D.C.I.T. 9(2), MUMBAI V. M/S. LATAX IMPEX P.LTD., MUMBAI

ITA 2598/MUM/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 1024 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(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: 23-04-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S B PRASAD
• Assessee Lawyers: MUKESH B BHATT
• Keywords: Speculation loss; Wrong claim; Difference of opinion; Set aside
• Section: 271(1)(c); 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. 2598/MUM/2009 (ASSESSMENT YEARS: 2003-04) DCIT 9(2), ROOM NO.218, AAYAKAR BHAVAN, M K ROAD MUMBAI-400020 .APPELLANT V/S LATEX IMPEX P LTD. C/O IPCO INVESTMENT AND FINANCIAL CONSULTANCY, 121, AGRA BUILDING, OPP. MUMBAI UNIVERISTY, PAN: AAACL8123A RESPONDENT APPELLANT BY : SHRI S B PRASAD RESPONDENT BY : SHRI MUKESH B BHATT O R D E R PER VIJAY PAL RAO,JM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 10-02.2009 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.4,55,353/- LEVIED U/S 271(1)( C ) OF THE IT ACT, 1961, HOLDING THAT THE ISSUE ON WHICH THE ITA NO. 2598/MUM/2009 (ASSESSMENT YEARS: 2003-04) 2 PENALTY WAS IMPOSED WAS A DEBATABLE ONE WHEREAS THE QUANTUM ADDITION WAS CONFIRMED BY THE LD. CIT(A ) AND THE ASSESSEE HAS ACCEPTED THE ADDITION WHICH HAS ACHIEVED FINALITY. 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 ASSESSMENT WAS COMPLETED U/S 1 43(3) DETERMINING THE TOTAL INCOME AT RS.11,54,755. THE AO OBSERVED THAT THE ASSESSEE SUFFERED A LOSS FROM SHA RE TRADING OF RS.25,69,279/- AND IT HAS SHOWN AN INCOME OF RS.12,39,057/- FROM THE SALE OF INVESTMENT, INTERE ST AND DIVIDEND. THE ASSESSEE CLAIMED AS SET OFF OF LOS S FROM SPECULATION BUSINESS AND SHOWN THE LOSS OF RS.14,1 3,681/-. THE AO DID NOT ALLOWED THE SETTING OFF OF LOSS FRO M SPECULATION BUSINESS AND INITIATED THE PENALTY PROC EEDINGS U/S 271(1)( C ) ON THE GROUND THAT THE ASSESSEE HAS TRI ED TO ADJUST SHARE TRADING LOSS AGAINST INVESTMENT INCOME OR INT EREST INCOME OF DIVIDEND INCOME, THEREFORE, THE ASSESSEE HAS CONCEALED ITS INCOME AND ALSO FURNISHED INACCURATE PARTICULARS ITA NO. 2598/MUM/2009 (ASSESSMENT YEARS: 2003-04) 3 OF ITS INCOME WHICH HAVE THUS ESCAPED ASSESSMENT AN D THEREFORE THE AO IMPOSED THE 100% PENALTY ON THE T AX SOUGHT TO BE EVADED. 4. THE MATTER WAS CARRIED TO THE CIT(A) WHO DELETED THE PENALTY BY HOLDING THAT THE ASSESSEE INCURRED SUCH LOSS AND THAT THE SAME IS FOUND TO BE GENUINE. THE ASSESSE E WHILE FILING THE RETURN HAS MENTIONED IN THE RETURN ABOUT THE LOSS INCURRED IN THE SHARE BUSINESS. THE CIT(A) WAS OF T HE VIEW THAT THE DETAILS OF LOSS WERE AVAILABLE WITH THE AO , THEREFORE, IT IS NOT A CASE OF SUPPRESSION OF INCOME OR FURNISHIN G INACCURATE PARTICULARS OF INCOME. THE CIT(A) OBSERVED THAT TH E AO TREATED THIS LOSS AS SPECULATION LOSS, HOWEVER THE FACT REMAINS THAT LOSS HAS BEEN TREATED AS GENUINE AND NOT BOGUS THEREFORE, THE CIT(A) WAS OF THE VIEW THAT PENALTY CANNOT BE LEVIED FOR TECHNICAL BREACH. THE AO REJECTED THE C LAIM OF THE ASSESSEE ON THE GROUND THAT HE WAS NOT AGREED WITH THE VIEW OF THE ASSESSEE. THE DISALLOWANCE WAS NOT BASED ON ANY INDEPENDENT EVIDENCE BROUGHT ON RECORD BY THE AO. THE DISALLOWANCE WAS DUE TO THE DIFFERENCE IN OPINION O F THE AO AND NOT DUE TO CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME. THERE FORE, THE CIT(A) WAS OF THE VIEW THE REJECTION OF THE CLAIM B Y THE AO CANNOT LEAD TO PENALTY. HE ALSO OBSERVED THAT COURT S AND TRIBUNAL HAD UNANIMOUS VIEW THAT NO CASE FOR LEVY O F PENALTY ITA NO. 2598/MUM/2009 (ASSESSMENT YEARS: 2003-04) 4 CAN BE MADE WHERE TWO OPINIONS ARE POSSIBLE. THE A SSESSEE CANNOT BE PENALIZED FOR CANVASSING A VIEW DIFFERENT FROM THE DEPARTMENTAL VIEW AND WHERE THE ASSESSEE IS MERELY CONTENDING FOR A POSITION CONTRARY TO THE VIEW TAKE N BY THE AO. THEREFORE, THE CIT(A) DELETED THE PENALTY. 5. 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 PENALTY LEVIED BY THE AO IS JUSTIFIED. HE HAS RELI ED UPON THE ORDER OF THE AO. 6. 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 THE AO DID NO T ALLOWED THE SET OFF SHARE TRADING LOSS AGAINST INVESTMENT INCOME, INTEREST INCOME OR DIVIDEND INCOME. THE ASSESSEE DISCLOSED ALL DETAILS ABOUT LOSS IN SHARE AND INCOME DRAWN BY THE ASSESSEE WHILE FILING THE RETURN. THEREFORE, THERE IS NO CONCEALMENT OF INCOME AND FURNISHING OF INACCURATE PARTICULARS ITA NO. 2598/MUM/2009 (ASSESSMENT YEARS: 2003-04) 5 OF INCOME. IT IS UNDISPUTED FACT THAT THE ASSESSEE HAS CLAIMED THE LOSS ON SALE OF SHARES AS BUSINESS LOSS WHICH W AS TO BE SET OFF AGAINST INVESTMENT INCOME, INTEREST INCOME OR DIVIDEND INCOME. WHEREAS THE AO TREATED THE SAME AS SPECUL ATIVE LOSS WHICH COULD BE SET OFF AGAINST THE SPECULATIV E LOSS AND NOT AGAINST THE OTHER INCOME. THEREFORE, THE CLAIM OF THE ASSESSEE WAS DISALLOWED BECAUSE THE SAME COULD NOT BE ALLOWED UNDER THE PROVISIONS OF THE ACT WHICH DOES NOT WARRANT THE LEVY OF PENALTY. HE HAS ALSO RELIED UPON THE DE CISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT V/S R ELIANCE PETROPRODUCTS PVT.LTD REPORTED IN 322 ITR 158(SC ) AS WELL AS THE ORDER OF THIS TRIBUNAL IN THE CASE OF ITO V/ S OASIS SECURITIES LTD IN ITA NO.846/M/2008 ORDER DATED 29 .01.2010. HE HAS ALSO REFERRED FOLLOWING DECISIONS OF THIS TR IBUNAL WHEREIN THE SIMILAR ISSUE WAS CONSIDERED AND DECIDE D IN FAVOUR OF THE ASSESSEE: 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). ITA NO. 2598/MUM/2009 (ASSESSMENT YEARS: 2003-04) 6 7. 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 AND FILED BY THE ASSESSEE. THEREF ORE, THE DISALLOWANCE WAS MERELY, BY TREATING THE LOSS ON S ALE OF SHARES AS SPECULATIVE LOSS INSTEAD OF BUSINESS LO SS CLAIMED BY THE ASSESSEE AND NOT ON THE BASIS OF ANY BOGUS CLAIM OR FALSE CLAIM MADE BY THE ASSESSEE. WHEN THE ASSESSE E DISCLOSED ALL THE MATERIAL FACTS REGARDING THE SOUR CE OF INCOME /LOSS THEN IT CANNOT BE SAID THAT THE ASSESSEE HAS CONCEALED THE PARTICULARS OF INCOME OR FURNISHED INACCURATE P ARTICULARS OF INCOME. THE ADDITION ON ACCOUNT OF TREATMENT OF L OSS BY APPLYING THE PROVISIONS OF SECTION 73 ITSELF SHOWS THAT THE DISALLOWANCE WAS MADE BY THE AO BY APPLYING THE DE EMING PROVISIONS, UNDER SECTION 73 WHICH DOES NOT AMOUNT TO CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING INACCURATE 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 ITA NO. 2598/MUM/2009 (ASSESSMENT YEARS: 2003-04) 7 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 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 ITA NO. 2598/MUM/2009 (ASSESSMENT YEARS: 2003-04) 8 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 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. 8. FROM THE DECISION OF THE HONBLE SUPREME COURT ( SUPRA), IT IS CLEAR THAT WHEN THE INFORMATION AND DETAILS G IVEN BY THE ITA NO. 2598/MUM/2009 (ASSESSMENT YEARS: 2003-04) 9 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. RESPECTFULL Y FOLLOWING THE DECISION OF THE SUPREME COURT (SUPRA), WE FIND THA T, 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. 9. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. PRONOUNCED IN THE OPEN COURT ON ______ SD SD (P.M.JAGTAP) (VIJAY PAL RAO) ACCOUNTANT MEMBER JUDICIAL MEMB ER MUMBAI, DATED 23RD 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