ITO 2(1)(1), MUMBAI V. DINDAYAL COMMODITGIES P. LTD, MUMBAI

ITA 1978/MUM/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 8168 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-02-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2006-2007
• Appeal Filed On: 11-03-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JI TENDRA YADAV
• Assessee Lawyers: JAIDEV

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH: MUMBAI BEFORE SHRI R. S. SYAL, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO.1978/MUM/2010 (ASSESSMENT YEAR: 2006-07) ITO-2(1)(1), AAYAKAR BHAVAN, ROOM NO.575, 5 TH FLOOR, MUMBAI -400 020 REVENUE VS M/S. DINDAYAL COMMODITIES P. LTD., 601, VITHALDAS CHAMBERS, B.S. MARG, FORT, MUMBAI -400 0 23 PAN: AAACB 2008 E ASSESSEE ASSESSEE BY: SHRI JAIDEV REVENUE BY: SHRI JITENDRA YADAV O R D E R IN THIS APPEAL THE REVENUE HAS CHALLENGED THE IMPUG NED ORDER OF THE LD. CIT (A)-IV MUMBAI DATED 02.12.2009 FOR THE A.Y. 200 6-07. 2. THE SHORT CONTROVERSY BEFORE US IS WHETHER THE P ENALTY IMPOSED BY THE SEBI FOR THE VIOLATION OF MARGINS WHETHER AMOUN TS TO PENAL IN NATURE AND LEVIED FOR SERIOUS INFRACTION OF LAW. ITA 1978/M/2010 M/S. DINDAYAL COMMODITIES P. LTD. 2 3. THE ASSESSEE-COMPANY IS IN THE TRADING AND BRO KING OF THE COMMODITY. IT WAS NOTICED BY THE A.O. THAT AS PER THE AUDIT REPORT, THE PENALTY OF ` ` 7,05,399/- WAS LEVIED. THE A.O. WAS OF THE OPINIO N THAT THE SAID PENALTY WAS FOR THE INFRACTION OF THE LAW AND WAS NOT ALLOWABLE EXPENDITURE U/S.37(1) OF THE ACT. THE A.O., THEREF ORE, DISALLOWED THE AMOUNT OF THE PENALTY OF ` ` 7,05,399/- AND MADE THE ADDITION TO THE INCOME OF THE ASSESSEE. THE ASSESSEE CARRIED THE M ATTER BEFORE THE LD. CIT (A). BEFORE THE LD. CIT (A) IT WAS CONTENDED T HAT THE ASSESSEE IS A MEMBER OF THE COMMODITY EXCHANGE CALLED MCX AND DOE S THE TRANSACTION IN COMMODITIES IN THE SAID EXCHANGE. THERE ARE RULES OF THE EXCHANGE FRAMED FOR THE SETTLEMENT PROCEDURE FOR TH E VARIOUS COMMODITIES LIKE, CHANA, URAD, SILVER ETC. IF A ME MBER DOES NOT SQUARE UP THE COMMODITY ON THE SETTLEMENT DATE, THEN HE IS LIABLE FOR THE PENALTY AND AS PER THE EXCHANGE RULES. THE LD. CIT (A) HAS ACCEPTED PLEA OF THE ASSESSEE THAT THE PENALTY LEVIED BY THE MCX IS ANALOGOUS TO THE PENALTY LEVIED BY THE SEBI ON THE SHARE BROKER AND IT IS FOR THE VIOLATION OF THE MARGIN NOT FOR ANY SERIOUS CONTRAVENTION OF THE LAW. THE LD. CIT (A) HELD THAT THE SAID PENALTY IS COMPENSATORY IN N ATURE AND ALLOWED THE CLAIM OF THE ASSESSEE. NOW, THE REVENUE IS IN APPE AL BEFORE US. 4. WE HAVE HEARD THE PARTIES. THE LD. COUNSEL SUBM ITTED THAT THE PENALTY LEVIED BY THE EXCHANGE IS ANALOGOUS TO THE PENALTY LEVIED BY THE SEBI FOR VIOLATION OF THE MARGIN AND OTHER PROCEDUR ES. HE RELIED ON THE DECISION OF HONBLE P&H HIGH COURT IN THE CASE OF C IT VS. HERO CYCLES LIMITED, LUDHIANA IN ITA NO.655 OF 2008 DATED 9.12. 2008 AS WELL AS THE DECISION OF THE ITAT MUMBAI IN THE CASE OF KAIRA CA N CO. LTD. VS. DCTI 2 ITR (TRIB) 20 (MUM). WE HAVE ALSO HEARD THE LD. D. R. THERE IS NO MUCH MORE DISCUSSION IN THE ASSESSMENT ORDER ON THIS ISS UE. THE LD. CIT (A) HAS PUT SOME LIGHT ON THE NATURE OF THE PENALTY. T HE LD. CIT (A) HAS ALSO CONSIDERED THE PENALTY LEVIED UNDER THE SEBI REGULA TIONS UPON A SHARE ITA 1978/M/2010 M/S. DINDAYAL COMMODITIES P. LTD. 3 BROKER. NOWHERE IT IS CONTROVERTED THAT THE PENALT Y LEVIED BY THE COMMODITY EXCHANGE FOR NON SETTLEMENT OF TRANSACT IONS ON THE SETTLEMENT DATE CAN BE SAID TO BE FOR ANY SERIOUS V IOLATION. IN OUR OPINION, IT IS A COMPENSATORY IN NATURE, AS HELD BY THE LD. CIT (A). MOREOVER, WE FIND THAT THE NATURE OF THE PENALTY LE VIED BY THE COMMODITY EXCHANGE IS ANALOGOUS TO THE PENALTY LEVIED BY THE SEBI. WE, THEREFORE, HOLD THAT THE PENALTY LEVIED BY THE SEBI AS PER THE FACTS ON RECORD, ADMITTEDLY COMPENSATORY NOT FOR ANY SERIOUS INFRACT ION OF LAW. WE, ACCORDINGLY, CONFIRM THE ORDER OF THE LD. CIT (A) O N THIS ISSUE. 5. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 25TH FEBRUARY 2011. SD/- SD/- (R. S. SYAL ) ACCOUNTANT MEMBER ( R.S. PADVEKAR ) JUDICIAL MEMBER MUMBAI, DATE: 25TH FEBRUARY 2011 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) 4, MUMBAI. 4) THE CIT-2, MUMBAI. 5) THE D.R. D BENCH, MUMBAI. BY ORDER / / TRUE COPY / / ASSTT. REGISTRAR I.T.A.T., MUMBAI *CHAVAN ITA 1978/M/2010 M/S. DINDAYAL COMMODITIES P. LTD. 4 SR.N. EPISODE OF AN ORDER DATE INITIALS CONCERNED 1 DRAFT DICTATED ON 14.02.2011 SR.PS 2 DRAFT PLACED BEFORE AUTHOR 21.02.2011 SR.PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6 KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7 FILE SENT TO THE BENCH CLERK SR.PS/PS 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER