ITO, Ward - 11(1), Kolkata V. Principal Officer, M/s. Alliance Stock Broking Ltd., Kolkata

ITA 1316/KOL/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 2458 (ITAT-KOLKATA)
• Duration Of Justice: 11 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-07-2010
• Appeal Filed By: Department
• Bench Allotted: C
• Next Hearing Date: 25-02-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 30-07-2009
• Court: TRIBUNAL
• Department Lawyers: MRS JYOTI KUMARI
• Assessee Lawyers: R SALARPURIA
• Keywords: Reasonable cause
• Section: 143(3)

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : KOLKATA ( (( ( ) )) ) . .. . . . . . , ,, , ! ! ! ! '#$ '#$ '#$ '#$ . .. .% %% % . . . . &' &' &' &', , , , () () () () [BEFORE HONBLE SHRI G. D. AGRAWAL, VP & HONBLE SR I D. K. TYAGI, JM] $* $* $* $* / ITA NO. 1316 /KOL/2009 +, #-. +, #-. +, #-. +, #-./ // / ASSESSMENT YEAR : 2004-05 INCOME-TAX OFFICER, WD-11(1), KOLKATA -VS- M/S. AL LIANCE STOCK BROKING LTD. (PA NO. AAFCA 4601 Q) (01 / APPELLANT ) (2&01/ RESPONDENT ) FOR THE APPELLANT: MRS. JYOTI KUMARI FOR THE RESPONDENT: SHRI R. SALARPURIA (%3 / ORDER PER D. K. TYAGI, JM ( . . . . % %% % . . . . &' &' &' &', () ) THE APPEAL PREFERRED BY THE REVENUE IS DIRECTED AG AINST THE ORDER OF THE LD. CIT(A), KOLKATA DATED 06.05.2009 FOR THE ASSESSMEN T YEAR 2004-05 IN CANCELING THE PENALTY LEVIED U/S. 271(1)(C) ON THE DISALLOWANCE O F RS.93,55,248/- CLAIMED BY THE ASSESSEE AS REVENUE LOSS. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FI LED ITS LOSS RETURN ON 29.10.2004 OF (-) RS.2,59,08,100/- DURING THE ASSESSMENT PROCEED INGS, THE AO FOUND THAT THE ASSESSEE HAD DEBITED IN THE P & L ACCOUNT A SUM OF RS.2,60,61,049/- ON ACCOUNT OF DECRETION IN VALUE OF INVESTMENTS (WRITTEN OFF). S INCE THE ASSESSEE WAS HOLDING THE INVESTMENTS IN DIFFERENT SHARES AS INVESTMENTS AND NOT AS STOCK IN TRADE, IT WAS ASKED TO THE ASSESEE TO EXPLAIN AS TO WHY THE AFORESAID CLAI M OF DECRETION IN THE VALUE OF INVESTMENTS SHOULD NOT BE TREATED TO BE OF CAPITAL IN NATURE AND AS SUCH WHY THE SAID AMOUNT SHOULD NOT BE DISALLOWED TO BE DEBITED TO T HE P & L ACCOUNT. THE ASSESSEE FAILED TO FURNISH ANY CREDIBLE AND SATISFACTORY EXP LANATION IN THIS REGARD AND CONSEQUENTLY THE ASSESSMENT OF TOTAL INCOME OF THE ASSESEE FOR THE ASSESSMENT YEAR UNDER CONSIDERATION WAS MADE U/S. 143(3) OF THE ACT BY DISALLOWING THE SAID SUM OF RS.2,60,61,049/- AS AN ITEM WHICH COULD NOT BE DEBI TED TO THE P & L ACCOUNT INASMUCH AS THE SAME WAS A LOSS WHICH WAS CAPITAL IN NATURE. PENALTY PROCEEDINGS U/S. 271(1)(C) OF THE ACT WAS INITIATED DURING THE ASSESSMENT PROC EEDINGS FOR THE ABOVE MENTIONED ADDITION AS IT WAS HELD THAT THE ASSESSEE HAD FURNI SHED INACCURATE PARTICULARS OF INCOME 2 WITHIN THE MEANING OF SECTION 271(1)(C) OF THE ACT. IN APPEAL, THE LD. CIT(A) HELD AS UNDER : 1.5. ACCORDING TO THE NOTES ON ACCOUNT, THE LOSS W AS ON ACCOUNT OF DIMINUTION IN THE VALUE OF INVESTMENT IN THE SHARES OF ALLIANCE FINLE ASE LTD. ACCORDING TO THE AUDITED ACCOUNTS OF THE SAID COMPANY I.E. ALLIANCE FINLEASE LTD. EROSION IN THE VALUE OF ITS SHARES WAS MAINLY ATTRIBUTABLE TO THE EROSION IN TH E VALUE OF SHARES OF THE COMPANIES WHEREIN IT HAD INVESTED. THERE WAS SIMILAR EROSION IN THE VALUE OF INVESTMENT OF THE OTHER COMPANIES. THERE ARE ALSO INSTANCES OF CROSS INVESTMENT. OVERALL, IT APPEARS THAT THE GROUP ITSELF HAD SUFFERED EROSION IN THE VALUE OF ITS SHARE CAPITAL. TO THAT EXTENT, THE ASSESSEES PLEA THAT THE EROSION IN THE VALUE OF IT S SHARE INVESTMENT WAS GENUINE AND THAT THERE WAS NO INTENTION TO CONCEAL PARTICULARS OF ANY INCOME OR EVADE TAX APPEARS TO BE CORRECT. THE COMPANY HAS ALMOST WIPED OUT ITS NE T WORTH AND IS UNDER LIQUIDATION. CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTA NCES OF THE CASE DISCUSSED ABOVE AND THE CASE LAW RELIED UPON BY THE ASSESSEE, IT IS HEL D THAT THERE WAS REASONABLE CAUSE FOR PROVIDING FOR DIMINUTION IN THE VALUE OF THE ASSETS AND CLAIMING IT AS AN EXPENDITURE. SINCE THE RELEVANT PARTICULARS WERE FURNISHED IN TH E RETURN OF INCOME AND ALLOWABILITY OF DEDUCTION WAS A DEBATABLE ISSUE, IT WAS NOT A FIT C ASE FOR IMPOSITION OF PENALTY U/S. 271(1)(C) OF THE INCOME-TAX ACT. CONSEQUENTLY, THE PENALTY IS CANCELLED. AGGRIEVED BY THE SAID ORDER, NOW THE REVENUE IS IN APPEAL BEFORE US. 3. AT THE TIME OF HEARING BEFORE US, THE LD. DR REL IED ON THE ORDER OF THE AO AND PRAYED BEFORE THE BENCH TO CONFIRM HIS ACTION. 4. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSES SEE WHILE REITERATING HIS SAME SUBMISSIONS AS SUBMITTED BEFORE THE LOWER AUTHORITI ES RELIED ON THE ORDER OF THE LD.CIT(A) AND URGED BEFORE THE BENCH TO CONFIRM HIS ACTION. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE LD. CIT(A) AFTER CONSIDER ING THE ASSESEES EXPLANATION HAS DELETED THE PENALTY VIDE FINDING RECORDED IN PARA 1 .5 OF HIS ORDER WHICH WE HAVE REPRODUCED ABOVE. IN THE ABSENCE OF ANY CONTRARY M ATERIAL BROUGHT ON RECORD BY THE REVENUE AGAINST THE FINDING OF THE LD. CIT(A) AND I N THE LIGHT OF THE ASSESSEES EXPLANATION WHICH WAS ALSO NOT CONTROVERTED BY THE REVENUE, WE ARE INCLINED TO UPHOLD THE FINDING OF THE LD. CIT(A) IN DELETING THE PENAL TY MADE U/S. 271(1)(C) OF THE ACT AND ACCORDINGLY, THE APPEAL OF THE REVENUE IS DISMISSED . 7. IN THE RESULT, THE APPEAL OF THE REVENUE STANDS DISMISSED. ORDER IS PRONOUNCED IN THE COURT ON 16.7.10 SD/- SD/- . .. . . . . . , , , , ! ! ! ! . . . . % %% % . . . . &' &' &' &', , , , () (G. D. AGRAWAL) (D. K. TYAGI) VICE PRESIDENT JUDICIAL MEMBER ( (( (4 4 4 4) )) ) DATED : 16 TH JULY, 2010 #56 +7 +8# JD.(SR.P.S.) 3 (%3 9 2++: %:-;- COPY OF THE ORDER FORWARDED TO: 1. 01 /APPELLANT ITO, WARD-11(1), KOLKATA. 2. 2&01 /M/S. ALLIANCE STOCK BROKING LTD., FLAT NO. 302, 28 /2, SHAKESPEARE SARANI, KOLKATA-17. 3. +3 / THE CIT, KOLKATA 4. +3 ()/ THE CIT(A), KOLKATA 5. #=+' 2+ / DR, KOLKATA BENCHES, KOLKATA &: 2+/ TRUE COPY, (%3>/ BY ORDER, $ /DEPUTY REGISTRAR .