Assistant Commissioner of Income-tax, V. Mr. Cyprian D'souza, Pune

ITA 1751/PUN/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 9603 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 6 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-04-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 04-04-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 19-09-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Salary income; Wrong claim; Corroborative evidences
• Section: 143(3); 14A; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE , ! , $ BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURV EDI, AM . / ITA NOS.1751 & 1752/PUN/2014 & & / ASSESSMENT YEARS : 2007-08 & 2005-06 THE DY. COMMISSIONER OF INCOME TAX, CIRCLE 8, PUNE . / APPELLANT VS. MR. CYPRIAN DSOUZA, A-53, VRINDAVAN SOCIETY, PASHAN, PUNE 411 008 . RESPONDENT PAN: AAAPD6636R / APPELLANT BY : SHRI SUHAS KULKARNI / RESPONDENT BY : NONE DATE OF HEARING : 04.04.2017 / DATE OF PRONOUNCEMENT: 11.04.2017 / ORDER PER SUSHMA CHOWLA, JM: BOTH THE APPEALS FILED BY THE REVENUE ARE AGAINST S EPARATE ORDERS OF CIT(A)-V, PUNE, BOTH DATED 26.06.2014 RELATING TO A SSESSMENT YEARS 2007-08 AND 2005-06 AGAINST ORDER PASSED UNDER SECTION 143( 3) R.W.S. 263 AND PENALTY LEVIED UNDER SECTION 271(1)(C) OF THE INCOME-TAX AC T, 1961 (IN SHORT THE ACT), RESPECTIVELY. ITA NOS.1751 & 1752/PUN/2014 CYPRIAN DSOUZA 2 2. DESPITE SERVICE OF NOTICE, NONE APPEARED ON BEHA LF OF ASSESSEE AND WE PROCEED TO DECIDE THE PRESENT APPEAL AFTER HEARING THE LD. DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE. 3. BOTH THE APPEALS FILED BY THE REVENUE RELATING T O SAME ASSESSEE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS CO NSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 4. THE REVENUE IN ITA NO.1752/PUN/2014 FOR ASSESSME NT YEAR 2005-06 HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. 'WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) WAS JUSTIFIED IN DELETING THE PENALTY LEV IED U/S.271(1)(C) OF THE IT ACT ON THE DISALLOWANCE OF EXPENSES OF RS.77 ,82,002/- CLAIMED ON SALE OF EMPLOYEES STOCK OPTION PLAN (ESO P) WHEN THE ASSESSEE HAD MADE WRONG CLAIM BY MISREPRESENTING TH E FACTS WITH REGARD TO ESOP PERQUISITE? 2. 'WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD.CIT(A) WAS JUSTIFIED IN DELETING THE PENALTY LEV IED U/S.271(1)(C) OF THE IT ACT WITHOUT APPRECIATING THE FACT THAT BOGUS EXPENSES/ DEDUCTION CLAIMED BY THE ASSESSEE BY FURNISHING INA CCURATE PARTICULARS LEADS TO CONCEALMENT OF INCOME AND BY I GNORING THE DECISION OF HON'BLE HIGH COURT OF KERALA IN THE CAS E OF KALPAKA BAZAR 313 ITR 414 ?' 3. 'WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD.CIT(A) WAS JUSTIFIED IN DELETING THE PENALTY LEV IED U/S.271(1)(C) OF THE IT ACT BY WRONGLY APPLYING THE DECISION OF SUPR EME COURT GIVEN IN THE CASE OF RELIANCE PETRO PRODUCTS PVT. LTD?' 4. 'WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD.CIT(A) WAS JUSTIFIED IN DELETING THE PENALTY LEV IED U/S.271(1)(C) OF THE IT ACT BY WRONGLY CONCLUDING WITHOUT ANY SUCH M ATERIALS ON RECORD THAT THE CLAIM WAS MADE ON THE ADVICE OF A P ROFESSIONAL?' 5. THE ISSUE RAISED IN THE PRESENT APPEAL IS AGAINS T LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT. ITA NOS.1751 & 1752/PUN/2014 CYPRIAN DSOUZA 3 6. BRIEFLY IN THE FACTS OF THE CASE THE ASSESSEE FO R THE YEAR UNDER CONSIDERATION HAD DECLARED TOTAL INCOME OF RS.13,20 ,99,105/-. THE CASE OF THE ASSESSEE WAS REOPENED UNDER SECTION 148 OF THE ACT. ON VERIFICATION OF THE RETURN OF INCOME, THE ASSESSING OFFICER NOTICED THA T THE TOTAL INCOME INCLUDED INCOME FROM SALARY OF RS.1,46,23,455/- AND CAPITAL GAINS OF RS.11,66,34,328/-. ON THE PERUSAL OF FORM NO.16 ENCLOSED WITH THE RETU RN OF INCOME, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAD RECEI VED SALARY OF RS.1.46 CRORES, ESOP PERQUISITE OF RS.12,52,08,302/- AGGREG ATING TO RS.13,98,54,257/-. HOWEVER, THE ASSESSEE HAD NOT INCLUDED THE ESOP PER QUISITE RECEIPT UNDER THE HEAD SALARY BUT HAD OFFERED THE SAME UNDER THE HEAD SHORT TERM CAPITAL GAINS, IN ORDER TO CLAIM THE BENEFIT OF FURTHER DEDUCTION OF RS.77,82,002/-, BEING THE EXPENDITURE INCURRED ON SALE OF THE SAID STOCK OPTI ON. THE ASSESSING OFFICER WAS OF THE VIEW THAT WHERE THE EMPLOYER OF THE ASSE SSEE ITSELF HAD TREATED THE ESOP PERQUISITE AS TAXABLE UNDER THE HEAD INCOME FR OM SALARY, THE ASSESSEE SHOULD HAVE OFFERED THE SAME UNDER THE SAME HEAD. THE ASSESSEE WAS SHOW CAUSED IN THIS REGARD. HOWEVER, THE ASSESSING OFFI CER INCLUDED THE ESOP PERQUISITE OF RS.12.52 CRORES UNDER THE HEAD INCOME FROM SALARY AND THE DEDUCTION CLAIMED AT RS.77,82,002/- WAS DISALLOWED. PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT WERE INITIATED. 7. DURING THE COURSE OF PENALTY PROCEEDINGS THERE W AS NON-APPEARANCE ON BEHALF OF THE ASSESSEE. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE ASSESSEE HAD FURNISHED INACCURATE PARTICULARS OF IN COME TO THE EXTENT OF RS.77,82,002/-. IN RESPECT OF ANOTHER ADDITION OF RS.9,03,160/- THE ASSESSEE WAS HELD TO HAVE CONCEALED THE PARTICULARS OF INCOM E. ITA NOS.1751 & 1752/PUN/2014 CYPRIAN DSOUZA 4 8. IN APPEAL THE LEVY OF PENALTY ON THE ADDITION OF RS.9,03,160/- WAS CONFIRMED AS THE ASSESSEE HAD NOT FILED ANY SUBMISS IONS IN THAT REGARD AND THE SAME WAS CONFIRMED BY THE CIT(A). WITH REGARD TO T HE SECOND ISSUE OF CLAIM OF EXPENDITURE TOTALING RS.77,82,002/- AGAINST ESOP PE RQUISITE, THE CIT(A) NOTED THAT THE SAID CLAIM AND THE OFFERING OF ESOP PERQUI SITE AS INCOME UNDER THE HEAD SHORT TERM CAPITAL GAINS, WAS ON THE ADVICE OF THE TAX CONSULTANT AND THE ASSESSEE COULD NOT BE PENALIZED FOR THE WRONG ADVIC E OF THE TAX CONSULTANT. THE CIT(A) FURTHER OBSERVED THAT WHERE ALL THE FACT S ASSOCIATED WITH THE TRANSACTION WERE REPORTED IN FORM NO.16 AND ALSO TD S DETAILS WERE AVAILABLE WITH THE DEPARTMENT, THEREFORE, IT COULD NOT BE SAI D THAT THE ASSESSEE HAD FURNISHED INACCURATE PARTICULARS OF INCOME OR HAD C ONCEALED THE INCOME. RELIANCE IN THIS REGARD WAS PLACED ON THE RATIO LAI D DOWN BY THE HONBLE SUPREME COURT IN CIT VS. RELIANCE PETROPRODUCTS PVT . LTD. REPORTED IN 322 ITR 158 (SC). SINCE ALL THE FACTS ASSOCIATED WITH THE TRANSACTIONS WERE DECLARED BY THE ASSESSEE BEFORE THE DEPARTMENT, AND THE CLAIM O F THE EXPENSES WAS BASED ON THE OPINION OF THE TAX CONSULTANT, THEREFORE, TH E CIT(A) HELD THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN LEVYING PENA LTY UNDER SECTION 271(1)(C) OF THE ACT. 9. THE REVENUE IS IN APPEAL AGAINST THE ORDER OF CI T(A). 10. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE POINTED OUT THAT THE SAID EXPENDITURE WAS NOT ALLOWABLE IN THE HANDS OF ASSESSEE AND AGAINST NON-ALLOWANCE OF EXPENDITURE LEVY OF PENALT Y IS JUSTIFIED. RELIANCE WAS PLACED ON THE RATIO LAID DOWN BY THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. M/S. KHANNA & ANNADHANAM VIDE ITA NO.1395/ DEL/2009 ORDER DATED 22-07-2011. ITA NOS.1751 & 1752/PUN/2014 CYPRIAN DSOUZA 5 11. ON THE PERUSAL OF RECORD, THE ISSUE ARISING IN THE PRESENT APPEAL IS IN RELATION TO THE DELETION OF PENALTY LEVIED FOR FURN ISHING INACCURATE PARTICULARS OF INCOME UNDER SECTION 271(1)(C) OF THE ACT ON DISALL OWANCE OF EXPENSES TOTALING TO RS.77,82,002/-. THE ASSESSEE WAS A SALARIED EMP LOYEE AND IN ADDITION TO THE SALARY, HAD RECEIVED ESOP PERQUISITE BENEFITS. THE EMPLOYER OF THE ASSESSEE HAD DEDUCTED TAX AT SOURCE ON BOTH THE SAL ARY PAY OUTS AND THE ESOP PERQUISITE BENEFITS AND HAD INCLUDED THE SAME AS PART OF GROSS SALARY IN FORM NO.16 ISSUED BY IT. THE ASSESSEE IN THE RETUR N OF INCOME HAD DECLARED THE INCOME FROM SALARY SEPARATELY AND THE ESOP PERQ UISITE BENEFITS WERE DECLARED UNDER THE HEAD INCOME FROM SHORT TERM CAPI TAL GAINS. WHILE DECLARING THE SAID INCOME, THE ASSESSEE HAD CLAIMED EXPENDITU RE ON ACCOUNT OF SHARE TRANSFER EXPENSES TOTALING TO RS.77,82,002/-, AS DE DUCTION UNDER THE HEAD SHORT TERM CAPITAL GAINS. THE ASSESSING OFFICER WAS OF T HE VIEW THAT THE ESOP PERQUISITE BENEFITS ARE PART OF THE SALARY AND SINC E EVEN THE EMPLOYER HAD DEDUCTED TAX AT SOURCE ON THE SAME UNDER THE HEAD S ALARY AND HENCE WERE TO BE INCLUDED IN THE SALARY INCOME. ONCE IT WAS SO I NCLUDED, EXPENDITURE CLAIMED ON SHARE TRANSFER CERTIFICATES TOTALING TO RS.77,82 ,002/- WAS NOT ALLOWED IN THE HANDS OF ASSESSEE. THE ISSUE WHICH AROSE BEFORE US IS IN RELATION TO THE LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT FOR FURN ISHING INACCURATE PARTICULARS OF INCOME IN RESPECT OF THE SAID DISALLOWANCE OF RS .77,82,002/-. THE CASE OF ASSESSEE EVOLVES THAT HE HAD DECLARED THE INCOME I N HIS RETURN OF INCOME ON THE BASIS OF THE ADVICE OF HIS COUNSEL AND HENCE NO MISCHIEF COULD BE ATTRIBUTED TO THE ASSESSEE. SECOND PLEA OF THE ASSESSEE BEFOR E CIT(A) WAS THAT HE HAD DECLARED COMPLETE PARTICULARS OF THE SAID INCOME AN D EXPENDITURE FULLY IN THE RETURN OF INCOME AND HENCE THERE IS NO MERIT IN THE LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT ON DISALLOWANCE OF THE EXPENDITURE. ITA NOS.1751 & 1752/PUN/2014 CYPRIAN DSOUZA 6 12. WE FIND MERIT IN THE PLEA OF THE ASSESSEE IN TH IS REGARD. FIRST OF ALL WHERE THE ASSESSEE HAD FURNISHED THE PARTICULARS OF INCOME ON THE ADVICE OF HIS TAX CONSULTANT, THEN IN CASE ANY DISALLOWANCE I S MADE IN THAT REGARD, THE ASSESSEE CANNOT BE HELD TO HAVE FURNISHED INACCURAT E PARTICULARS OF INCOME MAKING IT EXIGIBLE TO LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. SECONDLY COMPLETE PARTICULARS OF INCOME AND OTHER D ETAILS HAD BEEN FILED IN THE RETURN OF INCOME ITSELF AND MERELY BECAUSE THE EXPE NDITURE WAS DISALLOWED IN THE HANDS OF ASSESSEE DOES NOT JUSTIFY THE LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. 13. WE FIND SUPPORT FROM THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETROPRODUCTS PVT. LTD.(SUPRA) HAS ELABORATED ON THE EXPRESSION INACCURATE PARTICULARS OF INCOME HOLDING AS UNDER : 8. THEREFORE, IT IS OBVIOUS THAT IT MUST BE SHOWN THAT THE CONDITIONS UNDER SECTION 271(1)(C) MUST EXIST BEFORE THE PENALTY IS IMPOSED. THERE CAN BE NO DISPUTE THAT EVERYTHING WOULD DEPEND UPON THE RETUR N FILED BECAUSE THAT IS THE ONLY DOCUMENT, WHERE THE ASSESSEE CAN FURNISH THE P ARTICULARS OF HIS INCOME. WHEN SUCH PARTICULARS ARE FOUND TO BE INACCURATE, T HE LIABILITY WOULD ARISE. IN DILIP N. SHROFF V. JOINT CIT [2007] 6 SCC 329, THIS COURT EXPLAINED THE TERMS 'CONCEALMENT OF INCOME' AND 'FURNISHING INACCURATE PARTICULARS'........................ 9. WE ARE NOT CONCERNED IN THE PRESENT CASE WITH TH E MENS REA. HOWEVER, WE HAVE TO ONLY SEE AS TO WHETHER IN THIS CASE, AS A MATTER OF FACT, THE ASSESSEE HAS GIVEN INACCURATE PARTICULARS. IN WEBST ER'S DICTIONARY, THE WORD 'INACCURATE' HAS BEEN DEFINED AS : 'NOT ACCURATE, NOT EXACT OR CORRECT ; NOT ACCORDING TO TRUTH ; ERRONEOUS ; AS AN INACCURATE STATEMENT, COPY OR TRANSCRIPT.' WE HAVE ALREADY SEEN THE MEANING OF THE WORD 'PARTI CULARS' IN THE EARLIER PART OF THIS JUDGMENT. READING THE WORDS IN CONJUNCTION, THEY MUST MEAN THE DETAILS SUPPLIED IN THE RETURN, WHICH ARE NOT ACCURATE, NOT EXACT OR CORRECT, NOT ACCORDING TO TRUTH OR ERRONEOUS. WE MUST HASTEN TO ADD HERE THAT IN THIS CASE, THERE IS NO FINDING THAT ANY DETAILS SUPPLIED BY TH E ASSESSEE IN ITS RETURN WERE FOUND TO BE INCORRECT OR ERRONEOUS OR FALSE. SUCH N OT BEING THE CASE, THERE WOULD BE NO QUESTION OF INVITING THE PENALTY UNDER SECTION 271(1)(C) OF THE ACT. A MERE MAKING OF THE CLAIM, WHICH IS NOT SUSTAINABL E IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REGARDI NG THE INCOME OF THE ASSESSEE. SUCH CLAIM MADE IN THE RETURN CANNOT AMOU NT TO THE INACCURATE PARTICULARS. ITA NOS.1751 & 1752/PUN/2014 CYPRIAN DSOUZA 7 10. IT WAS TRIED TO BE SUGGESTED THAT SECTION 14A O F THE ACT SPECIFICALLY EXCLUDED THE DEDUCTIONS IN RESPECT OF THE EXPENDITU RE INCURRED BY THE ASSESSEE IN RELATION TO INCOME WHICH DOES NOT FORM PART OF T HE TOTAL INCOME UNDER THE ACT. IT WAS FURTHER POINTED OUT THAT THE DIVIDENDS FROM THE SHARES DID NOT FORM THE PART OF THE TOTAL INCOME. IT WAS, THEREFORE, REITER ATED BEFORE US THAT THE ASSESSING OFFICER HAD CORRECTLY REACHED THE CONCLUS ION THAT SINCE THE ASSESSEE HAD CLAIMED EXCESSIVE DEDUCTIONS KNOWING THAT THEY ARE INCORRECT ; IT AMOUNTED TO CONCEALMENT OF INCOME. IT WAS TRIED TO BE ARGUED THAT THE FALSEHOOD IN ACCOUNTS CAN TAKE EITHER OF THE TWO FORMS ; (I) AN ITEM OF RECEIPT MAY BE SUPPRESSED FRAUDULENTLY ; (II) AN ITEM OF EXPENDITU RE MAY BE FALSELY (OR IN AN EXAGGERATED AMOUNT) CLAIMED, AND BOTH TYPES ATTEMPT TO REDUCE THE TAXABLE INCOME AND, THEREFORE, BOTH TYPES AMOUNT TO CONCEAL MENT OF PARTICULARS OF ONE'S INCOME AS WELL AS FURNISHING OF INACCURATE PA RTICULARS OF INCOME. WE DO NOT AGREE, AS THE ASSESSEE HAD FURNISHED ALL THE DE TAILS OF ITS EXPENDITURE AS WELL AS INCOME IN ITS RETURN, WHICH DETAILS, IN THE MSELVES, WERE NOT FOUND TO BE INACCURATE NOR COULD BE VIEWED AS THE CONCEALMENT O F INCOME ON ITS PART. IT WAS UP TO THE AUTHORITIES TO ACCEPT ITS CLAIM IN THE RE TURN OR NOT. MERELY BECAUSE THE ASSESSEE HAD CLAIMED THE EXPENDITURE, WHICH CLAIM W AS NOT ACCEPTED OR WAS NOT ACCEPTABLE TO THE REVENUE, THAT BY ITSELF WOULD NOT, IN OUR OPINION, ATTRACT THE PENALTY UNDER SECTION 271(1)(C). IF WE ACCEPT T HE CONTENTION OF THE REVENUE THEN IN CASE OF EVERY RETURN WHERE THE CLAIM MADE I S NOT ACCEPTED BY THE ASSESSING OFFICER FOR ANY REASON, THE ASSESSEE WILL INVITE PENALTY UNDER SECTION 271(1)(C). THAT IS CLEARLY NOT THE INTENDMENT OF TH E LEGISLATURE. 14. THE HONBLE SUPREME COURT IN CIT VS. RELIANCE P ETROPRODUCTS (P) LTD. (SUPRA) HAVE LAID DOWN THE PRINCIPLE THAT MAKING AN INCORRECT CLAIM IN LAW CANNOT TANTAMOUNT TO FURNISHING OF INACCURATE PARTI CULARS. THE HONBLE SUPREME COURT FURTHER HELD THE WORD PARTICULARS MUST MEAN THE DETAILS SUPPLIED IN THE RETURN, WHICH ARE NOT ACCURATE, NOT EXACT OR CORRECT, NOT ACCORDING TO TRUTH OR ERRONEOUS . 15. APPLYING THE SAID PRINCIPLE TO THE FACTS OF THE PRESENT CASE, IT IS NOT THE CASE OF REVENUE THAT THE DETAILS WHICH WERE SUPPLIE D BY THE ASSESSEE IN THE RETURN OF INCOME, ARE NOT ACCURATE, NOT EXACT OR CO RRECT OR NOT ACCORDING TO THE TRUTH OR ERRONEOUS. IN THE PRESENT SET OF FACTS AL SO, THE ASSESSEE HAD FURNISHED THE PARTICULARS OF ITS INCOME AND HAD ALSO MADE A D ECLARATION WITH REGARD TO ITS CLAIM OF EXPENDITURE WHICH WAS FOUND TO BE NOT ADMI SSIBLE AND THE EXPENDITURE CLAIMED WAS DISALLOWED IN THE HANDS OF ASSESSEE. H OWEVER, SUCH DISALLOWANCE OF EXPENSES CANNOT TANTAMOUNT TO FURNISHING OF INAC CURATE PARTICULARS OF ITA NOS.1751 & 1752/PUN/2014 CYPRIAN DSOUZA 8 INCOME. IN THE TOTALITY OF THE ABOVE SAID FACTS WE UPHOLD THE ORDER OF CIT(A) IN DELETING THE PENALTY LEVIED UNDER SECTION 271(1)(C) OF THE ACT. 16. THE REVENUE IN ITA NO.1751/PUN/2014 FOR ASSESSM ENT YEAR 2007-08 HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. 'WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD.CIT(A) WAS JUSTIFIED IN RESTRICTING THE DISA LLOWANCE TO RS.21,83,0161- WHEN THE ASSESSEE HAS ADMITTED VIOLATED THE PROVISIONS OF SEC.94(7) OF THE IT. ACT?' 2. 'WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD.CIT(A) WAS JUSTIFIED IN OVERLOOKING THE FACT THAT THE ASSESSEE TRIED TO KEEP THE ISSUE OF SEC.94(7) OF TH E ACT UNDER WRAPS BY NETTING THE LOSS WITH THAT OF INCOME AND D ELIBERATELY DID NOT PROVIDE THE DETAILS DURING THE COURSE OF SCRUTI NY ASSESSMENT PROCEEDINGS?' 3. 'WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD.CIT(A) WAS JUSTIFIED IN RESTRICTING THE DISA LLOWANCE WHEN THE ONUS WAS ON THE ASSESSEE TO ESTABLISH THE CORRECTNE SS OF THE CLAIM AND IN THE ABSENCE OF THE SAME, THE ACTION OF THE AO IN DISALLOWING THE ENTIRE DIVIDEND INCOME U/S.94(7) WA S JUDICIALLY CORRECT?' 4. 'WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD.CIT(A) WAS JUSTIFIED IN RESTRICTING THE DISA LLOWANCE BY ACCEPTING THE CONTENTION OF THE ASSESSEE WITHOUT AN Y RELEVANT DETAILS AND IN CONTRAVENTION OF RULE 46A?' 5. 'WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD.CIT(A) WAS JUSTIFIED IN RESTRICTING THE DISA LLOWANCE BY IGNORING THE FACT THAT THE ASSESSEE HAS DELIBERATEL Y NOT PRODUCED THE DETAILS / SUPPORTING EVIDENCES OF DIVIDEND RECEIVED ON MUTUAL FUND / SHARES AT THE TIME OF ASSESSMENT TO SUPPORT THE CLAIM?' 6. 'WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD.CIT(A) WAS JUSTIFIED IN RESTRICTING THE DISA LLOWANCE BY MERELY RELYING UPON THE CHART GIVEN BY THE ASSESSEE REGARDING DETAILS OF DIVIDEND AMOUNT RECEIVED ON MUTUAL FUND / SHARES?' 17. THE ONLY ISSUE RAISED IN THE PRESENT APPEAL IS AGAINST THE ORDER OF CIT(A) IN RESTRICTING THE DISALLOWANCE TO RS.21,83,016/- F OR VIOLATION OF THE PROVISIONS OF SECTION 94(7) OF THE ACT. ITA NOS.1751 & 1752/PUN/2014 CYPRIAN DSOUZA 9 18. BRIEFLY IN THE FACTS OF THE CASE RELATING TO TH E ISSUE ARE THAT THE ASSESSEE WAS A JOINT DIRECTOR OF M/S. CAPGEMINI SOFTWARE IND IA PRIVATE LIMITED. THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT WAS COMP LETED ON ASSESSED INCOME OF RS.47,60,91,000/-. THE SAID ORDER PASSED BY THE ASSESSING OFFICER WAS SET ASIDE BY THE CIT-V, PUNE UNDER SECTION 263( 1) OF THE ACT. THE CIT WAS OF THE VIEW THAT THE ASSESSEE HAD RECEIVED DIVI DEND ON EQUITY SHARES AMOUNTING TO RS.44,060/- AND HAS ALSO DECLARED PROF IT/LOSS ON EQUITY INVESTMENT HELD FOR LESS THAN ONE YEAR AT RS.3,89,9 43/-. SINCE THE ASSESSING OFFICER HAD ACCEPTED THE CLAIM OF THE ASSESSEE WITH OUT COMPUTING THE DISALLOWANCE AS PER THE PROVISIONS OF SECTION 94(7) OF THE ACT, HE HELD THAT WHERE THE ASSESSING OFFICER HAD NOT APPLIED HIS MIN D WITH RESPECT TO THE DISALLOWANCE UNDER SECTION 94(7) OF THE ACT, THE OR DER PASSED BY THE ASSESSING OFFICER WAS BOTH ERRONEOUS AND PREJUDICIAL TO THE I NTEREST OF THE REVENUE. IN THE PROCEEDINGS THEREAFTER THE ASSESSING OFFICER NO TED THAT THE ASSESSEE HAD SHOWN SHORT TERM CAPITAL GAIN OF RS.73,07,986/- ON SALE OF SHARES AND MUTUAL FUNDS. THE ASSESSING OFFICER NOTED THAT THE ASSESS EE FOR THE YEAR HAD EARNED TOTAL SHORT TERM CAPITAL GAIN OF RS.1,19,80,849/- A ND HAD CLAIMED THE SHORT TERM CAPITAL LOSS OF RS.60,46,891/-. THE ASSESSING OFFI CER FURTHER ON GOING THROUGH THE SALE TRANSACTION OF MUTUAL FUNDS, NOTICED THAT ALL THE TRANSACTIONS OF MUTUAL FUNDS FELL UNDER THE DEFINITION OF SECTION 94(7) OF THE ACT, THE ASSESSEE WAS ASKED TO FURNISH THE SCRIP-WISE DETAILS AND ALSO TO FILE THE RECORD DATE OF DIVIDEND IN CASE OF TRANSACTIONS OF SHARES AS WELL AS MUTUAL FUNDS, WHEREIN LOSS HAD BEEN CLAIMED. THE ASSESSEE IN REPLY FURNISHED THE DETAILS OF SALE AND PURCHASE OF SHARES OF INDIAN COMPANIES BUT DID NOT FURNISH THE DETAILS IN RESPECT OF MUTUAL FUNDS. THE ASSESSEE HAD COMPARAT IVELY SHOWN LESSER SHORT TERM CAPITAL LOSSES IN SHARES TRANSACTION AND HUGE LOSSES IN MUTUAL FUND TRANSACTION. IN RESPONSE TO THE NOTICE ISSUED, THE ASSESSEE DID NOT FURNISH ANY ITA NOS.1751 & 1752/PUN/2014 CYPRIAN DSOUZA 10 REPLY, HOWEVER, THE LIST OF SHORT TERM CAPITAL LOSS WAS PREPARED FROM THE DETAILS AVAILABLE ON RECORD AND DETAILS CALLED FROM M/S. KO TAK SECURITIES LTD., THE LIST OF TRANSACTIONS OF SHORT TERM CAPITAL LOSS FROM MUTUAL FUNDS ARE TABULATED AT PAGES 7 TO 9 OF THE ASSESSMENT ORDER ALONG WITH THE LIST OF TRANSACTION OF SHORT TERM CAPITAL LOSS FROM SHARES TRANSACTION. THE SHORT TE RM CAPITAL LOSS ON MUTUAL FUNDS WORKED OUT TO RS.60,46,891/- AND FROM SHARES WORKED OUT TO RS.94,303/-. 19. THE ASSESSEE WAS SHOW CAUSED TO EXPLAIN AS TO W HY THE SAID LOSS SHOULD NOT BE DISALLOWED WITHIN THE MEANING OF SECT ION 94(7) OF THE ACT. IN THE ABSENCE OF RELEVANT DETAILS, SUCH AS DIVIDEND AMOUN T OF EACH SCRIB AND RECORD DATE OF DIVIDEND, SUPPORTING EVIDENCE OR CONTRA INF ORMATION WHICH IS OF SHARES AND MUTUAL FUND TRANSACTION ETC., ANOTHER OPPORTUN ITY WAS AFFORDED TO THE ASSESSEE AND IN RESPONSE THE ASSESSEE FILED AN EXPL ANATION VIDE LETTER SENT THROUGH COURIER. HOWEVER, THE CHART SUBMITTED BY T HE ASSESSEE WAS FOUND TO BE INCOMPLETE AND EVEN THE DETAILS OF DIVIDEND AMOU NT WERE NOT FURNISHED. ACCORDINGLY, THE ASSESSING OFFICER HELD THAT ENTIRE SHORT TERM LOSS IN CASE OF SHARES AMOUNTING TO RS.94,303/- AND ENTIRE SHORT TE RM LOSS IN CASE OF MUTUAL FUNDS AMOUNTING TO RS.60,46,891/- WAS TO BE DISALLO WED WITHIN THE MEANING OF SECTION 94(7) OF THE ACT. 20. BEFORE CIT(A) THE ASSESSEE REFERRED TO THE LETT ER FILED BEFORE THE ASSESSING OFFICER WHEREIN IT WAS CONTENDED THAT SHO RT TERM CAPITAL LOSS OF RS.21,79,196/- NEEDS TO BE DISALLOWED UNDER SECTION 94(7) OF THE ACT. THE CIT(A) OBSERVED THAT THE ASSESSEE HAD NOT COOPERATE D WITH THE ASSESSING OFFICER, WHO INTURN HAD OBTAINED CERTAIN DETAILS FR OM M/S. KOTAK SECURITIES LTD. WITH REGARD TO THE LOSS ON SALE OF MUTUAL FUNDS AND SHARES. HOWEVER, THE ASSESSING OFFICER HAD DISALLOWED THE ENTIRE LOSS ON THE BASIS OF MERE POSSIBILITY ITA NOS.1751 & 1752/PUN/2014 CYPRIAN DSOUZA 11 OF THE SAME BEING LINKED TO THE TOTAL DIVIDEND RECE IVED AMOUNTING TO RS.80,20,569/- COULD NOT BE RULED OUT. THE CIT(A) HELD THAT THIS OBSERVATION OF THE ASSESSING OFFICER WAS WITHOUT LOGIC AND COULD N OT BE ACCEPTED. THE CIT(A) REFERRED TO THE CLAIM OF ASSESSEE DURING THE ASSESS MENT PROCEEDINGS AND HELD THAT WHERE THE ASSESSEE HAD FURNISHED THE DETAILS A ND POINTED OUT THAT THE DISALLOWANCE SHOULD BE RESTRICTED TO RS.21,79,196/- IN RESPECT OF MUTUAL FUNDS, IN VIEW OF PROVISIONS OF SECTION 94(7) OF THE ACT. THE CIT(A) ACCEPTED THE WORKING OF DISALLOWANCE IN RESPECT OF SHARES AT RS. 3,820/- WHICH ACCORDING TO HIM APPEARED TO BE IN ORDER AND ALLOWED THE CLAIM O F THE ASSESSEE PARTLY. 21. THE REVENUE IS IN APPEAL AGAINST THE PART ALLOW ANCE OF THE LOSS CLAIMED ON SALE OF MUTUAL FUNDS BY INVOKING THE PROVISIONS OF SECTION 94(7) OF THE ACT. 22. THE LD. DEPARTMENTAL REPRESENTATIVE FOR THE REV ENUE PLACED RELIANCE ON THE STATEMENT OF FACTS FILED BEFORE THE TRIBUNAL . 23. DESPITE SERVICE OF NOTICE THERE WAS NON-REPRESE NTATION ON BEHALF OF THE ASSESSEE AND WE PROCEED TO DECIDE THE APPEAL EXPART E. 24. ON THE PERUSAL OF RECORD, THE ISSUE WHICH ARISE S FOR ADJUDICATION IS THE QUANTUM OF CAPITAL LOSS TO BE ALLOWED IN THE HANDS OF ASSESSEE, IN VIEW OF THE PROVISIONS OF SECTION 94(7) OF THE ACT. THE ASSESS EE ADMITTEDLY DURING THE YEAR UNDER CONSIDERATION HAD MADE SEVERAL INVESTMENTS IN MUTUAL FUNDS AND SHARES OF THE INDIAN COMPANIES. THE ASSESSEE HAD SOLD CER TAIN SHARES AND DECLARED SHORT TERM CAPITAL GAINS ON SALE OF SHARES. THE AS SESSEE HAD NOT FURNISHED COMPLETE DETAILS AND CONSEQUENTLY THE ORDER OF ASSE SSMENT WAS SET ASIDE BY THE CIT-V, PUNE. THE ASSESSING OFFICER IN THE SECO ND ROUND OF SET ASIDE ITA NOS.1751 & 1752/PUN/2014 CYPRIAN DSOUZA 12 PROCEEDINGS AGAIN REQUESTED THE ASSESSEE TO FURNISH THE DETAILS AND THERE WAS NON-COOPERATION ON BEHALF OF THE ASSESSEE, CONSEQUE NT TO WHICH THE ASSESSMENT ORDER WAS PASSED WHEREIN SUM OF RS.60,46 ,891/- WAS DISALLOWED. IT MAY BE POINTED HEREIN ITSELF THAT THE SAID SUM R EPRESENTED THE SHORT TERM CAPITAL LOSS, IN ENTIRETY CLAIMED BY THE ASSESSEE. HOWEVER, THE PROVISIONS OF SECTION 94(7) OF THE ACT ARE APPLICABLE TO SUCH SCR IPS FOR WHICH THE DIVIDEND HAD BEEN RECEIVED AND THE MUTUAL FUNDS HAVE BEEN SOLD T HEREAFTER. THE ASSESSEE HAD PREPARED A COMPUTATION IN THIS REGARD AND POINT ED OUT THAT OUT OF THE TOTAL LOSS OF RS.61,41,194/- ON ACCOUNT OF SALE OF SHARES AND MUTUAL FUNDS, LOSS TO THE EXTENT OF RS.21,79,176/- SHOULD BE DISALLOWED. THE PROVISIONS OF SECTION 94(7) OF THE ACT ARE APPLICABLE TO SUCH SHARES/MUTU AL FUNDS ON WHOM THE DIVIDEND HAS BEEN RECEIVED AND IMMEDIATELY THEREAFT ER THE SHARES/MUTUAL FUNDS HAVE BEEN SOLD, I.E. CASE OF DIVIDEND STRIPPING. H OWEVER, IN THE PRESENT CASE THE WORKING OF THE DISALLOWANCE UNDER SECTION 94(7) OF THE ACT IS INCORRECT WHEREIN THE TOTAL SHORT TERM CAPITAL LOSS FOR THE Y EAR UNDER CONSIDERATION HAS BEEN DISALLOWED BY THE ASSESSING OFFICER. BUT THE DISALLOWANCE IS TO BE RESTRICTED TO RS.21,9,196/-. THE ASSESSEE HAS FURN ISHED A CHART IN WHICH COMPLETE DETAILS OF DATE OF DIVIDEND RECEIVED HAD B EEN FURNISHED. ACCORDINGLY, WE UPHOLD THE ORDER OF CIT AND DISMISS THE GROUNDS OF APPEAL RAISED BY THE REVENUE. 25. IN THE RESULT, BOTH THE APPEALS OF REVENUE ARE DISMISSED. ORDER PRONOUNCED ON THIS 11 TH DAY OF APRIL, 2017. SD/- SD/- (ANIL CHATURVEDI) (SUSHMA CHOWLA) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE DATED : 11 TH APRIL, 2017 . SATISH ITA NOS.1751 & 1752/PUN/2014 CYPRIAN DSOUZA 13 ( )*+ ,+ / COPY OF THE ORDER IS FORWARDED TO : THE APPELLANT; THE RESPONDENT; ( () THE CIT(A)-V, PUNE; ( / THE CIT-V, PUNE; + ../, /, / DR A, ITAT, PUNE; 4 / GUARD FILE. / BY ORDER + . // TRUE COPY // / ASSISTANT REGISTRAR, / , / ITAT, PUNE