Shri Areez Pirozsha Khambatta, Ahmedabad V. The ACIT.,Circle-10, Ahmedabad

ITA 1574/AHD/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 76911 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-07-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 15-07-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 17-07-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B L YADAV
• Assessee Lawyers: PF JAIN

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD BEFORE SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER AND SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER ITA NO.1574/AHD/2012 A.Y.2006-07 AREEZ PIROZSHA KHAMBATTA. PROP. OF JAFEE MFG. CO., B/H. ELLISBRIDGE GYMKHANA, ELLISBRIDGE, AHMEDABAD. PAN: ABMPK 6322L VS ACIT, CIRLE-10, AHMEDABAD. (APPELLANT) (RESPONDENT) REVENUE BY : SHRI B.L. YADAV, SR.D.R., ASSESSEE(S) BY : SHRI P.F. JAIN, A.R. / // / DATE OF HEARING : 15/07/2014 / DATE OF PRONOUNCEMENT: 18/07/2014 / O R D E R SHRI MUKUL KUMAR SHRAWAT (JUDICIAL MEMBER) THIS IS AN APPEAL FILED BY THE ASSESSEE ARISING FRO M THE ORDER OF LEARNED CIT(A)-XVI AHMEDABAD, DATED 1 ST JUNE, 2012. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN UP HOLDING THE LEVY OF PENALTY OF RS.2,65,490/- ON DISALLOWANCE OF LOSS ON RBI BONDS, ON THE GROUND OF FURNISHING INACCURATE PARTICULARS OF INCOME WITH OUT PROPERLY APPRECIATING THE FACTS AND SUBMISSIONS OF THE APPELLANT.. 2. FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDING ASSESSMENT ORDERS PASSED U/S.143(3), DATED 31.12.2008 AND THE PENALTY ORDER PASSED U/S.271(1)(C) DATED 30 TH OF MARCH, 2011 WERE THAT DISALLOWANCE WAS MADE IN RESPECT OF SHORT TERM CAPITAL LOSS CLAIMED ON MA TURITY OF TAX FREE RBI ITA NO.1574/AHD/2012 AREEZ PIROZSHA KHAMBATTA VS. ACIT CIRCLE-10 FOR A.Y. 2006-07 - 2 - BONDS OF RS.7,88,730/-. WHILE DISALLOWING THE SET U P OF LOSS, THE AO HAS MADE AN OBSERVATION AS UNDER: 6.) DISALLOWANCE OF SET-OFF OF LOSS ON SALE OF 9% RELIE F BONDS OF RS.7,88,730/-: ON PERUSAL OF STATEMENT OF SHORT TERM CAPITAL GAIN AND SCHEDULE-H REGARDING CAPITAL GAINS, IT IS SEEN THAT, THE ASSES SEE HAS SET-OFF LOSS ON SALE OF 9% RELIEF BONDS AMOUNTING TO RS.7,88,730/-. THE ASS ESSEE WAS ACCORDINGLY REQUESTED TO EXPLAIN AS TO HOW THE LOSSES ARE INCUR RED ON SALE OF RELIEF BONDS. IT WAS ALSO POINTED OUT THAT, THE 9% RELIEF BONDS I S A DEBT INSTRUMENT AND THE INTEREST THEREFROM IS TAX FREE AND ACCORDINGLY, IT WAS INFERRED THAT, IF IN ANY WAY, LOSS IS INCURRED, IT WILL REDUCE THE TAX FREE INCOME. THE ASSESSEE HAS CONTENDED THAT HE HAS PURCHASED 9% TAX FREE RELIEF BOND FROM THE OPEN MARKET AT A PREMIUM AND ON MATURITY HE RECEIVED THE FACE VALUE ONLY. THE DIFFERENCE OF COST AND FACE VALUE HAS BEEN CLAIMED AS SHORT TERM CAPITAL LOSS AS THE ASSESSEE HAS REALIZED LESSER AMOUNT ON MATURITY . THE CONTENTION OF THE ASSESSEE IS NOT ACCEPTABLE DUE TO THE REASON THAT, THE 9% RELIEF BOND IS TAX FREE AND THE INCOME OF WHICH IS NOT LIABLE TO TAX. THE P REMIUM PAID FOR PURCHASING BOND FROM OPEN MARKET WILL RESULT INTO REDUCTION OF TAX FREE INCOME TO THAT EXTENT. ON MATURITY THE ASSESSEE HAS RECEIVED THE F ACE VALUE FROM RBI AND THERE IS NO ANY TRANSFER ASSET AND FURTHER AS IT IS A DEBT INSTRUMENT, THE QUESTION OF ANY CAPITAL LOSS DOES NOT ARISE. THEREFORE, THE SHORT TERM CAPITAL LOSS COMPUTED BY THE ASSESSEE ON MATURITY OF THE TAX FRE E RBI BOND AT RS.7,88,730/- IS DISALLOWED AND AS A RESULT THE SHO RT TERM CAPITAL LOSS IS RECOMPUTED AS UNDER: . 3. AGAINST THE LEVY OF PENALTY MATTER WAS CARRIED B EFORE THE FIRST APPELLATE AUTHORITY AND LEARNED CIT(A) HAS HELD THA T AT THE TIME OF FILING THE RETURN THE CLAIM WAS MADE BUT THE ASSESSEE WAS FULLY AWARE THAT SUCH CLAIM WAS NOT AN ALLOWABLE CLAIM AS PER LAW. ACCORD ING TO LEARNED CIT(A), BY NO STRETCH OF IMAGINATION, IT WAS A CASE WHICH HAD FALLEN UNDER THE CATEGORY OF DEBATABLE ISSUE BUT IT WAS A CASE OF FURNISHING OF INACCURATE PARTICULARS. BY ASSIGNING THOSE REASONS, THE ACTION OF THE AO WAS CONFIRMED. 4. WITH THIS BRIEF BACKGROUND, WE HAVE HEARD BOTH T HE SIDES. WE ARE NOT IN AGREEMENT WITH THE FINDINGS OF LEARNED CIT(A ) BECAUSE THE NATURE OF THE RECEIPT, THE AMOUNT RECEIPT ON MATURITY ON T AX FREE RBI BONDS AS ITA NO.1574/AHD/2012 AREEZ PIROZSHA KHAMBATTA VS. ACIT CIRCLE-10 FOR A.Y. 2006-07 - 3 - WELL AS OTHER RELATED INFORMATION WAS PLACED BEFORE THE REVENUE DEPARTMENT AT THE TIME OF FILING OF THE RETURN. THE REFORE, IT CAN BE OPINED THAT THERE WAS NO CONCEALMENT ABOUT THE PARTICULARS OF THE FACTS REGARDING THE MATURITY OF RBI BONDS. ON THOSE FACTS BEING DIS CLOSED BEFORE THE REVENUE DEPARTMENT A LEGAL QUESTION HAS CROPPED UP WHETHER THE ASSESSEE WAS ELIGIBLE FOR THE SHORT TERM CAPITAL LO SS OR NOT. ALTHOUGH, IT IS TRUE THAT THE LOSS WAS NOT PERMISSIBLE IN THE EYES OF LAW BUT THE CORRECT POSITION OF LAW COULD ONLY BE ASCERTAINED BY THE RE VENUE DEPARTMENT AFTER EXAMINING THE FACTS OF EACH CASE. BECAUSE OF THIS REASON, WE HEREBY HOLD THAT THE CASE OF RELIANCE PETRO PRODUCT PVT. LTD., (2010) 322 ITR 158 (SC) IS APPLICABLE AND THE PENALTY DESERVES TO BE DELET ED. WE HEREBY DIRECT TO DELETE THE PENALTY. RESULTANTLY, GROUND R AISED IS ALLOWED. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. SD/- SD/- (ANIL CHATURVEDI) (MUK UL KR. SHRAWAT) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 18/07/2014 PRABHAT KR. KESARWANI, SR. P.S. / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. !' / THE RESPONDENT. 3. #$#% ' '& / CONCERNED CIT 4. ' '&() / THE CIT(A)-III, AHMEDABAD 5. )*' %, ' ' % , ,-$ / DR, ITAT, AHMEDABAD 6. *./ 0 / GUARD FILE. / BY ORDER, 1 11 1/ // /,' #2 ,' #2 ,' #2 ,' #2 ( DY./ASSTT.REGISTRAR) ' ' % ' ' % ' ' % ' ' % , , , , ,-$ ,-$ ,-$ ,-$ / ITAT, AHMEDABAD