DCIT CC-11 (1), V. Indian Sugar Exim Corp. Ltd,

ITA 1217/DEL/2008

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 1337 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 6 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-10-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 12-10-2009
• Assessment Year: 1999-2000
• Appeal Filed On: 04-04-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K SINHA
• Assessee Lawyers: RAKESH GUPTA
• Keywords: Question of law; Valuation report
• Section: 271(1)(c); 80HHC; 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C : NEW DELHI BEFORE SHRI D.R.SINGH, JM AND SHRI R.C.SHARMA, AM ITA NOS.3528/DEL/2007 & 1217/DEL/2008 ASSESSMENT YEARS : 2001-02 & 1999-2000 DY.COMMISSIONER OF INCOME TAX, CIRCLE-11(1), NEW DELHI. VS. M/S INDIAN SUGAR EXIM CORPORATION LIMITED, (FORMERLY INDIAN SUGAR & GENERAL INDUSTRY LIMITED), C-BLOCK, 2 ND FLOOR, ANSAL PLAZA, AUGUST KRANTI MARG, NEW DELHI. PAN NO.AAACI1163M. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI A.K.SINHA, DR. RESPONDENT BY : SHRI RAKESH GUPTA AND SHRI SUMIT JA IN. ORDER PER R.C.SHARMA, AM : THESE ARE THE APPEALS FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A) FOR AY 1999-2000 AND 2001-02, IN THE MATTER OF PENALTY IMPOSED U/S 271(1)(C) OF THE IT ACT. 2. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PER USED. FACTS IN BRIEF ARE THAT THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINES S OF EXPORT OF SUGAR. DURING THE ASSESSMENT PROCEEDINGS, VARIOUS ADDITIONS AND D ISALLOWANCES WERE MADE, WITH RESPECT TO WHICH AO ALSO LEVIED PENALTY U/S 271(1)( C) OF IT ACT. IN THE AY 2001- 02, THE AO IMPOSED PENALTY OF RS.59,54,422/- IN RES PECT OF FOLLOWING DISALLOWANCES ON THE GROUND THAT ASSESSEE CONCEALED THE PARTICULARS AND FURNISHED INACCURATE PARTICULARS. DISALLOWANCE U/S 80HHC RS.1,07,04,666/- INTEREST OF GE CAPITAL BONDS RS.22,58,875/- DISALLOWANCE U/S 14A RS.6,81,673/- ITA-3528/D/2007 & 1217/D/2008 2 DISALLOWANCE OF LEAVE ENCASHMENT LIABILITY RS.1,9 4,000/- ADDITION IN CLOSING STOCK VALUE RS.11,76,750/- CAPITALIZATION OF MOBILE PHONE RS.29,464/- CLAIM OF LONG TERM CAPITAL LOSS RS.10,001/- TOTAL RS.1,50,55,429/- 3. THE AO STATES IN THE ORDER OF PENALTY THAT THE I SSUE OF DEDUCTION U/S 80HHC HAS BEEN DECIDED AGAINST THE ASSESSEE IN THE ASSESS EES OWN CASE FOR AY 1993-94 BY THE ITAT IN APPEAL NO.4362/DEL/1996 FOLLOWING TH E DECISION OF THE SUPREME COURT IN THE CASE OF IPCA LABORATORIES VS. DCIT 266 ITR 521 AND ROHAN DYES & INTERMEDIATES LTD. VS. CIT 270 ITR 350 (BOM). IN T HAT VIEW THE AO STATES THAT THE ASSESSEES METHOD OF IGNORING TRADING LOSS IN E XPORT WAS NOT IN ORDER AND HENCE THE CLAIM OF DEDUCTION U/S 80HHC OF RS.1,07,04,666/ - IS CONTRARY TO THE SETTLED POSITION OF LAW. THE CIT(A) HAS CONFIRMED THE DISA LLOWANCE OF THE ASSESSEES CLAIM OF DEDUCTION U/S 80HHC. ACCORDINGLY, AO LEVI ED PENALTY WITH REGARD TO REDUCED AMOUNT OF CLAIM MADE U/S 80HHC. 4. BY THE IMPUGNED ORDER, CIT(A) DELETED THE PENALT Y BY OBSERVING THAT ASSESSEE HAS FILED ITS CLAIM DULY CERTIFIED BY C.A. IN FORM 10CCAC DATED 18.10.2001. BONA-FIDE CLAIM WAS MADE BY THE ASSESS EE AND MERELY BECAUSE OF REDUCTION IN AMOUNT OF DEDUCTION, NO PENALTY WAS AT TRACTED. 5. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND FOU ND THAT BECAUSE OF SET OFF OF TRADING LOSS IN EXPORT, THERE WAS NO POSITIVE IN COME THEREFORE ASSESSEES CLAIM FOR DEDUCTION U/S 80HHC WAS NOT ELIGIBLE IN VIEW OF DECISION OF HON'BLE SUPREME COURT IN THE CASE OF IPCA LABORATORIES DELIVERED ON 11 TH MARCH, 2004 AND REPORTED AT 266 ITR 591. HOWEVER, THE ASSESSEE HAD FILED ITS RETURN ON 30 TH OCTOBER, 2001. THERE WAS GREAT CONTROVERSY WITH RE GARD TO ALLOWING THE CLAIM OF DEDUCTION U/S 80HHC WHEN THERE IS NO POSITIVE INCOM E U/S 80HHC(3). THE CONTROVERSY WAS RESOLVED ONLY AFTER DECISION IN IPC A LABORATORIES ON 11 TH MARCH, 2004 WHEREAS IN THE INSTANT CASE, THE ASSESSEE HAS FILED ITS RETURN OF INCOME ON ITA-3528/D/2007 & 1217/D/2008 3 30.10.2001, WHEREIN BONA-FIDE CLAIM WAS MADE ON THE BASIS OF LEGAL OPINION OBTAINED FROM BANSI S.MEHTA, CA. THE CLAIM WAS MAD E AS PER AUDIT REPORT IN FORM 10CCAC. THE VIEW THAT THE ASSESSEE COULD TREA T THE NEGATIVE FIGURE OF EXPORT TURNOVER LESS DIRECT AND INDIRECT COST AT NI L AND COMPUTE DEDUCTION U/S 80HHC ON THE 90% OF THE EXPORT INCENTIVE HAD BEEN A CCEPTED IN VARIOUS JUDGEMENTS SUCH AS HINDUSTAN FASHIONS LTD. VS. ACIT 61 TTJ 734 (AHD), PRATIBHA SYNTES LTD. 63 TTJ 409 (AHD), A.M.MOOSA VS . ACIT 54 TTJ 193 (COCHI), AVON CYCLES LTD. VS. ACIT 59 TTJ 75 (CHD), AND LALSONS ENTERPRISES 89 ITD 25 (DEL)(SB). IN ITS OWN CASE FOR AY 1992-93, THE ITAT HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE ON THE CLAIM OF DED UCTION U/S 80HHC VIDE ORDER DATED 26.2.2001. THUS, IT IS CLEAR THAT THERE WAS DIVERGENT OPINIONS ON NEGATIVE PROFITS IN ANY ONE LIMB OF ACTIVITIES CONTEMPLATED U/S 80HHC AND THIS CONTROVERSY WAS SET AT REST BY HON'BLE SUPREME COURT BY DELIVER ING JUDGMENT IN IPCA LABORATORIES. WE ALSO FOUND THAT IN ASSESSEES OWN CASE DEPARTMENTAL APPEAL AGAINST THE ITATS ORDER, THE ISSUE OF DEDUCTION U/ S 80HHC WAS ADMITTED WHICH CLEARLY SHOWS THAT THE ISSUE INVOLVED IS SUBSTANTIA L QUESTION OF LAW. IN THE INSTANT CASE, THE ASSESSEE HAD FILED RETURN ON 30.10.2001, WHICH IS MUCH PRIOR TO THE DATE OF SUPREME COURT ORDER PRONOUNCED ON 11.3.2004. EX ACTLY ON SIMILAR ISSUE, HON'BLE DELHI HIGH COURT VIDE ITS ORDER DATED 4.9.2 009 IN ITA 619/2009, THE APPEAL OF THE REVENUE WAS DISMISSED AS NO SUBSTANTI AL QUESTION OF LAW ARISE OUT OF THE ORDER OF THE TRIBUNAL. THE HONBLE COURT OBSER VED AS UNDER:- ADMITTED FACTS ARE THAT THE ASSESSEE HAD FILED RET URN ON 28 TH NOVEMBER, 2003 WHEREAS THE JUDGMENT OF SUPREME COUR T IN THE CASE OF IPCA LABORATORY LTD. VS. DCIT (2004), 266 ITR 52 1 WAS DELIVERED ON 11 TH MARCH, 2004 WHICH IS SUBSEQUENTLY CLARIFYING THE CERTAIN ISSUES IN RESPECT OF WHICH THE ASSESSEE HAD CLAIMED DEDUCTIONS. BEFORE THE AFORESAID JUDGMENT, THOSE I SSUES REMAIN HIGHLY DEBATABLE AND THEREFORE, THE ITAT RIGHTLY PO INTED OUT THAT IT IS NOT A CASE WHERE THERE WAS ANY CONCEALMENT OF MATER IAL FACTS OR NOT FURNISHING OF FULL PARTICULARS. WE ARE, THEREFORE, OF THE OPINION THAT NO SUBSTANTI AL QUESTION OF LAW ARISES. ITA-3528/D/2007 & 1217/D/2008 4 ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE OR DER OF CIT(A) FOR DELETING PENALTY WITH RESPECT TO REDUCED AMOUNT OF DEDUCTION ALLOWED U/S 80HHC. 6. THE AO MENTIONS IN RESPECT OF ACCRUED INTEREST O N GE CAPITAL BONDS AND DEBENTURES THAT SUCH INTEREST WAS REQUIRED TO BE RE FLECTED IN THE ACCOUNTS, SINCE THE APPELLANT FOLLOWS MERCANTILE BASIS OF ACCOUNTING. THAT IT HAD OFFERED TO TAX AN AMOUNT OF RS.22,58,875/- IN COURSE OF ASSESSMENT PR OCEEDINGS. THE AO STATES THAT HIS VIEW ON THE TAXABILITY OF THE AMOUNTS OF INTERE ST ON ACCRUAL BASIS HAS BEEN VINDICATED BY THE CIT(A). HAD THERE BEEN NO SCRUTI NY ASSESSMENT, THE AMOUNT OF INTEREST ON GE CAPITAL BONDS/DEBENTURES WOULD HAVE ESCAPED FROM TAXATION ALL TOGETHER. THE PENALTY SO LEVIED WAS DELETED BY THE CIT(A) BY OBSERVING THAT THE ASSESSEE VIDE ITS LETTER DATED 14.8.2003 TO THE AO CLARIFIED THAT IT HAD PURCHASED 10 DEBENTURES FOR RS.1.39 CRORES DURING AY 1999-2000. THAT IT WAS HOLDING PART A DEBENTURES, WHICH ARE REDEEMABLE AT PAR IN ONE INST ALLMENT ON 14.12.2003. THAT THE TREASURY OPERATION CONTROLLER OF GE CAPITAL SER VICE VIDE LETTER DATED 23.2.2000 INFORMED THE ASSESSEE THAT THE ASSESSEE W AS ENTITLED TO THE REDEMPTION OF THE PRINCIPLE DUE AGAINST THE DEBENTURES AND NOT EN TITLED TO ANY INTEREST COUPON PAYMENTS, AND THAT THE DEBENTURES SHALL BE REDEEMED AT PAR IN ONE INSTALLMENT ON 14.12.2003. IN VIEW OF THIS, THE CIT(A) FOUND THAT SUFFICIENT COGENT EXPLANATION WAS FURNISHED BY THE ASSESSEE IN ORDER TO REINFORCE THE POSITION THAT INTEREST ON ACCRUAL BASIS ON GE CAPITAL DEBENTURES COULD NOT HA VE BEEN MADE A PART OF THE TAXABLE INCOME. IN VIEW OF THE FINDING RECORDED BY THE CIT(A), WE ARE OF THE CONSIDERED VIEW THAT ASSESSEE WAS UNDER A BONA-FIDE BELIEF THAT INTEREST ON THE GE CAPITAL BONDS WAS NOT TAXABLE ON ACCRUAL BASIS ON T HE STRENGTH OF THE PRESS NOTE DATED 20.3.2002. CIRCULAR NO.2/2002 DATED 15.2.200 2 IN RESPECT OF DETERMINATION OF INTEREST ACCRUED ON BONDS ETC. AS PER PRESS NOTE DATED 20.3.2002 WOULD BE APPLICABLE FOR ISSUES AFTER THE DATE OF THE CIRCULA R, AND IN THAT VIEW SINCE THE ASSESSEE HAD INVESTED IN THE BONDS DURING AY 1999-2 000 AND WAS ENTITLED TO RECEIVE FULL VALUE OF CONSIDERATION IN ONE INSTALLM ENT IN 2003, INTEREST ON ACCRUAL ITA-3528/D/2007 & 1217/D/2008 5 BASIS IN RESPECT OF BONDS COULD NOT BE MADE TAXABLE FOR THE RELEVANT ASSESSMENT YEAR. ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) FOR DELETING THE PENALTY WITH RESPECT TO ACCRUAL OF INT EREST ON DEBENTURES. 7. IN RESPECT OF ASSESSEES DISALLOWANCE OF CLAIM O N ACCOUNT OF LEAVE ENCASHMENT LIABILITY, WE FOUND THAT THE CLAIM HAD B EEN MADE AS PER THE STATED POLICY MENTIONED IN THE AUDITED ACCOUNTS. THE CIT( A) IN QUANTUM APPEAL NO.266/03-04 AT PARA 5.3 THEREOF DIRECTED THAT THE APPELLANT SHOULD BE ALLOWED TO CLAIM LIABILITY OF LEAVE ENCASHMENT ON ACTUARIAL VA LUATION. IN VIEW OF THESE OBSERVATIONS IN QUANTUM PROCEEDINGS, WHILE DECIDING THE LEVIABILITY OF PENALTY ON SUCH DISALLOWANCE, THE CIT(A) OBSERVED THAT FAILURE OF ASSESSEE TO PUT FORTH THE VALUATION CERTIFICATE IN ORDER THAT ITS CLAIM OF LI ABILITY OF RS.1.94 LAKHS IS TO BE ALLOWED, COULD BE A CASE OF TECHNICAL OR VENIAL BRE ACH OF LAW AND SHOULD NOT HAVE BEEN A MATTER OF IMPOSITION OF PENALTY FOR CONCEALM ENT. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) FOR DELETING THE P ENALTY IMPOSED WITH REGARD TO DISALLOWANCE OF CLAIM OF LEAVE ENCASHMENT, WHICH WA S DUE TO NON FURNISHING OF ACTUARIAL VALUATION REPORT. 8. WITH REGARD TO PENALTY IMPOSED FOR THE ADDITION IN CLOSING STOCK VALUED BY THE AO, WE FOUND THAT THE TRIBUNAL HAS DELETED THE ADDITION IN THE QUANTUM APPEAL FOR AY 2001-02 VIDE ORDER DATED 5.12.2008. AS THE QUANTUM ITSELF HAS BEEN DELETED, PENALTY IMPOSED THEREON HAS NO LEGS TO STA ND. ACCORDINGLY, THERE IS NO INFIRMITY FOR DELETING THE PENALTY WITH RESPECT TO SUCH AN ADDITION. 9. WITH RESPECT TO DISALLOWANCE OF EXPENDITURE ON M OBILE PHONE AMOUNTING TO RS.29,464/- ON THE PLEA OF SAME BEING CAPITAL IN NA TURE, WE FOUND THAT EXPENDITURE WAS ON REPLACEMENT OF OLD MOBILE IN VIEW OF CHANGE IN TECHNOLOGY. CLAIM OF SUCH EXPENDITURE DOES NOT AMOUNT TO FURNISHING OF INACCU RATE PARTICULARS, THEREFORE NO PENALTY IS LEVIABLE ONLY BY TREATING SUCH EXPENDITU RE AS CAPITAL IN NATURE. ITA-3528/D/2007 & 1217/D/2008 6 10. WITH REGARD TO REDUCTION IN THE CLAIM OF LONG T ERM CAPITAL LOSS OF RS.10,001/-, WE FOUND THAT ASSESSEE ITSELF FILED A LETTER ASKING TO REDUCE THE LOSS IN VIEW OF THE CLERICAL ERROR IN COMPUTATION. ACCORDI NGLY, THERE IS NO JUSTIFICATION FOR ANY PENALTY BEING LEVIED FOR SUCH CORRECTION BEING PROPOSED BY THE ASSESSEE HIMSELF. 11. WITH REGARD TO DISALLOWING OF COMMON EXPENDITUR E IN THE FORM OF ADMINISTRATIVE OVERHEAD AMOUNTING TO RS.6,81,673/- BY INVOKING PROVISIONS OF SECTION 14A, WE FOUND THAT ISSUE WAS WIDELY UNDER C ONTROVERSY. ITAT DELHI BENCH IN THE CASE OF WIMCO SEEDLING 107 ITD 267 H ELD THAT NO DISALLOWANCE OUT OF COMMON EXPENDITURE CAN BE MADE. THE AMENDMENT I N SECTION 14A WARRANTING DISALLOWANCE OF EVEN COMMON EXPENDITURE WAS BROUGHT IN BY THE FINANCE ACT, 2006 W.E.F. 1.4.2007 WHICH WAS MUCH AFTER THE ASSES SEES FILING OF RETURN. FOR SUCH CONTROVERSIAL ISSUE, NO PENALTY IS WARRANTED F OR ANY DISALLOWANCE MADE BY THE AO. ACCORDINGLY, NO INTERFERENCE IS WARRANTED IN C IT(A)S ORDER FOR DELETING PENALTY FOR SUCH DISALLOWANCE. 12. IN THE RESULT, THE APPEAL OF THE REVENUE FOR AY 2001-02 IS DISMISSED. 13. IN AY 1999-2000, EXACTLY ON THE SAME ISSUE OF D EDUCTION U/S 80HHC, PENALTY WAS LEVIED, IN VIEW OF OUR DISCUSSION AT PA RA 5 OF OUR ORDER, NO PENALTY IS WARRANTED FOR SUCH DISALLOWANCE. 14. THE AO HAS ALSO LEVIED PENALTY WITH RESPECT TO CERTAIN INCOME WHICH WAS PERTAINING TO THE PRIOR PERIOD, NOT OFFERED IN THE RETURN OF INCOME. FROM THE RECORD, WE FOUND THAT THE ASSESSEE HAD SHOWN PRIOR PERIOD ITEMS SEPARATELY IN THE P&L APPROPRIATION ACCOUNT. DURING THE ASSESSMENT P ROCEEDINGS, IT HAD REQUESTED THAT IN CASE PRIOR PERIOD INCOME IS TO BE ADDED TO THE INCOME, THAN DEDUCTION OF PREVIOUS YEAR EXPENSES MAY ALSO BE ALLOWED. IN ALL APPELLATE PROCEEDINGS, PREVIOUS YEARS EXPENSES HAVE BEEN ALLOWED TO THE A SSESSEE. THE ASSESSEE HAD ITA-3528/D/2007 & 1217/D/2008 7 DULY DISCLOSED THE PARTICULARS OF PRIOR PERIOD INCO ME AND EXPENSES IN THE TAX AUDIT REPORT ATTACHED TO THE RETURN. THE ITAT IN ALL PRE CEDING YEARS HAD DIRECTED THE AO TO ALLOW SUCH EXPENSES IN THE RESPECTIVE YEARS TO W HICH THEY PERTAIN. THUS, DISALLOWANCE OF PART OF CLAIM, CANNOT BE REGARDED A S REPRESENTING CONCEALMENT OF INCOME OR FURNISHING INACCURATE PARTICULARS. 18. TH E DETAILS OF LONG TERM CAPITAL GAIN WERE GIVEN IN THE COMPUTATION OF INCOME, WHERE AS PRIOR PERIOD INCOME WAS DULY DISCLOSED IN THE TAX AUDIT REPORT. FURTHER, T HE ASSESSEE HAS GIVEN REASONABLE EXPLANATION THAT THERE HAS BEEN LONG TERM CAPITAL G AIN, THAT PRIOR PERIOD INCOME IS NOT CHARGEABLE TO TAX AS THERE IS NET DEBIT ON ACCO UNT OF PRIOR PERIOD ITEMS. ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE OR DER OF CIT(A) FOR DELETING PENALTY AFTER RECORDING DETAILED FINDING WHICH HAS NOT BEEN CONTROVERTED BY THE LEARNED DR. 15. WITH REGARD TO LEVY OF PENALTY IN RESPECT OF RE FUND OF INSURANCE PREMIUM, WE FOUND THAT ASSESSEE WAS FOLLOWING ACCOUNTING SYS TEM WHEREIN INSURANCE CLAIM WAS RECOGNIZED AS INCOME IN THE YEAR OF RECEIPT IN VIEW OF UNCERTAINTY WITH RESPECT TO THE ULTIMATE COLLECTION. THE SIGNIFICANT ACCOUN TING POLICY FORMING PART OF THE ASSESSEES AUDITED ACCOUNTS SUPPORTS THE CASE OF TH E ASSESSEE. EVEN IN THE AUDIT REPORT FOR THE YEAR UNDER CONSIDERATION, THE ASSESS EE HAD MADE SPECIFIC DISCLOSURE WITH REGARD TO ACCOUNTING OF INSURANCE REFUND. ACC ORDINGLY, NO PENALTY IS WARRANTED FOR SUCH ADDITION. IT IS AN UNDISPUTED F ACT THAT REFUND OF INSURANCE PREMIUM WAS ACCOUNTED FOR IN THE YEAR OF ACTUAL REC EIPT AND OFFERED TO TAX IN THE IMMEDIATELY SUCCEEDING ASSESSMENT YEAR. 16. WITH REGARD TO LEVY OF PENALTY ON THE PROFIT ON SALE OF INVESTMENT, WE FOUND THAT IN THE COMPUTATION OF INCOME, PROFIT ON SALE O F INVESTMENT HAS BEEN SHOWN, WHICH HAS BEEN ADJUSTED IN FULL AGAINST BROUGHT FOR WARD CAPITAL GAIN, AND AN AMOUNT OF RS.2,65,56,306/- HAS BEEN OFFERED UNDER L ONG TERM CAPITAL GAIN TO SUBSEQUENT YEARS. IN COURSE OF ASSESSMENT PROCEEDI NGS, DEBIT VOUCHER NO.908 DATED 3.1.1998 WAS FURNISHED, SHOWING INTER ALIA PU RCHASE OF 12.00 LAKHS ESCORTS ITA-3528/D/2007 & 1217/D/2008 8 MUTUAL BONDS YIELDING 14.5% PER ANNUM AND WHICH WAS SAID TO BE REDEEMABLE AFTER ONE YEAR. IN THE DEAL CONFIRMATION NOTE DATE D 6.1.1998 OF ESCORTS FINANCE LTD., THE ISSUING COMPANY HAS CONFIRMED PURCHASE BY THE ASSESSEE OF 12.00 LAKHS ESCORTS INCOME BONDS AS PER SETTLEMENT DATE OF 6.1. 1998 GIVEN IN THAT DAYS CONFIRMATION NOTE. AS PER CREDIT VOUCHER NO.108 DA TED 7.1.1999, THE BONDS HAVE BEEN DISINVESTED FOR RS.1,65,48,000/-. THE PAY IN SLIP OF SYNDICATE BANK DATED 7.1.1999 SHOWS THAT THE CHEQUE OF RS.1,65,48,000/- DRAWN ON BANK OF RAJASTHAN, JANPATH, NEW DELHI HAS BEEN DEPOSITED IN THE ASSESS EES ACCOUNT ON 7.1.1999. THE AO OBSERVED THAT DATE OF PURCHASE OF INVESTMENT IS 6.1.1998 (THE DATE AS GIVEN IN THE DEAL CONFIRMATION REPORT) AND THE REDEMPTION DA TE AS 6.1.1999 (AS PER CREDIT VOUCHER DATED 7.1.1999). ACCORDINGLY, IT WAS HELD THAT BONDS WERE HELD FOR LESS THAN ONE YEAR, THEREFORE PROFIT WAS TAXABLE AS SHOR T TERM CAPITAL GAIN. IN THIS CASE, IT IS CRYSTAL CLEAR THAT FOR COMPUTING ITS CLAIM FO R LONG TERM CAPITAL GAIN, THE ASSESSEE HAS GIVEN EXPLANATION WHICH IS UNPROVED BU T NOT DISPROVED I.E. IT IS NOT ACCEPTED BUT CIRCUMSTANCES DO NOT LEAD TO THE REASO NABLE AND POSITIVE INFERENCE THAT ASSESSEES CASE IS FALSE, THE EXPLANATION CANN OT HELP THE DEPARTMENT BECAUSE THERE WAS NO MATERIAL TO SHOW THAT THE AMOUNT IN QU ESTION WAS THE INCOME OF THE ASSESSEE. ACCORDINGLY, WHERE THE CIRCUMSTANCES DO NOT LEAD TO A REASONABLE AND POSITIVE INFERENCE THAT THE ASSESSEES EXPLANATION IS FALSE, THE ASSESSEE MUST BE HELD TO HAVE PROVED THAT THERE WAS NO MENS-REA OR G UILTY MIND ON HIS PART. FOR THIS PURPOSE, RELIANCE CAN BE PLACED ON K.C. BUILDERS 265 ITR 562. IN THE INSTANT CASE, THE CLAIM OF LONG TERM CAPITAL GAIN ON SALE O F ESCORTS BONDS WAS MADE IN THE RETURN OF INCOME. THE BASIS OF THE CLAIM WAS DISCL OSED IN COURSE OF ASSESSMENT PROCEEDINGS AS PER THE EVIDENCES IN FORM OF DEBIT V OUCHER DATED 3.1.1998 AND BANK PAY IN SLIP DATED 7.1.1999. WHEREAS THE FORMER WAS SAID TO INDICATE THE DATE OF PURCHASE OF INVESTMENT, THE LATTER INDICATED THE DA TE OF SALE. THE AO ON THE CONTRARY WENT BY THE DEAL CONFIRMATION NOTE OF THE ISSUING COMPANY AND CREDIT VOUCHER DATED 8.1.1999. HOWEVER, THE FACT THAT THE ASSESSEE HAD ISSUED CHEQUE DATED 3.1.1998 FOR PURCHASE OF THE INVESTMENT, AND THAT IT HAD RECEIVED CHEQUE DATED 6.1.1999 ON REDEMPTION OF INVESTMENT IS ALSO UNCONTROVERTED. THUS, WHILE ITA-3528/D/2007 & 1217/D/2008 9 TAKING DEAL OF CONFIRMATION AS THE DATE OF INVESTME NT AND THE DATE OF ISSUANCE OF CHEQUE AS THE DATE OF SALE OF INVESTMENTS, THE PERI OD OF HOLDING SHOULD BE COMPUTED ON THE BASIS OF DEBIT VOUCHER AND THE DATE OF CREDIT VOUCHER CANNOT BE CONSTRUED AS AN ACT OF CONCEALMENT. THUS, THERE WA S A BONA-FIDE EXPLANATION TO SUPPORT ASSESSEES CONTENTION WITH REGARD TO ITS CL AIM OF LONG TERM CAPITAL GAIN ON REDEMPTION OF ESCORTS BONDS. IT IS ALSO A MATTER O F RECORD THAT ASSESSEE WAS HAVING SUFFICIENT BROUGHT FORWARD CAPITAL LOSS AND THE COM PUTATION OF CAPITAL GAIN IN THE NATURE OF SHORT TERM CAPITAL GAIN FOR THE YEAR UNDE R CONSIDERATION, ONLY REDUCE THE CLAIM OF CAPITAL LOSS TO BE CARRIED FORWARD AND WIL L NOT HAVE ANY IMPACT TOWARDS DETERMINATION OF TAX FOR THE YEAR UNDER CONSIDERATI ON. ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) FOR DELETING T HE PENALTY IMPOSED WITH REFERENCE TO LONG TERM CAPITAL GAIN SHOWN BY THE AS SESSEE. 17. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE ARE DISMISSED. DECISION PRONOUNCED IN THE OPEN COURT ON 23 RD OCTOBER, 2009. SD/- SD/- (D.R.SINGH) (R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 23.10.2009. VK. COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT DEPUTY REGISTRAR