DCIT 9(1), MUMBAI V. ARFIN BROKERS (P) LTD, MUMBAI

ITA 2589/MUM/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 1021 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-07-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2003-2004
• Appeal Filed On: 22-04-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S B PRASAD
• Keywords: Speculation loss; Wrong claim; Difference of opinion
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, A, MUMBAI BEFORE SHRI P.M.JAGTAP, ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO, JUDICIAL MEMBER ITA NO. 2589/MUM/2009 (ASSESSMENT YEARS: 2003-04) DCIT 9(1), ROOM NO.223, AAYAKAR BHAVAN, M K ROAD MUMBAI-400020 .APPELLANT V/S ARFIN BROKERS (P) LTD 103, KEDIA CHAMBERS, S V ROAD, MALAD (W), PAN: AAACA9794Q RESPONDENT APPELLANT BY : SHRI S B PRASAD RESPONDENT BY : SHRI JAYANT BHATT O R D E R PER VIJAY PAL RAO,JM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 05-02.2009 OF CIT(A)-IX, MUMBAI ARISING FROM THE PENALTY ORDER PASSED UNDER SECTION 271(1)(C) OF THE ACT FOR THE ASSESSMENT YEAR 2003-04. 2 THE REVENUE HAS RAISED FOLLOWING GROUNDS : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING T HE PENALTY OF RS.6,87,207/- LEVIED U/S 271(1)( C ) OF THE IT ACT, 1961, HOLDING THAT THE ISSUE ON WHICH THE PENALTY WAS IMPOSED WAS A DEBATABLE ONE WHEREAS ITA NO. 2589/MUM/2009 (ASSESSMENT YEARS: 2003-04) 2 THE ISSUE IS NO MORE DEBATABLE AS ENVISAGED IN EXPLANATION TO SECTION 73 OF THE IT ACT, 1961; 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING T HE PENALTY U/S 271(1)( C ) OF THE IT ACT, 1961 WITH OUT APPRECIATING THAT THE ASSESSEE CONCEALED THE PARTICULARS OF INCOME WITHIN THE MEANING OF EXPLANATION -1 TO SECTION 271(1)( C) OF THE INCOME TAX ACT, 1961; 3. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE GROUNDS BE SET ASIDE AND THAT OF THE AO BE RESTORED 3. BRIEF FACTS OF THE CASE EMERGING FROM THE RECOR D ARE THAT THE ASSESSEE IN THE RETURN OF INCOME SHOWN A LOSS O F RS.14,13,681/-. THE AO OBSERVED THAT THE ASSESSEE S INCOME FROM SALE OF INVESTMENT, INTEREST AND DIVIDEND ON SALE OF SHARES AS BUSINESS LOSS OF THE ASSESSEE AND ACCORDI NGLY THE INCOME WAS RETURN AT LOSS OF RS.30,73,539/-. THE AO HAS ASSESSED THE LOSS ON SALE OF SHARES AND SECURITI ES AS SPECULATION LOSS AND HAS ALSO APPORTIONED CERTAIN E XPENSES PERTAINING TO THE EARNING OF SUCH INCOME. THE AO ALSO DISALLOWED CERTAIN EXPENSES FOR NON BUSINESS PURPOS ES. SINCE THE LOSS WAS CONSIDERED AS SPECULATION LOSS AND WAS NOT ALLOWED TO SET OFF AGAINST THE OTHER INCOME, THE AO ASSESSED THE INCOME AT RS.2,37,785/- IS CHARGEABLE TO TAX A ND ALLOWED CARRIED FORWARD LOSS AS SPECULATION LOSS TO BE ADJU STED AGAINST THE SUCH INCOME IN FUTURE. 4. ON APPEAL, THE CIT(A) ACCEPTED THE STAND OF TH E AO OF TREATING THE LOSS ON SALE OF SHARES AS SPECULATION LOSS. ITA NO. 2589/MUM/2009 (ASSESSMENT YEARS: 2003-04) 3 HOWEVER, THE CIT(A) DELETED THE DISALLOWANCE MADE BY THE AO EXCEPT THE EXPENSES ON FOREIGN TRAVELS. THE A PPEAL FILED BY THE DEPARTMENT BEFORE THIS TRIBUNAL WAS DISMISS ED IN- LIMINE. 5. THE AO THEN LEVIED PENALTY OF RS.6,87,207/- VID E ORDER DATED 26.09.2009 ON THE AMOUNT DISALLOWED AS EXPENS ES AS WELL AS THE AMOUNT OF LOSS WHICH HAS BEEN TREATED A S SPECULATION LOSS. 6. THE ASSESSEE FILED THE APPEAL BEFORE THE CIT(A) AGAINST THE ORDER OF PENALTY. THE CIT(A) DELETED THE PENAL TY LEVIED BY THE AO ON THE GROUND THAT THE DISALLOWANCE WAS DUE TO DIFFERENCE OF OPINION OF THE AO AND NOT DUE TO THE CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING INACCURATE P ARTICULARS OF INCOME. 7. BEFORE US, THE LEARNED DR HAS SUBMITTED THAT TH E CIT(A) HAS COMMITTED AN ERROR BY DELETING THE PENALTY ON THE GROUND THAT THE DISALLOWANCE WAS BASED ON DIFFERENCE OF OP INION WHEREAS THERE IS NO SECOND VIEW OR OPINION ON THE ISSUE OF LOSS ON SALE OF SHARES AND SECURITIES BEING TREATED AS SPECULATION LOSS. THUS, ONCE THE ISSUE IS SETTLED AND NOT DEBATABLE THEN THE VIEW OF THE CIT(A) IS NOT SUSTA INABLE AND ITA NO. 2589/MUM/2009 (ASSESSMENT YEARS: 2003-04) 4 PENALTY LEVIED BY THE AO IS JUSTIFIED. HE HAS RELI ED UPON THE ORDER OF THE AO. 8. ON THE OTHER HAND, THE LEARNED AR HAS SUBMITTED THAT THE ASSESSEE HAS DISCLOSED ALL PARTICULARS REGARDIN G SOURCE OF INCOME AS WELL AS NATURE OF EXPENDITURE. HE SUBMIT TED THAT THE ADDITION WAS MADE ONLY BECAUSE OF TREATING THE INCOME/LOSS UNDER SEPARATE HEAD THAN THE ASSESSEE TREATED. THEREFORE, THERE IS NO CONCEALMENT OF INCOME AND FU RNISHING OF INACCURATE PARTICULARS OF INCOME. IT IS UNDISPUTED FACT THAT THE ASSESSEE HAS CLAIMED THE LOSS ON SALE OF SHARES AS BUSINESS LOSS WHICH WAS TO BE SET OFF AGAINST THE BUSINESS I NCOME IN THE SUBSEQUENT YEARS. WHEREAS THE AO TREATED THE SAME AS SPECULATIVE LOSS AND THE FACT WAS ONLY SET OFF OF SPECULATIVE LOSS IS ALLOWED AGAINST THE SPECULATIVE LOSS AND N OT AGAINST THE OTHER INCOME. THEREFORE, THE CLAIM OF THE ASSE SSEE WAS DISALLOWED UNDER THE PROVISIONS OF THE ACT WHICH DO ES NOT WARRANT THE LEVY OF PENALTY. HE HAS ALSO RELIED UPO N THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT V/S RELIANCE PETROPRODUCTS PVT.LTD REPORTED IN 3 22 ITR 158(SC) AS WELL AS THE ORDER OF THIS TRIBUNAL IN TH E CASE OF ITO V/S OASIS SECURITIES LTD IN ITA NO.846/M/2008 ORDER DATED 29.01.2010. HE HAS ALSO REFERRED FOLLOWING D ECISIONS OF THIS TRIBUNAL WHEREIN THE SIMILAR ISSUE WAS CONSIDE RED AND DECIDED IN FAVOUR OF THE ASSESSEE: ITA NO. 2589/MUM/2009 (ASSESSMENT YEARS: 2003-04) 5 I) ITA NO.2983/MUM/2007 MIMOSA INVESTMENT CO.LTD V/S ITO, ORDER DATED 15.01.2009; II) ITA NO.6528 / MUM/2005, ITO V/S GACL FINANE LTD, ORDER DATED 19.3.2009; III) ITO V/S SOT 181 (MUM) ITO V/S ROBORANT INVESTMENTS (P) LTD ORDER DATED AUG- 2006; THE LEARNED AR ALSO RELIED UPON THE ORDER OF THE C IT(A). 9. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND RE LEVANT RECORD. WE NOTED THAT THE ASSESSEE DISCLOSED AND FURNISHED RELEVANT PARTICULARS AND MATERIAL NECESSARY FOR THE ASSESSMENT. THE AO HAS FRAMED THE ASSESSMENT BASED ON RECORD AVAILABLE LAND FILED BY THE ASSESSEE. THERE FORE, THE DISALLOWANCE WAS MERELY, BY TREATING THE LOSS ON S ALE OF SHARES AND SECURITIES AS SPECULATIVE LOSS INSTEAD OF BUSINESS LOSS CLAIMED BY THE ASSESSEE AND NOT ON THE BASIS OF ANY BOGUS CLAIM OR FALSE CLAIM MADE BY THE ASSESSEE. WH EN THE ASSESSEE DISCLOSED ALL THE MATERIAL FACTS REGARDING THE SOURCE OF INCOME /LOSS THEN IT CANNOT BE SAID THAT THE ASS ESSEE HAS CONCEALED THE PARTICULARS OF INCOME OR FURNISHED IN ACCURATE PARTICULARS OF INCOME. THE ADDITION ON ACCOUNT OF TREATMENT OF LOSS BY APPLYING THE PROVISIONS OF SECTION 73 IT SELF SHOWS THAT THE DISALLOWANCE WAS MADE BY THE AO BY APPLY ING THE DEEMING PROVISIONS, UNDER SECTION 73 WHICH DOES NO T AMOUNT TO CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHI NG INACCURATE PARTICULARS OF INCOME. AS REGARDS THE D ISALLOWANCE ITA NO. 2589/MUM/2009 (ASSESSMENT YEARS: 2003-04) 6 OF EXPENSES ON FOREIGN TOUR THE SAME IS ALSO NOT O N ACCOUNT OF FALSE OR BOGUS CLAIM MADE BY THE ASSESSEE BUT O N DIFFERENCE OF OPINION IN TREATING THE SAME AS NON B USINESS EXPENDITURE. WHEN THE ASSESSEE DISCLOSED THE NATU RE OF EXPENDITURE BEING INCURRED ON THE FOREIGN TOUR THE N THE CLAIM OF THE ASSESSEES THAT THE EXPENDITURE WAS INCURRED FOR BUSINESS PURPOSE WAS NOT ACCEPTED BY THE AUTHORITIE S DOES NOT IPSO-FACTO CONCLUSIVELY PROVED THAT THE ASSESSEE H AS CONCEALED THE PARTICULARS OF INCOME OR FURNISHED I NACCURATE PARTICULARS OF INCOME. WE NOTE THAT CO-ORDINATE BE NCHES OF THIS TRIBUNAL ON VARIOUS OCCASIONS HAVE CONSIDERED AND ADJUDICATED UPON THE ISSUE IN FOLLOWING ORDERS : I) ITA NO.2983/MUM/2007 MIMOSA INVESTMENT CO.LTD V/S ITO, ORDER DATED 15.01.2009; II) ITA NO.6528 / MUM/2005, ITO V/S GACL FINANE LTD, ORDER DATED 19.3.2009; IV) ITO V/S SOT 181 (MUM) ITO V/S ROBORANT INVESTMENTS (P) LTD ORDER DATED AUG- 2006; FURTHER, THE HONBLE APEX COURT IN THE CASE OF CIT V/S RELIANCE PETROPRODUCTS PVT.LTD REPORTED IN 322 I TR 158(SC) HELD IN PARAGRAPHS 11 TO 14 AS UNDER : 11. WE HAVE ALREADY SEEN THE MEANING OF THE WORD PARTICULARS IN THE EARLIER PART OF THIS JUDG MENT. READING THE WORDS IN CONJUNCTION, THEY MUST MEANS THE DETAILS SUPPLIED IN THE RETURN, WHICH ARE NOT ACCURATE, NOT EXACT OR CORRECT, NOT ACCORDING TO TR UTH OR ERRONEOUS. WE MUST HASTEN TO ADD HERE THAT IN TH IS ITA NO. 2589/MUM/2009 (ASSESSMENT YEARS: 2003-04) 7 CASE, THERE IS NO FINDING THAT ANY DETAILS SUPPLIED BY THE ASSESSEE IN ITS RETURN WERE FOUND TO BE INCORR ECT OR ERRONEOUS OR FALSE, SUCH NOT BEING THE CASE, TH ERE 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, W ILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REGARDI NG THE INCOME OF HE ASSESSEE. SUCH CLAIM MADE IN THE RETURN CANNOT AMOUNT TO THE INACCURATE PARTICULARS. 12. IT WAS TRIED TO BE SUGGESTED THAT SECTION 14A OF THE ACT SPECIFICALLY EXCLUDED THE DEDUCTION IN RESPECT OF THE EXPENDITURE INCURRED BY THE ASSESSEE IN RELATION TO INCOME WHICH DOES NOT FORM PART OF T HE 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 REITER ATED BEFORE US THAT THE ASSESSING OFFICER HAD CORRECTLY REACHED THE CONCLUSION THAT SINCE THE ASSESSEE HAD CLAIMED EXCESSIVE DEDUCTIONS KNOWING THAT THEY ARE INCORRECT, IT AMOUNTED TO CONCEALMENT OF INCOME. I T WAS TRIED TO BE ARGUED THAT THE FALSEHOOD IN ACCOUN TS CAN TAKE EITHER OF THE TWO FORMS ; (I) AN ITEM OF R ECEIPT 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 AMOUN T TO CONCEALMENT OF PARTICULARS OF ONES INCOME AS WE LL AS FURNISHING OF INACCURATE PARTICULARS OF INCOME. WE DO NOT AGREE, AS THE ASSESSEE HAD FURNISHED ALL TH E DETAILS OF ITS EXPENDITURE AS WELL AS INCOME IN IS RETURN, WHICH DETAILS, IN THEMSELVES WE NOT FOUND T O BE INACCURATE NOR COULD BE VIEWED AS THE CONCEALMEN T OF INCOME ON ITS PARTS. IT WAS UP TO THE AUTHORITI ES TO ACCEPT ITS CLAIM IN THE RETURN OR NOT. MERELY BECA USE 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 OPINION, ATTRACT THE PENALTY UNDER SECTION 271(1)( C ). IF W E ACCEPT THE CONTENTION OF THE REVENUE THEN IN CASE OF EVERY RETURN WHERE THE CLAIM MAD IS NOT ACCEPTED BY THE AO FOR ANY REASON, THE ASSESSEE WILL INVITE PENALTY UNDER SECTION 271(1)( C ). THAT IS CLEARLY NOT THE INTENDMENT OF THE LEGISLATURE. 13. IN THIS BEHALF THE OBSERVATIONS OF THIS COURT MADE IN SREE KRISHNA ELECTRICIANS V/S STATE OF TAMI L NADU (2009) 23 VST 249 AS REGARDS THE PENALTY ARE ITA NO. 2589/MUM/2009 (ASSESSMENT YEARS: 2003-04) 8 APPOSITE. IN THE AFOREMENTIONED DECISION WHICH PERTAINED TO THE PENALTY PROCEEDINGS UNDER THE TAM IL NADU GENERAL SALES TAX ACT, THE COURT HAD FOUND TH AT THE AUTHORITIES BELOW HAD FOUND THAT THERE WERE SOM E INCORRECT STATEMENTS MADE IN THE RETURN . HOWEVER, THE SAID TRANSACTIONS WERE REFLECTED IN THE ACCOUNT S OF THE ASSESSEE. 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 TURNOVER DISALLOWING THE EXEMPTION, PENALTY CANNOT BE IMPOSED. THE PENALTY LEVIED STANDS SET ASIDE 14. THE SITUATION IN THE PRESENT CASE IS STILL BET TER AS NO FAULT HAS BEEN FOUND WITH THE PARTICULARS SUBMITTED BY THE ASSESSEE IN ITS RETURN. 10. FROM THE DECISION OF THE HONBLE SUPREME COURT (SUPRA), IT IS CLEAR THAT WHEN THE INFORMATION AND DETAILS G IVEN BY THE ASSESSEE IS NOT FOUND TO BE INCORRECT OR INACCURATE , THE ASSESSEE CANNOT BE HELD OF GUILTY OF FURNISHING INA CCURATE PARTICULARS RESULTING LEVY OF PENALTY. RESPECTFUL LY FOLLOWING THE DECISION OF THE SUPREME COURT (SUPRA), WE FIND THAT, IN THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, THE PE NALTY IS NOT JUSTIFIED. WE FIND NO ERROR OR ILLEGALITY IN THE O RDER OF THE CIT(A) IN DELETING THE PENALTY IMPOSED BY THE AO. ITA NO. 2589/MUM/2009 (ASSESSMENT YEARS: 2003-04) 9 11. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. PRONOUNCED IN THE OPEN COURT ON 23.07.2010 SD SD (P.M.JAGTAP) (VIJAY PAL RAO) ACCOUNTANT MEMBER JUDICIAL MEMB ER MUMBAI, DATED JULY 2010 SRL:20710 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) CONCERNED 4. CIT CONCERNED 5. DR A BENCH. BY ORDER TRUE COPY ASSTT. REGISTRAR, ITAT, MUMBAI