ITO 24(2)(3), MUMBAI V. KARAN R BAHAL, MUMBAI

ITA 1496/MUM/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0021 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 3 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 06-04-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 12-03-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJESH KUMAR YADAV
• Keywords: Business income; Depreciation; Transactions in derivatives; Difference of opinion
• Section: 143(3); 154

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY , JM AND SHRI RAJESH KUMAR , AM ./ I.T.A. NO . 149 6 /MUM/201 5 ( / ASSESSMENT YEA R : 2 0 08 - 09 ) INCOME TAX OFFICER 24(2)(3), ROOM NO.609. 6 TH FLOOR, PIRAMAL CHAMBERS, PAREL, MUMBAI - 400012 / VS. S HRI KARAN R BAHAL, PLOT NO.84, SAKET, 15 TH ROAD, MIDC, ANDHERI(E), MUMBAI - 400093 APPELLANT RESPONDENT PAN: AGPPB9301E / APPELLA NT BY : SHRI RAJESH KUMAR YADAV /R ESPONDENT BY : NONE / DATE OF HEARING : 6. 4.2017 / DATE OF PRONOUNCEMENT : 30.6 . 2017 / O R D E R PER RAJESH KUMAR, A. M: THIS IS AN APPEAL FILED BY THE REV ENUE CHALLENGING THE ORDER OF LD. CIT(A) - 36, MUMBAI, DATED 10 .12.2014 , PERTAINS TO THE ASSESSMENT YEAR 20 08 - 09 . 2. AT THE OUTSET, WE WOULD LIKE TO MENTION HERE THAT NEITHER THE ASSESSEE OR HIS AUTHORIZED REPR ESENTATIVE APPEARED BEFORE THE BENCH WHEN THE APPEAL WAS CALLED FOR HEARING NOR ANY APPLICATION SEEKING ADJOURNMENT OF THE 2 I.T.A. NO. 1497 / MUM/ 201 5 HEARING RECEIVED IN THE OFFICE OF THE TRIBUNAL . ON PERUSAL OF THE RECORD, WE FIND THAT THE NOTICE SENT TO THE ASSESSEE IS RECEIVED BACK IN THE OFFICE OF TRIBUNAL. THEREFORE, WE PROCEED TO DISPOSE OF THE APPEAL OF THE REVENUE IN ABSENCE OF THE ASSESSEE EX - PARTE AFTER HEARING THE LD.DR AND ON PERUSAL OF THE RECORD ON MERIT . 3. THE ONLY ISSUE RAISED IN THE VARIOUS G ROUNDS OF APPEAL IS AGAINST THE DELETION OF PENALTY BY THE LD.CI T(A) AS IMPOSED BY T HE AO UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961 BY IGNORING THE FACTS THAT THE PENALTY W A S IMPOSED WHEN THE ASSESSEE FAILED TO OFFER ANY EXPLANATION FOR SHOWING INCOME UNDER WRONG HEAD . 4. THE FACTS IN BRIEF ARE THAT THE ASSE SSEE HAS FILED RETURN OF INCOME ON 30.9.2008 DECLARING TOTAL INCOME OF RS.22,969/ - . THEREAFTER THE ASSESSMENT PROCEEDINGS WERE COMPLETED U/S 143(3) OF THE ACT ON 23.12.2010 ASSESSING THE INCOME OF THE ASSESSEE AT RS.7,32,21,821 / - . THEREAFTER THE SAID ORD ER WAS RECTIFIED U/S 154 ON 9.2.2011 GIVING EFFECT TO THE SET OFF OF THE BROUGHT FORWARD LOSSES FOR THE ASSESSMENT YEAR 2007 - 08 OF RS.6,94,96,410/ - AND ASSESSED REVISED INCOME AT RS.37,25,411/ - . THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF SHARING TRADI NG IN FUTURES , OPTIONS AND SHAR ES. D URING THE YEAR THE INCOME OF THE ASSESSEE FROM