ITO 9(2)(3), MUMBAI V. MIDAS POWERTECH P.LTD, MUMBAI

ITA 2110/MUM/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 88497 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 11 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-03-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 02-03-2015
• Assessment Year: 2004-2005
• Appeal Filed On: 30-03-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIVEK BATRA
• Keywords: Business income; Bonafide belief

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'B' BENCH, MUMBAI BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER ITA NO. 2110/MUM/2012 (ASSESSMENT YEAR: 2004-05) INCOME TAX OFFICER-9(2)(3) VS. M/S. MIDAS POWERTECH P. LTD. ROOM NO. 225, 2ND FLOOR AAYAKAR BHAVAN, M.K. ROAD MUMBAI 400020 309, PIONEER INDUSTRIAL ESTATE SUBHASH ROAD, JOGESHWARI (E) MUMBAI 400060 PAN - AAACC1922C APPELLANT RESPONDENT APPELLANT BY: SHRI VIVEK BATRA RESPONDENT BY: NONE DATE OF HEARING: 02.03.2015 DATE OF PRONOUNCEMENT: 02.03.2015 O R D E R PER D. MANMOHAN, V.P. THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER PASSED BY CIT(A)-20, MUMBAI AND IT PERTAINS TO A.Y. 2004-05. 2. THE ONLY GROUND URGED BY THE REVENUE READS AS UNDER : - WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE LD. CIT(A) WAS CORRECT IN DELETING THE PENALTY OF RS.11,03,087/- LEVIED U/S. 271(1)(C) OF THE I.T. ACT, 1961, WITHOU T APPRECIATING THE FACT THAT THE HON'BLE ITAT HAS CONFIRMED THE DISALLOWANC E OF LOSS U/S. 94(7) OF THE ACT AND WHEN PROVISIONS OF SECTION 94(7) ARE CLEAR ON THE POINT OF RECKONING OF LIMITATION AND EXPIRY OF LIMITATION. 3. NONE APPEARED ON BEHALF OF THE ASSESSEE. WE HAVE HE ARD THE LEARNED D.R. AND PROCEED TO DISPOSE OF THE APPEAL. 4. FACTS NECESSARY FOR DISPOSAL OF THE APPEAL ARE STAT ED IN BRIEF. ASSESSEE-COMPANY IS ENGAGED IN TRADING OF GOODS AND COMMODITIES ON READY OR FORWARD BASIS AND ALSO ACTED AS COMMISSION AGENT , BROKER, EXPORTER AND IMPORTER APART FROM INVESTING IN SHARES, STOCKS, DE BENTURES, ETC. FOR THE YEAR UNDER CONSIDERATION ASSESSEE-COMPANY DECLARED TOTAL INCOME OF ` 31,590/- ACCOMPANIED WITH AUDIT REPORT IN FORM NO. 3CA/3CD AND OTHER ITA NO. 2110/MUM/2012 M/S. MIDAS POWERTECH P. LTD. 2 RELEVANT DETAILS. THOUGH THE RETURN WAS PROCESSED U NDER SECTION 143(1) OF THE ACT IT WAS LATER TAKEN UP FOR SCRUTINY WHEREIN IT WAS NOTICED THAT THE ASSESSEE-COMPANY ENTERED INTO TRANSACTION OF PURCHA SE AND SALE OF SUNDARAM BOND SAVER (MUTUAL FUND); ASSESSEE PURCHAS ED UNITS ON 26.12.2003 FOR ` 79,50,000/-, RECEIVED DIVIDEND OF ` 30,74,808/- ON THE SAME DATE, CLAIMED EXEMPTION UNDER SECTION 10(35) OF THE ACT AND THEREAFTER SOLD THE UNITS ON 26.03.2004 FOR ` 45,04,799/- WHICH RESULTED IN A LOSS OF ` 34,45,201/- ON THE TRANSACTION OF PURCHASE AND SALE OF SHARES AND THE SAID LOSS WAS SET OFF AGAINST THE PROFIT OF OTHER SECURI TIES/SHARES. ACCORDING TO THE AO, PURCHASE OF SHARES, CLAIMING DIVIDEND AS EXEMPT AND SALE OF SHARES WITHIN THREE MONTHS AFTER THE RECORD DATE IS CLEARL Y IN VIOLATION PROVISIONS OF SECTION 94(7) OF THE INCOME TAX ACT AND THEREFORE T HE LOSS TO THE EXTENT OF DIVIDEND OF ` 30,74,808/- WAS IGNORED UNDER SECTION 94(7) OF THE ACT AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. FURTHER THE BALANCE OF ` 3,70,393/- WAS ALSO NOT ALLOWED TO BE SET OFF AGAIN ST OTHER BUSINESS INCOME FOLLOWING THE DECISION OF THE HON'BLE PUNJAB & HARY ANA HIGH COURT IN THE CASE OF VANEET JAIN VS. CIT 205 CTR 92. CONSEQUENT THERETO THE AO INITIATED PENALTY PROCEEDINGS AND LEVIED PENALTY OF ` 11,03,087/-. 5. IT MAY BE NOTICED THAT THE ASSESSEE PREFERRED AN AP PEAL AGAINST THE QUANTUM OF LOSS AND THE CIT(A) SET ASIDE THE ENTIRE ADDITION OF ` 34,45,201/-. ON A FURTHER APPEAL THE ITAT B BENCH, MUMBAI, VID E ITA NO. 183/MUM/2008 ALLOWED THE DEPARTMENTAL APPEAL PARTLY THEREBY SUSTAINING THE DISALLOWANCE TO THE TUNE OF ` 30,74,808/-. ASSESSEE PREFERRED AN APPEAL BEFORE THE HON'BLE BOMBAY HIGH COURT AGAINST THE OR DER OF THE ITAT. 6. IN THE APPEAL FILED BY THE ASSESSEE AGAINST LEVY OF PENALTY, IT WAS CONTENDED BEFORE THE CIT(A) THAT THE ASSESSEE PURCH ASED THE UNITS OF SUNDARAM MUTUAL FUND ON 26 TH DECEMBER 2003 AND RECEIVED DIVIDEND ON 26.12.2003. THESE UNITS WERE SOLD ON 26 TH MARCH, 2004 RESULTING IN SHORT TERM CAPITAL LOSS. AS PER PROVISIONS OF SECTION 94( 7) TWO CONDITIONS NEED TO BE APPLIED SIMULTANEOUSLY. FIRST, THESE UNITS WERE PUR CHASED WITHIN A PERIOD OF THREE MONTHS PRIOR TO THE RECORD DATE AND SECOND, T HE UNITS WERE SOLD WITHIN A PERIOD OF THREE MONTHS AFTER SUCH RECORD DATE. IT IS THE CASE OF THE ASSESSEE THAT WHEN IT PURCHASED THE UNITS ON 26 TH DECEMBER, 2003 THE FIRST CONDITION ITA NO. 2110/MUM/2012 M/S. MIDAS POWERTECH P. LTD. 3 WAS NOT SATISFIED SINCE THE RECORD DATE IS 25 TH DECEMBER, 2003. FURTHER, WHEN THE UNITS WERE SOLD ON 26 TH MARCH, 2004 THEN THE UNITS CAN BE SAID TO HAVE BEEN SOLD AFTER THE PERIOD OF THREE MONTHS FROM THE RECORD DATE IN AS MUCH AS THE THREE MONTHS PERIOD EXPIRES ON 25 TH MARCH, 2004 ITSELF. 7. IT WAS ALSO CONTENDED THAT IT WAS NOT A CASE OF CON CEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME A S TWO DIFFERENT VIEWS WERE POSSIBLE ON THIS MATTER; TWO JUDGEMENTS OF THE HIGH COURTS WERE IN FAVOUR OF THE ASSESSEE AS REGARDS THE DEFINITION OF THE TERM MONTH. THUS THE ISSUE IS LEGAL AND DEBATABLE IN NATURE IN WHICH EVENT PENALT Y IS NOT LEVIABLE. RELIANCE WAS ALSO PLACED UPON THE DECISION OF THE ITAT MUMBA I BENCHES IN THE CASE OF HINDALCO INDIA LTD. 41 SOT 254 WHEREIN IT WAS HE LD THAT NO PENALTY CAN BE LEVIED WHEN DISALLOWANCES WERE MADE UNDER SECTIO N 94(7) WHEN THE ASSESSEE DISCLOSED FULL FACTS AND DETAILS WHICH WER E NOT PROVED TO BE INCORRECT. RELIANCE WAS ALSO PLACED UPON THE DECISI ONS OF THE HON'BLE CALCUTTA HIGH COURT AND HON'BLE MADRAS HIGH COURT W HEREIN IT WAS HELD THAT MONTH EXPIRES ON A DATE BEFORE THE CORRESPON DING DATE OF NEXT MONTH IN WHICH EVENT, IN THE INSTANT CASE, ONE OF THE CON DITIONS OF SECTION 94(7) IS NOT APPLICABLE. 8. HAVING REGARD TO THE CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A) CANCELLED THE PENALTY BY OBSERVING AS UNDER: - 5. I HAVE PERUSED THE ASSESSMENT ORDER, PENALTY AN D WRITTEN SUBMISSIONS OF THE APPELLANT. THE WHOLE CASE REVOLV ES AROUND THE DEFINITION OF MONTH. THE DECISION OF THE CIT(A) I S IN APPELLANTS FAVOUR AS THE DECISION OF THE HON'BLE MADRAS HIGH COURT IN THE CASE OF CIT VS. KADRAI MILLS LTD. (106 ITR 846) AND THAT OF HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. S.L.M. MANEKLAL INDUSTRIES L TD. (274 ITR 485) ARE ALSO IN APPELLANTS FAVOUR WHEREAS THE HON'BLE ITAT HAS NOT AGREED WITH THIS DEFINITION. THE ISSUE, THEREFORE, IS LEGA L, DEBATABLE WHERE TWO BONAFIDE OPINIONS ARE POSSIBLE. 5.1. MORE IMPORTANTLY THERE IS DIRECT DECISION OF H ON'BLE ITAT MUMBAI IN THE CASE OF HINDALCO INDIA LTD CITED SUPR A WHERE IT HAS BEEN HELD PENALTY CANNOT BE LEVIED FOR DISALLOWANCE MADE U/S. 94(7) IF THE APPELLANT HAD FURNISHED FULL DETAILS AND PARTICULAR S OF INCOME WHILE FILING RETURN OF INCOME AND UNDER BONAFIDE BELIEF R EGARDING ALLOWABILITY OF SAID CLAIM. IN THE PRESENT CASE, EXCEPT FOR DIFF ERENT INTERPRETATION OF THE TERM MONTH THERE IS NOTHING TO SUGGEST THAT A NY PARTICULARS WERE CONCEALED BY THE APPELLANT. IN THESE CIRCUMSTANCES, THE DECISION OF JURISDICTIONAL ITAT THAT NO PENALTY IS LEVIABLE ON A DISALLOWANCE MADE ITA NO. 2110/MUM/2012 M/S. MIDAS POWERTECH P. LTD. 4 U/S. 84(7) HAS A BINDING FORCE. THUS TAKING INTO AL L THE FACTS AND CIRCUMSTANCES OF THE EXPLANATION OFFERED BY THE APP ELLANT IS HELD TO BE BONAFIDE AND PENALTY LEVIED IS CANCELLED. 9. AGGRIEVED, REVENUE IS IN APPEAL BEFORE US. AT THE T IME OF HEARING THE LEARNED D.R. COULD NOT PLACE ANY MATERIAL ON RECORD OR ANY CASE LAW ON THIS ISSUE TO PROVE THAT THE VIEW TAKEN BY THE LEARNED C IT(A) IS NOT IN ACCORDANCE WITH LAW. HE MAINLY RELIED UPON THE ORDER PASSED BY THE AO AND SUBMITTED THAT THE ITAT CONFIRMED THE LOSS UNDER SECTION 94(7 ) OF THE ACT AND HENCE PENALTY IS LEVIABLE. WHEN SPECIFICALLY POINTED OUT THAT HE HAS TO READ THE CONCLUSIONS AND FINDINGS OF THE LEARNED CIT(A) AND REBUT THE FINDINGS, THE LEARNED D.R. COULD NOT PLACE ANY MATERIAL TO CONTRA DICT THE FINDINGS. IN FACT IT APPEARS THAT HE HAS NOT EVEN LOOKED INTO THE DEC ISION OF THE ITAT, MUMBAI IN THE CASE OF HINDALCO INDIA LTD. OR THE DECISIONS OF THE CALCUTTA/MADRAS HIGH COURTS REFERRED TO BY THE LEARNED CIT(A). IN V IEW OF THE POOR PREPARATION OF THE LEARNED SR. D.R. AND IN THE ABSE NCE OF ANY MATERIAL TO CONTRADICT THE FINDINGS OF THE LEARNED CIT(A), WE A RE OF THE VIEW THAT THE ORDER PASSED BY THE LEARNED CIT(A) DESERVES TO BE C ONFIRMED. 10. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS D ISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 2 ND MARCH, 2015. SD/- SD/- ( CHANDRA POOJARI ) (D. MANMOHAN) ACCOUNTANT MEMBER VICE PRESIDENT MUMBAI, DATED: 2 ND MARCH, 2015 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 20, MUMBAI 4. THE CIT 9, MUMBAI CITY 5. THE DR, B BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.