HAROON MAHMOOD ADAM, MUMBAI V. ACIT 12(3), MUMBAI

ITA 1636/MUM/2013

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 8191 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-09-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Next Hearing Date: 15-09-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 28-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIVEK A PERAMPURNA
• Assessee Lawyers: KISHORE PATEL
• Keywords: Business income; Speculation loss
• Section: 43(5)

Judgement Text

H IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI BEFORE SHRI R.C. SHARMA, ACCOUNTANT MEMBER & SHRI SANJAY GARG, JUDICIAL MEMBER ./ I.T.A. NO.1636 /MUM/2013 ( / ASSESSMENT YEAR : 2007-2008 MISS HARRON MAHMOOD ADAM, 4, RAVINDRA MANSION, DINSHAW WACHHA ROAD, CHURCHGATE, MUMBAI 400 020. / VS. ACIT 12(3), MUMBAI. ./ PAN : AABPA0755F ( / APPELLANT ) .. ( / RESPONDENT ) A PPELLANT BY SHRI KISHORE PATEL R E SPONDENT BY : SHRI VIVEK A. PERAMPURNA / DATE OF HEARING : 15-09-2014 / DATE OF PRONOUNCEMENT : 19-9-2014 [ !' / O R D E R PER R.C. SHARMA, A.M . : THIS IS AN APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LD. CIT(A) -10, MUMBAI DATED 14-12-2012 FOR THE A.Y . 2007-08 IN THE MATTER OF ORDER PASSED U/S 271(1)(C) OF THE INCOME TAX ACT , 1961. 2. IN THIS APPEAL, THE ASSESSEE IS AGGRIEVED FOR T HE LEVY OF PENALTY OF RS. 5,05,474/- IMPOSED BY THE A.O. 3. THE FACTS IN BRIEF ARE THAT DURING THE RELEVANT ASSESSMENT YEAR UNDER CONSIDERATION, THE ASSESSEE HAD INCURRED A LOSS OF RS. 15,01,708/- IN COMMODITY EXCHANGE IN COMMODITIES IN MCX & NCDEX. THE ASSESSEE HAD TREATED THE SAME AS BUSINESS LOSS AND SET OFF AGAIN ST OTHER BUSINESS INCOME. ITA 1636/M/13 2 DURING THE COURSE OF ASSESSMENT ITSELF, THE ASSESSE E OFFERED THE SAME AS SPECULATIVE LOSS AND DID NOT CLAIM IT AS SET OFF AG AINST THE BUSINESS INCOME. HOWEVER, THE A.O. LEVIED PENALTY U/S 271(1)(C) OF T HE ACT BY OBSERVING THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF HE R INCOME AND CONCEALED THE INCOME. THE A.O. ALSO OBSERVED THAT SINCE THE CASE WAS FIXED FOR SCRUTINY, THEREFORE, THIS INCOME COULD NOT ESCAPE FROM TAX LI ABILITY. THE LD. CIT(A) CONFIRMED THE ACTION OF THE A.O. AGAINST WHICH THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 3. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND FOU ND FROM THE RECORDS THAT DERIVATIVE TRANSACTIONS CARRIED OUT IN A RECOG NIZED STOCK EXCHANGE WERE ULTIMATELY SETTLED OUT OTHERWISE THAN BY THE ACTUAL DELIVERY OR TRANSFER OF SCRIP. THE PROFIT/LOSS FROM TRADING IN DERIVATIVE T RANSACTIONS IS CONSIDERED AS BUSINESS INCOME AND NOT SPECULATIVE TRANSACTION. NC DEX AND MCX ARE ALSO EXCHANGES FOR TRADING IN COMMODITIES AND THE COMMOD ITIES TRANSACTIONS IN NCDEX AND MCX ARE ALSO SETTLED OTHERWISE THAN BY TH E ACTUAL DELIVERY OR TRANSFER OF COMMODITY. ACCORDINGLY, TRADING IN COMM ODITIES TRANSACTIONS AT NCDEX AND MCX WERE TREATED AS BUSINESS ACTIVITIES A ND LOSS FROM COMMODITIES TRANSACTIONS OF RS. 15,01,708/- WAS SET OFF AGAINST OTHER BUSINESS INCOME UNDER THE SAME TAXABLE HEAD OF INCO ME. IN THE RETURN OF INCOME, THE ASSESSEE HAS FURNISHED ALL DETAILS AND HAD NOT CONCEALED ANY PARTICULARS OF INCOME. HOWEVER, INADVERTENTLY THE A SSESSEE HAS CONSIDERED NCDEX/MCX AS A STOCK EXCHANGE WITHIN THE MEANING OF SECTION 43(5) OF THE ACT AND THEREBY CONSIDERED THE COMMODI TY TRADE LOSS AS A BUSINESS LOSS AGAINST SPECULATION LOSS. IN THE COUR SE OF ASSESSMENT ITSELF SAME WAS RECTIFIED AND ACCEPTED BY THE ASSESSEE. 4. THE LD. COUNSEL FOR THE ASSESSEE PLACED RELIANCE ON THE DECISION OF CO- ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF ACIT VS. ARNAV AKSHAY MEHTA, 53 SOT 581 (MUMBAI) WHEREIN IT WAS HELD THAT ASSESS EES DERIVATIVE TRADING ITA 1636/M/13 3 THROUGH MCX STOCK EXCHANGE IN THE A.Y. 2007-08 IS N ON-SPECULATION TRANSACTION AND, THEREFORE, LOSS INCURRED IS TO BE TREATED AS NORMAL BUSINESS LOSS. THE BENCH ALSO OBSERVED THAT TRANSACTIONS CAR RIED OUT THROUGH MCX STOCK EXCHANGE AFTER 1-4-2006 WOULD BE ELIGIBLE FOR BEING TREATED AS NON- SPECULATION WITHIN THE MEANING OF SECTION 43(5)(D) OF THE ACT. IN THE INSTANT CASE ALSO THE ASSESSMENT YEAR UNDER CONSIDERATION I S A.Y. 2007-08, THEREFORE, AS PER THE PROPOSITION LAID DOWN BY THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF ARNAV AKSHAY MEHTA (SUPRA) THE LOSS INC URRED BY THE ASSESSEE SHOULD BE TREATED AS NORMAL BUSINESS LOSS. ONCE SU CH LOSS IS TREATED AS BUSINESS LOSS, MERE TREATMENT BY THE A.O. AS SPECUL ATION LOSS WILL NOT BE JUSTIFIED TO LEVY PENALTY U/S 271(1)(C) OF THE ACT. FURTHERMORE, THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. BHARTESH JA IN, (2010) 323 ITR 358 HELD THAT MERE TREATMENT OF BUSINESS LOSS AS SPECUL ATIVE LOSS WOULD NOT AMOUNT TO CONCEALMENT U/S 271(1)(C) OF THE ACT. IT WAS HELD THAT PENALTY U/S 271(1)(C) WAS NOT LEVIABLE WHERE THE ADDITION WAS M ADE ON ACCOUNT OF TREATMENT OF BUSINESS LOSS AS SPECULATION LOSS. TH E HONBLE SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETROPRODUCTS (P) L TD., 322 ITR 158 (SC) ALSO OBSERVED THAT MERE MAKING OF THE CLAIM, WHICH IS NO T SUSTAINABLE IN LAW, BY ITSELF WILL NOT AMOUNT TO FURNISHING INACCURATE PAR TICULARS SO AS TO LEVY PENALTY U/S 271(1)(C) OF THE INCOME TAX ACT, 1961. 5. IN VIEW OF THE ABOVE DISCUSSION, WE HOLD THAT AD DITION MADE BY MERE CHANGE OF HEAD OF INCOME WILL NOT ATTRACT PENALTY U /S 271(1)((C) OF THE ACT. THE A.O. IS DIRECTED TO DELETE THE SAME. ITA 1636/M/13 4 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH SEPTEMBER, 2014. !' # $% &! ' 19-9-2014 ( ) SD/ - SD/- (SANJAY GARG) (R.C. SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER $ 5 MUMBAI ; &! DATED 19-09-2014 [ .<../ RK , SR. PS ! '#$% &%# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. = () / THE CIT(A) 3,, MUMBAI 4. = / CIT II, MUMBAI 5. @A( <