S.R.J. Securities Ltd., V. ITO, Ward-9(2),

ITA 1348/DEL/2004

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 2082 (ITAT-DELHI)
• Duration Of Justice: 5 year(s) 8 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-12-2009
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 07-12-2009
• Assessment Year: 1997-1998
• Appeal Filed On: 23-03-2004
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: KISHORE B
• Assessee Lawyers: VED JAIN MS RANO JAIN
• Keywords: Speculation loss
• Section: 271(1)(c)

Judgement Text

I.T.A. NO. 1348/DEL/2004 1/6 IN THE INCOME TAX APPELLATE TRIBUNAL, NEW DELHI, BENCH G BEFORE SHRI DEEPAK R. SHAH, ACCOUTANT MEMBER AND SHRI GEORGE MATHAN, JUDICIAL MEMBER ITA NO.1348 /DEL/2004 (ASSESSMENT YEAR 1997-98) M/S. SRJ SECURITIES LTD., VS. ITO, WARD 9(2), 17, NETAJI SUBHASH MARG, NEW DELHI DARYAGANJ, NEW DELHI-110 002 (APPELLANTS) (RESPONDENTS) APPELLANT BY: SHRI VED JAIN, MS.RANO JAIN, CA RESPONDENT BY: SHRI KISHORE B, SR. DR PAN / GIR NO. 117-S ORDER PER GEORGE MATHAN, JM: 1. THIS APPEAL BY THE ASSESSEE HAS BEEN PREFERRED A GAINST THE ORDER OF LD./ CIT(A) XII, NEW DELHI IN APPEAL NO.72/2003-04 DATED 27.01.2004 FOR THE ASSESSMENT YEAR 1997-98 AGAINST THE CONFIRMATION OF PENALTY LE VIED U/S 271(1)(C) OF THE ACT. SHRI VED JAIN AND MS. RA NO JIAN, CA REPRESENTED FOR THE ASSESSEE AND SHRI KISH ORE B, SR. DR REPRESENTED FOR THE REVENUE. I.T.A. NO. 1348/DEL/2004 2/6 2. IT WAS SUBMITTED BY THE LD. A.R. THAT THE ASSESS EE DID NOT WISH TO PRESS GROUND NO.5 IN THE ASSESSEES APP EAL AND CONSEQUENTLY, THE SAME IS DISMISSED AS NOT PRES SED. 3. IN RESPECT OF THE MERITS, IT WAS SUBMITTED THAT THE ASSESSEE IS A COMPANY, WHICH IS DOING THE BUSINESS OF TRADING IN SHARES AS ALSO EARNING BROKERAGE/COMMISS ION ON THE PURCHASE AND SALE OF SHARES. IT WAS THE SUBMISSION THAT DURING THE YEAR, THE ASSESSEE HAD CLAIMED NET LOSS TO THE P & L ACCOUNT ON ACCOUNT OF SHARE TRADING AT RS.34,99,611/-. IT WAS THE SUBMIS SION THAT IN THE COURSE OF ASSESSMENT THE A.O. HAD INVOK ED THE PROVISIONS OF EXPLANATION TO SECTION 73 OF THE ACT AND HAD TREATED THE LOSS ON ACCOUNT OF PURCHASE AND SALE OF SHARES AS SPECULATION LOSS. THE ASSESSEE HAD RE PLIED SUBMITTING THAT THE LOSS OF RS.34,99,611/- WAS ON ACCOUNT OF DELIVERY BASIS TRADING AND THE SAME WAS LIABLE TO BE ALLOWED TO BE ADJUSTED AGAINST THE BUS INESS INCOME AND THAT THE CLAIM WAS NOT HIT BY EXPLANATIO N TO SECTION 73 OF THE ACT. THE A.O. HAD NOT ACCEPTED T HE EXPLANATION AND HAD TREATED THE LOSS AS SPECULATION LOSS. AGGRIEVED, THE ASSESSEE HAD FILED APPEAL BEFORE THE LD. CIT(A) AND THE ITAT. IT WAS THE SUBMISSION THAT TH E ASSESSEE HAD NOT SUCCEEDED IN THE APPELLATE PROCEED INGS AND AT PRESENT THE APPEAL WAS PENDING BEFORE THE HON'BLE HIGH COURT OF DELHI. IT WAS THE SUBMISSION THAT THE A.O. HAD INITIATED PENALTY PROCEEDINGS U/S I.T.A. NO. 1348/DEL/2004 3/6 271(1)(C) OF THE ACT AND THE ASSESSEE HAD ALSO REPL IED TO THE SHOW CAUSE NOTICE ISSUED. IT WAS THE SUBMISSIO N THAT THE ISSUE AS TO WHETHER THE LOSS WAS SPECULATI ON LOSS OR A BUSINESS LOSS WAS HIGHLY DEBATABLE ISSUE AND O N SUCH DEBATABLE ISSUE NO PENALTY WAS LEVIABLE. IT WA S THE FURTHER SUBMISSION THAT THE DETAILS OF SHARE PURCHA SED AND SOLD WAS ALSO AVAILABLE IN THE ACCOUNTS AS FILE D BEFORE THE A.O. AND ALONG WITH THE RETURN. IT WAS THE SUBMISSION THAT THERE WAS NO CONCEALMENT OF INCOME NOR WAS THERE ANY FURNISHING OF INACCURATE PARTICUL ARS OF SUCH INCOME. IT WAS THE SUBMISSION THAT IT WAS ONL Y ON ACCOUNT OF EXPLANATION TO SECTION 73 OF THE ACT, WH ICH IS A HIGHLY DEBATABLE PROVISION THAT THE LOSS AS IN CURRED BY THE ASSESSEE HAS BEEN TREATED AS SPECULATION LOS S AND THE SET OFF HAS BEEN DENIED AGAINST THE BUSINESS IN COME OF THE ASSESSEE. IT WAS THE SUBMISSION THAT THE PROVISIONS OF EXPLANATION TO SECTION 73 PROVIDED FO R A DEEMING PROVISIONS AND ON SUCH DEEMING PROVISIONS, PENALTY WAS NOT EXIGIBLE. HE PLACED RELIANCE ON TH E DECISION OF HON'BLE JURISDICTIONAL HIGH COURT IN TH E CASE OF AURIC INVESTMENTS & SECURITIES LTD. REPORTE D IN 163 TAXMAN 533 TO SUPPORT HIS CONTENTION WHEREIN IT WAS HELD ON SIMILAR TREATMENT OF BUSINESS LOSS AS SPECULATION LOSS BY THE A.O. DOES NOT AUTOMATICALLY JUSTIFY INFERENCE OF CONCEALMENT OF INCOME. HE FUR THER RELIED UPON THE DECISION OF HON'BLE HIGH COURT OF I.T.A. NO. 1348/DEL/2004 4/6 MADHYA PRADESH IN THE CASE OF SPK STEELS PVT. LTD. REPORTED IN 270 ITR 1556 (M.P.) TO SUPPORT HIS CONTENTION THAT WHEN THE ASSESSEE HAD FILED PRELIMI NARY DETAILS ALONG WITH THE RETURN AND THE ASSESSEE IS E NGAGED IN THE BUSINESS OF COMMISSION AGENCY, LOSS ON ACCOU NT OF TRADING IN SHARES HAVING BEEN DISALLOWED BY INVO KING THE PROVISIONS OF EXPLANATION TO SECTION 73, NO PEN ALTY WAS LEVIABLE. IT WAS HIS PRAYER THAT THE PENALTY A S LEVIED BY THE A.O. AND AS CONFIRMED BY THE LD. CIT(A) WAS LIABLE TO BE DELETED. 4. IN REPLY, THE LD. D.R. SUBMITTED THAT THE EXPLAN ATION TO SECTION 73 WAS CLEAR AND THERE WAS NO BONA FIDE EXPLANATION PROVIDED BY THE ASSESSEE. IT WAS THE SUBMISSION THAT THE PENALTY AS CONFIRMED BY THE LD. CIT(A) WAS LIABLE TO BE UPHELD. HE VEHEMENTLY SUPPORTED THE ORDER OF THE A.O. AND THE CIT(A). 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. A PERU SAL OF THE COMPUTATION OF TOTAL INCOME AND THE DETAILS FIL ED WITH THE RETURN AS FOUND AT PAGES 1 TO 28 OF THE PA PER BOOK, CLEARLY SHOWS THAT THE ASSESSEE HAS PLACED AL L THE DETAILS OF SHARE TRANSACTION DONE BY THE ASSESSEE. THE AUDIT REPORT IN THE FORM 3C,D AS FOUND AT PAGES 15 TO 19 OF THE PAPER BOOK ALSO DO NOT TALK OF EXPLANATIO N TO SECTION 73 BEING APPLICABLE. THE TRIAL BALANCE IN RESPECT OF THE TRADING OF SHARES QUANTIFYING OF LOS S OF RS.34.99 LACS WAS ALSO PLACED BEFORE THE A.O. A I.T.A. NO. 1348/DEL/2004 5/6 PERUSAL OF THE ASSESSMENT ORDER SHOWS THAT THE A.O. HAS INVOKED THE PROVISIONS OF EXPLANATION TO SECTION 73 OF THE ACT TO TREAT THE LOSS INCURRED BY THE ASSESSEE ON ACCOUNT OF SELF TRADING IN THE SHARES TO AN EXTENT OF RS.37,40,568/- AS SPECULATIVE LOSS. A PERUSAL OF T HE REPLY AS FILED BY THE ASSESSEE IN THE COURSE OF ASSESSMENT PROCEEDINGS ALSO EXPLAINS THE REASONS GI VEN BY THE ASSESSEE FOR THE NON-APPLICABILITY OF EXPLAN ATION TO SECTION 73 OF THE ACT. THE FACT THAT THE ASSESS EE HAS INCURRED A LOSS IS NOT DISPUTED. THE QUANTUM OF TH E LOSS IS ALSO NOT DISPUTED. THE ONLY ISSUE IS WHETHER TH E DEEMING PROVISIONS OF EXPLANATION TO SECTION 73 OF THE ACT HIT THE ASSESSEE IN SO FAR AS THE BUSINESS LOSS AS INCURRED BY THE ASSESSEE IS TREATED AS SPECULATION LOSS FOR THE PURPOSE OF COMPUTATION OF TAXABLE INCOME. A PERUSAL OF THE DECISION OF HON'BLE JURISDICTIONAL H IGH COURT IN THE CASE OF AURIC INVESTMENTS & SECURITIES P. LTD. REFERRED TO SUPRA, SHOWS THAT THE HON'BLE HIGH COURT HAD UNDER SIMILAR CIRCUMSTANCES WHERE ALL THE REQUISITE INFORMATION AS REQUIRED BY THE A.O. WAS FURNISHED BY THE ASSESSEE AND THERE IS NOTHING ON R ECORD TO SHOW THAT IN FURNISHING ITS RETURN OF INCOME THE ASSESSEE HAS CONCEALED HIS INCOME OR FURNISHED ANY INACCURATE PARTICULARS OF SUCH INCOME, JUST ON ACCO UNT OF THE TREATMENT OF BUSINESS LOSS AS SPECULATION LOSS BY THE A.O. DOES NOT AUTOMATICALLY WARRANT THE INFERENCE O F I.T.A. NO. 1348/DEL/2004 6/6 CONCEALMENT OF INCOME. HERE AS IT IS NOTICED THAT THE FACTS IN THE ASSESSEES CASE ARE IDENTICAL TO THE F ACTS OF THE CASE IN THE CASE OF AURIC INVESTMENTS & SECURIT IES PVT. LTD. IN THE CIRCUMSANCES RESPECTFULLY FOLLOWI NG THE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT IN TH E CASE OF AURIC INVESTMENTS & SECURITIES PVT. LTD., W E ARE OF THE VIEW THAT THE PENALTY LEVIED U/S 271(1)(C) O F THE ACT IS NOT EXIGIBLE. IN THESE CIRCUMSTANCES, THE P ENALTY AS LEVIED BY THE A.O. AND AS CONFIRMED BY THE LD. CIT(A) STANDS DELETED. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. 7. THIS DECISION WAS PRONOUNCED IN THE OPEN COURT O N 11 TH DEC., 2009. SD./- SD./- (DEEPAK R. SHAH) (GEORGE MATHAN) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED:11 TH DEC., 2009 SP. COPY FORWARDED TO 1. APPELLANT 2. RESPONDENT 3. CIT TRUE COPY: BY ORDER 4. CIT(A) 5. DR DY. REGISTRAR, ITAT, NEW DELHI