The ITO, Ward-8(4), Ahmedabad V. Vora Stock Holding Pvt.Ltd., Ahmedabad

ITA 1907/AHD/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 0985 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-08-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 07-06-2016
• Assessment Year: 2005-2006
• Appeal Filed On: 05-07-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Depreciation; Deemed to accrue or arise in india; Initiation of penalty proceedings; Difference of opinion; Change of opinion
• Section: 143(3); 234B; 115JB

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER ./ ITA.NO.1907/AHD/2013 WITH CO NO.182/AHD/2014 / ASSTT. YEAR: 2005-2006 ITO, WARD-8(4) AHMEDABAD. VS VORA STOCK HOLDING PVT.LTD. 302, ADITYA BUILDING B/H. SARDAR PATEL SEVA SAMAJ HALL NAVRANGPURA, AHMEDABAD. ! / (APPELLANT) '# ! / (RESPONDENT) REVENUE BY : SHRI RAKESH JHA, SR.DR ASSESSEE BY : SHRI P.M. MEHTA, WITH SHRI GULAB THAKOR, AR / DATE OF HEARING : 08/06/2016 / DATE OF PRONOUNCEMENT: 01/08/2016 $%/ O R D E R REVENUE IS IN APPEAL BEFORE THE TRIBUNAL AGAINST TH E ORDER OF THE LD.CIT(A)-XIV, AHMEDABAD PASSED FOR THE ASSTT.YEAR 2005-06. THE ASSESSEE HAS ALSO FILED CROSS-OBJECTION AFTER RECEIVING NOTI CE IN APPEAL BY THE REVENUE. 2. SOLITARY GRIEVANCE OF THE REVENUE IS THAT THE LD .CIT(A) HAS ERRED IN DELETING THE PENALTY OF RS.12,97,704/- IMPOSED BY T HE AO UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT. 3. BRIEF FACTS OF THE CASE ARE THAT ASSESSEE HAS FI LED ITS RETURN OF INCOME ON 27.10.2005 DECLARING A LOSS OF RS.5,49,506/-. THE CASE OF THE ASSESSEE WAS ITA NO.1907/AHD/2013 2 SELECTED FOR SCRUTINY ASSESSMENT AND NOTICE UNDER S ECTION 143(2) OF THE INCOME TAX ACT WAS ISSUED AND SERVED UPON THE ASSES SEE. ON SCRUTINY OF THE ACCOUNTS, IT REVEALED TO THE AO THAT THE ASSESSEE H AS SOLD THE SHARES OF ENERGY DEVELOPMENT CO. LTD. ON 7.1.2005 FOR A CONSIDERATIO N OF RS.60,35,915/-. THE ASSESSEE HAD EARNED A PROFIT OF RS.35,45,915/- ON S ALE OF SUCH SHARES. IT HAS CLAIMED EXEMPTION UNDER SECTION 10(38) OF THE INCOM E TAX ACT, BY SHOWING A GAIN AS LONG TERM CAPITAL GAIN. THE LD.AO ON AN EX AMINATION OF THE DETAILS ARRIVED AT A CONCLUSION THAT THESE SHARES WERE HELD BY THE ASSESSEE AS STOCK-IN- TRADE IN THE PAST, AND THE ASSESSEE CANNOT BE TREAT ED AS INVESTOR QUA THESE SHARES. ACCORDINGLY, HE DID NOT GRANT EXEMPTION UN DER SECTION 10(38) OF THE INCOME TAX ACT, AND TREATED THE PROFIT ON SALE OF S HARES AS BUSINESS INCOME. HOWEVER, AFTER CONSIDERING THE BROUGHT FORWARD LOSS , HE DETERMINED THE TAXABLE INCOME OF THE ASSESSEE UNDER THE NORMAL PRO VISION AT NIL. BOOK PROFIT FOR MAT PURPOSE UNDER SECTION 115JB HAS BEEN WORKED OUT AT RS.31,02,962/-. THE RELEVANT OBSERVATIONS OF THE A O IN THIS REGARD ARE NOTICED AS UNDER: . IN THE INSTANT CASE, THE SHARES HAD CONSISTENTLY BEEN SHOW N UNDER THE HEAD STOCK IN TRADE BY THE ASSESSEE, WHICH SHOW S THE INTENTION OF THE ASSESSEE THAT THE SHARES HAD BEEN KEPT FOR PURCHASE AND SALE IN THE MARKET WITH MOTIVE TO EARN PROFIT. HENCE, IN VIEW O F ABOVE AND IN ABSENCE OF ANY SATISFACTORY EXPLANATION FROM THE ASSESSEE, THE ASSESSEE'S CLAIM TO TREAT THE TRANSACTION AS LONG TERM CAPITAL GAIN IS NOT ACCEPTED AND THE ENTIRE SALE PROCEED OF THE SHARES HELD UNDER STOCK IN TRADE HAS BEEN TREATED AS THE BUSINESS INCOME AND TAXED ACCORDINGL Y. IN VIEW OF THIS, THE ASSESSEE'S CLAIM U/S. 10(38) IN RESPECT OF THE SALE OF SHARES AS MENTIONED ABOVE, IS REJECTED AND THE PROFIT ON SALE OF SHARES OF RS.35,46,365/- IS TREATED AS BUSINESS INCOME OF THE ASSESSEE AND TAXE D ACCORDINGLY. THOUGH THE ASSESSEE HAS CO-OPERATED WITH THE DEPT. FOR MAKING THE PAYMENT OF TAX UNDER THE MAT, THE ASSESSEE'S REQUEST FOR NON-INITIATION OF PENALTY PROCEEDINGS U/S 271(1)(C) CANNOT BE ACCEDED TO AT THIS STAGE. THE ASSESSEE HAS ONLY COME UP TO PAY THE MAT TAX AF TER THE DETECTION BY THE DEPT.. HENCE PENALTY PROCEEDINGS U/S.271(L )(C) OF THE I.T. ACT ARE INITIATED FOR FURNISHING INACCURATE PARTICULARS OF INCOME. 5. MAT: ITA NO.1907/AHD/2013 3 AS DISCUSSED ABOVE, THE BOOK PROFIT OF THE ASSESSEE IS DETERMINED AT RS.3102962/- FOR WHICH THE ASSESSEE IS LIABLE TO PAY MAT TAX AS PER THE PROVISIONS OF SECTION 315.TR OF THE I.T. ACT SINCE TH E TOTAL INCOME DETERMINED HAS BEEN REDUCED TO NIL AFTER THE SET OF F OF BROUGHT FORWARD BUSINESS LOSS, ETC. 6. SUBJECT TO ABOVE REMARKS, THE TOTAL INCOME OF THE ASSESSEE IS COMPUTED AS UNDER. NET PROFIT AS PER P&L ACCOUNT RS.3102962/- LESS: INCOME CONSIDERED SEPARATELY PROFIT ON J.M. MUTUAL FUND 106103/- PROFIT ON SALE OF SHARES NIL (AS DISCUSSED ABOVE) RS.2996859/- ADD: LONG TERM CAPITAL GAIN 14287/- B/F LONG TERM CAPITAL LOSS 14287/- RS. NIL RS.2996859/- LESS: B/F BUSINESS LOSS TO THE EXTENT OF RS.29968 59/- TOTAL INCOME NIL BOOK PROFIT FOR MAT U/S.115JB RS.3102962/- ASSESSED U/S.143(3) OF THE ACT. ISSUE DEMAND NOTIC E ACCORDINGLY. CHARGE INTEREST U/S.234B, 234C AND 234D. ISSUE PEN ALTY NOTICE U/S.271(1)(C) FOR FURNISHING INACCURATE PARTICULARS OF INCOME. GIVE CREDIT FOR PREPAID TAXES AFTER DUE VERIFICATION. 