PUSHPAVATI KHUSHALCHAND MEHTA, MUMBAI V. ITO 20 (2)(1), MUMBAI

ITA 2784/MUM/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 8940 (ITAT-MUMBAI)
• Duration Of Justice: 8 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-01-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 15-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUMAN KUMAR
• Keywords: Business income; Tax effect
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'B' BENCH, MUMBAI BEFORE SHRI JASON P. BOAZ, ACCOUNTANT MEMBER AND SHRI RAMLAL NEGI, JUDICIAL MEMBER ITA NO. 2784/MUM/2016 (ASSESSMENT YEAR: 2008-09) MS. PUSHPAVATI KHUSHALCHAND MEHTA VS. INCOME TAX OFFICER - 20(2)(1) C/O. SUJAN IMPEX PVT. LTD. C-3 NANDDHAM INDL. ESTATE MAROL MAROSHI ROAD ANDHERI (E), MUMBAI 400059 PRATYAKSAHAKAR BHAVAN C-10, B.K.C., BANDRA MUMBAI 400050 PAN AHPPM7568P APPELLANT RESPONDENT APPELLANT BY: NONE RESPONDENT BY: SHRI SUMAN KUMAR DATE OF HEARING: 04.01.2017 DATE OF PRONOUNCEMENT: 11.01.2017 O R D E R PER JASON P. BOAZ, A.M. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE CIT(A)- 31, MUMBAI DATED 05.01.2016 UPHOLDING THE LEVY OF P ENALTY OF ` 1,18,735/- UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961 (IN SHORT 'THE ACT') FOR A.Y. 2008-09. 2. THE FACTS OF THE CASE, BRIEFLY, ARE AS UNDER: - 2.1 THE ASSESSEE FILED HER RETURN OF INCOME FOR A.Y . 2008-09 ON 30.03.2009 DECLARING TOTAL INCOME OF ` 46,99,360/- UNDER THE HEADS OF INCOME FROM HOUSE PROPERTY, SHORT TERM CAPITAL GAIN S (STCG), LONG TERM CAPITAL GAINS (LTCG) AND INCOME FROM OTHER SOURCES . THE CASE WAS SUBSEQUENTLY TAKEN UP FOR SCRUTINY. IN THE COURSE O F ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER (AO) OBSERVED THA T THE ASSESSEE WAS ENGAGED IN THE ACTIVITY OF PURCHASE AND SALE OF EQU ITY SHARES OF VARIOUS COMPANIES. ON EXAMINATION THEREOF, THE AO CAME TO T HE VIEW AND HELD THAT THE INCOME SHOWN UNDER THE HEAD STCG BY THE ASSESSE E IS TO BE ASSESSED ITA NO. 2784/MUM/2016 MS. PUSHPAVATI KHUSHALCHAND 2 UNDER THE HEAD INCOME FROM BUSINESS AND PROFESSION AND IN THIS REGARD INITIATED PENALTY PROCEEDINGS UNDER SECTION 271(1)( C) OF THE ACT R.W. EXPLANATION 1 THEREUNDER FOR FURNISHING OF INACCURA TE PARTICULARS OF INCOME BY ISSUE OF NOTICE UNDER SECTION 274 R.W.S. 271 OF THE ACT SIMULTANEOUSLY WHILE COMPLETING THE ORDER OF ASSESS MENT UNDER SECTION 143(3) OF THE ACT VIDE ORDER DATED 26.11.2010. 2.2 PENALTY PROCEEDINGS WERE TAKEN UP BY THE AO BY ISSUE OF SHOW CAUSE NOTICE. THE ASSESSEES SUBMISSIONS DATED 26.06.2013 AND 16.09.2013 SOUGHT DROPPING OF PENALTY PROCEEDINGS SUBMITTING, INTER A LIA, THAT PENALTY UNDER SECTION 271(1)(C) OF THE ACT CANNOT BE LEVIED FOR R ECLASSIFICATION OF STCG INCOME DECLARED BY THE ASSESSEE AS BUSINESS INCOME BY THE AO AND IN THIS CONTEXT RELIED ON THE DECISION OF THE HON'BLE APEX COURT IN RELIANCE PETROPRODUCTS LTD. (230 CTR 320). IT WAS ALSO SUBMI TTED THAT FOR THE IMMEDIATELY SUCCEEDING YEAR A.Y. 2009-10, IN THE OR DER OF ASSESSMENT DATED 25.11.2011 PASSED U/S 143(3) OF THE ACT, THE AO HAS ACCEPTED THE ASSESSEES CLAIM OF STCG. IT WAS SUBMITTED THAT NO INACCURATE PARTICULARS OF INCOME WERE FURNISHED AND THERE WAS ONLY A CHANGE OF HEAD OF INCOME FROM STCG TO BUSINESS INCOME MADE BY THE AO IN RESPECT OF THE VE RY SAME INCOME. THE AO REJECTED THE ASSESSEES CONTENTIONS AND PROCEEDED T O LEVY PENALTY OF ` 1,18,735/- UNDER SECTION 271(1)(C) OF THE ACT IN TH E ORDER DATED 23.03.2013. 2.3 ON APPEAL, THE LEARNED CIT(A)-31 VIDE THE IMPUG NED ORDER DATED 04.01.2016 UPHELD THE AOS ACTION IN LEVYING THE PE NALTY UNDER SECTION 271(1)(C) OF THE ACT FOR A.Y. 2008-09 HOLDING AS UN DER AT PARA 5.10 THEREOF:- 510. I HAVE GONE THROUGH THE FACTS MARSHALED DURING THE ASSESSMENT AND PENALTY PROCEEDINGS AND OBSERVED THAT THE APPEL LANT IS IN THE BUSINESS OF INVESTMENT IN SHARES. APPELLANT'S PLEA THAT THE ISSUE WAS DEBATABLE CANNOT BE STRETCHED BEYOND THE POINT TO B ELIEVE. BESIDES, IF THE CLAIM ITSELF IS IMPOSSIBLE TO ACCEPT AND IS CON TRARY TO FUNDAMENTALS OF TAX OR ACCOUNTANCY IT CANNOT BE ACC EPTED. THAT IS WHY IN THE INSTANT CASE AO'S STAND HAS BEEN UPHELD BY THE APPELLATE AUTHORITIES. BONA FIDE BELIEF OF AN APPELLANT IN TR EATING A PARTICULAR ITEM OF INCOME HAS LIMITED ROLE FOR DECIDING THE ISSUE OF PENALTY TO B E IMPOSED U/S 271(1) (C). FACTS OF THE CASE DECIDE WH ETHER A BELIEF COULD BE TREATED AS BONA FIDE OR NOT. IN OTHER WORD S IT CAN SAFELY BE HELD THAT IF AN APPELLANT, DISREGARDING ALL THE RELEVANT FACTS AND ITA NO. 2784/MUM/2016 MS. PUSHPAVATI KHUSHALCHAND 3 CIRCUMSTANCES, INTERPRETS A SECTION THAT SUITS ITS INTEREST THEN SUCH INTERPRETATION CANNOT BE HELD BONA FIDE BELIEF. AO' S VIEW THAT APPELLANT CONSCIOUSLY ATTEMPTED TO REDUCE TAX LIABI LITY TO THE EXTENT OF RS.1,18,735/- BEING THE DIFFERENCE BETWEEN TAX ON S HORT TERM CAPITAL GAIN OF RS. 81,945/- AND TAX ON BUSINESS INCOME OF RS.2,00,6801- AND AS SUCH APPELLANT COMES IN THE PURVIEW OF SECTI ON 271(1)(C) OF THE ACT , IS UPHELD. IN VIEW OF THIS SOLE GROUND OF APPEAL RAISED BY THE APPELLANT IS DISMISSED. 3.1 AGGRIEVED BY THE ORDER OF THE CIT(A)-31, MUMBAI DATED 05.01.2016 UPHOLDING THE LEVY OF PENALTY UNDER SECTION 271(1)( C) OF THE ACT FOR A.Y. 2008-09, THE ASSESSEE HAS PREFERRED THIS APPEAL RAI SING THE FOLLOWING GROUNDS: - 1. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - 36, MUMBAI [HEREINAFTER REFERRED TO AS THE 'LD. CIT(A)'] ERRED IN PASSING THE ORDER DATED 05.01.2016 CONFIRMING THE PENALTY LEVIE D BY THE LD. A.O. IN PENALTY ORDER DATED 23.09.2013 PASSED UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961 [HEREINAFTER REFERRED TO AS 'THE ACT']. THE APPELLANT STRONGLY OBJECTS TO THE L EVY OF PENALTY CONFIRMED BY THE LD. CIT(A)-36. 2. PENALTY U/S 271(1)(C) OF RS.1,18,735/- THE LD. CIT(A) ERRED IN CONFIRMING THE ACTION OF T HE LD. A.O. IN LEVYING PENALTY U/S 271(1)(C) OF RS.1,18,735/- FOR THE ATTEMPT TO REDUCE TAX LIABILITY, CONSCIOUSLY FURNISHED INACCUR ATE PARTICULARS BY SHOWING THE INCOME OF RS.8,19,451/- UNDER THE HE AD 'SHORT TERM CAPITAL GAIN' WHICH OUGHT TO HAVE BEEN DECLARE D UNDER THE HEAD 'INCOME FROM BUSINESS OR PROFESSION' WITHOUT A PPRECIATING THE FACTS AND CIRCUMSTANCES OF THE CASE. HENCE, THE LEVY OF PENALTY OF RS.1,18,735/- IS UNJUSTIFIED AND THE SAM E MAY BE DELETED. 3. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, RESCIN D OR AMEND ANY OF THE ABOVE GROUNDS OF APPEAL. THE ONLY ISSUE RAISED IN THIS APPEAL IS AGAINST TH E ORDER OF THE LEARNED CIT(A) FOR CONFIRMING THE LEVY OF PENALTY B Y THE AO UNDER SECTION 271(1)(C) OF THE ACT FOR FURNISHING OF INACCURATE P ARTICULARS OF INCOME. 3.2 WHEN THE CASE WAS CALLED FOR HEARING, NONE WAS PRESENT FOR THE ASSESSEE, BUT THE LEARNED D.R., WHO WAS PRESENT, FA IRLY CONCEDED THAT THE ASSESSEES APPEAL IS TO BE ALLOWED IN VIEW OF THE D ECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF BENNETT COLEMAN & CO. LTD. 259 CTR 383 (BOM); WHEREIN PENALTY FOR FURNISHING OF INACCU RATE PARTICULARS OF INCOME, FOR CHANGE OF HEAD OF INCOME, WAS DELETED. ITA NO. 2784/MUM/2016 MS. PUSHPAVATI KHUSHALCHAND 4 3.3.1 WE HAVE HEARD THE LEARNED D.R. FOR REVENUE AN D PERUSED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD, INCLUD ING ASSESSEES SUBMISSIONS BEFORE THE CIT(A) AND THE JUDICIAL PRON OUNCEMENT REFERRED TO. FROM THE FACTS ON RECORD IT IS CLEAR THAT THE ASSES SEES INCOME IS MAINLY FROM STCG/LTCG ARISING FROM DEALINGS IN SHARES AND SECURITIES AND ALSO FROM HOUSE PROPERTY AND INCOME FROM OTHER SOURCE S. THE AO WAS OF THE VIEW THAT THE INCOME FROM STCG OF ` 8,19,450/- ARISING FROM INVESTMENT ACTIVITY AS DECLARED BY THE ASSESSEE IS TO ASSESSED UNDER THE HEAD BUSINESS INCOME AND AFTER ASSESSING THE SAME ACCO RDINGLY IN THE ORDER OF ASSESSMENT DATED 26.11.2010, SIMULTANEOUSLY INITIAT ED PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT FOR FURNISHING INACCURATE PARTICULARS OF INCOME. THE AO LEVIED THE SAID PENAL TY DESPITE THE EXPLANATION OF THE ASSESSEE, INTER ALIA, THAT PENAL TY WAS NOT LEVIABLE FOR MERE CHANGE OF HEAD OF INCOME FROM STCG TO BUSINESS INCOME, THERE BEING NO FURNISHING OF INACCURATE PARTICULARS AND A LSO THAT THE STCG DECLARED BY THE ASSESSEE WAS ACCEPTED BY THE AO IN THE VERY NEXT A.Y. 2009-10. ON APPEAL BY THE ASSESSEE, THE AOS ACTION WAS UPHELD BY THE LEARNED CIT(A). 3.3.2 WE FIND FROM THE DETAILS ON RECORD, PLACED BE FORE AUTHORITIES BELOW BY THE ASSESSEE, THAT THE ASSESSEES PROPOSITION WA S THAT ITS ACTIVITY OF DEALING/INVESTMENT IN SHARES AND SECURITIES ARE INV ESTMENT ACTIVITY AND NOT BUSINESS ACTIVITY AS HELD BY THE AO/CIT(A) AND THAT THERE WAS ONLY A CHANGE OF HEAD OF INCOME FROM STCG TO BUSINESS INCO ME AND THEREFORE THERE WAS NO FURNISHING OF INACCURATE PARTICULARS O F INCOME AS IS BEING SOUGHT TO BE MADE OUT. FROM THE DETAILS ON RECORD B EFORE US, WE TOO OBSERVE THAT THERE IS ONLY A CHANGE OF HEAD OF INCO ME BY THE AO FROM STCG INCOME ON ACCOUNT OF INVESTMENT IN SHARES AN D SECURITIES DECLARED BY THE ASSESSEE TO BUSINESS INCOME BY THE AO AND THERE IS NO ADDITION TO INCOME OF THE ASSESSEE. IN THE FACTUAL MATRIX, IT I S CLEAR THAT THERE IS NO FURNISHING OF INACCURATE PARTICULARS OF INCOME BY T HE ASSESSEE. NO DOUBT, THE TAX EFFECT WOULD BE THERE SINCE THE RATE OF TAX FOR BUSINESS INCOME IS HIGHER THAN FOR STCG. THE HON'BLE BOMBAY HIGH COU RT IN THE CASE OF BENNETT COLEMAN & CO. LTD. (SUPRA) HAS HELD THAT WH EN THERE IS ONLY A ITA NO. 2784/MUM/2016 MS. PUSHPAVATI KHUSHALCHAND 5 CHANGE OF HEAD OF INCOME AND IN THE ABSENCE OF ANY EVIDENCE TO SHOW THAT THE ASSESSEES CLAIM WAS NOT BONA FIDE, PENALTY LEV IED UNDER SECTION 271(1)(C) FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME/CONCEALMENT OF INCOME WAS TO BE DELETED. AT PARA 3 OF ITS ORDER TH E HON'BLE BOMBAY HIGH COURT HELD AS UNDER: - 3. SO FAR AS QUESTION (II) IS CONCERNED, THE RESPO NDENT- ASSESSEE HAD CLAIMED PREMIUM ON REDEMPTION OF DEBENTURES AS INCO ME FROM CAPITAL GAINS. WHEREAS THE ASSESSING OFFICER HELD THAT THE REDEMPTION OF DEBENTURES IS REVENUE RECEIPT ASSESSABLE TO TAX UND ER THE HEAD INCOME FROM OTHER SOURCES. THE CIT(A) CONFIRMED THE ORDER OF THE ASSESSING OFFICER. THE RESPONDENT-ASSESSEE DID NOT FILE ANY F URTHER APPEAL ON THE QUANTUM PROCEEDINGS. THEREAFTER, THE ASSESSING OFFI CER LEVIED PENALTY UNDER SECTION 271(1)(C) OF THE ACT ON THE RESPONDEN T-ASSESSEE. THE CIT(A) ALSO CONFIRMED THE LEVY OF PENALTY UPON THE RESPONDENT- ASSESSEE. ON FURTHER APPEAL, THE TRIBUNAL HELD THAT THERE IS NO DISPUTE WITH REGARD TO THE FACT THAT THE RESPONDENT- ASSESS EE HAD DISCLOSED THAT THE AMOUNT RECEIVED AS PREMIUM ON REDEMPTION O F DEBENTURES IN ITS COMPUTATION OF INCOME. FURTHER, THE TRIBUNAL RE CORDS THAT IT IS NOT THE CASE OF THE DEPARTMENT THAT THE RESPONDENT-ASSE SSEE HAD CONCEALED ANY PARTICULARS OF INCOME OR FURNISHED IN ACCURATE PARTICULARS OF INCOME BY STATING INCORRECT FACTS. THE ASSESSING OFFICER CONSIDERED THE SAID PREMIUM RECEIVED ON REDEMPTION OF DEBENTUR ES TO BE TAXABLE UNDER THE HEAD INCOME FROM OTHER SOURCES WHILE THE RESPONDENT- ASSESSEE CONSIDERED THE SAME TO BE TAXABLE UNDER TH E HEAD CAPITAL GAINS. IN VIEW OF THE FACT THAT THERE IS ONLY A CHA NGE OF HEAD OF INCOME AND IN THE ABSENCE OF ANY FACTS THAT THE CLAIM OF T HE ASSESSEE WAS NOT BONAFIDE, THE TRIBUNAL DELETED THE PENALTY IMPOSED UNDER SECTION 271(1)(C) OF THE ACT. THE REVENUE HAS NOT BEEN ABLE TO POINT OUT THAT THE FINDING OF THE TRIBUNAL IS PERVERSE. IN THESE CIRCU MSTANCES, WE SEE NO REASON TO ENTERTAIN THE PROPOSED QUESTION (II). 3.3.3 THE AFORESAID DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF BENNETT COLEMAN & CO. LTD. (259 CTR 383) (BOM) O N SIMILAR FACT SITUATION WAS FOLLOWED BY A COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF MITA J. JHAVERI IN ITA NO. 6210/MUM/2012 DATED 30.0 8.2016. WE FIND THAT IN THE CASE ON HAND, THE ASSESSEE HAD DECLARED THE INCOME ARISING OUT OF PURCHASE AND SALE ACTIVITY IN SHARES AND SECURIT IES AS STCG AS AGAINST BUSINESS INCOME ASSESSED BY THE AO. IT IS SEEN THAT THE ASSESSEE HAD ALSO FILED WRITTEN SUBMISSIONS BEFORE THE AUTHORITIES BE LOW THAT SHE WAS UNDER THE BONA FIDE BELIEF THAT ITS ACTIVITY OF PURCHASE/ SALE OF SHARES AND SECURITIES WAS ONLY CAPITAL GAIN AND NOT BUSINESS I NCOME AND ALSO THAT THE ASSESSEES CLAIM OF CAPITAL GAINS/LOSS HAS BEEN ACC EPTED BY THE AO IN THE ITA NO. 2784/MUM/2016 MS. PUSHPAVATI KHUSHALCHAND 6 ASSESSEES OWN CASE FOR THE NEXT ASSESSMENT YEAR I. E. A.Y. 2009-10, WHICH WAS COMPLETED IN SCRUTINY UNDER SECTION 143(3) OF T HE ACT. IT WAS ALSO CONTENDED BY THE ASSESSEE THAT THERE WAS NO FURNISH ING OF INACCURATE PARTICULARS OF INCOME OR CONCEALMENT OF INCOME IN H ER CASE. IN VIEW OF THE ABOVE ARGUMENTS PUT FORTH BY THE ASSESSEE, WE ARE O F THE OPINION THAT THE AUTHORITIES BELOW WERE NOT ABLE TO CONTROVERT THEM OR HOLD THEM TO BE FALSE. IN THIS VIEW OF THE MATTER AND RESPECTFULLY FOLLOWI NG THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF BENNETT CO LEMAN & CO. LTD. (SUPRA) AND OF THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF MITA J. JHAVERI (SUPRA), WE HOLD THAT SINCE THERE IS ONLY A CHANGE OF HEAD OF INCOME FROM STCG AS DECLARED BY THE ASSESSEE TO BUSINESS INCOME AS HELD BY THE AO AND NO EVIDENCE BROUGHT ON RECORD TH AT THE ASSESSEES CLAIM WAS NOT BONA FIDE, WE DELETE THE PENALTY OF ` 1,18,735/- LEVIED UNDER SECTION 271(1)(C) OF THE ACT FOR A.Y. 2008-09. WE H OLD AND DIRECT ACCORDINGLY. CONSEQUENTLY GROUNDS 1 TO 3 OF ASSESSE ES APPEAL ARE ALLOWED. 4. IN THE RESULT, THE ASSESSEES APPEAL FOR A.Y. 2008- 09 IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 11 TH JANUARY, 2017. SD/ - SD/ - (RAMLAL NEGI) (JASON P. BOAZ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 11 TH JANUARY, 2017 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) -36, MUMBAI 4. THE CIT - 24, MUMBAI 5. THE DR, F BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.