HARISH CHANDRA GUTT & CO. P. LTD, MUMBAI V. ITO 4(1)(2), MUMBAI

ITA 1487/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 93218 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 4 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-07-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Next Hearing Date: 26-05-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 22-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S K MUTSADDI
• Keywords: Cost of acquisition; Speculation loss
• Section: 43B; 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH H, MUMBAI BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI SANJAY GARG, JUDICIAL MEMBER ITA NO.1487/M/2013 ASSESSMENT YEAR: 2008-09 M/S. HARISH CHANDRA GUTT & CO. PVT. LTD., 45/47, 4 TH FLOOR, BANK OF MAHARASHTRA BUILDING, BOMBAY SAMACHAR MARG, FORT, MUMBAI 400 001 PAN: AAACH 2825B VS. INCOME TAX OFFICER-4(1)(2), AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400020 (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI J.P. BAIRAGRA, A.R. & SHRI S.K . MUTSADDI, A.R. REVENUE BY : SHRI JITENDRA KUMAR, D.R. DATE OF HEARING : 26.05.2015 DATE OF PRONOUNCEMENT :17.07.2015 O R D E R PER SANJAY GARG, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSES SEE AGAINST THE ORDER DATED 21.01.2013 OF THE COMMISSIONER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS THE CIT(A)] RELEVANT TO ASSESSMENT Y EAR 2008-09. 2. THE ASSESSEE HAS AGITATED THE LEVY OF PENALTY UN DER SECTION 271(1)(C) OF THE INCOME TAX ACT. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE I S A SHARE BROKER REGISTERED WITH BOMBAY STOCK EXCHANGE (BSE). DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER (HEREINAFTER REFERRED TO AS THE A O) NOTED THAT THE ASSESSEE HAD SOLD 5,474 SHARES TO BSE ON BUYBACK OFFER AT TH E RATE OF RS.5,200/- PER SHARE AND HAS SHOWN A SALE CONSIDERATION OF RS.2,84 ,64,800/-. THEREAFTER, ITA NO.1487/M/2013 M/S. HARISH CHANDRA GUTT & CO. PVT. LTD. 2 TAKING THE INDEXATION BENEFIT OF PURCHASE COST OF T HESE SHARES, THE ASSESSEE HAD SHOWN LONG TERM CAPITAL GAINS OF RS.1,55,99,087/-. AFTER TAKING SET OFF OF SHORT TERM CAPITAL LOSS AMOUNTING TO RS.1,55,41,449/-, TH E ASSESSEE OFFERED NET LONG TERM CAPITAL GAINS OF RS.57,638/-. THE AO ASKED THE ASSESSEE TO PROVIDE THE NECESSARY DETAILS IN THIS RESPECT. AFTER CONSIDERI NG THE DETAILS SUBMITTED BY THE ASSESSEE, THE AO HELD THAT THE TRANSACTIONS RELATIN G TO SHORT TERM CAPITAL LOSS WERE BOGUS. THE AO FURTHER HELD THAT THE ASSESSEE HAD WRONGFULLY CLAIMED THE INDEXATION BENEFIT ON PURCHASE COST OF BSE SHARES F ROM F.Y. 1996-97, WHEREAS, AS PER THE CERTIFICATE OF INCORPORATION, T HE COMPANY WAS INCORPORATED ONLY ON 20.11.1997. THE AO THEREFORE GRANTED THE I NFLATION INDEXATION BENEFIT FROM THE YEAR 1997-98 AS AGAINST THE CLAIM OF INDEX ATION BENEFIT BY THE ASSESSEE FROM F.Y. 1996-97. THE AO ACCORDINGLY CAL CULATED THE LONG TERM CAPITAL GAINS OF THE ASSESSEE AT RS.1,66,18,800/-. THE AO ALSO MADE DISALLOWANCE OF RS.8,46,915/- UNDER SECTION 40(A)(I A) OF THE ACT AND FURTHER DISALLOWANCE OF BROKERAGE CLAIMED AT RS.7,57,600/-, OUT OF REPAIR AND MAINTENANCE CLAIM AT RS.4,36,848/-, FURTHER A SUM O F RS.10,44,594/- UNDER SECTION 43B OF THE ACT, OTHER MISCELLANEOUS DISALLO WANCE OF RS.2,717/- AND DISALLOWANCE UNDER SECTION 14A OF THE ACT AT RS.248 /-. THE AO ALSO INITIATED PENALTY PROCEEDINGS AGAINST THE ASSESSEE FOR FURNIS HING THE INACCURATE PARTICULARS OF INCOME. 