Pacific Orient Company Ltd., CHENNAI V. DCIT Corporate Circle 5(1), CHENNAI

ITA 2591/CHNY/2017

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 5051 (ITAT-CHENNAI)
• Duration Of Justice: 7 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-06-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 27-10-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANATH KUMAR RAHA
• Assessee Lawyers: D ANAND
• Keywords: Business income; Bonafide belief

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : CHENNAI . . . , !' . #$#% , & '' ( [BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER ] ./I.T.A. NO.2591/CHNY/2017 / ASSESSMENT YEAR : 2006-2007. M/S. PACIFIC ORIENT COMPANY LTD, NO.20, SECOND CANAL CROSS ROAD, GANDHI NAGAR, ADYAR, CHENNAI 600 020. [ PAN AAACP 3727C ] VS. THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 5(1) CHENNAI. ( )* / APPELLANT) ( +,)* /RESPONDENT) / APPELLANT BY : SHRI. D. ANAND, ADVOCATE /RESPONDENT BY : SHRI. SANATH KUMAR RAHA, JCIT. /DATE OF HEARING : 13-06-2018 ! /DATE OF PRONOUNCEMENT : 18-06-2018 / O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER ASSESSEE IN THIS APPEAL WHICH IS DIRECTED AGAINS T AN ORDER DATED 31.07.2017 OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-3, CHENNAI, ASSAILS LEVY OF PENALTY OF @17,53,268/- M ADE U/S.271(1) (C) OF THE INCOME TAX ACT,1961 (IN SHORT THE ACT). ITA NO.2591/CHNY/2017. :- 2 -: 2. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT ASSESS EE HAD DURING THE RELEVANT PREVIOUS YEAR PURCHASED AND SOL D SHARES ON DELIVERY BASIS, THROUGH HIS DEMAT ACCOUNT. AS PER THE LD. AUTHORISED REPRESENTATIVE, ASSESSEE WAS OF THE BONAFIDE BELIEF THAT SURPLUS ARISING ON SUCH TRANSACTION WOULD COME WITHIN THE A MBIT OF SECTION 111A OF THE ACT AND WAS ELIGIBLE FOR CONCESSIONAL T AX RATE OF 10%. HOWEVER, AS PER THE LD. AUTHORISED REPRESENTATIVE, LD. ASSESSING OFFICER HAD CONSIDERED THE SURPLUS AS BUSINESS INCO ME AND SUBJECTED THE ASSESSEE TO TAX AT MAXIMUM MARGIN RATE. AS PER THE LD. AUTHORISED REPRESENTATIVE, THOUGH THE TRIBUNAL, ON ASSESSEES APPEAL HAD CONFIRMED THE TREATMENT OF THE SURPLUS UNDER T HE HEAD INCOME FROM BUSINESS, IT HAD SPECIFICALLY NOTED THAT AS SESSEE HAD DISCLOSED ALL THE TRANSACTIONS AND THERE WAS ONLY A DIFFERENC E IN CLASSIFICATION OF INCOME. CONTENTION OF THE LD. AUTHORISED REPRESENTA TIVE WAS THAT PENALTY LEVIED U/S.271 (1) (C) OF THE ACT WAS ON A N ERRONEOUS PREMISE THAT TRIBUNAL HAD CONFIRMED THE ASSESSMENT . AS PER THE LD. AUTHORISED REPRESENTATIVE, ASSESSEE HAD NOT FURNISH ED ANY INACCURATE PARTICULARS OF INCOME NOR CONCEALED ANY INCOME. RE LYING ON THE JUDGMENT OF HONBLE APEX COURT IN THE CASE OF CIT VS. RELIANCE PETROPRODUCTS PVT LTD 322 ITR 158 , LD. AUTHORISED REPRESENTATIVE SUBMITTED THAT LEVY OF PENALTY WAS NOT JUSTIFIED. ITA NO.2591/CHNY/2017. :- 3 -: 3. PER CONTRA, LD. DEPARTMENTAL REPRESENTATIVE STRONG LY SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES. 4. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSE D THE ORDERS OF THE AUTHORITIES BELOW. ASSESSEE HAD MADE PROFIT ON BUYING AND SELLING SHARES THROUGH A RECOGNIZED STOCK EXCHA NGE. IN SCHEDULE 9 OF ITS BALANCE SHEET, FILED ALONGWITH THE RETURN, ASSESSEE HAD GIVEN DETAILS OF THE SHARES WHICH IT HAD BOUGHT AND SOLD. ASSESSEE HAD CLAIMED GAINS UNDER THE HEAD CAPITAL GAINS AND APPLIED CONCESSIONAL RATE OF TAX AVAILABLE U/S.111A OF THE ACT. HOWEVE R, LD. ASSESSING OFFICER HAD HELD THAT THE TRANSACTIONS GIVING RISE TO THE GAINS IN THE NATURE OF BUSINESS AND HENCE THE SURPLUS HAD TO BE CONSIDERED UNDER THE HEAD BUSINESS INCOME. NO DOUBT, THIS TREATMEN T WAS CONFIRMED BY THIS TRIBUNAL, ON ASSESSEES APPEAL IN ITA NOS .362 & 363/MDS/2013, VIDE ITS ORDER DATED 26.06.2015. PAR A 6 OF THIS ORDER IS REPRODUCED HEREUNDER:- 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ONLY ISSUE ARISES FOR CONSIDERATION IS CLASSIFICATION OF INCOME. THE ASSESSEE CLAIMS THAT THE PROFIT ON SALE OF SHARES HAS TO BE CLASSIFIED AS CAPITAL GAINS. HOWEVER, THE REVENUE CONTENDS THAT IT HAS TO BE CLASSIFIED AS INCOME FROM BUSINESS ACTIVITIES. IF THE INCOME WAS CLASSIFIED AS CAPITAL GAINS, THEN THE ASSESSEE MAY BE ENTITLED FOR CONCESSIONAL RATE OF TAX @ 10% UJS LLLA OF THE ACT. THE ASSESSING OFFICER, AFTER GOING ITA NO.2591/CHNY/2017. :- 4 -: THROUGH THE PROFIT & LOSS ACCOUNT AND OTHER MATERIAL AVAILABLE ON RECORD, FOUND THAT THE ASSESSEE ITSELF DISCLOSED THE TRANSACTION AS OPENING AND CLOSING STOCK. THE ASSESSING OFFICER ALSO FOUND THAT THE ASSESSEE IS IN THE BUSINESS OF PURCHASE AND SALE OF SHARES THROUGH STOCK EXCHANGE ON DAY-TO-DAY BASIS. THE ASSESSING OFFICER FOUND THAT THE TRANSACTION OF THE ASSESSEE CAN BE TREATED AS BUSINESS TRANSACTION. WHEN THESE DETAILS WERE BROUGHT TO THE NOTICE OF THE ASSESSEE, THE ASSESSEE AGREED TO OFFER THE SAME AS BUSINESS INCOME AND TO PAY THE TAX. IN VIEW OF THIS AGREEMENT OF THE ASSESSEE TO OFFER THE SAME AS BUSINESS AND PAY TAXES, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE C!T(A) HAS RIGHTLY CONFIRMED THE ORDER OF THE ASSESSING OFFICER. ACCORDINGLY, THIS TRIBUNAL DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LOWER AUTHORITY AND THE SAME IS CONFIRMED. IT IS CLEAR FROM THE OBSERVATIONS OF THE TRIBUNAL T HAT THE DISPUTE BETWEEN REVENUE AND ASSESSEE WAS ON CLASSIFICATION OF THE INCOME ARISING FROM PURCHASE AND SALE OF SHARES. ASSESSEE HAD CLAIMED IT AS SHORT TERM CAPITAL GAINS WHEREAS LD. ASSESSING OFF ICER CONSIDERED IT TO BE INCOME FROM BUSINESS. IN OUR OPINION, THERE WA S NO CONCEALMENT OF INCOME NOR ANY FURNISHING ANY INACCURATE PARTIC ULARS. THAT MAKING AN INCORRECT CLAIM IN LAW WOULD NOT TANTAMOUNT TO F URNISHING OF INACCURATE PARTICULARS, IS THE LAW LAID DOWN BY H ONBLE APEX COURT IN THE CASE OF RELIANCE PETROPRODUCTS PVT LTD (SUPRA). WE ARE THEREFORE OF THE OPINION THAT LEVY OF PENALTY WAS NOT WARRANT ED. SUCH LEVY STANDS ITA NO.2591/CHNY/2017. :- 5 -: DELETED. ORDERS OF THE LOWER AUTHORITIES ARE SET ASIDE. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOW ED. ORDER PRONOUNCED ON MONDAY, THE 18TH DAY OF JUNE, 2 018, AT CHENNAI. SD/- SD/- ( . . . ' ) (N.R.S. GANESAN) / JUDICIAL MEMBER ( !' . #$#% ) (ABRAHAM P. GEORGE) & / ACCOUNTANT MEMBER #$ / CHENNAI %& / DATED:18TH JUNE, 2018. KV &' ()*) / COPY TO: 1 . / APPELLANT 3. +,' / CIT(A) 5. )-. / / DR 2. / RESPONDENT 4. + / CIT 6. .01 / GF