Shri Rahul Doshi, Indore V. The ACIT, Indore

ITA 318/IND/2010

• Counselvise Citation: [2011] 119 COUNSELVISE.COM (IT) 6635 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 1 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-07-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2006-2007
• Appeal Filed On: 19-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ARUN DEWAN
• Keywords: Transactions in derivatives
• Section: 43(5); 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, J.M. AND SHRI R.C.SHARM A, A.M. PAN NO. : - I.T.A.NO.318/IND/2010 A.Y. : 2006-07 SHRI RAHUL DOSHI, ACIT, 23, NEMI NAGAR EXTN., VS 3(1), JAIL COLONY, INDORE. INDORE. APPELLANT RESPONDENT APPELLANT BY : SHRI ANIL KAMAL GARG, CA RESPONDENT BY : SHRI ARUN DEWAN, SR. DR O R D E R PER R. C. SHARMA, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) DATED 2 ND FEBRUARY, 2010, FOR THE ASSESSMENT YEAR 2006-07. 2. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORDS PERUSED. THE FACTS, IN BRIEF, ARE THAT THE ASSESSEE WAS ENGAGED IN CARRYING ON BUSINESS OF TRADING IN SHARE S AND DERIVATIVES OF SHARES AND COMMODITIES. HE MAINTAINE D ONE COMMON ACCOUNT IN RESPECT OF DELIVERY BASED TRANSAC TION -: 2: - 2 AND DERIVATIVES TRANSACTIONS IN THE REGULAR BOOKS O F ACCOUNT IN THE ORDINARY COURSE OF BUSINESS OF TRADING IN SH ARES AND DERIVATIVES. DURING THE COURSE OF ASSESSMENT, THE A O DID NOT FIND ANY DISCREPANCY IN THE DETAILS FURNISHED B Y THE ASSESSEE. HOWEVER, ON TECHNICAL GROUND, HE OBSERVED THAT THE ASSESSEE IS NOT ELIGIBLE FOR CLAIM OF SET OFF O F NET LOSS OF RS. 3,32,149/- INCURRED BY HIM BEFORE 21 ST JANUARY, 2006, IN RESPECT OF DERIVATIVES OF COMMODITIES AND SHARES . ON THE RETURNED INCOME OF RS. 48.18 LAKHS, THE TAX LIABILI TY WAS WORKED OUT AT RS. 13.95 LAKHS AND SINCE THE ASSESSE E HAD PAID RS. 15.60 LAKHS BY WAY OF SECURITY TRANSACTION TAX ( FOR SHORT STT), WHICH WAS CLAIMED U/S 88E OF THE AC T TO THE EXTENT OF TAX PAYABLE, NO REFUND OF TAX WAS CLAIMED IN RESPECT OF HIGHER SECURITY TRANSACTION PAID AMOUNTI NG TO RS. 1.64 LAKHS. IN VIEW OF THE FACT THAT THE ASSESSEE H AS ALREADY PAID MORE STT, THERE WAS NO ADDITIONAL TAX LIABILIT Y ON ACCOUNT OF THE ADDITION/DISALLOWANCE SO MADE BY THE ASSESSING OFFICER. ACCORDINGLY, NO APPEAL WAS FILED AGAINST THE ADDITION/DISALLOWANCE SO MADE BY THE ASSESSING OFFICER. WITH RESPECT TO THE AMOUNT OF ADDITION/DISALLOWANCE , THE AO LEVIED PENALTY U/S 271(1)(C) OF THE ACT, WHICH W AS -: 3: - 3 CONFIRMED BY THE LD. CIT(A) AND THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 3. WE HAVE CONSIDERED THE RIVAL CONTENTIONS, CAREFULL Y GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AN D FOUND FROM RECORD THAT THE ASSESSEE WAS ENGAGED IN BUSINE SS OF TRADING IN SHARES AND DERIVATIVES OF SHARES AND COMMODITIES. HE WAS MAINTAINING ONE COMMON ACCOUNT IN RESPECT OF DEALING IN SHARES AS WELL AS DERIVATIVES IN THE LAST SO MANY YEARS. NET RESULT OF SPECULATIVE/DERIVATIVE S TRANSACTION WAS DULY INCORPORATED IN THE TRADING AC COUNT. DURING THE YEAR, THE TOTAL TURNOVER OF THE ASSESSEE WAS RS. 252.73 CRORES. THE ASSESSEE HAD DISCLOSED HIS POLIC Y OF INCORPORATING THE BALANCE OF DERIVATIVES TRANSACTIO NS IN PURCHASE VALUE BY WAY OF NOTE IN DISCLOSURE OF SIGN IFICANT ACCOUNTING POLICY, WHICH WAS ANNEXED TO AND FORMING PART OF ITS AUDITED FINANCIAL STATEMENTS. ON AOS QUERIE S, THE ASSESSEE PROVIDED NECESSARY INFORMATION AND DETAILS TO THE AO. WHILE MAKING THE ASSESSMENT, THE AO DID NOT FIN D ANY DISCREPANCY EITHER IN THE DETAILS PROVIDED BY THE A SSESSEE OR IN THE BOOKS OF ACCOUNT. THE GENUINENESS OF THE TRA NSACTION RECORDED IN THE REGULAR BOOKS OF ACCOUNT WERE ALSO NOT -: 4: - 4 DOUBTED. THE ISSUE ON WHICH ADDITION HAS BEEN MADE IS A DEBATABLE ONE. THE FINANCE ACT, 2005, HAS INSERTED A NEW CLAUSE (D) IN PROVISO TO SECTION 43(5) OF THE ACT, W.E.F. 1 ST APRIL, 2006, ACCORDING TO WHICH ANY ELIGIBLE TRANSA CTION IN RESPECT OF TRADING IN DERIVATIVES FOR THE SECURITIE S CARRIED OUT IN A RECOGNIZED STOCK EXCHANGE, WOULD NOT BE DEEMED TO BE A SPECULATIVE TRANSACTION. THE ASSESSEE WAS UNDER A BONA FIDE BELIEF THAT THE BENEFIT OF CLAUSE (D) OF THE P ROVISO CAN BE TAKEN FOR ALL THE TRANSACTIONS OF DERIVATIVES CARRI ED OUT DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 2006-07. ON THE OTHER HAND, THE AO WAS OF THE OPINI ON THAT THE BENEFIT OF CLAUSE (D) IS AVAILABLE ONLY FROM TH E DATE THE CBDT ISSUED NOTIFICATION NO.2/2006 ON 25.1.2006. TH E VIEW TAKEN BY THE AO IS DEBATABLE FOR THE REASON THAT CL AUSE (D) HAS BEEN MADE EFFECTIVE FROM THE ASSESSMENT YEAR BE GINNING FROM 1.4.2006 AND IT CANNOT BE INTERPRETED THAT SUC H CLAUSE WOULD HAVE ITS APPLICATION FORM THE DATE OF ISSUE O F NOTIFICATION BY THE CBDT. THERE IS A DIRECT JUDGMEN T ON THE ISSUE BY THE I.T.A.T. DELHI BENCH IN THE CASE OF SE EMA JAIN, 6 ITR (TRIB)/488, WHEREIN IT WAS OBSERVED THAT CLAU SE (D) OF SECTION 43(5) WOULD HAVE ITS APPLICATION FOR ALL TH E -: 5: - 5 TRANSACTIONS CARRIED OUT ON 1.4.2005 TO 31 ST MARCH, 2006. ACCORDINGLY, IT WAS HELD THAT DERIVATIVE TRANSACTIO N CARRIED OUT BEFORE 25 TH JANUARY, 2006, WOULD ALSO BE REGARDED AS NON-SPECULATIVE IN NATURE. FURTHERMORE, I.T.A.T., S PL. BENCH, KOLKATA, IN THE CASE OF SHARE CAPITAL SERVIC ES LIMITED, 124 TTJ 740, HAS HELD THAT CLAUSE (D) OF S ECTION 43(5) WILL BE EFFECTIVE FROM THE DATE FROM WHICH LE GISLATURE MADE IT EFFECTIVE I.E. ASSESSMENT YEAR COMMENCING F ROM 1 ST APRIL, 2006. IN VIEW OF THE ABOVE FACTS, THE INSTAN T CASE IS NOT FIT FOR LEVY OF PENALTY U/S 271(1)(C) IN SO FAR AS ISSUE UNDER CONSIDERATION IS DEBATABLE ON WHICH DIFFERENT VIEWS HAVE BEEN TAKEN BY THE JUDICIAL AUTHORITIES. MOREOV ER, IN VIEW OF THE DECISION OF THE HON'BLE SUPREME COURT I N THE CASE OF RELIANCE PETROL PRODUCTS PRIVATE LIMITED, 3 22 ITR 158, A MERE MAKING OF A CLAIM, WHICH IS NOT SUSTAIN ABLE IN LAW BY ITSELF WILL NOT AMOUNT TO FURNISHING OF INAC CURATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. T HE HON'BLE COURT AT PAR A(11) HAS MADE A REFERENCE OF ITS OWN EARLIER JUDGMENT IN CASE OF SHREE KRISHNA ELECTRICA LS VS. STATE OF TAMILNADU & ANR. (2009) 23 JVST 249 ( S. C) AND QUOTED FEW LINES OF SUCH JUDGMENT AS FOLLOWS :- -: 6: - 6 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. WHEREIN CERTAIN ITEMS WHICH ARE NOT INCLUDED IN THE TURNOVER AND DISCLOSED IN THE DEALERS OWN ACCOUNT BOOKS AND THE ASSESSING AUTHORITIES INCLUDE THESE ITEMS IN THE DEALER TURNOVER DISALLOWING THE EXEMPTION, PENALTY CANNOT BE IMPOSED. THE PENALTY LEVIED STANDS SET ASIDE. 4. FROM THE ORDER OF THE LD. CIT(A), WE FOUND THAT HE HAS HEAVILY RELIED ON THE DECISION OF THE HON'BLE S UPREME COURT IN THE CASE OF DHARMENDRA TEXTILES PROCESSORS , 306 ITR 277, FOR UPHOLDING THE PENALTY ORDER PASSED BY THE ASSESSING OFFICER. WE FOUND THAT HON'BLE PUNJAB & H ARYANA HIGH COURT IN THE CASE OF M/S. HARYANA WAREHOUSING CORPN, 314 ITR 215, AND IN CASE SIDDHARTH ENTERPRIS ES, 322 ITR 80, AFTER DISCUSSING THE DECISION OF HON'BLE SU PREME COURT IN THE CASE OF DHARMENDRA TEXTILES (SUPRA), H ELD THAT THE JUDGMENT IN DHARMENDRA TEXTILES (SUPRA) CANNOT BE READ AS LAYING DOWN THAT IN EVERY CASE WHERE THE PA RTICULARS OF INCOME ARE INACCURATE, PENALTY MUST FOLLOW. THE PECULIAR FACTS OF THE INSTANT CASE, ALSO REVEALS THAT EVEN A FTER MAKING ADDITION/DISALLOWANCE, THE ASSESSEE WAS NOT REQUIRE D TO PAY ANY TAX MORE IN SO FAR AS STT ALREADY PAID BY THE A SSESSEE -: 7: - 7 WAS SUFFICIENT TO COVER THE ADDITIONS SO MADE BY TH E ASSESSING OFFICER. 5. IN VIEW OF THE ABOVE DISCUSSION, WE DO NOT FIND ANY MERIT IN THE ORDER OF THE LOWER AUTHORITIES FOR LEV YING AND CONFIRMING THE PENALTY OF RS. 1,11,800/-. ACCORDING LY, THE ORDER OF LOWER AUTHORITIES ARE BEING REVERSED AND A PPEAL IS ALLOWED IN FAVOUR OF THE ASSESSEE. 6. IN THE RESULT, THE APPEAL IS ALLOWED. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 5 TH JULY, 2011. SD/- SD/- (JOGINDER SINGH) ( R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 5 TH JULY, 2011. CPU* 47