Appeal details
Counselvise Citation
[2016] 133 COUNSELVISE.COM (IT) 1785 (ITAT-AHMEDABAD)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
6 month(s) 12 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
04-04-2016
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
SMC
Next Hearing Date
12-01-2016
Assessment Year
2009-2010
Appeal Filed On
22-09-2015
Judgement Text
, , IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER ./ ITA.NO.2676/AHD/2015 /BLOCK ASSTT. YEAR: 2009-2010 DCIT, CIR.1(3) AHMEDABAD. VS EDELWEISS FINANCIAL ADVISORS LTD. [FORMERLY KNOWN AS ANAGRAM STOCK BROKING LTD.) ANAGRAM HOUSE, NR. H.L. COMMERCE COLLEGE STADIUM ROAD, NAVRANGPURA AHMEDABAD. PAN : AABCA 9956 F %& / (APPELLANT) '( %& / (RESPONDENT) REVENUE BY : SHRI SHIV SEWAK, SR.DR ASSESSEE BY : SHRI VIJAY RANJAN / DATE OF HEARING : 13/01/2016 / DATE OF PRONOUNCEMENT: 04/04/2016 )*/ O R D E R THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL AGAINS T THE ORDER OF THE LD.CIT(A)-10, AHMEDABAD DATED 15.7.2015 PASSED FOR THE ASSTT.YEAR 2009- 2010. 2. SOLITARY GRIEVANCE OF THE REVENUE IS THAT THE LD .CIT(A) HAS ERRED IN DELETING THE PENALTY OF RS.12,03,184/- WHICH WAS IM POSED BY THE AO UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT. 3. BRIEF FACTS OF THE CASE THAT THE ASSESSEE HAS FI LED ITS RETURN OF INCOME ON 28.9.2009 DECLARING TOTAL INCOME AT RS.44,66,340/-. THE ASSESSEE HAS CLAIMED ITA NO.2676/AHD/2015 2 DEPRECIATION ON STOCK EXCHANGE CARD AMOUNTING TO RS .31,02,147/-. THIS CLAIM OF THE ASSESSEE WAS DISALLOWED BY THE AO ON THE GRO UND THAT BOMBAY STOCK EXCHANGE LTD. HAS ADOPTED CORPORATIZATION AND DEMUT UALIZATION SCHEME, 2005. IT HAS ALLOTTED SHARES TO THE ASSESSEE, AND THESE ARE NOT AKIN TO ERSTWHILE MEMBERSHIP CARD. THEREFORE, ON THE ALLEGED STOCK E XCHANGE CARD, THE ASSESSEE IS NOT ENTITLED FOR DEPRECIATION. THE LD.AO HAS IM POSED PENALTY WITH REGARD TO THIS ADDITION UPON THE ASSESSEE. 4. ON APPEAL, THE LD.CIT(A) HAS DELETED THE PENALTY BY OBSERVING AS UNDER: ON CAREFUL CONSIDERATION OF ENTIRE FACTS, IT IS O BSERVED THAT ASSESSING OFFICER HAS LEVIED PENALTY UNDER SECTION 271(1)(C) FOR RS. 12,03,184 ON DISALLOWANCE OF DEPRECIATION ON STOCK EXCHANGE CARD AS WELL AS DISALLOWANCE OF BROKERAGE REFUND. SO FAR AS LEVY OF PENALTY ON DISALLOWANCE ON STOCK EXCHANGE CARD IS CONCERNED, I T IS OBSERVED THAT SAID CLAIM WAS DENIED BY ASSESSING OFFICER AS WELL AS CIT (APPEALS) MAINLY ON THE GROUND THAT DUE TO DEMUTUALIZATION OF STOCK EXCHANGE, APPELLANT WAS ALLOTTED EQUITY SHARES HENCE AS PER P ROVISIONS OF SECTION 55(2)(AB), COST OF ACQUISITION OF TRADING AND CLEAR ING RIGHT SHALL BE DEEMED TO BE NIL HENCE DEPRECIATION CANNOT BE ALLOW ED. IT IS PERTINENT TO NOTE THAT ABOVE DEMUTUALIZATION OF STOCK EXCHANG E WAS MADE IN A.Y. 2006-07 AND PURSUANT TO SUCH DEMUTUALIZATION CLAIM OF APPELLANT FOR ALLOWING DEPRECIATION ON STOCK EXCHANGE CARD WAS DI SALLOWED FOR FIRST TIME IN A.Y. 2006-07. HOWEVER, HON'BLE AHMEDABAD IT AT, IN APPELLANT'S OWN CASE IN ITA NO. 1168/AHD/2011 HAS D ELETED DISALLOWANCE SO MADE BY ASSESSING OFFICER AND OBSER VED AS UNDER: '6. GROUND NO.2 IS AGAINST DISALLOWANCE OF DEPRECIA TION ON THE MEMBERSHIP OF THE STOCK EXCHANGE CARD. THE ID. COUN SEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS AS WERE MADE IN THE STATEMENT OF FACTS-CUM- SYNOPSIS. THE ID. COUNSEL FOR THE ASSESS EE SUBMITTED THAT THE ISSUE IS SQUARELY COVERED BY THE JUDGEMENT OF COORD INATE BENCH (ITAT MUMBAI 'G' BENCH AHMEDABAD) RENDERED IN THE CASE OF M/S. GRISHMA SECURITIES PVT. LTD. VS. ITO IN ITA NO.6098/M/2010 FOR AY 2007-08, DATED 29/03/2011. 6.1. ON THE CONTRARY, ID. SR. DR SUPPORTED THE ORDE RS OF THE AUTHORITIES BELOW. ITA NO.2676/AHD/2015 3 7. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW AS WELL AS THE DECISION RELIED UPON BY THE ID. COUNSEL FOR THE ASSESSEE. THE ID. CIT(A) HAS DECIDED THIS ISSUE IN PARA-8 OF HIS ORDER BY OBSERVING AS UNDER: - '8. THE TRADING RIGHTS WHICH HAVE BEEN CONFERRED UP ON THE ERSTWHILE CARD HOLD OF BSE AFTER ITS CORPORATIZATION AND DEMU TUALIZATION HAS NO VALUE IS EVIDENT FROM THE PROVISIONS OF PROVISO TO SECTION 55(2)(AB) OF THE ACT WHICH HAS BEEN BROUGHT ON A STATUE BY THE F INANCE ACT 2003 W.E.F. 01/04/2004. IN PRESENT CASE UNDER CONSIDERAT ION, IT IS ADMITTED FACT THAT THE ASSESSEE HAS BEEN ALLOTTED EQUITY SHA RES UNDER THE BSE CORPORATIZATION AND DEMUTUALIZATION SCHEME 2005 AND SAME IS EVIDENT FROM THE BALANCE SHEET WHERE UNDER THE HEAD INVESTM ENT OF RS. 10000 EQUITY SHARES OF BSE LIMITED HAS BEEN REFLECTED. ON CE THE ASSESSEE HAS BEEN ALLOTTED EQUITY SHARES OF BSE LIMITED UNDER SC HEME THEN AS PER PROVISIONS OF SECTION 55(2)(AB), THE COST OF ACQUIS ITION OF TRADING AND CLEARING RIGHT SHALL BE DEEMED TO BE NIL HENCE DEPR ECIATION CANNOT BE ALLOWED. CONSIDERING THE SAME, DISALLOWANCE MADE BY AO IS UPHELD AND RELATED GROUND OF APPEAL IS DISMISSED.' 7.1. WE FIND THAT THE COORDINATE BENCH IN ITA NO.60 98/M/2010 FOR AY 2007-08 IN THE CASE OF M/S. GRISHMA SECURITIES PVT. LTD. VS. ITO (SUPRA), HAS HELD AS UNDER- '2. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE REC ORDS AND CONSIDERED THE MATTER CAREFULLY. THE DISPUTE IS REGARDING ALLO WABILITY OF DEPRECIATION ON A STOCK EXCHANGE CARD. UNDER THE PR OVISIONS OF SECTION 32(1 )(II) DEPRECIATION IS ALLOWABLE ON CERTAIN INT ANGIBLE ASSETS SUCH AS KNOW-HOW, PATENTS, COPY RIGHTS AND LICENSE ETC. EAR LIER THE HON'BLE HIGH COURT OF MUMBAI IN CASE OF TECHNO SHARES AND S TOCK LTD. (SUPRA) HAD HELD THAT STOCK EXCHANGE CARD WAS NOT COVERED U NDER SECTION 32(1 )(II) AND THEREFORE DEPRECIATION WAS NOT ALLOWABLE. HOWEVER THE SAID JUDGMENT OF THE BOMBAY HIGH COURT HAS RECENTLY BEEN CONSIDERED BY THE HON'BLE SUPREME COURT IN THE SAME CASE AND IT W AS HELD THAT STOCK EXCHANGE CARD IS AKIN TO A LICENSE AND THEREFORE IT IS COVERED UNDER SECTION 32(1 )(II) AND DEPRECIATION IS ALLOWABLE. W E THEREFORE RESPECTFULLY FOLLOWING THE SAID JUDGMENT OF HON'BLE SUPREME COURT, SET ASIDE THE ORDER OF CIT(A) AND ALLOWED THE CLAIM OF THE ASSESSEE.' 7.2. SINCE THE FACTS ARE IDENTICAL AND NO CHANGE IN TO THE FACTS AND CIRCUMSTANCES HAS BEEN POINTED OUT BY THE ID. SR. D R, WE HAVE NO ITA NO.2676/AHD/2015 4 REASON TO TAKE A DIFFERENT VIEW THAN TAKEN BY THE C OORDINATE BENCH IN THE CASE OF M/S. GRISHMA SECURITIES PVT. LTD.(SUPRA ). THUS, THIS GROUND OF ASSESSEE'S APPEAL IS ALLOWED.' 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED.' THUS, IT IS OBSERVED THAT A SIMILAR CLAIM MADE BY A PPELLANT IS ACCEPTED BY HON'BLE AHMEDABAD I.T.A.T., HENCE SUCH CLAIM IN PRESENT YEAR CANNOT BE HELD AS FALSE OR NON-GENUINE CLAIM W HICH REQUIRE IMPOSITION OF PENALTY UNDER SECTION 271(1)(C) OF TH E ACT FOR CONCEALMENT OF INCOME OR FOR FURNISHING OF INACCURA TE PARTICULARS OF INCOME. IN ANY CASE SUCH CLAIM IS BONAFIDE CLAIM IN VIEW OF SAID DECISION OF I.T.A.T. CONSIDERING THESE FACTS PENALT Y LEVIED UNDER SECTION 271(1)(C) ON DISALLOWANCE OF STOCK EXCHANGE CARD FOR RS. 31,02,147 IS DELETED. SO FAR AS LEVY OF PENALTY ON BROKERAGE REFUND IS CO NCERNED, IT IS OBSERVED THAT SUCH REBATE/REFUND IS CREDITED TO RES PECTIVE CLIENT'S ACCOUNT AND SUCH ACCOUNT IS SETTLED THOUGH ACCOUNT PAYEE CHEQUES. IT IS FURTHER OBSERVED THAT DURING THE YEAR UNDER CONSIDE RATION, APPELLANT HAS EARNED TOTAL BROKERAGE OF RS,22.09 CRORES AGAIN ST WHICH REFUND IS ONLY OF RS.4.38 LACS WHICH REPRESENTS 0.20% OF TOTA L BROKERAGE INCOME. IT IS FURTHER OBSERVED THAT BROKERAGE REBATE IS GIV EN TO CLIENTS WHO ARE NOT RELATIVES OF APPELLANT. THOUGH DISALLOWANCE IS UPHELD IN QUANTUM PROCEEDING, IT DOES NOT MEAN THAT APPELLANT HAS CON CEALED INCOME BECAUSE EXPLANATION OF APPELLANT IS BONA FIDE AND S UPPORTED BY EVIDENCES. IT IS PERTINENT TO NOTE IDENTICAL DISALL OWANCE WAS MADE IN APPELLANT'S GROUP CASE BEING EDELWEISS FINANCIAL AD VISORY LIMITED FOR A.Y. 2008-09 WHEREIN CIT (APPEALS) VIDE HIS ORDER D ATED 28TH APRIL, 2011 HAS DELETED SIMILAR DISALLOWANCE AND HELD AS U NDER: '7.3.7 THE APPELLANT HAS GIVEN THE LIST OF PARTIES TO WHOM BROKERAGE REBATE HAS BEEN GIVEN. IT WAS FURTHER STA TED THAT BROKERAGE REBATE IS GIVEN EFFECT IN CLIENT'S LEDGER ACCOUNT AND TO THAT EXTENT LEDGER BALANCE OF CLIENT WAS DECREASED. I AGREE WITH THE APPELLANT THAT CLAIM IS ALLOWABLE. FROM THE ABO VE IT CAN BE SEEN THAT THE APPELLANT HAS BEEN ABLE TO SHOW THAT THE REFUND OF BROKERAGE HAS BEEN GIVEN IN RESPECT OF ALL CASES. I N VIEW OF THE ABOVE DISCUSSION, THE REFUND OF BROKERAGE IS GENUIN ELY EXPLAINED, AND THE CLAIM IS THEREFORE ALLOWED. THE ENTIRE GROU ND OF APPEAL IS ALLOWED.' ITA NO.2676/AHD/2015 5 THE FACTS DISCUSSED HEREIN ABOVE CLEARLY SUGGEST TH AT CLAIM OF APPELLANT IS BONA FIDE AND SAME CANNOT BE HELD AS F URNISHING INACCURATE PARTICULARS OF INCOME. THE HON'BLE SUPRE ME COURT IN THE CASE OF CIT V/S RELIANCE PETROPRODUCTS PVT. LIMITED 322 ITR 158 HAS HELD AS UNDER: 'FROM THE HEAD NOTES PENALTY-CONCEALMENT OF PARTICULARS OF INCOME-NO INF ORMATION GIVEN IN RETURN FOUND TO BE INCORRECT-MAKING INCORRECT CLAIM -DOES NOT AMOUNT TO CONCEALMENT OF 'PARTICULARS'-LNCOME-TAX ACT, 196 1, S. 271(1)(C). A GLANCE AT THE PROVISIONS OF SECTION 271(1)(C) OF THE INCOME-TAX ACT, 1961, SUGGESTS THAT IN ORDER TO BE COVERED BY IT, T HERE HAS TO BE CONCEALMENT OF THE PARTICULARS OF THE INCOME OF THE ASSESSEE. SECONDLY, THE ASSESSEE MUST HAVE FURNISHED INACCURATE PARTICU LARS OF HIS INCOME. THE MEANING OF THE WORD 'PARTICULARS' USED IN SECTI ON 271(1)(C) WOULD EMBRACE THE DETAILS OF THE CLAIM MADE. WHERE NO INF ORMATION GIVEN IN THE RETURN IS FOUND TO BE INCORRECT OR INACCURATE, THE ASSESSEE CANNOT BE HELD GUILTY OF FURNISHING INACCURATE PARTICULARS. I N ORDER TO EXPOSE THE ASSESSEE TO PENALTY, UNLESS THE CASE IS STRICTLY CO VERED BY THE PROVISION, THE PENALTY PROVISION CANNOT BE INVOKED. BY NO STRE TCH OF IMAGINATION CAN MAKING AN INCORRECT CLAIM TANTAMOUNT TO FURNISH ING INACCURATE PARTICULARS. THERE CAN BE NO DISPUTE THAT EVERYTHIN G WOULD DEPEND UPON THE RETURN FILED BY THE ASSESSEE, BECAUSE THAT IS THE ONLY DOCUMENT WHERE THE ASSESSEE CAN FURNISH THE PARTICULARS OF H IS INCOME. WHEN SUCH PARTICULARS ARE FOUND TO BE INACCURATE, THE LI ABILITY WOULD ARISE. TO ATTRACT PENALTY, THE DETAILS SUPPLIED IN THE RET URN MUST NOT BE ACCURATE, NOT EXACT OR CORRECT, NOT ACCORDING TO TH E TRUTH OR ERRONEOUS. WHERE THERE IS NO FINDING THAT ANY DETAILS SUPPLIED BY THE ASSESSEE IN ITS RETURN ARE FOUND TO BE INCORRECT OR ERRONEOUS OR FA LSE THERE IS NO QUESTION OF INVITING THE PENALTY UNDER SECTION 271( 1)(C). A MERE MAKING OF A CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, BY ITS ELF, WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REGARDING THE INC OME OF THE ASSESSEE. SUCH A CLAIM MADE IN THE RETURN CANNOT AMOUNT TO FU RNISHING INACCURATE PARTICULARS. DECISION OF THE GUJARAT HIG H COURT AFFIRMED. DILIP N. SHROFF V. JOINT CIT [2007] 291 ITR 519 (SC ) AND SREE KRISHNA ELECTRICALS V. STATE OF TAMIL NADU [2009] 23 VST 24 9 (SC) RELIED ON.' IT IS FURTHER OBSERVED THAT SIMILAR DISALLOWANCE WA S MADE IN APPELLANT'S OWN CASE IN A.Y. 2008-09 AND SUCH DISAL LOWANCE WAS ITA NO.2676/AHD/2015 6 UPHELD BY CIT (APPEALS). HOWEVER, PENALTY UNDER SEC TION 271(1)(C) LEVIED ON SUCH ADDITION WAS DELETED BY MY PREDECESS OR CIT (APPEALS) VIDE HER ORDER DATED 8TH DECEMBER, 2014. CONSIDERING THE FACTS AND LEGAL POSITION DISCUSSED HEREIN ABOVE, ASSESSING OFFICER IS NOT JUSTIFIED IN LEVYING PENAL TY UNDER SECTION 271(1)(C) ON DISALLOWANCE OF BROKERAGE REFUND FOR R S. 4,37,669. IN THE NUTSHELL, ENTIRE PENALTY LEVIED UNDER SECTION 271(1 )(C) FOR RS. 12,03,184 IS DELETED. IN THE RESULT, RELATED GROUNDS OF APPEA L ARE ALLOWED. 5. WHILE HEARING THE QUANTUM APPEAL BEARING NO.1583 /AHD/2012, TRIBUNAL HAS ALLOWED DEPRECIATION TO THE ASSESSEE BY FOLLOWI NG THE ORDER OF THE ITAT IN THE ASSTT.YEAR 2006-07. THEREFORE, VERY BASIS OF V ISITING THE ASSESSEE WITH PENALTY NO MORE SURVIVE. DISALLOWANCE ITSELF HAS B EEN DELETED BY THE TRIBUNAL VIDE ORDER DATED 1.4.2016. IN VIEW OF THE ABOVE, THERE IS NO MERIT IN THIS APPEAL, HENCE, IT IS DISMISSED. 6. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE COURT ON 4 TH APRIL, 2016 AT AHMEDABAD. SD/- (RAJPAL YADAV) JUDICIAL MEMBER
Mehul