Sri Deo Kumar Saraf, Kolkata V. ACIT, Circle-49, Kolkata, Kolkata

ITA 199/KOL/2015

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 99862 (ITAT-KOLKATA)
• Duration Of Justice: 7 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-10-2015
• Appeal Filed By: Assessee
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 25-02-2015
• Court: TRIBUNAL
• Department Lawyers: ALOK KR NAG
• Assessee Lawyers: S M SURANA
• Keywords: Earning of tax free income; Initiation of penalty proceedings; Speculation loss
• Section: 143(3); 14A; 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: KOLKATA [BEFORE SHRI MAHAVIR SINGH, JM & SHRI WASEEM AHMED, AM] I.T.A NO.199/KOL/2015 ASSESSMENT YEAR: 2009-10 SRI DEO KUMAR SARAF VS. ASSISTANT COMMISSIONER OF INCOME-TAX (PAN: ALCPS1036P) CIRCLE-49, KOLKATA. ( APPELLANT ) ( RESPONDENT ) DATE OF HEARING: 03.09.2015 DATE OF PRONOUNCEMENT: 07.10.2015 FOR THE APPELLANT: SHRI S. M. SURANA, ADVOCATE FOR THE RESPONDENT: SHRI ALOK KR. NAG, JCIT, SR. DR ORDER PER SHRI WASEEM AHMED, AM: THIS APPEAL BY ASSESSEE IS ARISING OUT OF ORDER OF CIT(A)-15, K OLKATA IN APPEAL NO.11/CIT(A)-15/14-15/CIR-49/KOL DATED 13.01.2015. ASSESSMENT WA S FRAMED BY ACIT, CIR-49, KOLKATA U/S. 143(3) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR AY 2009-10 VIDE ITS ORDER DATED 27.12.2011. PENALTY WAS IMPOSED BY ACIT, CIRCLE-49, KOLKATA U/S. 271(1) (C) OF THE ACT VIDE HIS ORDER DATED 27.06.2012. 2. THE ONLY ISSUE IN THIS APPEAL OF ASSESSEE IS AGAINST THE ORDER OF CIT(A) CONFIRMING THE LEVY OF PENALTY U/S. 271(1)(C) OF THE ACT ON ACCOUNT OF (I) BOGUS SPECULATION PROFIT, (II) SHORT TERM CAPITAL LOSS AND (III) DISAL LOWANCE OF EXPENSES RELATING TO EXEMPT INCOME U/S. 14A OF THE ACT. 3. AT THE OUTSET, LD. COUNSEL FOR THE ASSESSEE DREW OUR ATTENTION TO THE ASSESSMENT ORDER WHEREIN AO MADE ADDITIONS IN RESPECT TO THESE THREE ITEMS AND INITIATED PENALTY PROCEEDINGS U/S. 271(1)(C) OF THE ACT IN RESPECT TO T HESE THREE ITEMS BY OBSERVING THAT PENALTY PROCEEDINGS U/S. 271(1)(C) OF THE ACT IS SEPARATELY INITIATED. THE COMMON INITIATION OF PENALTY IN RESPECT TO ALL THE THREE ITE MS WAS DONE BY AO ACCORDINGLY. LD. COUNSEL FOR THE ASSESSEE STATED THAT T HE CIT(A) ALSO CONFIRMED THE LEVY OF PENALTY EVEN THOUGH A SPECIFIC GROUND BEFORE HIM WA S RAISED THAT THERE IS NO SPECIFIC CHARGE EITHER OF CONCEALMENT OF INCOME OR FURNISHING 2 ITA NO.199/K/2015 SRI DEO KUMAR SARAF AY 2009-10 INACCURATE PARTICULARS OF INCOME AND AS SUCH PENALTY IMPOSED BY AO ITSELF IS BAD IN LAW. LD. COUNSEL FOR THE ASSESSEE ALSO STATED THAT THERE IS NO SATISFACTION RECORDED BY THE AO FOR INITIATING PENALTY PROCEEDINGS MERELY WRITING A L INE IN THE ASSESSMENT ORDER THAT PENALTY PROCEEDINGS U/S. 271(1)(C) OF THE ACT IS INITIATED IS NOT SUFFICIENT. FOR THIS, FIRST HE RELIED ON THE DECISION OF HONBLE GUJARAT HI GH COURT DECISION IN THE CASE OF NEW SORATHIA ENGINEERING CO. VS. CIT (2006) 282 ITR 642 (GUJ), WHEREIN HONBLE HIGH COURT HAS HELD THAT THE PENALTY ORDER AND THE ORDER OF CIT(A) SHOWED THAT NO CLEAR CUT FINDING IN RESPECT TO SATISFACTION IS REACHED WHE THER PENALTY IS BEING LEVIED FOR CONCEALMENT OF PARTICULARS OF INCOME BY THE ASS ESSEE OR WHETHER ANY INACCURATE PARTICULARS OF INCOME HAS BEEN FURNISHED BY THE A SSESSEE AND THERE SHOULD BE A CLEAR CUT FINDING BY THE AO WHILE INITIATING PENALTY. LD. COUNSEL