ITO 4(3)(3), MUMBAI V. MUKESH T. SHROFF, MUMBAI

ITA 2708/MUM/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 8247 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-03-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 1993-1994
• Appeal Filed On: 08-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHIMA GUPTA
• Keywords: Business income; Speculation loss
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH: MUMBAI BEFORE SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO.2708/MUM/2010 (ASSESSMENT YEAR: 1993-94) ITO 4(3)(3), R.NO.679, 6TH FLOOR, AAYAKAR BHAVAN, MUMBAI -400 020 .... REVENUE VS MR MUKESH T. SHROFF, CAMA BUILDING, 1ST FLOOR, DALAL STREET, FORT, MUMBAI -400 023 ASSESSEE PAN: AAGPS 5422 A ASSESSEE BY: SHRI VIJAY MEHTA REVENUE BY: SMT, ASHIMA GUPTA O R D E R PER R.S. PADVEKAR, JM IN THIS APPEAL THE REVENUE HAS CHALLENGED THE IMPUG NED ORDER OF THE LD. CIT (A)-VIII MUMBAI DATED 19.1.2010 FOR THE A.Y. 1993-94 AND THIS APPEAL IS ARISING OUT OF THE PENALTY LEVIED BY THE A.O. U/S.271(1)(C) OF THE ACT, WHICH WAS DELETED BY THE LD. CIT (A). THE REVENUE HAS TAKEN THE FOLLOWING EFFECTIVE GROUND:- ITA 2708/M/2010 MR MUKESH T. SHROFF 2 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT (A) ERRED IN CANCELING THE PENALTY OF ` 2,05,000/- LEVIED U/S.271(1)(C) OF THE I.T. ACT WITHOUT CONSID ERING THE FACT THAT THE LOSS CLAIMED BY THE ASSESSEE FOR SET OFF A GAINST THE BUSINESS INCOME IS PRIMA-FACIE INCORRECT AND WITHOU T CONSIDERING THE FACT THAT THE ISSUE HAS BEEN CONFIR MED BY THE CIT (A) FOR A.Y. 1993-94 IN THE ASSESSEES OWN CASE . 2. BRIEFLY STATED, THE FACTS WHICH REVEALED FROM TH E RECORD ARE AS UNDER. THE ASSESSEE IS A MEMBER OF UP STOCK EXCHAN GE AND HE TRANSACTED IN MASTER SHARES WITH M/S. V.B. DESAI SH ARES AND STOCK BROKERS OF THE BOMBAY STOCK EXCHANGE AND INCURRED A GGREGATE LOSS OF ` 4,52,500/- DURING THE A.Y. 1993-94 AND HE CLAIMED S AID LOSS AS A BUSINESS LOSS. IN THE ASSESSMENT ORDER PASSED U/S. 143(3) DATED 29.2.1996, THE A.O. HELD THAT THE SAID LOSS WAS ON ACCOUNT OF SPECULATION AND HENCE IT WAS A SPECULATION LOSS. THE ASSESSEE CARRIED THE ISSUE BEFORE THE LD. CIT (A) AND VIDE ORDER DATED 25.6.19 98 ALLOWED THE APPEAL FILED BY THE ASSESSEE. THE REVENUE CHALLENGED THE ORDER OF THE LD. CIT (A) BEFORE THE ITAT VIDE ORDER DATED 3.12.2003 THE ISSU E WAS REMITTED BACK TO THE LD. CIT (A) WITH CERTAIN DIRECTIONS. THE LD . CIT (A) AGAIN RE- EXAMINED THE MATTER AFTER CONSIDERING THE EVIDENCE AND THE PLEA OF THE ASSESSEE. IT APPEARS THAT THE ASSESSEE FILED THE D ISTINCTIVE NUMBER OF SHARES IN RESPECT OF EACH IT WAS CLAIMED BY THE ASS ESSEE THAT THE DELIVERY HAS BEEN TAKEN. IT APPEARS THAT THE LD. CIT (A) HA S CALLED FOR THE REMAND REPORT OF THE A.O. IN RESPECT OF THE EVIDENCES FILE D BY THE ASSESSEE. THE LD. CIT (A) OBSERVED THAT, IN THE COURSE OF LONG AP PELLATE PROCEEDINGS, THE ASSESSEE HAS MERELY DEMONSTRATED THE POSSIBILITY OF THE DELIVERY OF THE MASTERS SHARES OF THE UTI THAT DOES NOT MEAN THAT U NITS WERE ACTUALLY DELIVERED. THE LD. CIT (A) FINALLY HELD THAT THERE WAS NO DELIVERY OF THE ITA 2708/M/2010 MR MUKESH T. SHROFF 3 MASTERS SHARES AND HENCE LOSS CANNOT BE TREATED AS A BUSINESS LOSS BUT IT IS ONLY SPECULATION LOSS. THE A.O. LEVIED THE P ENALTY U/S.271(1)(C) OF THE ACT FOR FILING THE INACCURATE PARTICULARS OF IN COME. THE ASSESSEE CHALLENGED THE SAME BEFORE THE LD. CIT (A) BUT WITH OUT SUCCESS. NOW, THE ASSESSEE IS IN APPEAL BEFORE US. 3. WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE PARTI ES AND PERUSED THE RECORDS. THE LD. COUNSEL TOOK US THROUGH THE O BSERVATIONS OF THE LD. CIT (A). IN THE SECOND APPELLATE PROCEEDINGS, MORE PARTICULARLY, PAGE NO.5 OF THE ORDER, THE LD. CIT (A) HAS OBSERVED THA T NORMAL HUMAN BEHAVIOR UNDER THE CIRCUMSTANCES, WOULD NOT KEEP TH E SHARES PURCHASE AND NOT TO HAND OVER THE SHARES OF THE CLIENTS IF T HERE IS A SALE. HE ARGUES THAT THE LD. CIT (A) WHILE CONFIRMING THE AO S VERSION IN RESPECT OF THE NATURE OF LOSS WHETHER BUSINESS LOSS OR SPECULA TION LOSS, HAS MERELY GONE ON PRESUMPTION. HE ARGUES THAT THE ASSESSMENT PROCEEDINGS AND THE PENALTY PROCEEDINGS ARE TWO DISTINCT PROCEEDING S AND WITHOUT MEETING ANY OF THE EXPLANATION OF THE ASSESSEE, THE A.O. HAS MERELY CONCLUDED THAT THE ASSESSEE WAS NOT PHYSICALLY HOLD ING ANY MASTER SHARES OF PRIOR TO 31.3.1992 AND THEREAFTER, IT CAN NOT BE TREATED AS HEDGING IN NATURE OR TO PROTECT FROM LOSSES ON ACCO UNT OF FLUCTUATION AND CONCLUDED THAT LOSS ON ACCOUNT OF TRADING IN THE MA STERS SHARES OF ` 4,52,500/- IS IN THE NATURE OF THE SPECULATION LOSS AS PER THE PROVISIONS OF SECTION 43(5). HE, THEREFORE, PLEADED THAT MERE LY BECAUSE EVIDENCES OF THE ASSESSEE ARE REJECTED BY THE A.O. THAT WILL NOT AMOUNT TO FURNISHING OF INACCURATE PARTICULARS. HE, THEREFORE, PLEADED FOR DELETING THE PENALTY LEVIED. PER CONTRA, THE LD. D.R. SUPPORTED THE ORD ER OF THE LD. CIT (A). 4. ADMITTEDLY, IN THE CASE BEFORE US, THE CONTROVER SY IS WHETHER THE LOSS CLAIMED BY THE ASSESSEE IS A BUSINESS LOSS OR SPECULATION LOSS. THERE IS NO DISPUTE THAT SO FAR AS THE DECISION OF THE LD. CIT (A) IS ITA 2708/M/2010 MR MUKESH T. SHROFF 4 CONCERNED, IT HAS REACHED THE FINALITY AND THAT IS NOT CONTESTED BY THE ASSESSEE. WE FIND FORCE IN THE ARGUMENT OF LD. COU NSEL. THE LD. CIT (A) HAS GONE ON THE PROBABILITY OF THE PRUDENCE AND HUM AN BEHAVIOR FOR ARRIVING AT A CONCLUSION THAT THE LOSS DECLARED BY THE ASSESSEE ON THE TRANSACTION OF THE MASTERS SHARES OF THE UNITS CANN OT BE TREATED AS A BUSINESS LOSS AS THE ASSESSEE FAILED TO PROVE THE D ELIVERY OF THOSE SHARES. FROM THE EXPLANATION FILED BY THE ASSESSEE BEFORE T HE A.O., IT IS SEEN THAT THE A.O. HAS NOT DISCUSSED ANYTHING ON THE EXPLANAT ION BUT MERELY GONE ON THE OBSERVATIONS IN RESPECT OF THE NATURE OF THE LOSS. IN OUR OPINION, THE ASSESSEE HAS NOT CONCEALED ANY PARTICULARS OF I NCOME OR FILED INACCURATE PARTICULAR OF INCOME AND THE LD. CIT (A) HAS RIGHTLY DELETED THE PENALTY. WE FIND NO REASON TO INTERFERE WITH T HE ORDER OF THE LD. CIT (A). 5. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 11TH MARCH 2011. SD/- SD/- ( PRAMOD KUMAR ) ACCOUNTANT MEMBER ( R.S. PADVEKAR ) JUDICIAL MEMBER MUMBAI, DATE: 11TH MARCH 2011 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) 8, MUMBAI. 4) THE CIT 4, MUMBAI. 5) THE D.R. F BENCH, MUMBAI. BY ORDER / / TRUE COPY / / ASSTT. REGISTRAR I.T.A.T., MUMBAI *CHAVAN ITA 2708/M/2010 MR MUKESH T. SHROFF 5 SR.N. EPISODE OF AN ORDER DATE INITIALS CONCERNED 1 DRAFT DICTATED ON 04.03.2011 SR.PS 2 DRAFT PLACED BEFORE AUTHOR 07.03.2011 SR.PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6 KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7 FILE SENT TO THE BENCH CLERK SR.PS/PS 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER