MR. CHANDERSHEKHAR KAPUR, Mumbai V. I.T.O. WARD - 16(1)(1) , Mumbai

ITA 1118/MUM/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 3462 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-04-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2009-2010
• Appeal Filed On: 27-02-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: VIPUL MODY
• Keywords: Bonafide mistake
• Section: 271(1)(c); 273B; 143(3); 2

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL C BENCH MUMB AI BEFORE SHRI G.S. PANNU, VICE-PRESIDENT AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO. 1118/MUM/2018 (ASSESSMENT YEAR 2009-10 ) MR CHANDERSHEKHAR KAPUR A- 5, BEACH HOUSE, GANDHI GRAM ROAD, JUHU, MUMBAI-400001. PAN: AACPK9387Q VS. ITO, WARD 16(1)(1), AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-400020 APPELLANT RESPONDE NT APPELLANT BY : SHRI NITESH JOSHI & VIPUL MODY (AR) RESPONDENT BY : SHRI PRAMOD NIKALJE (DR) DATE OF HEARING : 23.04.2019 DATE OF PRONOUNCEMEN T : 30.04.2019 ORDER UNDER SECTION 254(1)OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER; 1. THIS APPEAL BY ASSESSEE UNDER SECTION 253 OF INCOME -TAX ACT (ACT) IS DIRECTED AGAINST THE ORDER OF LD. COMMISSIONER OF I NCOME-TAX (APPEALS)-6, MUMBAI [HEREINAFTER REFERRED AS LD. CO MMISSIONER (APPEALS) DATED 18.12.2017 FOR ASSESSMENT YEAR 2009 -10. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEA L: (1) THE LEARNED COMMISSIONER (APPEALS) ERRED IN UPHOLDI NG THE ORDER OF ASSESSING OFFICER LIVING PENALTY OF RS. 1,28,898/-U NDER SECTION 271(1)(C) OF THE ACT. IT IS SUBMITTED THAT APPELLANT HAD FURNISHED FULL A ND CORRECT PARTICULARS OF ITS INCOME. THE APPELLANT HAS NEITHER CONCEALED THE PARTICULARS OF ITS INCOME NOR HAVE FURNISHED INACCURATE PARTICULARS OF SUCH INCOME AND THEREFORE, NO PENALTY CAN BE LEVIED UNDER SECTION 2 71(1)(C) OF THE INCOME TAX ACT, 1961. MR CHANDERSHEKHAR KAPUR ITA NO.1118/M/2018 AY 2009-10 2 (2) THE APPELLANT RESERVES THE RIGHT TO ADD TO, ALTER O R AMEND THE GROUNDS OF APPEAL. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A FILM DIRECTOR, FILED ITS RETURN OF INCOME FOR ASSESSMENT YEAR 2009-10 DECLAR ING TOTAL INCOME AT RS. 2,89,957/-. THE RETURN OF INCOME WAS SELECTED F OR SCRUTINY AND ASSESSMENT ORDER WAS PASSED UNDER SECTION 143(3) OF THE ACT ON 18 TH NOVEMBER 2011. THE ASSESSING OFFICER WHILE PASSING THE ASSESSMENT ORDER DISALLOWED SHORT-TERM CAPITAL LOSS (STCL) ON ACCOUN T OF DIVIDEND STRIPPING OF RS. 2,05,631/- AND LONG-TERM CAPITAL L OSS (LTCL) OF RS. 5,97,909/-. ON APPEAL BEFORE LEARNED COMMISSIONER ( APPEALS) BOTH THE ADDITIONS/DISALLOWANCES WERE CONFIRMED. THE ASSESSI NG OFFICER WHILE PASSING THE ASSESSMENT ORDER INITIATED PENALTY PROC EEDING UNDER SECTION 271(1)(C) FURNISHING INACCURATE PARTICULARS OF INC OME. THE ASSESSING OFFICER ISSUED SHOW CAUSE NOTICE DATED 28 TH NOVEMBER 2014 FOR LEVYING PENALTY UNDER SECTION 271(1)(C). THE ASSESSEE FILED ITS REPLY DATED 31 ST DECEMBER 2014, STATING THAT CLAIM OF SHORT-TERM CAP ITAL LOSS WAS BONAFIDE IN NATURE AND THAT REDUCTION TO CARRY FORWARD OF S HORT-TERM CAPITAL LOSS WOULD BE TAX NEUTRAL FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. WITH REGARD TO THE CLAIM OF CARRY FORWARD LONG-TERM CAPI TAL LOSS THE ASSESSEE STATED THAT IT WAS WITHDRAWN BY THE ASSESSEE DURING ASSESSMENT VIDE HIS APPLICATION DATED 18 TH NOVEMBER 2011. THE ASSESSEE FURTHER STATED THAT LONG-TERM CAPITAL LOSS HAS NOT BEEN SET OFF AGAINST ANY CAPITAL GAIN IN MR CHANDERSHEKHAR KAPUR ITA NO.1118/M/2018 AY 2009-10 3 SUBSEQUENT YEARS, THEREFORE; THERE IS NO IMPACT ON THE RETURN INCOME. THE ASSESSEE PRAYED THAT NO PENALTY IS LEVIABLE ON THE ASSESSEE. THE ASSESSEE ALSO RELIED UPON THE DECISION OF HONBLE APEX COUR T IN CASE OF CIT VS RELIANCE PETROPRODUCTS PRIVATE LTD (322 ITR 158 SC) . THE EXPLANATION FURNISHED BY THE ASSESSING WAS NOT ACCEPTED BY ASSE SSING OFFICER HOLDING THAT DURING THE SCRUTINY ASSESSMENT, THE ASSESSING OFFICER INVESTIGATED THE ISSUE AND UNEARTH THE DISALLOWABILITY OF SHORT-TERM CAPITAL LOSS OF RS. 2,05,631/- UNDER SECTION 94(7). WITH REGARD TO LONG -TERM CAPITAL LOSS THE ASSESSING OFFICER HAD CONCLUDED THAT THE TRANSACTIO N WAS SUBJECT TO SECURITY TRANSACTION TAX, THE SAME WAS EXEMPTED UND ER SECTION 10(38) OF THE ACT, WHEN THE INCOME FROM LONG-TERM CAPITAL GAI N ON SUCH TRANSACTION IS NOT CONSIDERED FOR COMPUTING THE TAX LIABILITY, THE SAME PRINCIPLE APPLIES TO THE LOSS SO INCURRED ON SUCH TRANSACTION . HAD THE CASE NOT BEEN SELECTED FOR SCRUTINY AND THE ASSESSING OFFICER TRE ATED THE DETAILS FURNISHED BY ASSESSEE AS TRUE AND CORRECT, BASED TO ISSUE WOU LD HAVE GONE UNNOTICED CAUSING LOSS TO THE REVENUE. THE ASSESSING OFFICER LEVIED MINIMUM PENALTY @100% OF THE AMOUNT OF TAX SOUGHT TO BE EVA DED AND WORKED OUT THE PENALTY OF RS. 1, 28,898/- VIDE HIS ORDER DATED 29 TH JANUARY 2015. ON APPEAL BEFORE LEARNED COMMISSIONER (APPEAL), THE AC TION OF ASSESSING OFFICER WAS CONFIRMED. THUS, FURTHER AGGRIEVED BY T HE ORDER OF COMMISSIONER (APPEALS) THE ASSESSEE HAS FILED PRESE NT APPEAL BEFORE US. MR CHANDERSHEKHAR KAPUR ITA NO.1118/M/2018 AY 2009-10 4 3. WE HAVE HEARD THE SUBMISSION OF LEARNED AUTHORISED REPRESENTATIVE (AR) OF THE ASSESSEE AND LEARNED THE DEPARTMENTAL R EPRESENTATIVE (DR) FOR THE REVENUE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE LD. AR FOR THE ASSESSEE SUBMITS THAT NEITHER THE ASSESS EE CONCEALED THE PARTICULARS OF INCOME NOR FURNISHED INACCURATE PART ICULARS THEREOF. THE LD AR FOR THE ASSESSEE SUBMITS THAT MERE FACTS THAT THE CLAIMS OF THE ASSESSEE WAS NOT ACCEPTABLE TO THE ASSESSING OFFICE R OR THAT THE CLAIMS OF THE ASSESSEE WERE WRONG, BUT DISCLOSED THE SAME IN THE RETURN, WOULD NOT LEAD TO MAKE AN INFERENCE THAT THE ASSESSEE FUR NISHED INACCURATE PARTICULARS AND THE SAME ATTRACT PENALTY UNDER SECT ION 271(1)(C) OF THE ACT. IN SUPPORT OF HIS SUBMISSIONS THE LD. AR FOR T HE ASSESSEE RELIED ON THE DECISION OF HONBLE