ITO, New Delhi V. M/s. H.T. Ferro Pvt. Ltd., New Delhi

ITA 156/DEL/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 4119 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 3 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 03-03-2011
• Assessment Year: 1997-1998
• Appeal Filed On: 11-01-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MONA MOHANTY
• Keywords: Speculation loss

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C BEFORE SHRI G.E.VEERABHADRAPPA, VICE PRESIDENT AND SHRI I.P.BANSAL, JUDICIAL MEMBER ITA NO.156/DEL/2010 ASSTT.YEAR: 1997-98. INCOME-TAX OFFICER, VS M/S H.T.FERRO PVT.LTD. WARD 12(4), NEW DELHI. JG-1/120B, VIKASPURI NEW DELHI. PAN: AAACH1919E. (APPELLANT) (RESPONDENT) APPELLANT BY: SMT.MONA MOHANTY, SR.D.R RESPONDENT BY: NONE. O R D E R PER VEERABHADRAPPA, V.P. THIS APPEAL BY THE REVENUE ARISES OUT OF THE ORDER DATED 30.10.2009 OF THE CIT(APPEALS)XV, NEW DELHI FOR THE ASSESSMENT YEAR 1997-98. 2. THE ONLY DISPUTE IN THIS APPEAL RELATES TO THE R ELIEF OF PENALTY U/S 271(1)(C) OF THE ACT. 3. THE ASSESSEE A LIMITED COMPANY WAS ENGAGED IN TH E BUSINESS OF TRADING IN SOFTWARE AS ALSO TRADING IN SHARES. THE ASSESSEE HAS EARNED A PROFIT OF RS 10,30,450/- ON ACCOUNT OF TRADING IN COMPUTER SOFTWARE WHILE IT INCURRED A TRADING LOSS OF RS 3,97,38,050/- ON ACCO UNT OF TRADING IN SHARES. ACCORDING TO EXPLANATION APPENDED TO SECTION 73 OF THE INCOME-TAX ACT, THE LOSS IN TRADING IN SHARES IS TO BE DEEMED AS SPECUL ATION LOSS. IN THE QUANTUM ITA NO.156/DEL/2010 2 PROCEEDINGS, THE ASSESSEES CLAIM OF BUSINESS LOSS AND TRADING IN SHARES WERE DISALLOWED AND THE SAME WAS TREATED AS SPECULATION LOSS AND IN RESPECT OF SUCH DISALLOWANCE, PENALTY PROCEEDINGS WERE INITIAT ED U/S 271(1)(C) OF THE ACT. THE CLAIM OF THE ASSESSEE IS THAT THE ASSESSEE NEVER CONCEALED ANY INCOME NOR HAS FURNISHED ANY INACCURATE PARTICULARS OF INCOME AND DISALLOWANCE HAS BEEN MADE ONLY BECAUSE OF THE DEEM ING PROVISIONS OF EXPLANATION TO SECTION 73 OF THE ACT. THE CONTENTIO N OF THE ASSESSEE WAS NOT ACCEPTED BY THE A.O WHO LEVIED THE PENALTY OF RS 2, 53,893/- U/S 271(1)(C) OF THE ACT. 4. THE CIT (APPEALS) CANCELLED THE PENALTY BY DISCU SSING THE ISSUE AS UNDER: 5. I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELL ANT, FINDINGS OF THE AO AND THE FACTS ON RECORD THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. AURIC INVESTMENT & SECURITIES LTD. 310 ITR 121 (DEL) HAS HELD THAT THERE WAS NOTHING ON RECORD TO SHOW THAT IN FURNISHING ITS RETURN OF INCOME, THE ASSESSEE HAD EITHER CONCEALED ITS INCOME OR HAD FURNISHED ANY INACCURAT E PARTICULARS OF INCOME. THE MERE TREATMENT OF THE BUSINESS LOSS AS SPECULATION LOSS BY THE ASSESSING OFFICER DID NOT AUTOMATICALLY WARRANT THE INFERENCE OF CONC EALMENT OF INCOME. THE CANCELLATION OF PENALTY WAS VALID. IN THE CASE OF ITO 3(1)(4) MUMBAI VS. GACL 30 SOT 3 60 (MUMBAI BENCH ITAT) FINANCE LTD. HAS HELD THAT THUS, AFTER FURNISHING PARTICULARS REGARDING CALCULATION OF INCOME, THE ASSESSEE HAS RIGHT TO CL AIM EXEMPTION AND DEDUCTION, ACCORDING TO HIM WHICH ARE AS PER LAW. THE ASSESSIN G OFFICER WHILE DISCHARGING HIS DUTY ALLOWS OR DISALLOWS THE ASSESSEES CLAIM A ND IF HE ARRIVES AT A DIFFERENT FIGURE OF TOTAL INCOME THAN THE TOTAL INCOME DECLAR ED BY THE ASSESSEE, THAT CASE CAN NOT BE SAID TO BE A CASE OF FURNISHING INACCURA TE PARTICULARS OR CONCEALING OF PARTICULARS OF INCOME. [PARA 6.13]. IN THE INSTANT CASE, THE ASSESSEE HAD CLAIMED LOSS FROM TRADING OF SHARES AND FURNISHED ALL THE RELEVANT MATERIALS. THE AO TREATE D THE SAID LOSS UNDER EXPLANATION TO SECTION 73 AS DEEMED SPECULATION LOS S AND LEVIED PENALTY U/S 271(1)(C). THE COMMISSIONER (APPEALS) CANCELLED THE SAID PENALTY HOLDING THAT THE ASSESSEE HAD DISCLOSED ALL THE MATERIAL FACTS A ND IT WAS ONLY UNDER DEEMING PROVISIONS THAT THE LOSS WAS TO BE TREATED AS SPECU LATIVE LOSS. THE COMMISSIONER (APPEALS) HAD CANCELLED THE PENALTY AFTER CONSIDERI NG THE FACTS ON MERIT OF THE ITA NO.156/DEL/2010 3 CASE. HE HAD NOT CANCELLED THE PENALTY ON THE GROUN D OF WILFUL CONCEALMENT OR ON THE GROUND OF MENS REA. THUS, IT WAS OPINED TH AT THE INSTANT CASE WAS A SIMPLE CASE OF FIGHTING IN BETWEEN DUTY & RIGHTS WH ICH AUTOMATICALLY DID NOT AMOUNT TO A CASE OF CONCEALING PARTICULARS OR FURNI SHING INACCURATE PARTICULARS OF INCOME. FURTHER THERE WAS NO FINDING OF THE AO THAT EXPLANATION FURNISHED BY THE ASSESSEE WAS FOUND TO BE FALSE. [PARA 6.14]. IN VIEW OF THE AFORESAID, THE INSTANT CASE WAS NOT A FIT CASE FOR LEVY OF PENALTY U/S 271(1)(C). THEREFORE, THE ORDER OF THE COMMISSIONER (APPEALS) CANCELING THE PENALTY WAS TO BE UPHELD. [PARA 6.15]. IN THE INSTANT CASE THE APPELLANT HAD CLAIMED LOSSE S ON THE TRADING OF SHARES. THE AO RELYING ON PROVISIONS OF EXPLANATION 2 SECTION 7 3 OF THE I.T.ACT TREATED THE ABOVE LOSSES AS DEEMED SPECULATION LOSS AND PENALTY WAS LEVIED. THE FACTS SHOW THAT THE APPELLANT HAD DISCLOSED ALL THE ABOVE FACT S AND IT WAS ONLY UNDER THE DEEMING PROVISIONS OF THE I.T.ACT THAT THE AO TREAT ED THE LOSS TO BE SPECULATIVE LOSS. THERE WAS NO WILLFUL CONCEALMENT OR MENS REA ON THE PART OF THE APPELLANT. RESPECTFULLY FOLLOWING THE DECISIONS CITED ABOVE AN D VIEW OF THE FACT THAT THERE WAS NO WILLFUL CONCEALMENT ON THE PART OF THE APPEL LANT, THE PENALTY IS DELETED. THE GROUND IS ALLOWED. 5. IN THE ABSENCE OF THE ASSESSEE ON THE DATE OF HE ARING, WE HEARD THE LEARNED D.R WHO STRONGLY JUSTIFIED THE IMPOSITION O F PENALTY U/S 271(1)(C) OF THE ACT HAVING REGARD TO THE FACTS AND CIRCUMSTANCE S OF THE CASE DISCUSSED IN THE ASSESSMENT ORDER. IN OUR VIEW THE PENALTY U/S 2 71(1)(C) HAS RIGHTLY BEEN CANCELLED BY THE CIT(APPEALS). WE AGREE WITH THE VI EW OF THE CIT(APPEALS) THAT THE ASSESSEE HAD DISCLOSED ALL THE PARTICULARS OF INCOME AND HAS NOT FURNISHED ANY INACCURATE PARTICULARS IN RESPECT OF THE ISSUE IN DISPUTE. FROM OUT OF THE DETAILS FURNISHED ONLY, THE AO HAS WENT ON TO CONSIDER THE TRADING LOSS AS A SPECULATION LOSS IN TERMS OF PROVISIONS O F EXPLANATION TO SEC.73 OF THE ACT. ON THE PART OF THE ASSESSEE HE HAS DISCLOS ED ALL THE MATERIAL DETAILS WHICH COULD ENABLE THE DEPARTMENT TO COME TO A PROP ER CONCLUSION. THE LEARNED CIT(A), IN DELETING THE PENALTY, HAS FOLLOW ED THE DECISION OF DELHI HIGH COURT IN THE CASE OF CIT VS. AURIC INVSTMENT & SECURITIES LTD. 310 ITR 121 (DEL), INASMUCH AS THE ASSESSEE HAS DISCLOSED A LL PARTICULARS OF INCOME AND HAS NOT CONCEALED ANY PARTICULARS THEREOF. IN T HE LIGHT OF THE DETAILS THAT ITA NO.156/DEL/2010 4 IT HAD FURNISHED, IT CANNOT BE SAID THAT THE ASSESS EE HAS FURNISHED INACCURATE PARTICULARS OF INCOME. SO THE QUESTION OF LEVYING O F PENALTY U/S 271(1)(C DOES NOT ARISE. THE LEARNED CIT(APPEALS) HAS CORREC TLY CANCELLED THE PENALTY AND WE DECLINE TO INTERFERE. THE APPEAL IS DISMISSE D. PRONOUNCED IN OPEN COURT ON 29.04.2011. SD/- SD/- (I.P.BANSAL) (G.E.VEERABHADRAPPA) JUDICIAL MEMBER VICE PRESIDENT DATE: APRIL 29 ,2011. DRS COPY OF THE ORDER FORWARDED TO: 1. APPELLANT, 2. RESPONDENT, 3. CIT 4. CIT(A) 5. DR ASSTT.REGISTRAR, ITAT