4. THE D.AO HAS INITIATED PENALTY PROCEEDINGS AGAIN ST THE ASSESSEE, AND ULTIMATELY, IMPOSED PENALTY OF RS.12,97,704/-. THE PENALTY WAS INITIATED FOR FURNISHING INACCURATE PARTICULARS OF INCOME. THE A O HAS COMPUTED THE PENALTY AS UNDER: 6. AFTER CONSIDERING ALL THE FACTS AS WELL AS VARI OUS APPELLATE DECISIONS DISCUSSED ABOVE, I AM SATISFIED THAT ASSE SSEE HAS FURNISHED ITA NO.1907/AHD/2013 4 INACCURATE PARTICULARS OF ITS INCOME FROM TRANSACTI ONS OF SALE OF SHARES WITH THE INTENTION OF EVADING TAX ON THE SAME AND H AS RENDERED ITSELF LIABLE TO LEVY OF PENALTY UNDER PROVISIONS OF SECTI ON 271(L)(C) OF THE ACT. THE WORKING OF CONCEALED INCOME AND PENALTY U/S.271 (L)(C) IS CALCULATED AS UNDER: WORKING OF IMPOSABLE PENALTY : THE TOTAL INCOME OF CONCEALMENT AND PENALTY IMPOSAB LE IS WORKED OUT AS UNDER: SR. NO PARTICULARS AMOUNT IN RS. 1 INCOME DECLARED IN ROI (-)RS. 5,49,506 2 INCOME DETERMINED U/S 143(3) OF THE I.T.ACT RS.31,02,962/- U/S.115JB 3 INCOME IN RESPECT OF WHICH PARTICULARS HAS BEEN CONCEALED BY THE ASSESSEE TREATED AS BUSINESS INCOME INSTEAD OF LTCG. RS.35,46,365/- 4 TAX ON CONCEALED INCOME RS.12,97,704/- 5 MINIMUM PENALTY IMPOSABLE @ 100% OF TAX SOUGHT TO BE EVADED RS.12,97,704/- 6 MAXIMUM PENALTY IMPOSABLE @ 300% OF TAX SOUGHT TO BE EVADED RS.38,93,111/- 6. IN THIS CASE, THE MINIMUM PENALTY WILL BE RS. 12 ,97,704/- WHICH IS 100% OF THE TAX SOUGHT TO BE EVADED AND MAXIMUM PEN ALTY WILL BE RS.38,93,111/- WHICH IS 300% OF THE TAX SOUGHT TO B E EVADED. HOWEVER, KEEPING IN VIEW OF THE PRINCIPLE OF EQUITY AND JUST ICE, PENALTY OF SUM OF RS.12,97,704/- IS LEVIED U/S.271(L)(C) OF THE IT AC T. 8. THIS ORDER IS PASSED WITH THE PRIOR APPROVAL OF JT. CIT RANGE -8, AHMEDABAD VIDE HIS LETTER NO.JT.CIT.R.S/PENALTY APP ROVAL/VORA/2012- 13 DATED 12.10.2012. ITA NO.1907/AHD/2013 5 7. DEMAND NOTICE AND CHALLAN FOR RS.12, 97,7 04/- ARE ALSO ISSUED ACCORDINGLY. 5. ON APPEAL, THE LD.CIT(A) HAS DELETED PENALTY. B ASICALLY, THE LD.CIT(A) HAS ASSIGNED TWO REASONS. UNDER THE FIRST FOLD OF R EASONING, THE LD.CIT(A) HAS OBSERVED THAT THE ASSESSEE HAS DISCLOSED ALL THE FA CTS FULLY AND TRULY. THUS, IT CANNOT BE ALLEGED AGAINST THE ASSESSEE THAT, IT HAS FURNISHED INACCURATE PARTICULARS. THE DIFFERENCE BETWEEN THE ASSESSEE A ND THE AO WAS WITH REGARD TO THE TREATMENT TO A PARTICULAR ITEM OF INCOME WHE THER IT IS TO BE ASSESSED AS BUSINESS INCOME OR CAPITAL GAIN. THEREFORE, IT COU LD NOT BE ALLEGED THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS. APA RT FROM THE ABOVE, THE LD.CIT(A) IN SECOND FOLD OF REASONING, HAS OBSERVED THAT THE ASSESSEE HAD ACTUALLY BEEN ASSESSED TO TAX LIABILITY AT THE RATE OF 7.5% ON BOOK PROFIT OF RS.31,02,962/- UNDER SECTION 115JB. THE PENALTY AT THE MOST COULD BE CALCULATED AT RS.2,43,311/-. ACCORDING TO THE LD.C IT(A), THE COMPUTATION OF PENALTY AT RS.12,97,704/- IS WRONG. 6. WITH THE ASSISTANCE OF THE LD.REPRESENTATIVES, I HAVE GONE THROUGH THE RECORD CAREFULLY. TO MY MIND, NO INTERFERENCE IS C ALLED FOR IN THE ORDER OF THE LD.CIT(A), THOUGH FOR DIFFERENT REASONS. THE ISSU E IN DISPUTE IS COVERED BY THE DECISION OF THE HONBLE DELHI HIGH COURT RENDER ED IN THE CASE OF CIT VS. NALWA SONS INVESTMENTS LTD., 327 ITR 543 (DEL). IN THIS CASE, THE ASSESSEE HAD FILED RETURN DECLARING LOSS AT RS.43.47 CRORES. THIS RETURN WAS REVISED. ULTIMATELY, AN ASSESSMENT ORDER WAS PASSED, WHEREBY , THE AO ACCEPTED THE LOSS AT RS.36.95 CRORES AS PER THE NORMAL PROVISION AND BOOK PROFIT WAS WORKED OUT AT RS.4.01 CRORES UNDER SECTION 115JB. THE AO HAS REDUCED THE LOSS BY MAKING VARIOUS ADDITIONS. ONE OF THE ITEMS WAS DISALLOWANCE OF DEPRECIATION AT RS.32,51,906/-. HE INITIATED PENAL TY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT FOR THE ADDITIONS MADE BY HIM, VIDE WHICH CLAIM OF THE ITA NO.1907/AHD/2013 6 LOSS WAS REDUCED UNDER THE NORMAL PROVISION. THE H ONBLE DELHI HIGH COURT HAS OBSERVED THAT ONCE TAXES ARE TO BE PAID BY THE ASSESSEE ON THE INCOME ASSESSED UNDER SECTION115JB OF THE ACT, THEN, CONCE ALMENT OF INCOME WOULD HAVE NO ROLE TO PLAY AND WOULD NOT LEAD TO TAX QUA THE COMPUTATION MADE UNDER REGULAR PROVISION. THE DISCUSSION MADE BY TH E HONBLE DELHI HIGH COURT ON THIS ASPECT READS AS UNDER: THE QUESTION, HOWEVER, IN THE PRESENT CASE, WOULD B E, AS TO WHETHER FURNISHING OF SUCH WRONG PARTICULARS HAD AN Y THE EFFECT ON THE AMOUNT OF TAX SOUGHT TO BE EVADED. UNDER THE SCHEME OF THE ACT, THE TOTAL INCOME OF THE ASSESSEE IS FIRST COMPUTED UNDE R THE NORMAL PROVISIONS OF THE ACT AND TAX PAYABLE ON SUCH TOTAL INCOME IS COMPARED WITH THE PRESCRIBED PERCENTAGE OF THE BOOK PROFITS COMPUTED UNDER SECTION 115JB OF THE ACT. THE HIGHER OF THE TWO AMO UNTS IS REGARDED AS TOTAL INCOME AND TAX IS PAYABLE WITH REFERENCE TO S UCH TOTAL INCOME. IF THE TAX PAYABLE UNDER THE NORMAL PROVISIONS IS HIGH ER, SUCH AMOUNT IS THE TOTAL INCOME OF THE ASSESSEE, OTHERWISE, BOOK PROFITS ARE DEEMED AS THE TOTAL INCOME OF THE APPELLANT IN TERMS OF SE CTION 115JB OF THE ACT. IN THE PRESENT CASE, THE INCOME COMPUTED AS PER THE NORMAL PROCEDURE WAS LESS THAN THE INCOME DETERMINED BY LE GAL FICTION NAMELY BOOK PROFITS UNDER SECTION 115 JB OF THE ACT. ON THE BASIS OF N ORMAL PROVISION, THE INCOME WAS ASSESSED IN THE NEGATIVE I.E. AT A LOSS OF RS. 369521018. ON THE OTHER HAND, ASSESSMENT UNDER SECT ION 115 JB OF THE ACT RESULTED IN CALCULATION OF PROFITS AT RS. 40163 180. IN VIEW THEREOF, IN CONCLUSION, THE ASSESSMENT ORD ER RECORDS AS FOLLOWS:- ASSESSED AT RS. 40163180 U/S 115 JB, BEING HIGHER OF TWO. INTEREST U/S 234B AND 234C HAS BEEN CHARGED AS PER THE PROVISIONS OF INCOME TAX ACT, 1961. PENALTY PROCEED INGS U/S 271 (1)(C) OF THE INCOME TAX ACT, 1961 HAVE BEEN INITIA TED. ISSUE NECESSARY FORMS. THE INCOME OF THE ASSESSEE WAS THUS ASSESSED UNDER SECTION 115 JB AND NOT UNDER THE NORMAL PROVISIONS. IT IS IN TH IS CONTEXT THAT WE HAVE TO SEE AND EXAMINE THE APPLICATION OF EXPLANAT ION 4. JUDGMENT IN THE CASE OF GOLD COINS (SUPRA), OBVIOU SLY, DOES NOT DEAL WITH SUCH A SITUATION. WHAT IS HELD BY THE SUP REME COURT IN THAT CASE IS THAT EVEN IF IN THE INCOME TAX RETURN FILED BY THE ASSESSEE LOSSES ITA NO.1907/AHD/2013 7 ARE SHOWN, PENALTY CAN STILL BE IMPOSED IN A CASE W HERE ON SETTING OFF THE CONCEALED INCOME AGAINST ANY LOSS INCURRED BY T HE ASSESSEE UNDER OTHER HEAD OF INCOME OR BROUGHT FORWARD FROM EARLIE R YEARS, THE TOTAL INCOME IS REDUCED TO A FIGURE LOWER THAN THE CONCEA LED INCOME OR EVEN A MINUS FIGURE. THE COURT WAS OF THE OPINION THAT THE TAX SOUGHT TO BE EVADED WILL MEAN THE TAX CHARGEABLE NOT AS IF IT WERE THE TOTAL INCOME. ONCE, WE APPLY THIS RATIONALE TO EXPLANATION 4 GIVE N BY THE SUPREME COURT, IN THE PRESENT CASE, IT WILL BE DIFFICULT TO SUSTAIN THE PENALTY PROCEEDINGS. REASON IS SIMPLE. NO DOUBT, THERE WAS CONCEALMENT BUT THAT HAD ITS REPERCUSSIONS ONLY WHEN THE ASSESSMENT WAS DONE UNDER THE NORMAL PROCEDURE. THE ASSESSMENT AS PER THE NOR MAL PROCEDURE WAS, HOWEVER, NOT ACTED UPON. ON THE CONTRARY, IT I S THE DEEMED INCOME ASSESSED UNDER SECTION 115 JB OF THE ACT WHICH HAS BECOME THE BASIS OF ASSESSMENT AS IT WAS HIGHER OF THE TWO. TAX IS THUS PAID ON THE INCOME ASSESSED UNDER SECTION 115 JB OF THE ACT. HENCE, WH EN THE COMPUTATION WAS MADE UNDER SECTION 115 JB OF THE ACT, THE AFORE SAID CONCEALMENT HAD NO ROLE TO PLAY AND WAS TOTALLY IRRELEVANT. THE REFORE, THE CONCEALMENT DID NOT LEAD TO TAX EVASION AT ALL. THE UPSHOT OF THE AFORESAID DISCUSSION WOULD BE TO SUSTAIN THE ORDER OF THE TRIBUNAL, THOUGH ON DIFFERENT GROUNDS. THEREFORE, WHILE WE DO NOT AGREE WITH THE REASONING AND APPROACH OF THE TRIBUNAL, FOR OUR REASONS DISCLOSED ABOVE, WE ARE OF THE OPINION THAT PENALTY COULD NOT HAVE BEEN IMPOSED EVEN IN RESPECT OF CLAIM OF DEPRE CIATION MADE BY THE ASSESSEE. THIS APPEAL IS ACCORDINGLY DISMISSED. 7. I HAVE REPRODUCED THE COMPUTATION OF INCOME FROM THE ASSESSMENT ORDER. UNDER THE REGULAR PROVISION, INCOME OF THE ASSESSEE HAS BEEN COMPUTED AT NIL. FOR THE BOOK PROFIT, INCOME HAS B EEN COMPUTED AT RS.31,02,962/-. A PERUSAL OF THE WORKING OF IMPOSI TION OF PENALTY EXTRACTED SUPRA WOULD INDICATE THAT THE AO HAS NOT COMPUTED T HE PENALTY WITH REGARD TO WORKING MADE FOR THE PURPOSE OF SECTION 115JB, RATH ER, HE CONSIDERED THE ADDITION OF RS.35,46,365/- ONLY FOR COMPUTING THE P ENALTY. THUS, FOR THIS REASON ALSO PENALTY ORDER IS NOT SUSTAINABLE AND TH E ORDER OF THE LD.CIT(A) DESERVES TO BE CONFIRMED. APART FROM THE ABOVE, EV EN OTHERWISE, I DO NOT FIND ANY MERIT IN THIS APPEAL, BECAUSE, THE ASSESSEE HAS DISCLOSED ALL THE PARTICULARS OF ITS SHARE TRANSACTIONS. IT WAS CONTENDED BY THE ASSESSEE THAT IN THE PAST, ITA NO.1907/AHD/2013 8 THROUGH OVERSIGHT, THESE SHARES ARE CLASSIFIED AS S TOCK-IN-TRADE IN THE BOOKS OF ACCOUNTS. THIS MISTAKE WAS RECTIFIED ON 1.4.2004 B Y RE-CLASSIFYING THE SHARES AS INVESTMENT AND GAIN WAS SHOWN AS INCOME FROM CAP ITAL GAIN IN THE RETURN OF INCOME. THE AO, THOUGH, DID NOT ACCEPT THIS CONTEN TION OF THE ASSESSEE, AND TREATED THE GAIN AS BUSINESS INCOME. TO MY MIND, T HE LD.CIT(A) HAS RIGHTLY ACCEPTED THE CONTENTIONS OF THE ASSESSEE THAT IT HA D NOT FURNISHED ANY INACCURATE PARTICULARS OF INCOME, RATHER, THE ADDIT ION IS RESULT OF CHANGE OF OPINION. I DO NOT FIND ANY MERIT IN THIS APPEAL. ACCORDINGLY, IT IS DISMISSED. 8. THE LD.COUNSEL FOR THE ASSESSEE HAS NOT PRESSED THE CO FOR ADJUDICATION. THEREFORE, THE SAME IS DISMISSED FOR WANT OF PROSEC UTION. 9. IN THE RESULT, APPEAL OF THE REVENUE AND THE CO OF THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE COURT ON 1 ST AUGUST, 2016 AT AHMEDABAD. SD/- (RAJPAL YADAV) JUDICIAL MEMBER