BOMBAY HIGH COURT IN CIT VS NALIN P. SHAH (HUF) [2013] 40 TAXMANN.COM 86 (BOMBAY). ON THE ISS UE OF DISALLOWANCE OF SHORT TERM CAPITAL LOSS UNDER SECTI ON 94(VII), THE LD. AR SUBMITS THAT PROVISO OF SECTION 94(VII) PRESCRIB ED THREE CONDITION NAMELY (I) BUY OR ACQUIRING ANY SECURITY OR UNIT WI THIN A PERIOD OF THREE MONTHS PRIOR TO THE RECORD DATE, (II) THE UNI TS OR SECURITIES ARE SOD FOR TRANSFER WITHIN A PERIOD OF THREE MONTH AFTER S UCH DATE OR WITHIN A PERIOD NINE MONTH AFTER SUCH DATE AND (III) THE DIV IDEND OR INCOME ON SUCH SECURITIES OR UNIT RECEIVED OR RECEIVABLE BY P ERSON IS EXEMPT. THIS INFORMATION WAS AVAILABLE IN THE PROFIT & LOSS ACCO UNT FILED ALONG WITH THE RETURN OF INCOME AND THIS MISTAKE WAS ADMI TTED DURING THE MR CHANDERSHEKHAR KAPUR ITA NO.1118/M/2018 AY 2009-10 5 ASSESSMENT. IN SUPPORT OF HIS SUBMISSION, THE LD. A R OF THE ASSESSEE RELIED UPON THE DECISION OF PRICE WATER COOPERS PVT . LTD. VS. CIT (348 ITR 306) AND DECISION OF HONBLE ANDHRA PRADESH HIG H COURT IN CASE OF CIT VS. SANIA MIRZA (ITA NO. 526 OF 2011). FOR D ISALLOWANCE OF LONG TERM CAPITAL LOSS, THE LD. AR SUBMITS THAT THE MUMBAI TRIBUNAL IN RAPTAKOS BRETT & CO. LTD. VS. DCIT [69 SOT 383 ( MUM)] HELD THAT LONG TERM CAPITAL LOSS ON SALE OF SHARES ATTRACT SH ARE TRANSACTION TAX (STT) CAN BE SET OFF AGAINST LONG TERM CAPITAL GAIN ON SALE OF LAND IN ACCORDANCE WITH SECTION 70(3). THE LD. AR F URTHER SUBMITS THAT THE ASSESSEE HAS NOT SET OFF THE LONG TERM CAPITAL LOSS AGAINST THE INCOME IN SUBSEQUENT YEAR. THE LD. AR SUBMITS THAT THE DISALLOWANCE OF LONG TERM CAPITAL LOSS WAS NOT SET OFF IN SUBSEQ UENT YEARS. THUS, THE DISALLOWANCE WAS A TAX NEUTRAL. THE LD. AR OF T HE ASSESSEE PRAYED FOR DELETING THE ENTRE PENALTY. 4. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE SUPPO RTED THE ORDER OF LOWER AUTHORITIES. THE LD. DR FURTHER SUBMITS THAT THE CLAIMS OF SHORT TERM CAPITAL LOSS AND LONG TERM CAPITAL LOSS WERE N OT A RESULT OF THE BONAFIDE MISTAKE. HAD THE CASE WAS NOT SELECTED FOR SCRUTINY, THE INCOME CHARGEABLE TO TAX WOULD HAVE ESCAPED. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF THE PART IES AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. WE HAVE AL SO DELIBERATED ON VARIOUS CASE LAWS RELIED BY LOWER AUTHORITIES AND T HE LEARNED MR CHANDERSHEKHAR KAPUR ITA NO.1118/M/2018 AY 2009-10 6 REPRESENTATIVE WHILE MAKING SUBMISSION BEFORE US. T HE ASSESSING OFFICER WHILE PASSING THE ASSESSMENT ORDER MADE THE DISALLOWANCE OF SHORT TERM CAPITAL LOSS OF RS. 2,05,631/- AND LONG TERM CAPITAL LOSS OF RS. 5,97,909/-. ON APPEAL BEFORE THE LD. CIT(A), THE DISALLOWANCES WERE CONFIRMED. THE ASSESSING OFFICER ISSUED PENALT Y PROCEEDING UNDER SECTION 271(1)(C). SHOW-CAUSE NOTICE UNDER SE CTION 271(1)(C) R.W.S. 274 DATED 28.11.2014 WAS ISSUED TO THE ASSES SEE. THE ASSESSEE FILED ITS REPLY DATED 03.12.2014. IN THE REPLY, THE ASSESSEE STATED THAT SHORT TERM CAPITAL LOSS WAS BONAFIDE AND REDUCTION OF CARRY FORWARD OF SHORT TERM CAPITAL LOSS WOULD BE TAX NEUTRAL AND COMING TO KNOW ABOUT THE MISTAKE, THE SAME WAS WITHDRAWN. FOR LONG TERM CAPITAL LOSS, THE ASSESSEE STATED THAT THE SAME WAS ALSO WI THDRAWN VIDE LETTER DATED 18.11.2011 AND THAT IT HAS BEEN SET OFF AGAIN ST CAPITAL GAIN IN SUBSEQUENT YEAR AND THERE IS NO IMPACT ON RETURN IN COME. THE CONTENTION OF ASSESSEE WAS NOT ACCEPTED BY ASSESSIN G OFFICER, THE ASSESSING OFFICER LEVIED THE PENALTY @ 100% OF TAX SOUGHT TO BE EVADED ON BOTH THE DISALLOWANCES. THE LD. CIT(A) CO NFIRMED THE ACTION OF ASSESSING OFFICER HOLDING THAT AFTER DUE AND DIL IGENT ENQUIRY, THE ASSESSING OFFICER UNEARTHED THE DISALLOWABILITY OF LOSSES. 6. WE HAVE NOTED THAT THE ASSESSEE HAS FURNISHED THE C OMPLETE DETAILS REGARDING SHORT TERM CAPITAL LOSS AND LONG TERM CAP ITAL LOSS IN ITS PROFIT & LOSS ACCOUNT. FURTHER, WHEN THE CLAIM OF A SSESSEE WAS NOT MR CHANDERSHEKHAR KAPUR ITA NO.1118/M/2018 AY 2009-10 7 ACCEPTED, THE ASSESSEE VIDE HIS LETTER DATED 18.11. 2011 SUBMITTED BEFORE ASSESSING OFFICER CONCEDED TO THE NON-ALLOWANCE OF SHORT TERM CAPITAL LOSS ON ACCOUNT OF DIVIDEND RECEIVED AND CO VERED UNDER SECTION 94(VII) OF THE ACT. SIMILARLY, THE LONG TER M CAPITAL LOSS OF RS. 5,97,909/- WAS ALSO WITHDRAWN. THESE FACTS ARE DULY RECORDED BY ASSESSING OFFICER IN PARA-5 & 6 OF THE ASSESSMENT O RDER. THE ASSESSEE WHILE FILING REPLY OF SHOW-CAUSE NOTICE ISSUED UNDE R SECTION 274 R.W.S. 271(1)(C) ALSO STATED THAT THE CLAIM OF LONG TERM C APITAL LOSS WAS WITHDRAWN AND THAT LOSS HAS NOT BEEN SET OFF AGAINS T CAPITAL GAIN IN SUBSEQUENT YEARS AND THAT THERE WAS NO IMPACT ON RE TURN INCOME. IN OUR VIEW, THE ASSESSEE HAS FURNISHED A SATISFACTORY EXP LANATION WITHIN THE MEANING OF SECTION 273B OF INCOME-TAX ACT. THEREFOR E, NO PENALTY UNDER SECTION 271(1)(C) WAS LEVIABLE AGAINST THE AS SESSEE WHEN THE ASSESSEE HAS GIVEN REASONABLE AND SATISFACTORY EXPL ANATION. WE HAVE FURTHER NOTED THAT CO-ORDINATE BENCH OF MUMBAI TRIB UNAL IN REPTAKOS BRETT & CO. LTD. (SUPRA) HELD THAT LONG TERM CAPITA L LOSS ON SALE OF SHARES ATTRACT SHARE TRANSACTION TAX (STT) CAN BE S ET OFF AGAINST LONG TERM CAPITAL GAIN ON SALE OF LAND IN ACCORDANCE WIT H SECTION 70(3). 7. THE HONBLE BOMBAY HIGH COURT IN CIT VS. NALIN P. S HAH (HUF) (SUPRA) HELD THAT WHERE THE ASSESSEE MADE CLAIM FOR LOSS ON SALE OF US- 64 UNITS, BUT DISCLOSED SAME IN THE RETURN, THERE W AS NO CONCEALMENT OF INCOME. IN VIEW OF THE ABOVE DISCUSSION, WE DO NOT FIND ANY JUSTIFIABLE MR CHANDERSHEKHAR KAPUR ITA NO.1118/M/2018 AY 2009-10 8 REASON IN LEVYING PENALTY UNDER SECTION 271(1)(C). IN THE RESULT, THE GROUNDS OF APPEAL RAISED BY ASSESSEE ARE ALLOWED. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30/04/2019. SD/- SD /- G.S. PANNU PAWAN SINGH VICE-PRESIDENT JUDICIAL MEMBER MUMBAI, DATE: 30.04.2019 SK COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. DR C BENCH, ITAT, MUMBAI 6. GUARD FILE BY ORDER, DY./ASST. REGISTRAR ITAT, MUMBAI