HEAVILY RELIED ON THE DECISION OF HONBLE GUJARAT HIGH COURT CITED SUPR A, WHICH HAS BEEN FOLLOWED BY COORDINATE BENCH OF THIS TRIBUNAL IN THE FOLLOWING CASES: 1. ACIT VS. M/S. VINAYAK PROPERTIES & DEVELOPERS (AOP), ITA NO. 598/AGR/2008, AY 2005-06 DATED 25.06.2010; 2. SHRI MAHENDRA SINGH VS. ITO, ITA NO. 81/K/2013, AY 2006-07 DATED 10.10.2014, 3. MUNNALAL R. HALWAI VS. ITO, ITA NO.253/PNJ/2013, AY 2006-07 DATED 23.01.2015; 4. SRI CHANDRA PRAKASH BUBNA VS. ITO, ITA NO.289/K/2012, AY 2005-06 DATED 21.05.2015, 5. M/S. UNIPACK AIR EXPRESS (P) LTD. VS. ITO, ITA NO.421/K/2012, AY 1996- 97 DATED 30.07.2014 & 6. DCIT VS. SHRI ANAND SHARMA, ITA NO. 211/K/2010, AY 2006-07 DATED 30.07.2014. 4. ON THE OTHER HAND, LD. SR. DR ON THE ISSUE OF INITIATION OF PENALTY PROCEEDINGS AND RECORDING OF SATISFACTION HEAVILY RELIED ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF MAK DATA P. LTD. VS. CIT (2013) 358 IT R 593 (SC), WHEREIN HONBLE SUPREME COURT HAS HELD THAT THE AO RECORDED A CATEGORICAL FINDING THAT HE WAS SATISFIED THAT THE ASSESSEE HAD CONCEALED TRUE PAR TICULARS OF INCOME AND, THEREFORE, THERE WAS NO ILLEGALITY IN REVENUES INITIATING PENALT Y PROCEEDINGS U/S. 271(1)(C) OF THE ACT. IT IS FOR THE AO WHO HAS TO SATISFY HIMSEL F WHETHER PENALTY PROCEEDINGS SHOULD BE INITIATED DURING THE COURSE OF ASSESSMENT PROCEEDI NGS AND THE AO IS NOT REQUIRED TO RECORD HIS SATISFACTION IN PARTICULAR MANNER OR REDUCE IT INTO 3 ITA NO.199/K/2015 SRI DEO KUMAR SARAF AY 2009-10 WRITING. HONBLE SUPREME COURT AT PAGE 599 OF ITS ORDER HAS FINALLY OBSERVED AS UNDER: THE ASSESSING OFFICER HAS TO SATISFY WHETHER THE PENALTY PROCEE DINGS BE INITIATED OR NOT DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS AND THE ASSES SING OFFICER IS NOT REQUIRED TO RECORD HIS SATISFACTION IN A PARTICULAR MANNER OR REDUCE IT INTO WRITING. THE SCOPE OF SECTION 271(1)(C) HAS ALSO BEEN ELABORATELY DISC USSED BY THIS COURT IN UNION OF INDIA V. DHARMENDRA TEXTILE PROCESSORS (2008) 13 SCC 369 A ND CIT V. ATUL MOHAN BINDAL (2009) 9 SCC 589. 5. ON THE ISSUE OF INITIATION OF PENALTY AND RECORDING OF SATISFACTI ON, WE HAVE HEARD BOTH THE SIDES AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE HAVE NOTICED THAT THE AO HAS INITIATED PENALTY PROCEEDINGS U/S. 271(1)(C) OF T HE ACT FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME AND HAS RECORDED THIS F ACT STATING THAT PENALTY PROCEEDINGS U/S. 271(1)(C) IS SEPARATELY INITIATED IN T HE VERY ASSESSMENT ORDER. IN VIEW OF THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF MAK DATA P. LTD., SUPRA, WE ARE OF THE CONSIDERED VIEW THAT THERE IS NO NEED FOR T HE AO TO REDUCE IN WRITING HIS SATISFACTION BUT MERELY REACHED TO A SATISFACTI ON AND INITIATE PENALTY PROCEEDINGS. IN THE PRESENT CASE, THE AO HAS INITIATED PENALTY PROCEEDINGS AND THER E IS NO FURTHER REQUIREMENT UNDER THE ACT TO REDUCE IT INTO WRITING. T HIS VIEW OF OURS IS FULLY SUPPORTED BY THE DECISION OF HONBLE SUPREME COURT IN MAK DAT A P. LTD., SUPRA. ACCORDINGLY, THIS JURISDICTIONAL ISSUE IS DECIDED AGAINST T HE ASSESSEE AND IN FAVOUR OF REVENUE. 6. COMING TO THE MERITS OF THE CASE. THE FIRST ASPECT ADDED BY THE AO IS BOGUS SPECULATION INCOME. BRIEFLY STATED FACTS ARE THAT THE ASSE SSEE HAS DISCLOSED SPECULATION PROFIT TO THE EXTENT OF RS.53,34,463/- IN THE AUDITED PROFIT AND L OSS ACCOUNT FOR THE YEAR ENDING 31.03.2009 AND SET OFF THE SAME AGAINST BROUGHT FORWARD SPECULATION LOSS OF EARLIER YEARS AND THE DIFFERENCE OF RS.1,58,786/- WAS SHOWN AS INCOME FROM PROFIT AND GAINS OF BUSINESS AND PROFESSION. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO REQUIRED THE ASSESSEE TO EXPLAIN THE DETAILS OF SPECULATION PROFIT EARNED BY ASSESSEE AMOUNTING TO RS.53,39,463/ - BUT ASSESSEE COULD NOT FILE ANY DETAIL EXCEPT A CERTIFICATE DA TED 05.12.2011 FROM NAKAMICHI SECURITIES LTD. 23A, N. S. ROAD, KOLKATA-700001. THE AO SE RVED A NOTICE U/S. 133(6) OF THE ACT TO NAKAMICHI SECURITIES LTD. HAVING IT S REGISTERED OFFICE AT MERCANTILE BUILDING, BLOCK , 1 ST FLOOR, 9/12, LAL BAZAR ST., KOLKATA- 4 ITA NO.199/K/2015 SRI DEO KUMAR SARAF AY 2009-10 700001. NAKAMICHI SECURITIES LTD RESPONDED TO THE NOTICE U/S 133(6) OF THE ACT STATING THAT NO SUCH SHARE TRADING PROFIT WAS GIVEN TO THE ASSESSEE COMPANY AND THEY HAVE DENIED THE SAME. THE AO ACCORDINGLY, ADDED THE UNDISCLOSED SPECUL ATION PROFIT TO THE INCOME OF THE ASSESSEE AND ADJUSTMENT OF BROUGHT FORWARD S PECULATION LOSS OF THE EARLIER YEARS WAS DISALLOWED. THIS WAS NOT CONTES TED BY ASSESSEE IN APPEAL AND ACCEPTED THE ASSESSMENT OF THE SAME. 7. AS REGARDS THE SECOND ITEM OF SHORT TERM CAPITAL LOSS DISCL OSED BY ASSESSEE AT RS.9,67,233/- CLAIMED TO HAVE BEEN CARRIED FORWARD FOR SETTING OFF. T HE AO REQUIRED THE ASSESSEE TO FILE DETAILS OF THE SAME AND ASSESSE E SUBMITTED A SALE AND PURCHASE ACCOUNT OF SHARES BUT SCRIP WISE DETAILS WAS NOT PROVIDED. ACCORDINGLY, AO ACCEPTED SALE AND PURCHASE ACCOUNT OF SHARES BUT DISALLOWED THE CLAIM OF INTEREST RECEIVED/ADJUSTED AGAINST SALE AND PURCHASE AND ADDED TO T HE RETURNED INCOME OF THE ASSESSEE UNDER THE HEAD INTEREST RECEIVED. THIS WA S ALSO NOT CONTESTED BY ASSESSEE IN SECOND APPEAL AND ASSESSMENT WAS ACCEPTED AS IT IS. 8. COMING TO THIRD ITEM OF ADDITION IN RESPECT TO DISALLOWANCE OF E XPENSES QUA EXEMPT INCOME BY INVOKING THE PROVISION OF SECTION 14A OF THE ACT REA D WITH RULE 8D OF THE I. T. RULES, 1962. THE AO COMPUTED THE DISALLOWANCE ONLY ON TH E BASIS OF AUDIT REPORT IN FORM NO. 3CB AND 3CD FILED ALONG WITH RETURN OF INCOM E. THE ASSESSEE HAS NOT CONTESTED THIS ADDITION OF DISALLOWANCE OF EXPENS ES OF RS.3,01,590/- AND ASSESSMENT TO THE SAME WAS ACCEPTED. 9. IN RESPECT TO ABOVE THREE ITEMS THE AO INITIATED PENALTY PRO CEEDINGS AND PENALTY WAS ALSO LEVIED ONLY ON THE BASIS THAT THE ASSESSEE DID NOT OFFER ANY WRITTEN EXPLANATION IN RESPONSE TO THE NOTICE ISSUED AND NO EVIDENCE WAS FILED CONTR ARY TO THE OBSERVATION OF THE AO MADE IN THE ASSESSMENT ORDER IN RESPECT T O ALL THESE THREE ITEMS. ACCORDINGLY, AO LEVIED PENALTY U/S. 271(1)(C) OF THE ACT FOR FURNISHING INACCURATE PARTICULARS OF INCOME AS UNDER: ON THE BASIS OF THE ABOVE DISCUSSION, TOTAL PENALTY U/S. 271(1)(C) ON THE ISSUES AS DISCUSSED ABOVE, IS COMPUTED AS UNDER. PENALTY IMPOSED AS PER DISCUSSION IN PARA 2.0 RS.17,60,912/- PENALTY IMPOSED AS PER DISCUSSION IN PARA 3.0 RS. 3,82,940/- PENALTY IMPOSED AS PER DISCUSSION IN PARA 4.0 RS. 1,02,511/- TOTAL PENALTY IMPOSED RS.22,46,363/- 5 ITA NO.199/K/2015 SRI DEO KUMAR SARAF AY 2009-10 10. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT(A). THE CIT( A) IN RESPECT TO BOGUS SPECULATION INCOME OBSERVED THAT THIS IS INCOME FROM OTHER SOURC ES AND NOT SPECULATION INCOME AS CLAIMED BY THE ASSESSEE AND, THEREFORE , THE LOSS CLAIMED AGAINST THIS ALLEGED SPECULATION INCOME IS ACTUALLY INCOME FROM OTHER SOURCES AND HENCE, DISALLOWANCE OF LOSS IS ACTUALLY CONCEALMENT OF INCOME BY FILING INACCURATE PARTICULARS OF INCOME. HENCE, AFTER DISCUSSING THE MODUS OPERANDI OF ASSESSEE, HE CONFIRMED THE LEVY OF PENALTY RELYING ON THE DECISION OF HONBLE SUPREM E COURT IN THE CASE OF K. P. MADHUSUDANAN VS. CIT (2001) 251 ITR 99 (SC) AND ALS O HONBLE KARNATAKA HIGH COURT DECISION IN THE CASE OF B. DAMODAR VAMAN B ALIGA JEWELLERS VS. JCIT (2014) 353 ITR 205 (KAR). IN RESPECT TO SUPPRESSION OF INTERES T INCOME UNDER THE HEAD SHORT TERM CAPITAL LOSS, THE CIT(A) CONFIRMED THE PE NALTY BY OBSERVING THAT THIS INTRA HEAD ADJUSTMENT IS NOT AVAILABLE TO THE AS SESSEE AND, THEREFORE, INTEREST INCOME CANNOT BE SET OFF AGAINST SHORT TERM C APITAL LOSS AND THEREBY THE ASSESSEE HAS CONCEALED THIS TAXABLE INCOME AND ACCOR DINGLY, HE CONFIRMED THE LEVY OF PENALTY. SIMILARLY, IN RESPECT TO THIR D ADDITION OF EXPENSES DISALLOWED QUA EXEMPT INCOME WAS REPORTED IN THE AUDIT REPORT IN F ORM NO. 3CB AND 3CD BUT INCOME INCLUDED IN THE COMPUTATION OF INCOME AND ACCORDINGLY, THIS DISALLOWANCE OF EXPENSES IS ACTUALLY CONCEALED INCOME. ACCORDINGLY , HE CONFIRMED THE PENALTY ON THIS COUNT ALSO. AGGRIEVED, NOW ASSESSEE IS IN SECOND APPEAL BEFORE TRIBUNAL. 11. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS CIRCUMSTANCES OF THE CASE. THE FIRST ASPECT OF MERITS OF THE CASE IS THAT THE A SSESSEE HAS CLAIMED SPECULATION PROFIT AMOUNTING TO RS.53,34,463/- EARNED ON ACCOUNT OF SHARE TRADING WITH NAKAMICHI SECURITIES LTD. BUT NAKAMICHI SECURITIES LTD. VI DE LETTER DATED 21.12.2011 DENYING HAVING ANY TRANSACTION WITH THE ASSESSEE. IT WAS AL SO CLARIFIED BY NAKAMICHI SECURITIES LTD. THAT NO CERTIFICATE WAS ISSUED BY THE NAKAMICHI SECURITIES LTD. TO DEO KUMAR SARAF, THE ASSESSEE IN RESPECT OF ANY SPECULATION INCOME FROM SHARES IN BALARAMPUR CHINI MILLS LIMITED IN NSE F OR FY 2008-09 RELEVANT TO AY 2009-10. ACCORDING TO THEM, HE DOES NOT HAVE ANY TR ANSACTION WITH THE ASSESSEE. BUT, ASSESSEES MAIN CLAIM WAS THAT THIS LET TER OF NAKAMICHI SECURITIES LTD. WAS NEVER CONFRONTED TO THE ASSESSEE DURING THE COURSE OF ASSESSM ENT PROCEEDINGS OR DURING THE PENALTY PROCEEDINGS. EVEN DURING FIRST APPEAL, THIS LETTER 6 ITA NO.199/K/2015 SRI DEO KUMAR SARAF AY 2009-10 OF NAKAMICHI SECURITIES LTD. WAS NEVER CONFRONTED TO THE ASSESSEE. WHEN A SPECIFIC QUERY WAS PUT TO LD. SR. DR HE CATEGORICALLY STATED THAT THIS ST ATEMENT WAS NEVER CONFRONTED TO THE ASSESSEE. WHEN A QUERY WAS PUT FROM THE BENCH WHET HER ANY DETAILS OR EVIDENCE WERE FILED BY THE ASSESSEE IN RESPECT TO SPECULATION PROFIT OF RS.53,39,463/- OTHER THAN A CERTIFICATE PURPORTEDLY RECEIVED FROM NAKAMIC HI SECURITIES LTD. WE FIND THAT THE ENTIRE BASIS OF PENALTY IS THE DENIAL LETTER ISSUED BY NAKAMICHI SECURITIES LTD. DATED 21.12.2011 AND THERE IS NO OTHER EVIDENCE A VAILABLE WITH REVENUE WHICH SUGGESTS THAT THE ASSESSEE HAS CONCEALED THE PART ICULARS OF INCOME. ONCE THE VERY BASIS FOR LEVY OF PENALTY IS NO DOUBT, IT CANNOT BE SAID THAT THE ASSESSEE HAS CONCEALED THE PARTICULARS OF INCOME OR FURNISHE D INACCURATE PARTICULARS OF INCOME, AS THE CASE MAY BE. HERE IN THE PRES ENT CASE, THE ASSESSEE HAS DISCLOSED INCOME FROM SPECULATION PROFIT ONLY AND THE CASE IS THA T HE COULD NOT PROVE THAT THIS IS SPECULATION INCOME OR ANY OTHER INCOME FOR THE WANT OF EVIDENCE AND MERELY HE HAS NOT CHALLENGED THE QUANTUM ADDITION. HONBLE RAJASTHAN H IGH COURT IN THE CASE OF CIT VS. G. NEMICHAND (1976) CTR (RAJ) 193 HELD THAT AN ASSESSEE MAY FILE AN APPEAL AGAINST AN ORDER OF IMPOSITION OF PENALTY EVEN TH OUGH HE MIGHT NOT HAVE FILED AN APPEAL AGAINST THE ORDER OF ASSESSMENT. THE ASSES SMENT PROCEEDINGS ARE QUITE DISTINCT AND DIFFERENT FROM PENALTY PROCEEDINGS . ALTHOUGH THE ORDER OF ASSESSMENT IS A GOOD EVIDENCE BUT IT IS NOT A CONCLUSIVE PROOF THAT THE ASSESSEE HAS CONCEALED THE PARTICULARS OF INCOME. IN THE PRES ENT CASE BEFORE US, THE AOS LEVY OF PENALTY IS ENTIRELY BASED ON THE ASSESSMENT ORDER THAT THE ASSESSEE IS UNABLE TO PROVE THE PROFIT DECLARED IN SPECULATION INCOME RECEIVED TO BE ONE FROM NAKAMICHI SECURITIES LTD. IN THE ABSENCE OF EVIDENCE. IN LEVYING PE NALTY THE BURDEN IS ON THE REVENUE TO PROVE THAT THE PARTICULAR AMOUNT IS PROFIT NOT FROM SPECULATION INCOME BUT INCOME FROM OTHER SOURCES AGAINST WHICH SPECULATION LOS S CANNOT BE ADJUSTED. NO DOUBT THE FINDINGS DURING ASSESSMENT PROCEEDING FOR DETERMINING OR COMPUTING THE INCOME IS CONCLUSIVE AND IT IS ALSO A GOOD PIECE OF EVI DENCE FOR INITIATING PENALTY PROCEEDING BUT BEFORE PENALTY COULD BE IMPOSED THE E NTIRETY OF CIRCUMSTANCES MUST REASONABLY POINT TO THE CONCLUSION THAT THE DISPUT ED AMOUNT REPRESENTED INCOME THAT THE ASSESSEE HAS CONCEALED THE PARTICUL ARS OF INCOME OR HAS DELIBERATELY FURNISHED INACCURATE PARTICULARS OF INCOME. HERE NONE OF THE CASE IS PRESENT. IN VIEW OF THE ABOVE, WE ARE OF THE CONSIDERED VIEW THAT THE PENALTY U/S. 7 ITA NO.199/K/2015 SRI DEO KUMAR SARAF AY 2009-10 271(1)(C) OF THE ACT IN THE GIVEN FACTS AND CIRCUMSTANCES IS NOT LEVI ABLE. ACCORDINGLY, WE DELETE THE PENALTY AND ALLOW THIS ISSUE OF ASSESSEES APPEA L. 12. COMING TO THE SECOND ASPECT OF SUPPRESSION OF INTEREST INCOME UNDER T HE HEAD SHORT TERM CAPITAL LOSS. THE ASSESSEE MADE A CLAIM OF SHORT TERM CAPITAL LOSS OF RS.9,67,232/- AND GAVE COMPLETE COMPUTATION OF PURCHASE AND SALE OF SHARES , WHICH IS AS UNDER: SHARES PURCHASE A/C 14,51,62,084.49 LESS: INTEREST RECEIVED 11,26,622.00 14,40,35,464.49 SHARES SALES A/C. 14,30,68,229,97 SHORT TERM CAPITAL GAIN/LOSS 9,67,232.52 13. THE ASSESSEE HAS ALSO REDUCED INTEREST RECEIVED FROM SHARE PURCHASE ACCOUNT AT RS.11,26,622/- AND DISCLOSED IN THE RETURN OF INCOME AND MADE A CLAIM. T HE ASSESSEE HAS REDUCED INTEREST INCOME FROM THE COST OF SHARES WHILE CALCULATING SHORT TERM CAPITAL LOSS. WE FIND THAT THE ASSESSEE HAS CLAIMED SPE CULATION PROFIT AMOUNTING TO RS.53,34,463/- EARNED ON ACCOUNT OF SHARE TRADING WITH NAKAMICHI SECURITIE S LTD. BUT NAKAMICHI SECURITIES LTD. VIDE LETTER DATED 21.12.2011 DENYING HAVING ANY TRANSACTION WITH THE ASSESSEE. IT WAS ALSO CLARIFIED BY NA KAMICHI SECURITIES LTD. THAT NO CERTIFICATE WAS ISSUED BY THE NAKAMICHI SECURITIES LTD. T O DEO KUMAR SARAF, THE ASSESSEE IN RESPECT OF ANY SPECULATION INCOME FROM SHARES IN BALARAMPUR CHINI MILLS LIMITED IN NSE FOR FY 2008-09 RELEVANT TO AY 2009-10. ACCORDING TO THEM , IT DOES NOT HAVE ANY TRANSACTION WITH THE ASSESSEE. THE ASSESSEES MAI N CLAIM WAS THAT THIS LETTER OF NAKAMICHI SECURITIES LTD. WAS NEVER CONFRONTED TO THE AS SESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS OR DURING THE PENALTY PROCEEDINGS. EVEN DURING FIRST APPEAL, THIS LETTER OF NAKAMICHI SECURITIES LTD. WAS NEVE R CONFRONTED TO THE ASSESSEE. WHEN A SPECIFIC QUERY WAS PUT TO LD. SR. DR HE CATEGORIC ALLY STATED THAT THIS STATEMENT WAS NEVER CONFRONTED TO THE ASSESSEE. WHEN A QU ERY WAS PUT FROM THE BENCH WHETHER ANY DETAILS OR EVIDENCE WERE FILED BY THE ASSES SEE IN RESPECT TO SPECULATION PROFIT OF RS.53,39,463/- OTHER THAN A CERTIFICATE PURPORTEDLY RECEIVED FROM NAKAMICHI SECURITIES LTD. WE FIND THAT THE ENTIRE BASIS FOR LEVY OF PENALTY IS THE DENIAL LETTER ISSUED BY NAKAMICHI SECURITIES LTD. DATED 21.12.2011 AND THERE IS NO OTHER EVIDENCE AVAILABLE WITH REVENUE WHICH SUGGESTS THAT THE ASSE SSEE HAS CONCEALED THE PARTICULARS OF INCOME. ONCE THE VERY BASIS FOR L EVY OF PENALTY IS IN 8 ITA NO.199/K/2015 SRI DEO KUMAR SARAF AY 2009-10 DOUBT, IT CANNOT BE SAID THAT THE ASSESSEE HAS CONCEALED THE PARTICUL ARS OF INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME, AS THE CASE MAY BE. H ERE IN THE PRESENT CASE, THE ASSESSEE HAS DISCLOSED INCOME FROM SPECULATION PROFIT ONL Y AND THE CASE IS THAT HE COULD NOT PROVE THAT THIS IS SPECULATION INCOME OR ANY OTHER I NCOME FOR THE WANT OF EVIDENCE AND MERELY HE HAS NOT CHALLENGED THE QUANTUM ADDITION. H ONBLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. G. NEMICHAND (1976) CTR (RAJ) 193 HELD THAT AN ASSESSEE MAY FILE AN APPEAL AGAINST AN ORDER OF IMPOSITION OF PENALTY EVEN THOUGH HE MIGHT NOT HAVE FILED AN APPEAL AGAINST THE ORDER OF ASSESSME NT. THE ASSESSMENT PROCEEDINGS ARE QUITE DISTINCT AND DIFFERENT FROM PENAL TY PROCEEDINGS. ALTHOUGH THE ORDER OF ASSESSMENT IS GOOD PIECE OF EVIDENCE BUT IT IS NOT A CONCLUSIVE PROOF THAT THE ASSESSEE HAS CONCEALED THE PARTICULARS OF INCOME. IN THE PRESENT CASE BEFORE US, THE AOS LEVY OF PENALTY IS ENTIRELY BASED ON THE ASS ESSMENT ORDER THAT THE ASSESSEE IS UNABLE TO PROVE THE PROFIT DECLARED IN SPECULATION INCO ME RECEIVED TO BE ONE FROM NAKAMICHI SECURITIES LTD. IN THE ABSENCE OF EVIDENCE. IN L EVYING PENALTY THE BURDEN IS ON THE REVENUE TO PROVE THAT THE PARTICULAR AMOUNT IS PROFIT NOT FROM SPECULATION INCOME BUT INCOME FROM OTHER SOURCES AGAINST WHICH SPECULATION LOSS CANNOT BE ADJUSTED. NO DOUBT THE FINDINGS IN THE ASSESSMENT PROCEEDING FOR DETERMINING OR COMPUTING THE INCOME IS CONCLUSIVE AND IT IS ALSO A GOOD PIECE OF EVIDENCE FOR INITIATING PENALTY PROCEEDING BUT BEFORE PENALTY COULD BE IMPOS ED THE ENTIRETY OF CIRCUMSTANCES MUST REASONABLY POINT TO THE CONCLUSION T HAT THE DISPUTED AMOUNT REPRESENTED INCOME THAT THE ASSESSEE HAS CONCEALED THE PARTICULARS OF INCOME OR HAS DELIBERATELY FURNISHED INACCURATE PARTICULARS OF INCOME. HE RE NONE OF THE CASE IS PRESENT. IN VIEW OF THE ABOVE, WE ARE OF THE CONSIDERED VIEW THA T THE PENALTY U/S. 271(1)(C) OF THE ACT IN THE GIVEN FACTS AND CIRCUMSTANCES IS NOT LEVI ABLE. ACCORDINGLY, WE DELETE THE PENALTY AND ALLOW THIS ISSUE OF ASSESSEES APPE AL. 14. NOW COMING TO THIRD ASPECT ON ACCOUNT OF DISALLOWANCE OF EXPENSES AGAI NST EXEMPT INCOME U/S. 14A OF THE ACT BY INVOKING RULE 8D OF THE I. T. RUL ES, 1962. WE FIND THAT THE ASSESSEE HIMSELF DISCLOSED THE SAME IN AUDIT R EPORT IN FORM NO. 3CB AND 3CD ALONG WITH RETURN OF INCOME AND COMPLETE PARTICULARS WERE FILED ALONG WITH RETURN OF INCOME. 9 ITA NO.199/K/2015 SRI DEO KUMAR SARAF AY 2009-10 15. WE HAVE GONE THROUGH FACTS OF THE CASE AND NOTICED THAT THE ASSESS EE HAS FILED COMPLETE DETAILS IN RESPECT TO ALL THREE ITEMS UNDER DI SPUTE I.E. (I) SPECULATION PROFIT, (II) SHORT TERM CAPITAL LOSS, AND (III) DISALLOWANCE OF EXPENSES RELATING TO EXEMPT INCOME U/S. 14A OF THE ACT. THERE IS NO CHARGE BY REVENUE THA T DETAILS SUPPLIED BY THE ASSESSEE IN ITS RETURN OF INCOME ARE FOUND TO BE INCORRECT OR ERRONEOUS OR FALSE AND IN SUCH EVENTUALITY THERE IS NO QUESTION OF INVI TING PENALTY U/S. 271(1)(C) OF THE ACT. A MERE MAKING OF A CLAIM, WHICH IS NOT SUST AINABLE IN LAW, BY ITSELF WILL NOT AMOUNT TO FURNISHING OF INACCURATE PARTICULARS OF INCOME REGARDING THOSE ITEMS OF INCOME OF THE ASSESSEE. SUCH A CLAIM MADE IN THE RETURN OF INCOME CANNOT BE TREATED AS FURNISHING OF INACCURATE PARTICULARS OF INCOME. THE PROVISIONS OF SECTION 271(1)(C) OF THE ACT CLEARLY DEFINED THAT THERE HAS T O BE CONCEALMENT OF THE PARTICULARS OF INCOME BY THE ASSESSEE AND SECONDLY THE ASSE SSEE MUST HAVE FURNISHED INACCURATE PARTICULARS OF HIS INCOME. HON'BLE SUPREME C OURT IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCTS PVT. LTD. (2010) 322 ITR 158 (SUPREM E COURT) HAS INTERPRETED THE MEANING OF THE WORD PARTICULARS AS USED IN SEC TION 271(1)(C) OF THE ACT THAT THE SAME WOULD EMBRACE THE DETAILS OF THE CLAIM MADE. WHERE NO INFORMATION GIVEN IN THE RETURN OF INCOME IS FOUND TO BE INCORRECT OR INA CCURATE, THE ASSESSEE CANNOT BE HELD GUILTY OF FURNISHING OF INACCURATE PARTICULAR S OF INCOME. IN THE PRESENT CASE ALSO, THE AO HAS NOWHERE FOUND THE EXPLANATION OF THE AS SESSEE AS FALSE AND MOREOVER FROM THE DETAILS FILED IT COULD NOT BE ASCERTA INED THAT THE CLAIM MADE BY ASSESSEE IS FALSE. THE AO HAS TO PROVE THAT THE ASS ESSEE HAS CONCEALED THE PARTICULARS OF INCOME. IN SUCH CIRCUMSTANCES, THE PENALTY LEVIE D BY THE AO CANNOT BE SUSTAINED. 16. HERE, WE ARE RELYING ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF RELIANCE PETRO-PRODUCT LTD. SUPRA, WHEREIN HONBLE COURT HAS OBSERVED AS UNDER: WE ARE NOT CONCERNED IN THE PRESENT CASE WITH THE MENS REA. HOWEVER , WE HAVE TO ONLY SEE AS TO WHETHER IN THIS CASE, AS A MATTER OF FACT, THE ASSES SEE HAS GIVEN INACCURATE PARTICULARS. IN WEBSTERS DICTIONARY, THE WORD INACCU RATE 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 PARTICULARS IN THE EARLIER PART OF THIS JUDGMENT. READING THE WORDS IN CONJUNCTION, THEY MUST MEAN THE DETAIL S 10 ITA NO.199/K/2015 SRI DEO KUMAR SARAF AY 2009-10 SUPPLIED IN THE RETURN, WHICH ARE NOT ACCURATE, NOT EXACT OR CORREC T, NOT ACCORDING TO TRUTH OR ERRONEOUS. WE MUST HASTEN TO ADD HERE THAT IN THIS CASE, THE RE IS NO FINDING THAT ANY DETAILS SUPPLIED BY THE ASSESSEE IN ITS RETURN WERE FOUND TO BE INCORRECT OR ERRONEOUS OR FALSE. SUCH NOT 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 SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. SUCH CLAIM MADE IN THE RETU RN CANNOT AMOUNT TO THE INACCURATE PARTICULARS. IT WAS TRIED TO BE SUGGESTED THAT SECTION 14A OF THE ACT SPECIFICAL LY EXCLUDED THE DEDUCTIONS IN RESPECT OF THE EXPENDITURE INCURRED BY THE ASSES SEE IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE 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, REITERATED BEFORE US THAT THE ASSE SSING OFFICER HAD CORRECTLY REACHED THE CONCLUSION