Smt. Kalindiben J.Patel, Ahmedabad V. The Income tax Officer,Ward-5(2), Ahmedabad

ITA 2028/AHD/2011

• Counselvise Citation: 202820514 RSA 2011
• Duration Of Justice: 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-09-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2005-2006
• Appeal Filed On: 16-08-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: H P MEENA SR D R
• Assessee Lawyers: S N DIVATIA
• Keywords: Business income; Transactions in derivatives; Speculation loss; Wrong claim
• Section: 143(3); 43(5)

Judgement Text

, , . .. . . .. . , , , , IN THE INCOME TAX APPELLATE TRIBUNAL : SMC BENCH : AHMEDABAD (BEFORE HONBLE SHRI T.K. SHARMA, J.M .) . / I.T.A. NO. 2028/AHD./2011 ! '# ! '# ! '# ! '# / ASSESSMENT YEAR : 2005-2006 SMT. KALINDIBEN J. PATEL, AHMEDABAD -VS- I. T.O., WARD-5(2), AHMEDABAD (PAN : AIUPP 8295Q) $% / APPELLANT &'$% / RESPONDENT $% ( ) / APPELLANT BY SHRI S.N.DIVATIA, A.R. &'$% ( ) / RESPONDENT BY SHRI H.P.MEENA, SR.D.R. *!' + ( , - / DATE OF HEARING 05.09.2011 ./# ( , - / DATE OF PRONOUNCEMENT 09.09.2011 / ORDER THIS APPEAL FILED BY THE ASSESSEE IS AGAINST THE O RDER DATED 13.06.2011 PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (A)-XI, AHME DABAD CONFIRMING THE PENALTY OF RS.1,03,784/- LEVIED BY THE AO UNDER SECTION 271(1) (C) OF THE I.T. ACT, 1961 FOR THE ASSESSMENT YEAR 2005-2006. 2. BRIEFLY STATED, THE FACTS ARE THAT THE ASSESSEE IS AN INDIVIDUAL. FOR THE ASSESSMENT YEAR UNDER APPEAL, SHE FILED THE RETURN OF INCOME D ECLARING TOTAL INCOME AT RS.NIL AFTER CLAIMING SET OFF OF F&O LOSSES AGAINST SHORT-TERM C APITAL GAINS AND INCOME FROM OTHER SOURCES TO THE EXTENT OF RS.12,43,145/-. THE AO FRA MED THE ASSESSMENT UNDER SECTION 143(3) R.W.S. 147 ON 10.09.2009 AT RS.4,25,830/- WH ERE LOSS FROM F&O WAS TREATED AS SPECULATIVE LOSS AND SET OFF WAS NOT ALLOWED AGAINS T NON-SPECULATION BUSINESS INCOME. IN RESPECT OF THIS ADDITION, PENALTY PROCEEDINGS WERE ALSO INITIATED UNDER SECTION 271(1)(C). 2 ITA NO. 2028-AHD-2011 SUBSEQUENTLY, VIDE ORDER DATED 22.01.2010, THE AO L EVIED THE PENALTY OF RS.1,03,784/- BEING 100% OF TAX SOUGHT TO BE EVADED FOR CONCEALME NT OF INCOME. 3. IN APPEAL AGAINST THE PENALTY ORDER BEFORE THE L D. CIT(A), IT WAS PLEADED THAT LOSS OF RS.12,43,145/- WAS RESULTED FROM TRANSACTION IN DERIVATIVES. IT WAS CLAIMED AS SET OFF AGAINST SHORT-TERM CAPITAL GAIN AND INCOME FROM OTH ER SOURCES, ON A BONA FIDE BELIEF, THAT TRANSACTIONS IN DERIVATIVES WERE NOT SPECULATIVE IN NATURE. THE BELIEF ENTERTAINED BY THE ASSESSEE IS SUPPORTED BY VARIOUS JUDICIAL PRONOUNCE MENTS SUCH AS RBK SECURITIES PVT. LTD. REPORTED IN 12 DTR 255. IT WAS ALSO PLEADED TH AT SPECIAL BENCH ITAT HAD TO BE CONSTITUTED ON A QUESTION WHETHER THE AMENDMENT TO SECTION 43(5) WAS PROSPECTIVE OR RETROSPECTIVE IN NATURE THAT ITSELF PROVES THAT THE BELIEF HELD BY THE APPELLANT HAD SUBSTANCE. FINALLY, RELIANCE WAS ALSO PLACED ON THE JUDGEMENT OF THE HONBLE SUPREME COURT IN THE CASE OF RELIANCE PETROCHEM LTD. REPORT ED IN 322 ITR 158 WHEREIN IT WAS HELD THAT A MERE MAKING OR A CLAIM WHICH IS NOT SUS TAINABLE IN LAW BY ITSELF, WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REGARDI NG THE INCOME OF THE ASSESSEE. 3.1 AFTER CONSIDERING THE AFORESAID SUBMISSIONS, T HE LD. CIT(A) CONFIRMED THE PENALTY LEVIED UNDER SECTION 271(1)(C) OF THE I.T. ACT, 196 1 FOR THE DETAILED REASONS GIVEN IN PARA 4.1 OF THE IMPUGNED ORDER, WHICH READS AS UNDER: 4.1. IT IS AN ADMITTED FACT THAT THE ASSESSEE HAS CLAIMED SET OFF OF LOSSES INCURRED ON F&O LOSSES AGAINST STCG AND INCOME FROM OTHER SO URCE. THIS SET OFF IS NOT ALLOWED AS PER PROVISIONS OF SECTION 43(5) OF THE I . T. ACT IN THE RELEVANT ASSESSMENT YEAR. THUS IT IS CASE WHERE SET OFF WAS CLAIMED AGAINST THE EXPRESS PROVISIONS OF IT. ACT. IN MY CONSIDERED VIEW ONLY T HREE CATEGORIES OF ADDITIONS NAMELY STATUS OF TAXABILITY OF AN INCOME, ADMISSIBI LITY OF A DEDUCTION AND INTERPRETATION OF LAW ARE OUT OF PURVIEW OF PENALTY UNDER SECTION 271(1). THIS VIEW IS SUPPORTED BY KAMBAY SOFTWARE (P) LTD 122 TT J 721(PUNE) AND LASTLY BY RELIANCE PETRO PRODUCTS P. LTD. 321 ITR 158 (SC). T HE ABOVE MENTIONED SET OFF DOES NEITHER FALLS UNDER TAXABILITY OF AN INCOME NO R ADMISSIBILITY OF DEDUCTION NOR INTERPRETATION OF LAW AND THUS QUALIFIES FOR PENALT Y UNDER SECTION 271(1)(C)OF THE ACT. 4. AGGRIEVED WITH THE ORDER OF THE LD. CIT(A), THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 3 ITA NO. 2028-AHD-2011 5. AT THE TIME OF HEARING BEFORE ME, ON BEHALF OF T HE ASSESSEE, SHRI S.N.DIVATIA, A.R. APPEARED AND RELYING ON THE SUBMISSIONS MADE BEFORE BOTH THE DEPARTMENTAL AUTHORITIES BELOW, PLEADED THAT THE PENALTY LEVIED BY THE AO AN D CONFIRMED BY THE LD. CIT(A) BE CANCELLED. 6. ON THE OTHER HAND, THE LD. SR.D.R., SHRI H.R. ME ENA, APPEARING ON BEHALF OF THE REVENUE, POINTED OUT THAT THE ASSESSEE MADE INADMIS SIBLE CLAIM WHICH WAS RIGHTLY DISALLOWED. SINCE BLATANTLY WRONG CLAIM WAS MADE IN THE RETURN OF INCOME, PENALTY UNDER SECTION 271(1)(C) OF THE I.T. ACT IS RIGHTLY LEVIED AND CONFIRMED BY THE LD. CIT(A), IN THE IMPUGNED ORDER. 7. HAVING HEARD BOTH THE SIDES, I HAVE CAREFULLY GO NE THROUGH THE ORDER OF THE AUTHORITIES BELOW. THE FINANCE ACT, 2005 PROVIDES T HAT CERTAIN TRANSACTIONS IN RESPECT OF TRADING IN DERIVATIVES ARE NOT TO BE DEEMED TO BE S PECULATIVE TRANSACTIONS WITHIN THE MEANING OF SECTION 43(5) OF THE I.T. ACT, 1961. IT AT, KOLKATA SPECIAL BENCH IN THE CASE OF SHREE CAPITAL SERVICES LTD. VS- ACIT (KOL) (SB) REPORTED IN 318 ITR PAGE 1(A.T.) HELD THAT CLAUSE (D) OF SECTION 43(5) IS PROSPECTIV E IN NATURE AND WILL BE EFFECTIVE FROM THE DATE ON WHICH THE LEGISLATURE MADE IT EFFECTIVE I.E . APRIL, 2006 AND WILL BE APPLICABLE TO THE ASSESSMENT YEAR 2006-2007. FROM THE PERUSAL OF THIS DECISION OF THE ITAT, SPECIAL BENCH, KOLKATA, WE ARE CONVINCED THAT WHETHER THE A MENDMENT MADE BY THE FINANCE ACT, 2005 WAS RETROSPECTIVE WAS APPLICABLE FOR THE ASSES SMENT YEAR UNDER APPEAL, I.E. 2005- 2006, WAS NOT FREE FROM DOUBT. BE THAT IT MAY BE, I T APPEARS THAT THE ASSESSEE WAS OF THE BONA FIDE BELIEF THAT THE AMENDMENT MADE BY THE FINANCE ACT, 2005 WAS RETROSPECTIVE AND ON THAT BASIS, THE ASSESSEE CLAIMED THE SET OFF OF AN AMOUNT OF RS.12,43,145/-, IN THE RETURN OF INCOME. FOR THIS REASON, I AM OF THE VIEW THAT THIS IS NOT A FIT CASE FOR LEVYING THE PENALTY UNDER SECTION 271(1)(C). 7.1 APART FROM THE ABOVE, IN THE RETURN OF INCOME, THE ASSESSEE HAS FURNISHED THE COMPLETE DETAILS. THE HONBLE SUPREME COURT IN THE CASE OF RELIANCE PETROCHEM LTD. 4 ITA NO. 2028-AHD-2011 ( SUPRA ) HELD THAT A MERE MAKING OR A CLAIM WHICH IS NOT S USTAINABLE IN LAW BY ITSELF, WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REG ARDING THE INCOME OF THE ASSESSEE. 7.2 IN VIEW OF THE ABOVE, PENALTY OF RS. 1,03,784/- LEVIED BY THE AO UNDER SECTION 271(1)(C) AND CONFIRMED BY THE LD. CIT(A) IS HEREBY CANCELLED. RESULTANTLY, THE APPEAL OF THE ASSESSEE IS ALLOWED. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. 0 ( ./# 1! 2 09 / 09 /2011 / 3 ( 4+ 5 ORDER PRONOUNCED IN THE COURT ON 09.09.2011. SD/- (T.K. SHARMA) JUDICIAL MEMBER DATED : 09 /09/2011 ( (( ( &,6 &,6 &,6 &,6 76#, 76#, 76#, 76#, / COPY OF ORDER FORWARDED TO:- 1. $% / APPELLANT 2. &'$% / RESPONDENT 3. , *; / CONCERNED CIT 4. *;- / CIT (A) 5. 6'? 4 &,!, , / DR, ITAT, AHMEDABAD 6. 4 A B 0 / GUARD FILE. BY ORDER/ , C / D , 5 TALUKDAR/SR.P.S.