VARIOUS ACTIV ITIES AND EACH SOURCE OF WAS AS UNDER : 3 I.T.A. NO. 1497 / MUM/ 201 5 NATURE OF SHARE TRADING ACTIVITIES CLAIMED INCOME/PROFIT EARNED NO. OF SHARES TRADED F&O TRADING (21510 059) 36269502 SHORT - TERM PROFIT ON SALE OF SHARES 60128293 2145551 SPECULATION PROFIT (9343) 3644 LONG - TERM CAPITAL GAIN ON SALE OF SHARES 35659784 272551 TOTAL SHARES TRADED 38691248 THE LTCG TO THE TUNE OF RS.3,56,59,784/ - WAS CLAIMED AS EXEMPT U/S 10(38) OF THE ACT, WHEREAS THE SAME WAS A DDED BY THE AO AS INCOME FROM BUSINESS BY REJECTING THE CLAIM OF THE ASSESSEE QUA LONG TERM CAPITAL GAIN AND TH E LD. CIT(A) CONFIRMED THE ORDER OF AO TREATING THE INCOME FROM SHARES UNDER THE HEAD BUSINESS INCOME AS AGAINST THE LONG TERM CAPITAL GAIN . ACCORDING TO THE AO, THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF MAKING PROFIT FROM TRADING IN SHARES AND HAS NOT MADE ANY INVESTMENT S AND DELIBERATELY AND CONSCIOUSLY SHOWED THE AMO UNT OF SURPLUS AS LTCG FROM THE SHARES TO THE TUNE OF RS.3,56,59,784/ - CLAIMING EXEMPTION U/S 10(38) OF THE ACT IN ORDER TO EVADE TAX. THE AO ISSUED NOTICE U/S 271(1)( C ) OF THE ACT TO THE ASSESSEE AS TO WHY THE PENALTY SHOULD NOT BE LEVIED FOR CONCEA LING THE PARTICULARS OF INCOME . THEREAFTER A FTER CONSIDERING THE CONTENTIONS OF THE ASSESSEE, THE AO IMPOSED PENALTY OF RS.1,21,20,761/ - AT THE RATE OF 100% OF THE TAX SOUGHT TO BE EVADED. 5. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE PREFERRED TH E APPEAL BEFORE THE LD.CIT (A) WHO DELETED THE PENALTY BY OBSERVING AND HOLDING AS UNDER : 4 I.T.A. NO. 1497 / MUM/ 201 5 5.7 AS NOTED EARLIER, IN THE INSTANT CASE PENALTY U/S 271(1)(C) IS LEVIED ON TREATMENT OF LTCG INCOME AS BUSINESS INCOME. DURING THE COURSE OF SCRUTINY PROCEED INGS, THE AO EXAMINED THE INCOME OF THE APPELLANT FROM SHARE TRANSACTIONS DURING 'THE YEAR UNDER CONSIDERATION AND AFTER APPLYING THE YARDSTICK OF CRITERIA LAID DOWN BY CBDT CIRCULAR NO.4/2007 DATED 15/06/2007, CONCLUDED THAT THE VOLUME AND FREQUENCY OF T HE SHARE TRANSACTIONS CARRIED OUT BY THE APPELLANT WHEN CONSIDERED IN CONSONANCE WITH THE PROPORTION OF INCOME DERIVED FROM DIVIDEND ETC INDICATED THAT THE INCOME OF THE APPELLANT WAS FROM BUSINESS OF SHARE TRADING AND NOT FROM CAPITAL GAINS. IN DOING S O, HE DIFFERED FROM THE APPELLANT'S EXPLANATION THAT HE HAD BEEN SHOWING INCOME FROM SIMILAR TRANSACTIONS UNDER THE HEAD 'INCOME FROM CAPITAL GAINS FOR THE PAST SEVERAL YEARS AND THAT SUCH INCOME HAD BEEN ACCEPTED AS SUCH BY THE REVENUE. THE AO HAD ACCORD INGLY ASSESSED A TOTAL AMOUNT OF RS. 3,56,59,784/ - WHICH HAD BEEN SHOWN BY THE APPELLANT AS LTCG U/S 10(38) AS 'INCOME FROM BUSINESS. I N THE DECISION RENDERED IN THE CASE OF CIT V AMIT JAIN (33'TAXMANN.COM 178), THE HON'BLE HIGH COURT HELD THAT PENALTY U/S 271(1)(C) WAS NOT LEVIABLE FOR FURNISHING INACCURATE PARTICULARS WHERE THE AMOUNT IN QUESTION WAS TRUTHFULLY REPORTED IN THE RETURN FILED. ON PERUSAL OF THE STATEMENT OF COMPUTATION OF TAXABLE INCOME FILED BY THE APPELLANT FOR THE YEAR UNDER CONSIDERATION , IT IS SEEN THAT THE APPELLANT HAD DISCLOSED THE ENTIRE AMOUNT OF RS. 3,56,59,784/ - AS LONG - TERM CAPITAL GAIN EXEMPT U/S 10(36)/10(38)'. DETAILS OF THE TOTAL VALUE OF PURCHASES AND SALES LEADING TO THIS INCOME WERE ALSO REFLECTED IN THE COMPUTATION. NOTHI NG IN THE IMPUGNED ORDER INDICATES THAT ANY PARTICULARS RELATING TO SUCH TRANSACTIONS WERE FOUND FALSE OR INACCURATE BY THE AO OR THAT ANY PARTICULARS HAD BEEN WITHHELD BY THE APPELLANT. THAT BEING SO, THE APPELLANT CANNOT BE VISITED WITH PENALTY FOR FURNI SHING INACCURATE PARTICULARS. IT WAS ALSO NOT ESTABLISHED THAT WITH REFERENCE TO THE SAID TRANSACTIONS THE APPELLANT HAD EARNED ANY AMOUNT OVER AND ABOVE WHAT WAS REFLECTED IN THE RETURN FILED. IN FACT THE VERY SAME AMOUNT HAS BEEN ASSESSED BY THE AO AS ' INCOME FROM BUSINESS'. IT IS THEREFORE CLEAR THAT THE CHANGE OF HEAD UNDER WHICH THE INCOME WAS FOUND TAXABLE WAS ONLY ON ACCOUNT OF A DIFFERING INTERPRETATION OF FACTS AND LAW BY THE AO. THUS AFTER CONSIDERING THE FACTS OF THE CASE, IT IS EVIDENT THAT THE APPELLANT'S ACT IN OFFERING THIS INCOME AS 'INCOME FROM CAPITAL GAINS' CANNOT BE CONSIDERED AS LACKING IN BONA - FIDES.THE FACT THAT THE HEAD OF ASSESSMENT OF INCOME FROM SHARE TRANSACTIONS WAS BEING DISPUTED BETWEEN THE DEPARTMENT AND ASSESSEES IS CLEARLY EVIDENCED BY THE EXISTENCE OF A PLETHORA OF JUDGMENTS ON THE ISSUE BY 5 I.T.A. NO. 1497 / MUM/ 201 5 VARIOUS COURTS AND TRIBUNALS. THUS ON THIS ASPECT, AFTER CONSIDERING THE FACTS AND THE DECISIONS CITED IN PRECEDING PARAGRAPHS, I FIND THAT T HE ACTION OF THE APPELLANT I N OFFERING THE INCOME UNDER A DIFFERENT HEAD WAS A BONA FIDE AND BASED ON A POSSIBLE VIEW AND ALL THE MATERIAL FACTS RELEVANT TO THE SAID CLAIM HAVING BEEN FULLY AND TRULY FURNISHED BY THE APPELLANT, IT IS NOT A FIT CASE TO IMPOSE PENALTY U/S 271(1)( C ) 6 . WE HAVE CAREFULLY CONSIDERED THE CONTENTIONS OF THE LD DR AND PURSUED THE MATERIAL PLACED BEFORE US INCLUDING THE IMPUGNED ORDERS. WE FIND THAT IN THE CASE OF THE ASSESSEE, THE PENALTY HAS BEEN IMPOSED BY THE AO ON THE GROUND THAT T HE ASSESSEE HAS SHOWN INCOME FR OM SHARES AS LTCG AND CLAIMED THE SAME AS EXEMPT U/S 10(38) OF THE ACT IN ORDER TO EVADE TAX AND TREATED THE SAME AS INCOME FROM BUSINESS WHICH WAS CONFIRMED BY THE LD.CIT(A). THE LD.CIT(A) DELETED THE PENALTY BY OBSERVING THAT THE ASSESSEE HAS DULY DISCL OSED THE LTCG UNDER THE HEAD CAPITAL GAIN AND THEREFORE THE BONAFIDE OF THE ASSESSEE CANNOT BE DOUBTED AND IT WAS A CA S E OF CHANGE OF HEAD OF INCOME