THAT SINCE THE ASSESSEE HAD CLAIMED EXCESSIVE DEDUCTIONS KNOWING THAT THEY ARE INCORRECT ; IT AMOUNTED TO CONCEAL MENT OF INCOME. IT WAS TRIED TO BE ARGUED THAT THE FALSEHOOD IN ACCOUNTS CAN TAKE EIT HER OF THE TWO FORMS ; AN ITEM OF RECEIPT MAY BE SUPPRESSED FRAUDULENTLY ; (II) AN ITEM OF EXPENDITURE MAY BE FALSELY (OR IN AN EXAGGERATED AMOUNT) CLAIMED, AND BOTH TYPES ATTEMPT TO REDUCE THE TAXABLE INCOME AND, THEREFORE, BOTH TYPES AMOUNT TO CONCEALMENT OF PARTICULARS OF ONES INCOME AS WELL AS FURNISHING OF I NACCURATE PARTICULARS OF INCOME. WE DO NOT AGREE, AS THE ASSESSEE HAD FURNISHED ALL T HE DETAILS OF ITS EXPENDITURE AS WELL AS INCOME IN ITS RETURN, WHICH DETAILS, IN THEMSELVES, WERE NOT FOUND TO BE INACCURATE NOR COULD BE VIEWED AS THE CONCEALMENT OF I NCOME ON ITS PART. IT WAS UP TO THE AUTHORITIES TO ACCEPT ITS CLAIM IN THE RETU RN OR NOT. MERELY BECAUSE THE ASSESSEE HAD CLAIMED THE EXPENDITURE, WHICH CLAIM WAS NOT ACCEPTED OR WAS NOT ACCEPTABLE TO THE REVENUE, THAT BY ITSELF WOULD NOT, IN OUR OPI NION, ATTRACT THE PENALTY UNDER SECTION 271(1)(C). IF WE ACCEPT THE CONTENTION OF THE REVENUE THEN IN CASE OF EVERY RETURN WHERE THE CLAIM MADE IS NOT ACCEPTED BY THE ASSESSING OFFICER FOR ANY REASON, THE ASSESSEE WILL INVITE PENALTY UNDER SE CTION 271(1)(C). THAT IS CLEARLY NOT THE INTENDMENT OF THE LEGISLATURE. IN THIS BEHALF THE OBSERVATIONS OF THIS COURT MADE IN SREE KRISHNA ELECTRICALS V. STATE OF TAMIL NADU [2009] 23 VST 249 AS REGARDS THE PENALTY ARE APPOSITE. IN THE AFOREMENTIONED DECISION WHICH PERTAINED TO THE PENALTY PROCEEDINGS UNDER TH E TAMIL NADU GENERAL SALES TAX ACT, THE COURT HAD FOUND THAT THE AUTHORITIES BELOW HAD FOUND THAT THERE WERE SOME INCORRECT STATEMENTS MADE IN THE RET URN. HOWEVER, THE SAID TRANSACTIONS WERE REFLECTED IN THE ACCOUNTS OF THE ASSESS EE. THIS COURT, THEREFORE, OBSERVED (PAGE 251) : SO FAR AS THE QUESTION OF PENALTY IS CONCERNED THE ITEMS WHICH WERE NOT INCLUDED IN THE TURNOVER WERE FOUND INCORPORATED IN THE APPELLANTS ACCOUNT BOOKS. WHERE CERTAIN ITEMS WHICH ARE NOT INCLUDED IN THE TURNOVER ARE DISCLOSED IN THE DEALERS OWN ACCOUNT BOOKS AND THE ASSESSING AUTHORITIES INCLUDES THESE ITEMS IN THE DEALERS TURNOV ER DISALLOWING THE EXEMPTION, PENALTY CANNOT BE IMPOSED. THE PENALTY LEVIED STANDS SET ASIDE. THE SITUATION IN THE PRESENT CASE IS STILL BETTER AS NO FAULT HAS BEEN FOUND WITH THE PARTICULARS SUBMITTED BY THE ASSESSEE IN ITS RETURN. THE TRIBUNAL, AS WELL AS, THE COMMISSIONER OF INCOME-TAX (APPEALS) AND T HE HIGH COURT HAVE CORRECTLY REACHED THIS CONCLUSION AND, THEREFORE, THE APPE AL FILED BY THE REVENUE HAS NO MERITS AND IS DISMISSED. 11 ITA NO.199/K/2015 SRI DEO KUMAR SARAF AY 2009-10 RESPECTFULLY FOLLOWING THE DECISION OF HON'BLE SUPREME COURT, WE DELE TE THE PENALTY LEVIED U/S. 271(1)(C) OF THE ACT AND ALLOW THE APPEAL OF ASSESSEE. 17. IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWED. 18. ORDER IS PRONOUNCED IN THE OPEN COURT ON 07.10.2015 SD/- SD/- (MAHAVIR SINGH) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 07TH OCTOBER, 2015 JD. SR. P.S COPY OF THE ORDER FORWARDED TO: 1 . APPELLANT SHRI DEO KUMAR SARAF, AL-222, SALT LAKE CITY, KOLKATA- 700091 2 RESPONDENT ACIT, CIRCLE-49, KOLKATA. 3 . THE CIT(A), KOLKATA 4. 5. CIT KOLKATA DR, KOLKATA BENCHES, KOLKATA / TRUE COPY, BY ORDER, ASSTT. REGISTRAR .