3. IN THE PENALTY PROCEEDINGS, AFTER CONSIDERING TH E SUBMISSIONS OF THE ASSESSEE, THE AO HELD THAT THE ASSESSEE HAD FURNISH ED INACCURATE PARTICULARS OF INCOME IN RELATION TO INCOME AMOUNTING TO RS.1,70,5 5,648/- (LTCG OF RS.1,66,18,800/-) AND REPAIR AND MAINTENANCE EXPENS ES OF RS.4,36,848/-. HE THEREFORE CALCULATED THE TAX SOUGHT TO BE EVADED IN RELATION TO ABOVE ADDITION AT RS.38,00,295/- AND LEVIED THE PENALTY AT THE RATE O F 200% AT RS.76,00,500/-. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE PREF ERRED APPEAL BEFORE THE LD. CIT(A). ITA NO.1487/M/2013 M/S. HARISH CHANDRA GUTT & CO. PVT. LTD. 3 4. THE LD. CIT(A) UPHELD THE FINDINGS OF THE AO FOR LEVY OF PENALTY, HOWEVER, RESTRICTED THE PENALTY AT THE RATE OF 100% OF THE TAX AMOUNT SOUGHT TO BE EVADED. THE ASSESSEE HAS, THUS, COME IN APPEAL BEFORE US. 5. AT THE OUTSET, THE LD. A.R. OF THE ASSESSEE HAS BROUGHT OUR ATTENTION TO THE ORDER DATED 21.02.2012 OF THE LD. CIT(A) IN QUA NTUM PROCEEDINGS WHEREIN THE LD. CIT(A) HAS DIRECTED THE AO TO ALLOW THE ABO VE STATED EXPENDITURE ON ACCOUNT OF REPAIR AND MAINTENANCE EXPENSES OF RS.4, 36,848/-, AFTER PERUSAL OF ITS BILLS ALONG WITH LOG BOOK THAT REFERENCE TO THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. SINCE THE ISSUE RELATING TO DISALLOWAN CE OF REPAIR AND MAINTENANCE CHARGES HAS BEEN RESTORED BY THE LD. CIT(A) TO THE FILE OF THE AO, HENCE THE VERY DISALLOWANCE ON THE BASIS OF WHICH PENALTY HAS BEEN LEVIED HAS CEASED TO EXIST, HENCE THE PENALTY ON ACCOUNT OF DISALLOWANCE OF REPAIR AND MAINTENANCE CHARGES AT THIS STAGE HAS NO LEGS TO STAND AND THE SAME IS ACCORDINGLY SET ASIDE. 6. THE LD. A.R. OF THE ASSESSEE HAS FURTHER BROUGHT OU R ATTENTION TO THE ORDER OF THE TRIBUNAL IN THE OWN CASE OF THE ASSESSEE IN THE QUANTUM PROCEEDINGS RELEVANT TO ASSESSMENT YEAR UNDER CONSIDERATION I.E . A.Y. 2008-09 PASSED IN ITA NO.2622/M/2012 VIDE ORDER DATED 22.04.2015 WHER EIN THE TRIBUNAL HAS HELD THAT THE SHORT TERM CAPITAL LOSS CLAIMED BY TH E ASSESSEE WAS NOT BOGUS. THE TRIBUNAL, HOWEVER, HELD THAT THE LOSS SO INCURR ED WAS NOT SHORT TERM CAPITAL LOSS BUT SPECULATIVE LOSS AND THAT THE ASSE SSEE WAS ELIGIBLE TO CARRY FORWARD THE SAID SPECULATIVE LOSS UNDER SECTION 73( 1) AND TO SET OFF OF THE SAME AGAINST SPECULATIVE PROFIT ONLY IN SUBSEQUENT YEAR AS PER PROVISIONS OF THE LAW. THE TRIBUNAL THEREFORE HAS HELD THAT THE TRANSACTIO NS IN QUESTION WERE NOT BOGUS. HOWEVER, THE TRIBUNAL HAS TREATED THE SAME AS SPECULATIVE IN NATURE. THE FACTS SHOW THAT THE BASIS UPON WHICH THE PEN ALTY WAS LEVIED IN RESPECT OF CLAIM OF SHORT TERM CAPITAL GAINS HAS NOT BEEN ACCE PTED BY THE TRIBUNAL AND THE ITA NO.1487/M/2013 M/S. HARISH CHANDRA GUTT & CO. PVT. LTD. 4 TRANSACTIONS HAVE BEEN HELD TO BE GENUINE. MERELY BECAUSE THE TRIBUNAL TREATED THE TRANSACTIONS AS SPECULATIVE TRANSACTION S, IN OUR VIEW, THAT ITSELF, IS NOT A SUFFICIENT REASON TO HOLD THAT THE ASSESSEE H AD FURNISHED INACCURATE PARTICULARS OF INCOME OR HAD CONCEALED ITS INCOME. THOUGH THE TRIBUNAL HAS HELD THAT THE ASSESSEE IS ENTITLED TO CLAIM THE LOS S UNDER DIFFERENT HEAD BUT THE STAND OF THE REVENUE THAT THE TRANSACTIONS WERE BOG US HAS BEEN OVERRULED BY THE TRIBUNAL. UNDER THE CIRCUMSTANCES, IT CANNOT B E SAID TO BE A CASE OF FURNISHING OF INACCURATE PARTICULARS OF INCOME OR C ONCEALMENT OF INCOME. SINCE, THE FINDINGS OF THE LOWER AUTHORITIES HOLDIN G THE TRANSACTIONS RELATING TO SHORT TERM CAPITAL LOSS AS BOGUS HAS BEEN OVERTURNE D BY THE TRIBUNAL, THE CONSEQUENTIAL PENALTY IS THEREFORE ORDERED TO BE DE LETED. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS HER EBY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 17.07. 2015. SD/- SD/- (G.S. PANNU) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 17.07. 2015. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.