FOUR DIMENSIONS SECURITIES (I) LTD, MUMBAI V. ASST CIT RG 4(1), MUMBAI

ITA 2542/MUM/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 87971 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 9 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-01-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Next Hearing Date: 24-12-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 16-04-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: N PADMANABAN
• Keywords: Bonafide mistake

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL F , BENCH MUMBAI , BEFORE : SHRI R.C.SHARMA, AM & SHRI SANJAY GARG, JM ITA NO. 2542 / MUM/20 1 2 ( ASSESSMENT YEAR : 200 6 - 07 ) FOUR DIMENSIONS SECURITIES (INDIA) LTD., 209 - 210, ARCADIA BUILDING 195, NARIMAN POINT, MUMBAI - 400 021 VS. ACIT, RG.4(1), MUMBAI - 400 020 PAN/GIR NO. : A AA CF 1 734 F ( APPELLANT ) .. ( RESPONDENT ) /ASSESSEE BY : SHRI VIJAY MEHTA /REVENUE BY : SHRI N. PADMANABAN DATE OF HEARING : 31/12/2014 DATE OF PRONOUNCEMEN T : 16/01 /2015 O R D E R PER R.C.SHARMA ( A .M.) : THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A), DATED 6 - 2 - 2012 , FOR THE ASSESSMENT YEAR 200 6 - 07 , IN THE MATTER OF IMPOSITION OF PENALTY U/S.271(1) (C) OF THE I. T. ACT, ON THE FOLLOWING GROUNDS: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE HON'BLE CIT(A) ERRED IN CONFIRMING THE PENALTY LEVIED BY THE LD. ASSESSING OFFICER U/S. 271(1)(C) OF THE INCOME TAX ACT, 1961 AMOUNTING TO RS. 2,25,783/ - ON TH E DISALLOWANCE MADE U/S 94(7). THE APPELLANT PRAYS THAT THE SAME MAY PLEASE BE DELETED. GROUND NO.2: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE HON'BLE CIT(A) ERRED IN CONFIRMING THE PENALTY LEVIED BY THE LD. ASSESSING OFFICER U/ S. 271 (1 )(C) OF THE INCOME TAX ACT, 1961 AMOUNTING TO RS. 33,79,001/ - ON THE REDUCTION IN CLAIM OF REBATE U/S 88E. THE APPELLANT PRAYS THAT THE SAME MAY PLEASE BE DELETED. ITA NO. 2542 /20 1 2 2 GROUND NO.3: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE HON'BLE CIT(A) ERRED IN COMMENTING THAT THE APPELLANT HAS NOT VOLUNTARILY OFFERED THE DISALLOWANCE OF RS.1,42,10,000/ - RELATING TO ARBITRAGE FEES AND APPEARING UNDER THE HEAD LEGAL & PROFESSIONAL IN THE PROFIT & LOSS ACCOUNT, FOR TAXATION, AND HAS OFFERED AN EXPLANATION WHICH IS BOTH FALSE AND NON BONAFIDE IT FITS DIRECTLY TO EXPLANATION 1 TO SEC. 271 (1). THE APPELLANT PRAYS THAT THESE REMARKS OF THE HON'BLE CIT (A) ARE ERRONEOUS AND MAY PLEASE BE DELETED. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR OMIT ANY OF THE GROUNDS OF APPEAL BEFORE OR DURING THE HEARING OF THE APPEAL. 2 . RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. FACTS IN BRIEF ARE THAT THE ASSESSEE COMPANY IS A CORPORATE MEMBER OF NSE, ENGAGED IN THE BUSINESS OF BROKING IN SHA RES AND SECURITIES AND TRADING IN SHARES & SECURITIES AS WELL AS IN FUTURE AND OPTIONS . DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAD SHOWN TOTAL INCOME OF RS. 13,98,55,100/ - , WHICH INCLUDED RS. 8,73,43,276/ - FROM SHARE TRADING OPERATIONS. THE ASSESSE E CLAIMED ENTIRE AMOUNT OF STT PAID RS.2,38,83,416/ - AS REBATE UNDER SECTION 88E OF THE ACT. DURING THE ASSESSMENT PROCEEDINGS, THE A.O. NOTICED THAT THE ASSESSEE HAD RECEIVED A DIVIDEND OF RS.47,16,889/ - FROM INDIAN COMPANIES AND MUTUAL FUNDS. THE A.O. AS KED THE ASSESSEE TO FURNISH THE DETAILS OF THE PURCHASE AND SALE IN RESPECT OF COMPANIES WHICH WERE HIT BY THE PROVISIONS OF SECTION 94(7) OF THE ACT. THE ASSESSEE, IN RESPONSE, WORKED OUT THE DETAILS OF THE DISALLOWANCE AT RS. 6,70,776 / - AND OFFERED THE SA ME FOR TAX. AFTER MAKING THIS DISALLOWANCE , T HE A.O. INITIATED THE PENALTY PROCEEDINGS AND IMPOSED THE PENALTY OF RS. 2,25,783/ - @ 100% OF THE TAX AMOUNT SOUGHT TO BE EVADED. ITA NO. 2542 /20 1 2 3 3 . IT WAS ARGUED BY LD. AR THAT EXACTLY SIMILAR ISSUE WAS DEALT BY THE TRIBUNAL IN THE CASE OF CITY GROUP GLOBAL MARKETS INDIA PVT. LTD., ITA NO.5352/MUM/2009 , DATED 13 - 12 - 2011, WHEREIN PENALTY IMPOSED U/S.271(1)(C) FOR ADDITIONS MADE WITH REFERENCE TO DISALLOWANCE MADE UNDER SECTION 94(7) WAS DELETED AFTER HAVING THE FOLLOWING OBSERV ATIONS : - 5. IN OUR VIEW THIS DOES NOT ATTRACT PENALTY UNDER SECTION 271 (1) (C). FIRST OF ALL THE ASSESSEE IS REGULARLY PURCHASING AND SELLING SHARES AS PART OF BUSINESS ACTIVITY IN LARGE VOLUMES AND ONLY IN THESE TWO CASES THERE IS A DECLARATION OF DIVIDE ND AND SALE OF SHARES IMMEDIATELY THEREAFTER, WHICH ATTRACTED THE PROVISIONS OF SECTION 94(7). BUT FOR THE DECLARATION OF DIVIDEND, THE LOSS WOULD HAVE BECOME BUSINESS LOSS ALLOWABLE OTHERWISE IN THE COURSE OF ITS BUSINESS ACTIVITY OF PURCHASE AND SALE OF TRANSACTIONS. EVEN THE PROFESSIONAL AUDITORS/ADVISORS WHO EXAMINED LARGE NUMBER OF TRANSACTIONS BEFORE FILING THE RETURNS COULD NOT ADVISE THE ASSESSEE ON THE APPLICATION OF THIS PARTICULAR PROVISION INTRODUCED FROM THIS ASSESSMENT YEAR. EVEN THE ASSESSING OFFICER AT THE TIME OF ASSESSMENT WAS CONSIDERED ONLY THE LOSS ON VSNL SHARES ALONE OF `13,21,084/ - AS ATTRACTED BY SECTION 94(7) AND DISALLOWED LOSS. AS ASSESSEE ALSO UNDERTOOK TRANSACTIONS IN INFOSYS SHARES, IN WHICH THERE WAS GAIN AND ALSO LOSS ON 5 TR ANSACTIONS, THE CIT (A) ALLOWED SETOFF AND RESTRICTED TO NET AMOUNT OF RS. 12,45,342/ - . IN OUR VIEW, THIS IS A BONAFIDE MISTAKE HAPPENED AT THE LEVEL OF COMPILING THE DATA. THE APPLICATION OF PROVISIONS OF SECTION 94(7) WERE NOT EXAMINED NOR INVOKED. SINC E THE ASSESSEE HAS DECLARED LARGE AMOUNT OF PROFITS IN TRANSACTIONS ON PURCHASE AND SALE OF SHARES, THIS ASPECT COULD HAVE GENUINELY MISSED THE ATTENTION OF PERSONSCONCERNED. SINCE NO MALAFIDE INTENTION CAN BE ATTRIBUTED TO ASSESSEE IN CLAIMING LOSS IN TH ESE TRANSACTIONS, WE ARE OF THE VIEW THAT PENALTY UNDER SECTION 271(1)(C) IS NOT WARRANTED. VARIOUS CASE LAW RELIED UPON BY THE ASSESSEE ALSO SUPPORTS THE CONTENTIONS MADE. HOWEVER, WITHOUT GETTING INTO THE LEGAL PARAMETERS, ON FACTS OF THE CASE WE ARE OF THE VIEW THAT THERE OCCURRED A BONAFIDE MISTAKE IN NOT EXAMINING THE PROVISIONS OF SECTION 94(7) ON THESE TRANSACTIONS. MOREOVER, THOUGH THERE ARE DISALLOWANCES IN THE COURSE OF THE ASSESSMENT PROCEEDINGS, MERE DISALLOWANCE DOES NOT ATTRACT PENALTY PROCEED INGS UNDER SECTION 271(1)(C). ACCORDINGLY THE ASSESSEES GROUND IS ALLOWED. THE PENALTY LEVIED ON THIS DISALLOWANCE OF LOSS IS HEREBY CANCELLED. 4 . WE HAVE CONSIDERED RIVAL CONTENTIONS AND FOUND THAT ASSESSEE IS A SHARE BROKER AND SHARE TRADER AND HAS OF FERED A TOTAL INCOME OF RS.13,98,55,100. THE SAID INCOME INCLUDES PROFITS FROM SHARE TRADING OF RS. 8,73,43,276/ - . THE PROFIT HAS BEEN RESULTED FROM INNUMERABLE ITA NO. 2542 /20 1 2 4 TRANSACTIONS OF PURCHASE & SALES OF SHARES, INCLUDING ARBITRAGE, JOBBING ETC. DURING THE YEAR U NDER CONSIDERATION, THE ASSESSEE HAD MISSED OUT TO DISALLOW A MEAGER LOSS OF RS. 6,70,776/- U/ S 94(7) OF THE ACT, ON ACCOUNT OF DIVIDEND STRIPPING. D ISALLOWANCE U/ S 94(7) DEPENDS UPON CUMULATIVE SATISFACTION OF CERTAIN CONDITIONS PRESCRIBED IN THE ACT. TH E SAME HAS BEEN REMAINED TO BE APPLIED BY OVERSIGHT AND EVEN THE AUDITORS HAVE FAILED TO POINT IT OUT. HOWEVER AT THE TIME OF ASSESSMENT PROCEEDINGS, WHEN THE DETAILS OF PURCHASE AND SALE OF SHARES AND UNITS WERE CALLED FOR IN THE COURSE OF ORDINARY HEARIN G, THE ASSESSEE FURNISHED COMPLETE PARTICULARS OF TRANSACTIONS. DURING THESE PROCEEDINGS, THE SAID MISTAKE WAS REALIZED AND THE ASSESSEE AGREED BEFORE THE A.O. TO DISALLOW THE SAID AMOUNT. SINCE ASSESSE E HAS AGREED FOR DISALLOWANCE, NO SHOW CAUSE NOTICE WA S ISSUED BY THE A.O. IN THIS REGARD. THE DISALLOWANCE WAS MADE AS PER THE WORKING SUBMITTED BY THE APPELLANT, WHICH HAS BEEN ACCEPTED BY THE A.O. ALSO, AGAINST THE SAID DISALLOWANCE, NO APPEAL IS FILED BY THE ASSESSEE . IT IS A CASE OF AN INADVERTENT MISTAK E MADE BY THE ASSESSEE , AND THE ASSESSEE AGREED FOR DISALLOWANCE AT THE TIME OF ASSESSMENT PRO CEEDINGS. ACCORDINGLY, NO PENALTY U/S.271(1)(C) OF THE ACT WAS WARRANTED. PUTTING THESE FACTS TO THE PROPOSITION OF LAW DISCUSSED BY COORDINATE BENCH IN THE CASE OF CITY GROUP GLOBAL MARKETS INDIA PVT. LTD(SUPRA) , WE DO NOT FIND ANY MERIT IN THE PENALTY SO IMPOSED BY THE AO U/S.271(1)(C) OF THE ACT WITH RESPECT TO THE DISALLOWANCE MADE UNDER OF SECTION 94(7) OF THE ACT. 5 . SIMILAR VIEW HAS BEEN TAKEN BY THE ITAT M UMBAI BENCH IN THE CASE OF RAMESH DAMANI, ITA NO.1625/MUM/2012 , DATED 22 - 8 - 2014. ITA NO. 2542 /20 1 2 5 RESPECTFULLY FOLLOWING THE JUDICIAL PRONOUNCEMENTS AS DISCUSSED ABOVE, WE DO NOT FIND ANY MERIT IN THE IMPOSITION OF PENALTY ADDITION MADE WITH REFERENCE TO THE PROVISIONS OF SECTION 94(7). 6 . WITH RESPECT TO THE PENALTY IMPOSED ON ACCOUNT OF ADDITION MADE FOR LEGAL AND PROFESSIONAL FEE, WE FOUND THAT QUANTUM ADDITIONS SO MADE HAS BEEN RESTORED BACK BY THE CIT(A) TO THE FILE OF AO WITH A DIRECTION TO VERIFY THE NATURE OF EXPEN DITURE WHICH IS CLEAR FROM THE ORDER OF CIT(A), DATED 20 - 11 - 2009 AT PAGES 6 & 7, PARA 7.2, 7.2.1 & 7.2.2 . IN VIEW OF THE ABOVE, PENALTY IMPOSED IN RESPECT OF THESE ADDITION S WHICH HA VE BEEN SET ASIDE, IS ALSO RESTORED TO THE FILE OF AO FOR DECIDING AFRESH AFTER PASSING THE ORDER TO GIVE EFFECT TO THE DIRECTION OF THE CIT(A) WITH REFERENCE TO SUCH ADDITION. WE DIRECT ACCORDINGLY. 7 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED IN PART . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 16 TH JANUARY . 201 5 . 16 TH JAN,201 5 SD/ - SD/ - ( ) ( SANJAY GARG ) ( ) ( R.C.SHARMA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED 16 / 01/201 5 /PKM , PS COPY OF THE ORDER FORWARDED TO : / BY ORDER, ( ASSTT. REGISTRAR) / I T AT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / THE CIT(A) - X, MUMBAI. 4. / CIT 5. / DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//