ACIT, Cir-9(1), Hyderabad V. Smt. Nikhat Fatima, Hyderabad

ITA 1546/HYD/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 59091 (ITAT-HYDERABAD)
• Duration Of Justice: 4 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-01-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 26-08-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B V PRASAD REDDY
• Assessee Lawyers: A V RAGHURAM
• Keywords: Capital asset; Business income; Bonafide belief

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD B BENCH, HYDERABAD BEFORE CHANDRA POOJARI, ACCOUNTANT MEMBER & SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NO1546/HYD/2011 ASSESSMENT YEAR 2005-06 THE ACIT, CIRCLE 9(1), HYDERABAD VS SMT. NIKHAT FATI MA, HYDERABAD (AAHPF 6159 N) APPELLANT RESPONDENT APPELLANT BY : SHRI B.V. PRASAD REDDY RESPONDENT BY : SHRI A.V. RAGHURAM DATE OF HEARING : 26.12.2011 DATE OF PRONOUNCEMENT : 6.1.2012 ORDER PER ASHA VIJAYARAGHAVAN, JM: THIS APPEAL PREFERRED BY THE IS DIRECTED AGAINST T HE ORDER PASSED BY THE CIT(A) VI, HYDERABAD DATED 17.6.201 1 AND PERTAINS TO THE ASSESSMENT YEAR 2005-06. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE I S AN INDIVIDUAL ENGAGED IN THE BUSINESS OF TRADING IN SH ARES AND SECURITIES AND PARTNERS IN TWO FIRMS. THE AO NOTICE D THAT THE ASSESSEE HAS CLAIMED LONG TERM CAPITAL GAINS ON MAT URITY OF IVPS WHEREAS THE INTEREST HAS BEEN SHOWN AS INCOME FROM OTHER SOURCES. THE ASSESSING OFFICER ALSO NOTED THAT THE APPELLANT HAVING PURCHASED SHARES OF A COMPANY NAMED M/S.OFF SHORE FINVEST AT A COST OF RS,3,39,160/- SOLD THEM FOR A SUM OF RS.1,04,99,400/- AND DECLARED LONG TERM CAPITAL GAI NS ON IT. THE ASSESSING OFFICER HELD THIS TRANSACTION TO BE A N ADVENTURE IN ITA NO.1546/H/2011 SMT. NIKHAT FAMITA, HYDERABAD 2 THE NATURE OF TRADE. PENALTY WAS LEVIED ON THESE T WO ISSUES, VIZ., ASSESSMENT OF INTEREST INCOME FROM IVPS AND ASSESSM ENT OF THE SHARE TRANSACTION AS ADVENTURE IN THE NATURE OF TRA DE. 3. WITH REGARD TO THE IVPS, THE APPELLANT SUBMITTE D THAT SHE WAS NOT AWARE THAT THEY WERE NOT TO BE TREATED AS CAPITAL ASSETS AND THAT THE INTEREST ON IT WAS TO BE RETURNED AS INCOME FROM OTHER SOURCES. WITH REGARD TO THE TRANSACTION IN SALE OF SHARES, THE APPELLANT SUBMITTED THAT SHE MADE A PRUDENT INV ESTMENT OF RS.3,39,160/- OUT OF HER CAPITAL OF RS.20,34,600/- WHICH TURNED OUT TO BE REMUNERATIVE FOR HER. SHE SUBMITTED THAT SHE NEITHER CONCEALED THE PARTICULARS NOR FILED INACCURATE PART ICULARS ABOUT EITHER OF THE TRANSACTIONS AND THAT THE ISSUE WAS O NLY ONE OF INTERPRETATION OF LAW. 4. THE ASSESSING OFFICER DID NOT ACCEPT THE EXPLAN ATION. HE HELD THAT TREATING THE IVPS AS A CAPITAL ASSET, THE APPELLANT WAS SUBJECT TO A LOWER TAX RATE AND CONSEQUENTLY EVADED TAX. HE FURTHER OBSERVED THAT THE CONDUCT OF THE APPELLANT DID NOT APPEAR TO BE THAT OF A NORMAL INVESTOR WITH REGARD TO HER TRANSACTION IN SHARES SINCE SHE HAD BEEN UNABLE TO CLARIFY THE CIRCUMSTANCES IN WHICH SHE IDENTIFIED M/S.OFFSHORE FINVEST LTD AS A THE COMPANY TO INVEST IN, SHE HAD BEEN UNABLE TO FURNISH THE NAMES OF THE PROMOTERS OF THE COMPANY, AND SHE HAD FAILED TO EXPLAIN HOW SHE HAD COME IN CONTACT WITH THE BRO KER CONCERNED. HE ALSO RELIED ON THE FACT THAT THE COMP ANY M/S.OFFSHORE FINVEST LTD HAD BEEN THE SUBJECT OF AN ENQUIRY AND ADVERSE COMMENTS OF SEBI REGARDING UNFAIR PRACTICES AND PRICE MANIPULATION. THE ASSESSING OFFICER, THEREFORE, HE LD THAT THE SHARE TRANSACTION HAD BEEN UNDERTAKEN WITH A VIEW T O PARTICIPATE IN THE PROFITS THAT COULD BE GAINED FRO M THE MANIPULATION OF THE SHARE PRICES. ITA NO.1546/H/2011 SMT. NIKHAT FAMITA, HYDERABAD 3 5. ON APPEAL THE CIT(A) HELD RELYING ON THE DECIS ION OF THE SUPREME COURT IN THE CASE OF CIT VS RELIANCE PETROP RODUCTS P LTD REPORTED IN 322 ITR 158 THAT A MERE MAKING OF A N INCORRECT CLAIM WHICH IS NOT SUSTAINABLE IN LAW BY ITSELF WIL L NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS. FURTHER HE HELD THAT THE PARTY WAS NOT INVOLVED IN THE MANAGEMENT OF M/S.OFF SHORE FINVEST LTD AND WAS MERELY A SHARE HOLDER. THE CIT (A) DELETED THE PENALTY OF RS.23,77,294/-. 6. AGGRIEVED THE DEPARTMENT IS ON APPEAL BEFORE US BY RAISING THE FOLLOWING GROUNDS:- 1. THE CIT(A) ERRED IN DELETING THE PENALTY U/S.27 1(1)(C) BY SOLELY RELYING ON THE RECENT JUDGMENT OF SC IN THE CASE OF RELIANCE PETRO PRODUCT P LTD WHEREIN THE DECISION G IVEN BY THE SC WAS FOR ONLY FOR THAT CASE AND FURTHER THAT MERE MAKING OF INCORRECT CLAIM WHICH IS NOT SUSTAINABLE IN LAW BY ITSELF WILL NOT AMOUNT TO FURNISH INACCURATE PARTIC ULARS. HOWEVER, THE CLAIM OF THE ASSESSEE IN THE CASE ITSE LF IS NOT SUSTAINABLE. 2. THE CIT (A) ERRED ON THE FACTS AND IN THE CIRCUM STANCES WHEREIN THE CIT(A) AND ITAT CONFIRMED IN APPEAL AGA INST ORDER U/S.14393) THAT THE ASSESSEE IS DEALING OF SH ARE BUSINESS 7. THE LD.DR SHRI B.V.PRASADA REDDY VEHEMENTLY ARG UED THAT THE DECISION OF THE RELIANCE PETRO-PRODUCT CAN NOT BE RELIED UPON IN THIS CASE AS THE DECISION IS RELEVANT ONLY TO THE FACTS OF THAT PARTICULAR CASE. THE LD. COUNSEL FOR THE ASSE SSEE SHRI A.V.RAGHURAM RELIED ON THE ORDER OF THE CIT(A). 8. THE LEARNED COUNSEL FOR THE ASSESSEE SHRI A.V. RAGHURAM SUBMITTED BEFORE US: ITA NO.1546/H/2011 SMT. NIKHAT FAMITA, HYDERABAD 4 THE ASSESSEE WAS NOT AWARE OF THE FACT THAT IVPS W ERE NOT PART OF SECURITIES THAT WERE TO BE TREATED AS CAPITAL AS SETS. THEREFORE, THE MISTAKE WAS UNINTENTIONAL AND THE ASSESSEE WAS UNDER A BONAFIDE BELIEF THAT IVPS ARE TO BE TREATED AS CAPI TAL ASSETS. THE ASSESSEE ALSO DID NOT DISPUTE ADDITION OF INCOME ON THIS ISSUE. REGARDING TRANSACTION IN SHARES OF M/S OFFSHORE FIN VEST, THE ASSESSEE DID NOT HAVE ANY REGULAR BUSINESS INCOME F ROM SHARES AND HAD ONLY SPECULATIVE INCOME. OUT OF THE AVAILABLE CAPITAL OF RS.20,34,600/- THE ASSESSEE MADE A PRUDENT INVESTMENT OF RS.3,39,160/- IN SHARES OF M/S OFFSHORE FINVEST WHICH YIELDED GOOD RETURNS. 9. WE FIND THAT, THE ASSESSING OFFICER HAS REFERRE D TO ADVERSE FINDING REGARDING M/S.OFFSSHORE FINVEST LTD, WHICH IS OF NO RELEVANCE SINCE THERE IS NO FINDING THAT THE ASSESS EE HAS PARTICIPATED IN ANY WAY IN THE ALLEGED PRICE MANIPU LATION OF SHARE BY THE COMPANY. THE ASSESSEE HAS ONLY TRANSAC TED A SIMPLE PURCHASE AND SALE OF SHARES. HENCE, THE AO H AS ERRED IN ATTRIBUTING COLLUSIVE ACTIVITY OF MANIPULATION OF S HARE PRICES WITHOUT ANY BASIS. THE ASSESSEE DID NOT CONCEAL AN Y PARTICULARS NOR DID SHE FILE ANY INACCURATE PARTICULARS BECAUSE ALL THE FACTS WERE BEFORE THE ASSESSING OFFICER AND THE ISSUE INV OLVES ONLY INTERPRETATION OF LAW. THEREFORE, THERE IS NO GROU ND FOR LEVY OF PENALTY. IN THESE CIRCUMSTANCES, WE CONFIRM THE ORD ER OF THE CITA) DELETING THE PENALTY RELYING ON THE DECISION OF RELIANCE PETRO PRODUCTS PVT. LTD. (322 ITR 158 ) (SC). 9. IN THE RESULT THE DEPARTMENTAL APPEAL IS DISMIS SED. ORDER PRONOUNCED IN THE OPEN COURT ON: 6.1.2012 SD/- SD/- (CHANDRA POOJARI) ( (ASHA VIJAYA RAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 6 TH JANUARY, 2012 ITA NO.1546/H/2011 SMT. NIKHAT FAMITA, HYDERABAD 5 COPY FORWARDED TO: 1. THE ACIT, CIRCLE 9(1), HYDERABAD 2. SMT. NIKHAT FATIMA, 18-8-534/12/A/1, EDI BAZAR, KUMARWADI, HYDERABAD 3. THE CIT(A)- VI, HYDERABAD 4. THE CIT, HYDERABAD 5. THE DR, ITAT, HYDERABAD NP/