORDER OF THE ASSESSING OFFICER AND CONTENDED THAT WHERE THE TRANSACTION OF PURCHASE AND SALES OF SHARES CLEARLY ATTRACT THE PROVISIONS OF EXPLANATIO N TO SECTION 73 OF THE ACT, THE ACTION OF THE ASSESSEE IN TREATING THE SAM E AS REGULAR AND NON- SPECULATIVE BUSINESS LOSS AND THEREBY SEEKING SET O FF BY WRONG APPLICATION OF LAW WOULD CLEARLY ATTRACT PENALTY UN DER S.271(1)(C) OF THE ACT. IT WAS CONTENDED THAT THE ACTION OF THE ASS ESSEE IS OPPOSED TO THE PROVISIONS OF LAW WHEREBY THE RETURNED INCOME WAS S HOWN LOWER TO THE EXTENT OF SPECULATIVE LOSS ARISING FROM PURCHASE AN D SALES OF SHARES. THE LD.DR ALSO POINTED OUT THAT THE ASSESSEE HIMSELF HA S ALSO READILY ADMITTED THE FACT WHEN CONFRONTED THAT THE LOSS RES ULTED FROM TRADING OF ITA NO.1052/AHD/2017 DCIT VS. M/S.SURAJ LIMITED ASST .YEAR - 2009-10 - 5 - SHARES IS SPECULATION LOSS AND, THEREFORE, THE ACTI ON OF THE ASSESSEE CANNOT BE TREATED AS BONAFIDE. 7. THE LD.AR FOR THE ASSESSEE, ON THE OTHER HAND, P OINTED OUT THAT THE ASSESSEE HAS SUFFERED LOSS FROM PURCHASE AND SALES OF SHARES WHICH ARE DELIVERY BASED. IT IS ALSO CLAIMED THAT THE ASSESS EE HAS ALSO SUPPORTED EVERY TRANSACTION OF PURCHASE AND SALES BY CORROBOR ATIVE EVIDENCES. IT WAS FURTHER POINTED OUT THAT THE ASSESSEE HAS EARNE D INCOME UNDER THE HEAD CAPITAL GAINS AND, THEREFORE, EXPLANATION TO SECTION 73 IS STRICTLY NOT APPLICABLE. THE LD.AR STRONGLY CONTENDED THAT IT IS BY VIRTUE OF FICTION CREATED BY EXPLANATION TO SECTION 73 THAT T HE LOSS ARISING FROM PURCHASE AND SALES OF SHARES IS DEEMED TO BE SPECUL ATIVE LOSS UNDER S.73 FOR THE PURPOSES OF SET OFF. IT IS NOT THE CASE OF THE REVENUE THAT THE LOSS HAS NOT BEEN INCURRED OR A NON-EXISTENT LOSS HAS BE EN DUBIOUSLY CLAIMED. THE CHARACTER OF LOSS HAS ONLY BEEN MODIFIED BY THE REVENUE ON ACCOUNT OF DEEMING FICTION FOR WHICH NO PENALTY CANNOT BE I MPOSED, MORE SO, WHERE ALL PARTICULARS OF INCOME/LOSS ARISING FROM P URCHASE AND SALES OF SHARES HAVE BEEN DISCLOSED FULLY AND TRULY WITHOUT ANY SUPPRESSION. THE LD.AR ALSO POINTED OUT THAT THE ASSESSEE HAS READIL Y AGREED FOR ALTERATION OF CHARACTER OF INCOME WITHOUT ANY DEMUR TO CO-OPER ATE WITH THE DEPARTMENT AND TO AVOID PROTRACTED LITIGATION AND, THEREFORE IN THE CIRCUMSTANCES PENALTY UNDER S.271(1)(C) OF THE ACT IS NOT WARRANTED. 8. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. THE IMPOSITION OF PENALTY UNDER S.271(1)(C) OF THE ACT IS IN CONTROVERSY WHERE THE LOSS FROM PURCHASE AND SALES OF SHARES HA VE BEEN TREATED AS ITA NO.1052/AHD/2017 DCIT VS. M/S.SURAJ LIMITED ASST .YEAR - 2009-10 - 6 - SPECULATIVE LOSS BY THE ASSESSING OFFICER AND AC CORDINGLY THE CLAIM OF SET OFF HAS BEEN DENIED TO THE ASSESSEE IN VIEW OF THE EXPLANATION TO SECTION 73 OF THE ACT. WE STRAIGHT AWAY NOTICE THA T THERE IS NOT DISPUTE THAT THE ASSESSEE HAS FURNISHED ALL DETAILS WITH SU PPORTING EVIDENCES IN RESPECT OF PURCHASE AND SALES OF SHARES FROM WHICH IT HAS SUFFERED THE IMPUGNED LOSS OF RS.2,45,42,853/-. THEREFORE, THE RE IS NO FURNISHING OF INACCURATE PARTICULARS OF INCOME PER SE . THE ASSESSING OFFICER HAS NOT FOUND ANY FALSITY IN THE CLAIM OF LOSS. WHAT HAS B EEN DISPUTED BY THE ASSESSING OFFICER IS THE TRUE CHARACTERISATION OF I NCOME IN VIEW OF DEEMING FICTION. IN VIEW OF THE LEGAL FICTION CREA TED BY EXPLANATION 73 OF THE ACT, LOSS ARISING FROM PURCHASE AND SALES OF SH ARES IN THE HANDS OF COMPANY ARE TO BE TREATED AS SPECULATIVE LOSS FOR T HE PURPOSES OF SET OFF IN SPECIFIED CIRCUMSTANCES. THUS, THERE IS NO CON CEALMENT OR INACCURACY PER SE IN PARTICULARS OF INCOME. NEEDLESS TO SAY, CONSE QUENCE IN THE FORM OF PENALTY UNDER S.271(1)(C) OF THE ACT IT IS NOT AUTOMATIC SOLELY OWING TO INCREASE IN THE ASSESSED INCOME. THE INCO RRECT CLAIM OF THE ASSESSEE OWING TO DEEMED OR ARTIFICIAL CHARACTERISA TION OF INCOME COULD NOT, IN OUR VIEW, INVITE STRINGENT PENALTY, INCONSI STENCY WITH THE LEGAL PROVISION NOTWITHSTANDING. IT IS ON ACCOUNT OF DEE MING PROVISION OF LAW IN CONTRAST TO A SUBSTANTIVE PROVISION THAT A LOSS HAS BEEN TREATED AS NON- ADJUSTABLE SPECULATIVE LOSS BY AN UNNATURAL CONCEPT . THE EXERCISE OF ASSESSEE DESERVES STATUTORY DISCRETION TO BE EXERCI SED IN ITS FAVOUR IN SUCH CIRCUMSTANCES. THE CIT(A), IN OUR VIEW, HAS RIGHTL Y APPRECIATED THE FACTS AN CIRCUMSTANCES OF THE CASE IN PERSPECTIVE AND HAS APPLIED POSITION OF LAW CORRECTLY IN THIS REGARD. ITA NO.1052/AHD/2017 DCIT VS. M/S.SURAJ LIMITED ASST .YEAR - 2009-10 - 7 - 9. CONJOINTLY, WE ALSO TAKE A NOTE OF A PERTINENT F ACT THAT THE ASSESSEE HAS DECLARED SHORT TERM CAPITAL LOSS OF RS.175.50 LAKHS AND LONG TERM CAPITAL GAIN OF RS.297.13 LAKHS WHICH EXCEEDS THE A FORESAID SPECULATIVE LOSS OF RS.245.42 IN QUESTION AND, THEREFORE A DEBA TE MAY ALSO ARISE ABOUT THE APPLICABILITY OF EXPLANATION TO SECTION 73 ITSE LF IN THE GIVEN FACTS HAVING REGARD TO THE DECISION OF SPECIAL BENCH IN A CIT VS. CONCORD COMMERCIALS (P.) LTD. [2005] 95 ITD 117 (MUM.)[SB]. THUS, IN THE TOTALITY OF CIRCUMSTANCES, THE ACTION OF THE ASSESS EE CANNOT BE REGARDED AS MALAFIDE TO FALL WITHIN THE MISCHIEF OF SECTION 271 (1)(C) OF THE ACT. THEREFORE, WE CONCUR WITH THE CONCLUSION DRAWN BY T HE CIT(A). WE THUS DECLINE TO INTERFERE. HENCE, THE GROUND RAISED BY THE REVENUE CONTESTING REVERSAL OF PENALTY BY CIT(A) IS WITHOUT MERIT. 10. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. THIS ORDER PRONOUNCED IN OPEN COURT ON 14/05/2019 SD/- SD/- (MS.MADHUMITA ROY) (PRADIP KUMAR K EDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 14/05/2019 &.., .(.. / T.C. NAIR, SR. PS ITA NO.1052/AHD/2017 DCIT VS. M/S.SURAJ LIMITED ASST .YEAR - 2009-10 - 8 - / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. )*+ , / CONCERNED CIT 4. , ( ) / THE CIT(A)-XIV, AHMEDABAD 5. /01 ((*+ , *+# , ) / DR, ITAT, AHMEDABAD 6. 145 6 / GUARD FILE. / BY ORDER, / ( //TRUE COPY// / ( DY./ASSTT.REGISTRAR) $%, / ITAT, AHMEDABAD 1. DATE OF DICTATION ..6.5.19 (DICTATION PAD 17-PAG ES ATTACHED AT THE END OF THIS APPEAL-FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 6.5.19 3. OTHER MEMBER 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S.14.5.19 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 14.5.19 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER