DCIT RG 7(2), MUMBAI V. SHRISH B MODI INVESTMENT P. LTD, MUMBAI

ITA 1419/MUM/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75898 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-03-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 06-03-2014
• Assessment Year: 2004-2005
• Appeal Filed On: 01-03-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAVI PRAKASH
• Assessee Lawyers: SANJAY R PARIKH
• Keywords: Bonafide belief

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI , , , BEFORE SHRI SANJAY ARORA , ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA , JUDICIAL MEMB ER . / ITA NO. 1419 /MUM./ 2012 ( / ASSESSMENT YEAR : 20 0 4 05 ) ASSTT. COMMISSIONER OF INCOME TAX CIRCLE 7 ( 2 ), MUMBAI .. / APP ELLANT V/S M/S. SHRISH B. MODI INVESTMENT P. LTD. 83 B & C, SHE TH GOVINDRAO SMRITI DR. A.B. ROAD, WORLI, MUMBAI 400 018 .... / RESPONDENT ./ PERMANENT ACCOUNT NUMBER AAACS5493E / ASSESSEE BY : MR. SANJAY R. PARIKH / REVENUE BY : MR. RAVI PRAKASH / DATE OF HEARING 0 6 . 03 .201 4 / DATE OF ORDER 14.03.2014 / ORDER , / PER AMIT SHUKLA , J.M. THE PRESENT APPEAL HAS BEEN PREFERRED BY THE REVENUE CHALLENGING THE IMPUGNED ORDER DATED 13 TH NOVEMBER 2011 , PASSED BY THE LEARNED COMMISSIONER (APPEALS) XVIII , MUMBAI , FOR THE M/S. SHRISH B. MODI INVESTMENT P. LTD. 2 ASSESSMENT YEAR 2 0 04 05 . THE ONLY GROUND RAISED BY THE REVENUE READS AS UNDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A) ERRED IN DELETING THE PENALTY U/S 271(1)(C) IGNORING THE FACT THAT THE ASSESSEE HAD NEITHER IN THE RETURN OF INCOME NOR IN THE ACCOMPANIED DOCUMENTS, DISCLOSED THAT THE BONDS IN QUESTION WERE SOLD WITHIN THE PERIO D OF THREE MONTHS AND THE ASSESSEE DID NOT SUO MOTU DISALLOW THE SHORT TERM CAPITAL GAIN ON SALE OF THESE BONDS TO THE EXTENT OF DIVIDEND RECEIVED . 2 . FACTS IN BRIEF : THE ASSESSEE HAD PURCHASED SUNDARAM MUTUAL FUNDS FOR ` 40,00,000 ON 26 TH DECEMBER 2003, O N WHICH HE RECEIVED DIVIDEND OF ` 15,48,599. THE SAID UNITS WERE REDEEMED BY THE ASSESSEE ON 26 TH MARCH 2004 FOR ` 22,68,801 AS AGAINST THE INVESTMENT OF ` 40 LAKHS, WHICH RESULTED INTO SHORT TERM CAPITAL LOSS OF ` 17,31,198. THE DIVIDEND RECEIVED BY THE A SSESSEE OF ` 15,48,566 WAS CLAIMED AS EXEMPT. IN RESPONSE TO THE SHOW CAUSE NOTICE AS TO WHY THE SHORT TERM CAPITAL LOSS OF ` 17,31,198 SHOULD NOT BE IGNORED IN VIEW OF THE PROVISIONS OF SECTION 94( 7 ), THE ASSESSEE SUBMITTED AS UNDER: THE TRANSACTIONS, IF ENTERED WITHIN 3 MONTHS THEN THE PROVISIONS ARE ATTRACTED. IN OUR CASE PERIOD WITH 3 MONTHS EXPIRE ON 25 TH MARCH 2004 AND THE 4 TH MONTH STARTS FROM 26 3 04, THUS THE TRANSACTION IS NOT ENTERED WITHIN THREE MONTHS. HENCE, THE PROVISIONS OF SEC. 94(7) ARE NOT ATTRACTED. 3 . THE ASSESSEES EXPLANATION, HOWEVER, WAS NOT ACCEPTED ON THE GROUND THAT THE REDEMPTION OF ALL THE UNITS WAS DONE ON 26 TH MARCH 2004 WHICH IS WITHIN THE PERIOD OF THREE MONTHS FROM THE RECORD DATE OF 26 TH DECEMBER 2003. THE PERIOD OF THRE E MONTHS ENDS ONLY ON 26 TH M/S. SHRISH B. MODI INVESTMENT P. LTD. 3 MARCH 2004, THEREFORE, TH E PROVISIONS OF SECTION 94(7) GETS ATTRACTED AND, ACCORDINGLY, THE AMOUNT OF ` 15,48,595 WAS DISALLOWED , WHICH WAS THE AMOUNT OF DIVIDEND INCOME. THE PENALTY UNDER SECTION 271(1)(C) HAS BEEN LEVIED ON SUC H A DISALLOWANCE. 4 . IN THE PENALTY PROCEEDINGS, THE ASSESSEE SUBMITTED THAT THE ASSESSEE CALCULATED THE PERIOD BY COUNTING THE DAYS FROM 26 TH DECEMBER 2003 AND SUCH PERIOD OF THREE WAS EXPIRING ON 25 TH MARCH 2004, WHEREAS THE ASSESSING OFFICER HAS CALCULATE D THE PERIOD OF THREE MONTHS FROM 27 TH DECEMBER 2003 TO 26 TH MARCH 2004. THUS, THE ASSESSEE WAS TOTALLY UNDER A BONAFIDE BELIEF ON ACCOUNT OF CALCULATION OF MONTHS AND, HENCE, NO PENALTY SHOULD BE LEVIED FOR CONCEALMENT OF INCOME OR FURNISHING OF INACCURAT E PARTICULARS OF INCOME. 5 . THE LEARNED COMMISSIONER (APPEALS) DELETED THE PENALTY ON THE GROUND THAT THE ASSESSEE HAD A BONAFIDE BELIEF AND ALSO THE DISALLOWANCE IS MAINLY ON ACCOUNT OF TECHNICAL OR VENIAL BREACH OF LAW , WHICH CANNOT BE GROUND FOR LEVY OF P ENALTY UNDER SECTION 271(1)(C). 6 . BEFORE US, THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED ACCORDING TO THE PROVISIONS OF SECTION 94(7), THE LOSS CANNOT BE ALLOWED IF THE PERSON HAS SOLD THE SECURITIES WITHIN THE PERIOD OF THREE MONTHS TH E N SUCH A LOSS NEED TO BE DISALLOWED WHICH DOES NOT EXCEED THE AMOUNT OF DIVIDEND. IN THIS CASE, THE PERIOD OF THREE MONTHS THAN START FROM 27 TH DECEMBER 2003 , AS THE ASSESSEE HAD PURCHASED THE UNIT ON 26 TH DECEMBER 2003 AND THE PERIOD OF THREE MONTHS WILL EXPIRE ON 26 TH MARCH 2004. THUS, THE ASSESSEE WHO HAS SOLD THE UNIT OF MUTUAL FUNDS ON 26 TH MARCH 2003, IS WITHIN THE PERIOD OF THREE MONTHS. HE THUS, STRONGLY RELIED UPON THE ORDER OF THE ASSESSING OFFICER. M/S. SHRISH B. MODI INVESTMENT P. LTD. 4 7 . THE LEARNED COUNSEL FOR THE ASSESSEE, ON THE OTHER HAND, SUBM ITTED THAT HERE THE QUESTION IS THE CALCULATION OF THE PERIOD AND THE ASSESSEE UNDER A BONAFIDE IMPRESSION MADE THE CALCULATION OF THE PERIOD OF THREE MONTHS FROM 26 TH DECEMBER 2013 AND FROM SUCH DATE, THE PERIOD OF THREE MONTHS EXPIRES ON 25 TH MARCH 2004 AND WHEN THE ASSESSEE SOLD THE UNITS OF MUTUAL FUNDS ON 26 TH MARCH 2004, THEN CLEARLY, THE ASSESSEE WAS UNDER A BONAFIDE BELIEF THAT THE PERIOD OF THREE MONTHS HAD EXPIRED BY THAT TIME. ON THESE FACTS, IT CANNOT BE HELD THAT THE ASSESSEE IS GUILTY OF EITHE R CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. HE THUS, STRONGLY RELIED UPON THE FINDINGS GIVEN BY THE LEARNED COMMISSIONER (APPEALS). 8 . WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS, PERUSED THE ORDERS OF THE AUTHORITIES BE LOW AND THE MATERIAL AVAILABLE ON RECORD. IT IS UNDISPUTED FACT THAT THE ASSESSEE HAS PURCHASED UNITS OF SUNDARAM MUTUAL FUNDS FOR ` 40 LAKHS ON 26 TH DECEMBER 2003 , WHICH IS A RECORD DATE. O N SUCH MUTUAL FUNDS, THE ASSESSEE HAD RECEIVED DIVIDEND INCOME OF ` 15,48,598 ON 26 TH DECEMBER 2003. THE SAID UNITS HAVE BEEN REDEEMED ON 26 TH MARCH 2004 FOR ` 22,68,801 , WHEREBY INCURRING A LOSS OF ` 17,31,198, WHICH HAS BEEN CLAIMED BY THE ASSESSEE AS A SHORT TERM CAPITAL LOSS IN THE RETURN OF INCOME. AS PER THE PROVIS IONS OF SECTION 94(7), T HE LOSS, IF ANY, ARISING TO THE ASSESSEE ON ACCOUNT OF PURCHASE AND SALE OF SECURITIES OR UNITS , THEN SUCH A LOSS HAS TO BE IGNORED IF THE SECURITIES HAS BEEN SOLD OR TRANSFERRED WITHIN THE PERIOD OF THREE MONTHS. THE ASSESSEE HAS C ALCULATED THE PERIOD OF THREE MONTHS AFTER CONSIDERING THE DAYS IN A MONTH. HE HAS CALCULATED 91 DAYS UP TO 26 TH MARCH 2004 , AFTER CONSIDERING THE FIVE DAYS FROM 27 TH DECEMBER 2003 TO 31 ST DECEMBER 2003; 31 DAYS IN JANUARY 2004; 29 M/S. SHRISH B. MODI INVESTMENT P. LTD. 5 DAYS IN FEBRUARY 2004 (B EING A LEAP YEAR) AND 26 DAYS UP TO 26 TH MARCH 2004. THUS, THE TOTAL PERIOD CALCULATED WA S 91 DAYS. FROM SUCH A CALCULATION, IT CAN BE VERY WELL BE INFERRED THAT THE ASSESSEE WAS UNDER A BONAFIDE BELIEF THAT THE PERIOD OF THREE MONTHS HAD EXPIRED ON 25 TH M ARCH 2004 AND 26 TH MARCH 2004 IS THE 91 ST DAY. THE ASSESSING OFFICER HAS CALCULATED THE PERIOD OF THREE MONTHS ON CALENDAR BASIS WHICH PERHAPS IS CORRECT. HOWEVER, IT CANNOT BE HELD THAT THE ASSESSEE HAS FURNISHED ANY INACCURATE PARTICULARS OR CONCEALED A NY INCOME. UNDER THESE CIRCUMSTANCES, IT CANNOT BE HELD THAT THE ASSESSEES BELIEF OR EXPLANATION WHICH WAS GIVEN DURING THE COURSE OF QUANTUM PROCEEDINGS AS WELL AS PENALTY PROCEEDINGS IS NOT BONAFIDE. HENCE, ON THESE FACTS , WE DO NOT FIND ANY REASON TO D EVIATE FROM THE CONCLUSION DRAWN BY THE LEARNED COMMISSIONER (APPEALS) THAT PENALTY CANNOT BE SUSTAINED IN SUCH CASE. CONSEQUENTLY, THE ORDER PASSED BY THE LEARNED COMMISSIONER (APPEALS) CANCELLING THE PENALTY IS HEREBY SUSTAINED AND THE GROUND RAISED BY T HE REVENUE IS DISMISSED. 9 . 9. IN THE RESULT, REVENUES APPEAL IS DISMISSED. 14 TH MARCH 2014 ORDER PRONOUNCED IN THE OPEN COURT ON 14 TH MARCH 2014 SD/ - SANJAY ARORA ACCOUNTANT MEMB ER SD/ - AMIT SHUKLA JUDICIAL MEMBER MUMBAI, DATED : 14 TH MARCH 2014 M/S. SHRISH B. MODI INVESTMENT P. LTD. 6 / COPY OF THE ORDER FORWARDED TO : ( 1 ) / THE ASSESSEE ; ( 2 ) / THE REVENUE; ( 3 ) ( ) / THE CIT(A ) ; ( 4 ) / THE CIT, MUMBAI CITY CONCERNED ; ( 5 ) , , / THE DR, ITAT, MUMBAI ; ( 6 ) / GUARD FILE . / TRUE COPY / BY ORDER . / PRADEEP J. CHOWDHURY / SR. PRIVATE SECRETARY / / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI