DCIT 8(3), MUMBAI V. RINITA IMPEX P. LTD, MUMBAI

ITA 2960/MUM/2014

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 2859 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-10-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2009-2010
• Appeal Filed On: 30-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K SRIVASTAVA
• Keywords: Business income; Business expenditure; Revised return
• Section: 143(3); 263; 63

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BE NCH, MUMBAI BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER AND SHRI AMARJIT SINGH, JUDICIAL MEMBER / I .TA NOS. 2960 & 3028/MUM/2014 ( / ASSESSMENT YEARS:2009-10 & 2010-11 THE DCIT-8(3), AAYAKAR BHAVAN, MUMBAI-400 020 / VS. M/S. RINITA IMPEX PVT. LTD., 2 ND FLOOR, BOMBAY MUTUAL BLDG., DR. D.N. ROAD, FORT, MUMBAI-400 001 ./ ./ PAN/GIR NO. : AAACR 5451R ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY: SHRI A.K. SRIVASTAVA / RESPONDENT BY: SHRI JITENDRA JAIN / DATE OF HEARING :26.10.2015 ! / DATE OF PRONOUNCEMENT :28.10.2015 '# / O R D E R PER N.K. BILLAIYA, AM: THESE ARE APPEALS BY THE REVENUE AGAINST THE VERY S AME ORDER OF THE LD. CIT(A)-18, MUMBAI DATED 25.2.2014 PERTA INING TO ASSESSMENT YEARS 2009-10 AND 2010-11. SINCE THE FI RST APPELLATE AUTHORITY HAS DECIDED THESE TWO APPEALS BY A CONSOL IDATED ORDER, BOTH THESE APPEALS WERE HEARD TOGETHER AND DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. ITA. NOS. 2960 & 3028/M/14 2 2. ALTHOUGH THE ISSUES ARE COMMON IN BOTH THESE APP EALS, BUT FACTS OF A.Y. 2010-11 ARE SLIGHTLY DIFFERENT FROM T HE FACTS OF 2009-10, THEREFORE, WE ARE FIRST TAKING UP ITA NO. 2960/M/20 14 FOR A.Y. 2009- 10. THE SUM AND SUBSTANCE OF THE GRIEVANCE OF THE REVENUE IS THAT THE LD. CIT(A) ERRED IN DELETING THE PENALTY OF RS. 6,30,28,304/- IMPOSED U/S. 271(1)(C) OF THE ACT. 3. THE ROOTS FOR THE LEVY OF PENALTY LIE IN THE ASS ESSMENT ORDER DATED 29.11.2011 MADE U/S. 143(3) OF THE ACT. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF TRADING IN S HARES AND SECURITIES AND PROVIDING FINANCIAL SERVICES. WHILE SCRUTINIZING THE RETURN OF INCOME, THE ASSESSING OFFICER NOTICED THA T THE ASSESSEE COMPANY WAS HOLDING OPENING AND CLOSING STOCK OF RS . 128,51,24,748/-. THE AO FURTHER FOUND THAT THE STO CK IN HAND COMPRISES OF ONLY SHARES OF ONE COMPANY VIZ., CENT RUM CAPITAL LTD. THE AO OBSERVED THAT THOUGH THE ASSESSEE IS CLAIME D TO BE ENGAGED IN SHARE TRADING ACTIVITY BUT THE ASSESSEE HAS NOT DONE ANY TRADING ACTIVITY DURING THE YEAR UNDER CONSIDERATION. THE AO WAS OF THE FIRM BELIEF THAT THE STOCK OF SHARES WAS NOTHING BUT INV ESTMENT AND THE INVESTMENT WAS MADE OUT OF BORROWED FUNDS. WITH TH ESE ASSUMPTIONS, THE AO DISALLOWED THE ENTIRE CLAIM OF EXPENDITURE AND THE INCOME FROM BUSINESS WAS ASSESSED AT RS. NIL. THE AO SIMULTANEOUSLY INITIATED PENAL PROCEEDINGS U/S. 271 (1)(C) OF THE ACT. 3.1. AGAINST THIS ASSESSMENT ORDER, THE ASSESSEE PR EFERRED AN APPEAL BEFORE THE LD. CIT(A) BUT WITHOUT ANY SUCCES S. THE ASSESSEE FINALLY ACCEPTED THE ORDER OF THE FIRST APPELLATE A UTHORITY AND NO FURTHER APPEAL WAS FILED. ITA. NOS. 2960 & 3028/M/14 3 3.2. WITH THIS FACTUAL MATRIX, THE AO PROCEEDED WIT H THE PENAL PROCEEDINGS U/S. 271(1)(C) OF THE ACT. THE ASSESSE E WAS ASKED TO EXPLAIN WHY AN ORDER IMPOSING A PENALTY ON IT SHOUL D NOT BE PASSED U/S. 271(1)(C) OF THE ACT. THE ASSESSEE FILED A DE TAILED REPLY EXPLAINING ITS NATURE OF BUSINESS VIS--VIS HOLDING OF SHARES AND THE CLAIM OF EXPENDITURES. THE ASSESSEE STRONGLY CONTE NDED THAT IT HAS NEITHER CONCEALED ITS INCOME NOR IT HAS FURNISHED I NACCURATE PARTICULARS OF INCOME, THEREFORE PENAL PROCEEDINGS SHOULD BE DROPPED. 3.3. THE SUBMISSIONS OF THE ASSESSEE DID NOT FIND A NY FAVOUR WITH THE AO. DRAWING SUPPORT FROM THE DECISIONS OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS DHARMENDRA PROCESSORS 306 ITR 277 AND DILIP SHROFF 291 ITR 519, THE AO CONCLUDED BY LEVYI NG MINIMUM PENALTY OF RS. 6,30,28,304/-. 4. THE ASSESSEE STRONGLY AGITATED THE MATTER BEFORE THE LD. CIT(A) AND REITERATED ITS CONTENTION. AFTER CONSIDERING T HE FACTS AND THE SUBMISSIONS, THE FIRST APPELLATE AUTHORITY POSED A QUESTION TO ITSELF WHETHER THE ASSESSEE HAS CONCEALED ANY PARTICULAR S OF INCOME AND SUBMITTED INACCURATE PARTICULARS OF INCOME. THE LD . CIT(A) ANSWERED THIS QUESTION AS UNDER: TO ANSWER THIS QUESTION, IT IS CLEAR FROM THE FACTS OF THE CASE THAT THE ASSESSEE HAS PURCHASED SHARES AND SH OWN STOCK-IN-TRADE AND ALSO DEBITED THE INTEREST PAID ON BORROWED FUNDS TO THE PROFIT & LOSS ACCOUNT. THE RETURN FOR A.Y. 2008- 09 WAS ACCEPTED ON THE BASIS OF WHICH THE ASSESSEE HAS CARRIED FORWARD THE STOCK-IN-TRADE AS ON 31.03.2009 AND 31.03.2010. THE AO. HAS NOT ACCEPTED THE CONTEN TION OF THE APPELLANT AS BUSINESS INCOME AND TREATED IT AS INVESTMENT WHICH WAS CONFIRMED BY THE CLT(A). FROM THESE ITA. NOS. 2960 & 3028/M/14 4 FACTS, IT IS CLEAR THAT THE ASSESSEE HAS NOT CONCEA LED ANY PARTICULARS OF INCOME, BUT, IN HIS VIEW HE HAS TAKE N THE TRADING OF SHARES AS BUSINESS INCOME WHICH WAS DULY REFLECTED IN THE BOOKS OF ACCOUNT AND AUDITED PROFI T & LOSS ACCOUNT AND BALANCE SHEET WHICH WERE SUBMITTE D ALONG WITH THE RETURN OF INCOME, THEREFORE, THE ASS ESSEE HAS NOT CONCEALED ANY FACTS AND SUBMITTED INACCURATE PARTIC ULARS OF INCOME. THE VIEW OF THE A.0. BY TREATING IT AS INVESTMENT AND NOT BUSINESS INCOME IS CONFIRMED BY THE CIT(A) AND EVEN FOR A.Y. 2010-11, THE ASSESSEE HAS ALSO AGREED WITH THE DECISION OF THE A.O. AND CIT(A) AND REVISE D ITS RETURN OF INCOME. THUS, THE ASSESSEE HAS NOT CONCEA LED THE FACTS, BUT, THE A.O. HAS TAKEN A DIFFERENT VIEW ON THE BASIS OF THE PROFIT & LOSS ACCOUNT AND BALANCE SHEET FILE D BY THE APPELLANT ALONG WITH THE RETURN OF INCOME. IT IS NO W WELL ESTABLISHED FACT THAT ASSESSMENT PROCEEDINGS AND PE NALTY PROCEEDINGS ARE DIFFERENT AND INDEPENDENT TO EACH O THER. MERELY BECAUSE THE DISALLOWANCE MADE BY THE A.O. IS CONFIRMED IN APPEAL DOES NOT MEAN THAT ASSESSEE HAS CONCEALED ITS INCOME. IN THE PRESENT CASE, HE ISSUE IS THAT SHARE TRADING IS TREATED BY THE ASSESSEE AS BUSINES S INCOME BUT A.O. HAS HELD IT AN INVESTMENT AND PROFI T OR LOSS WILL BE TAKEN UNDER THE HEAD CAPITAL GAIN WHIC H MEANS CHANGE OF HEAD OF INCOME. THUS, IT IS CLEARLY A LEGAL & DEBATABLE ISSUE. 4.1. HAVING ANSWERED THE QUESTION AS MENTIONED HERE INABOVE AND DRAWING SUPPORT FROM THE DECISION OF THE HONBLE SU PREME COURT IN THE CASE OF CIT VS RELIANCE PETRO PRODUCTS PVT. LT D. 322 ITR 158, THE LD. CIT(A) DELETED THE PENALTY FOR THE YEAR UNDER C ONSIDERATION. 5. AGGRIEVED BY THIS, THE REVENUE IS BEFORE US. 6. THE LD. DEPARTMENTAL REPRESENTATIVE STRONGLY SUP PORTED THE FINDINGS OF THE AO AND PLACED RELIANCE ON THE DECIS ION OF THE HONBLE HIGH COURT OF DELHI IN THE CASE OF CIT VS ZOOM COM MUNICATION (P) LTD 327 ITR 510 AND ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF MAK DATA (P) LTD VS CIT 358 ITR 59 3. IT IS THE SAY OF ITA. NOS. 2960 & 3028/M/14 5 THE LD. DR THAT THE CONDUCT OF THE ASSESSEE IS A DE LIBERATE PLOY TO REDUCE THE TAXABLE INCOME. 7. PER CONTRA, THE LD. COUNSEL FOR THE ASSESSEE REI TERATED WHAT HAS BEEN STATED BEFORE THE LOWER AUTHORITIES. ONCE AGA IN, THE LD. COUNSEL HEAVILY RELIED UPON THE DECISION OF THE HONBLE SUP REME COURT IN THE CASE OF RELIANCE PETRO PRODUCTS (SUPRA). 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULL Y CONSIDERED THE ORDERS OF THE AUTHORITIES BELOW. WE HAVE EXAMI NED THE FACTS IN ISSUES IN THE LIGHT OF THE JUDICIAL DECISIONS RELIE D UPON BY THE REPRESENTATIVES OF BOTH THE SIDES. 8.1. THERE IS NO DISPUTE THAT THE ASSESSEE WAS HOLD ING SHARES OF ONLY ONE COMPANY AND SHOWING IT AS STOCK-IN-TRADE. THE SHARES WERE PURCHASED IN FINANCIAL YEAR 2007-08 RELEVANT TO ASS ESSMENT YEAR 2008-09 WHICH IS THE PRECEDING ASSESSMENT YEAR TO T HE ASSESSMENT YEAR UNDER CONSIDERATION. IT IS ALSO AN UNDISPUTED FACT THAT HAVING FOUND NO TRADING ACTIVITIES, THE HOLDING OF SHARES WERE CONSIDERED UNDER THE HEAD INVESTMENT AND ACCORDINGLY ALL EXPEN DITURES CLAIMED BY THE ASSESSEE WERE DISALLOWED. THE MAJOR EXPENDI TURE WAS IN RELATION TO THE INTEREST PAID ON BORROWED CAPITAL U TILIZED FOR THE PURCHASE OF SHARES OF THAT ONE COMPANY VIZ., CENTRU M CAPITAL LTD. THE AO HAS LEVIED THE PENALTY HOLDING THAT ASSESSEE HAS FILED INACCURATE PARTICULARS BY NOT SHOWING THE SHARES UN DER THE HEAD INVESTMENT AND CLAIMING BUSINESS EXPENDITURES INC LUDING INTEREST ON BORROWED CAPITAL. BY THIS CONDUCT, THE ASSESSEE REDUCED ITS TAX LIABILITY. IN OUR CONSIDERED OPINION, THIS OBSERVA TION OF THE AO IS AGAINST THE FACTS OF THE CASE. FIRSTLY, THE SHARES WERE PURCHASED IN ITA. NOS. 2960 & 3028/M/14 6 F.Y. 2007-08 AND IN ASSESSMENT YEAR 2008-09, THE RE VENUE HAS ACCEPTED THE CLAIM OF THE ASSESSEE THAT IT IS IN TH E BUSINESS OF TRADING IN SHARES AND SECURITIES. FOR THE ALLEGATION OF FI LING INACCURATE PARTICULARS OF INCOME, THE CONDUCT OF THE ASSESSEE HAS TO BE SEEN ON THE DATE OF THE FILING OF RETURN OF INCOME. ON THE DATE OF FILING OF RETURN OF INCOME, THE ASSESSEE HAD AN ASSESSMENT OR DER FOR A.Y. 2008-09 ACCEPTING ASSESSEES CLAIM OF BUSINESS OF T RADING IN SHARES AND SECURITIES. THUS ON THE DATE OF FILING OF RETU RN, THE ASSESSEE WAS NOT AWARE OF THE POSSIBLE VIEW THAT MIGHT BE TAKEN BY THE AO DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS. 8.2. FINALLY, THE VIEW TAKEN BY THE AO SIMPLY CHANG ED THE HEAD OF INCOME I.E. FROM THE HEAD PROFITS AND GAINS OF BUS INESS OR PROFESSION, THE SHARES BECAME PART OF CAPITAL GAINS. NO DOUBT, THE CLAIM OF THE ASSESSEE WAS ALSO DENIED BY THE FIRST APPELLATE AUT HORITY IN THE QUANTUM PROCEEDINGS BUT THAT BY ITSELF DO NOT PROVE OF FILING INACCURATE PARTICULARS OF INCOME WHEN ON THE SAME S ET OF FACTS, THERE ARE TWO POSSIBLE VIEWS AND BOTH THE VIEWS ARE WELL SUPPORTED BY A PLETHORA OF JUDICIAL DECISIONS WHETHER THE INCOME T O BE TAXED UNDER THE HEAD BUSINESS INCOME OR CAPITAL GAINS 8.3. THE HONBLE SUPREME COURT IN THE CASE OF RELIA NCE PETRO PRODUCTS HAS CLEARLY LAID DOWN THE RATIO BY ANY ST RETCH OF IMAGINATION, MAKING AN INCORRECT CLAIM IN LAW CANNO T TANTAMOUNT TO FURNISHING INACCURATE PARTICULARS. THE HONBLE SU PREME COURT FURTHER OBSERVED THERE CAN BE NO DISPUTE THAT EVER YTHING WOULD DEPEND UPON THE RETURN FILED BECAUSE THAT IS THE ON LY DOCUMENT, WHERE THE ASSESSEE CAN FURNISH THE PARTICULARS OF HIS INCOME. WHEN SUCH PARTICULARS ARE FOUND TO BE INACCURATE, THE LI ABILITY WOULD ARISE. ITA. NOS. 2960 & 3028/M/14 7 8.4. APPLYING THIS RATIO OF THE HONBLE SUPREME COU RT ON THE FACTS OF THE PRESENT CASE AS MENTIONED ELSEWHERE ON THE DATE OF THE FILING OF THE RETURN OF INCOME, THE ASSESSEE HAD ASSESSMENT O RDER FOR A.Y. 2008-09 WHEREIN BUSINESS OF TRADING IN SHARES AND S ECURITIES WAS ACCEPTED BY THE REVENUE AUTHORITIES EVEN IF THAT OR DER WAS MADE U/S. 143(1) OF THE ACT. TILL DATE NEITHER THE ASSESSMEN T OF A.Y. 2008-09 HAS BEEN REOPENED NOR ANY REVISIONARY ACTION U/S. 2 63 OF THE ACT HAVE BEEN TAKEN BY THE COMMISSIONER. CONSIDERING A LL THESE FACTS IN TOTALITY, WE DO NOT FIND ANY REASON TO INTERFERE WI TH THE FINDINGS OF THE LD. CIT(A). APPEAL FILED BY THE REVENUE IS ACC ORDINGLY DISMISSED. ITA NO. 3028/M/2014 A.Y. 2010-11 9. AS MENTIONED ELSEWHERE, THE FACTS OF THIS YEAR I S SLIGHTLY DIFFERENT FROM THE FACTS OF IMMEDIATELY PRECEDING ASSESSMENT YEAR INASMUCH AS IN THIS YEAR THE ASSESSEE WITHDREW THE CLAIM OF EXPENDITURE BY FILING A REVISED RETURN OF INCOME. THE RETURN WAS REVISED AFTER KNOWING THE VIEW TAKEN BY THE AO AND THE FIRST APPELLATE AUTHORITY FOR A.Y. 2009-10. EXCEPT FOR T HIS DISTINGUISHING FACT ALL OTHER ISSUES ARE IDENTICAL TO THE ISSUES C ONSIDERED BY US IN ITA NO. 2960/M/2014 FOR A.Y. 2009-10. 10. IN OUR CONSIDERED OPINION, THE DISTINGUISHING F ACTS SHOULD NOT HAVE ANY WEIGHTAGE ON THE OUTCOME OF OUR DECISION F OR EARLIER YEAR INASMUCH AS AND AS MENTIONED ELSEWHERE WHEN THE ASS ESSEE FILED THE RETURN OF INCOME, IT HAD A POSSIBLE VIEW FOR A.Y 20 08-09 AND WHEN THAT VIEW WAS NOT ACCEPTED FOR A.Y. 2009-10, THE AS SESSEE FILED A REVISED RETURN AND ACCEPTED THE VIEW TAKEN BY THE R EVENUE AUTHORITIES. BY ANY STRETCH OF IMAGINATION, THIS C ANNOT BE CONSIDERED ITA. NOS. 2960 & 3028/M/14 8 TO BE A FIT CASE OF TREATING THE RETURN OF INCOME A S FILING INACCURATE PARTICULARS OF INCOME. FOR OUR DETAILED DISCUSSIO N IN ITA NO. 2960/M/14, WE DECLINE TO INTERFERE WITH THE FINDING S OF THE LD. CIT(A). 11. IN THE RESULT, BOTH THE APPEALS FILED BY THE RE VENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH OCTOBER, 2015 SD/- SD/- (AMARJIT SINGH ) (N.K. BILLAIYA) $% ' /JUDICIAL MEMBER ' / ACCOUNTANT MEMBER & ' MUMBAI; (' DATED : 28 TH OCTOBER, 2015 . % . ./ RJ , SR. PS !' #' / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ) ( ) / THE CIT(A)- 4. ) / CIT 5. *+, %%-. , -.! , & ' / DR, ITAT, MUMBAI 6. ,/0 1 / GUARD FILE. $ / BY ORDER, * % //TRUE COPY// % / $& ' (DY./ASSTT. REGISTRAR) , & ' / ITAT, MUMBAI