FROM ONE HEAD TO ANOTHER AND HENCE DELETED THE PENALTY. THE CASE OF THE ASSESSEE IS ALSO FORTIFIED BY TH E DECISION OF THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF DCIT V/S G C PROPERTY P. LTD IN I.T.A.NO .95/ MUM/20 15 (AY : 2008 - 09 ) DATED 10.10.2016 WHEREIN THE AUTHOR IS PARTY. THE OPERATIVE PORTION OF THE ORDER IS REPRODUCED BELOW: 6. WE HAVE CONSIDERE D THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS ON RECORDS INCLUDING THE ORDERS OF AUTHORITIES BELOW. THE ASSESSEE WAS INCORPORATED FOR THE PURPOSE OF REAL ESTATE BUSINESS AS PER THE MAIN OBJECTS IN MEMORANDUM AND ARTICLES OF ASSOCIATION OF THE ASSESSE E COMPANY. THE BUILDING OF THE COMPANY WAS LET OUT AND THE RENTAL RECEIVED FROM THE LETTING OUT BY WAY OF LEAVE AND LICENSE BASIS WAS SHOWN AS BUSINESS INCOME ON THE GROUND THAT THE ASSESSEES 6 I.T.A. NO. 1497 / MUM/ 201 5 BUSINESS WAS OF REAL ESTATE AND EXPENSES SUCH AS ADMINISTRATIV E AND DEPRECIATION WERE CLAIMED ACCORDINGLY. THE AO ASSESSED THE INCOME OF THE ASSESSEE UNDER THE HEAD HOUSE PROPERTY AS AGAINST THE BUSINESS INCOME SHOWED BY THE ASSESSEE AND AS A RESULT DISALLOWED ALL THE EXPENSES INCLUDING DEPRECATION CLAIMED BY ASSE SSEE. THE AO ALSO IMPOSED PENALTY U/S 271(1) OF THE INCOME TAX ACT EQUAL TO 100% OF THE TAX SOUGHT TO BE EVADED FOR FURNISHING INACCURATE PARTICULARS OF INCOME. THE LD CIT(A) DELETED THE PENALTY BY HOLDING THAT PROVISIONS OF SECTION 271(1)(C) OF THE ACT WERE WRONGLY INVOKED AS IT WAS A CASE OF DIFFERENCE OF OPINION AND THE ISSUE WAS DEBATABLE ONE. IN OUR OPINION THE LD CONCLUSION DRAWN BY THE FAA WAS CORRECT AS THE ASSESSEE HAS SHOWN FULL PARTICULARS OF INCOME IN THE RETURN OF INCOME ITSELF AND MERE FACT THE INCOME SHOWN UNDER ONE HEAD OF INCOME WAS ASSESSED BY THE AO UNDER THE OTHER HEAD COULD NOT BE TAKEN AS TANTAMOUNT TO FILING INACCURATE PARTICULARS. THEREFORE THE ORDER OF FAA IS CORRECT AND DOES NOT REQUIRED TO BE DISTURBED OR INTERFERED WITH. ACC ORDINGLY WE UPHOLD THE SAME BY DISMISSING THE APPEAL OF THE REVENUE. 7 . SINCE THE ISSUE HAS ALREADY BEEN DECIDED BY US THAT THE PENALTY IS NOT LEVIABLE WHEN THE INCOME ASSESSED UNDER THE ONE HEAD, WHEREAS THE ASSESSEE HAS SHOWN IT UNDER DIFFERENT HEAD . THEREFORE, IN ORDER TO MAINTAIN THE CONSISTENCY WITH OUR ORDER PASSED IN THE AFORESAID APPEAL, WE UP HOLD T HE FINDING OF THE LD.CIT(A) BY DISMISSING THE APPEAL OF THE REVENUE. 8 . IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUN CED IN THE OPEN COURT ON 30TH JUNE , 2017 SD SD ( SAKTIJIT DEY ) ( RAJESH KUMAR ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 30. 6 . 2017 SRL,SR.PS 7 I.T.A. NO. 1497 / MUM/ 201 5 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F ILE / BY ORDER, TRUE COPY / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI