Shri Subhash S.Shah,HUF, Ahmedabad V. The Income tax Officer,Ward-11(2), Ahmedabad

ITA 3229/AHD/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 50754 (ITAT-AHMEDABAD)
• Duration Of Justice: 10 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-10-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 16-09-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 06-12-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: MEHUL K PATEL
• Keywords: Speculation loss; Bonafide mistake

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, B BENCH, AHMEDABAD BEFORE SHRI T. K. SHARMA, JUDICIAL MEMBER AND SHRI A. K. GARODIA, ACCOUNTANT MEMBER I.T.A. NO.3229 / AHD/2010 (ASSESSMENT YEAR 2006-07) SUBHASH S. SHAH HUF SAMARPAN, B/H ANAND SHOPPING CENTRE, BHATTA, AHMEDABAD VS. ITO, WARD 11(2), AHMEDABAD PAN/GIR NO. : AADHS5400H (APPELLANT) .. (RESPONDENT) APPELLANT BY: SHRI MEHUL K. PATEL, AR RESPONDENT BY: SHRI SAMIR TEKRIWAL, SR. DR DATE OF HEARING: 16.09.2011 DATE OF PRONOUNCEMENT: 20.10.2011 O R D E R PER SHRI A. K. GARODIA, AM:- THIS IS ASSESSEES APPEAL DIRECTED AGAINST THE ORD ER OF LD. CIT(A) XVI, AHMEDABAD DATED 20.09.2010 FOR THE ASSESSMENT YEAR 2006-07. 2. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER: 1. THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE PENALTY OF RS. 1,18,611/- U/S. 271(L)(C) OF THE ACT WITHOUT PR OPER CONSIDERATION AND APPRECIATION OF THE FACTS OF THE CASE. IN VIEW OF ELABORATE SUBMISSIONS FILED COUPLED WITH LEGAL POSI TION, THE IMPUGNED PENALTY OF RS. 1,18,611/- OUGHT TO HAVE BE EN DELETED. 2. THE LEARNED CIT(A) HAS ERRED IN NOT APPRECIATING THE FACT THAT THOUGH THE SPECULATION PROFIT OF RS.5,54,284/- WAS NOT CONSIDERED IN THE COMPUTATION OF TOTAL INCOME THROU GH OVERSIGHT AND MISTAKE, THE SAME BEING OTHER WISE ELIGIBLE FOR SET-OFF AGAINST SPECULATION LOSS OF EARLIER YEARS, THERE WAS NEITHER ANY MALAFIDE I.T.A.NO. 3229 /AHD/2010 2 INTENTION NOR REVENUE EFFECT AND IT WAS MERELY A CASE OF A BONAFIDE MISTAKE. THIS BEING THE CASE, THE APPELLANT'S CASE DOES NOT FALL WITHIN THE SCOPE AND AMBIT OF PENAL PROVISIONS OF SECTION 271(L)(C) OF THE ACT AND AS A COROLLARY THE PENALTY OF RS.1,18611/- REQUIRES TO BE DELETED. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER, MODIFY OR DELETE ANY OF THE ABOVE GROUNDS AS WELL AS TO SUBMIT ADDIT IONAL GROUNDS AT THE TIME OF HEARING OF THE APPEAL. 3. THE BRIEF FACTS TILL THE STAGE OF IMPOSITION OF PENALTY BY THE A.O. U/S 271(1)(C) ARE NOTED BY THE LD. CIT(A) IN PAR 2. 1 OF HIS ORDER WHICH IS REPRODUCED BELOW: 2.1 IN THE PENALTY ORDER, THE AO HAS STATED THAT W HILE FINALIZING THE ASSESSMENT UNDER SECTION 143(3), AN ADDITION OF RS, 5,54,284/- WAS MADE IN RESPECT OF WHICH PENALTY PROCEEDINGS UN DER SECTION 271(L)(C) WERE INITIATED. THE ASSESSEE HAD EARNED T HIS SPECULATION PROFIT OF RS. 5,54,284/-, WHICH WAS NOT SHOWN IN TH E P&.L ACCOUNT BUT WAS CREDITED TO THE CAPITAL, ACCOUNT. IT WAS AL SO STATED BY THE AO THAT THE ASSESSEE HAD CLAIMED CARRIED FORWARD OF SPECULATION LOSS OF RS. 16,95,220/-PERTAINING TO THE ASSESSMENT YEAR'S 2000-01 AND 2001-02. IN THE ASSESSMENT ORDER, THE AO ADDED THE SPECULATION PROFIT AND DISALLOWED THE CLAIM OF CARR Y FORWARD OF SPECULATION LOSS IN VIEW OF THE AMENDMENT MADE IN T HE PROVISIONS OF SECTION 73 (4) WITH EFFECT FROM A Y 2006-07. THE CIT(A), VIDE ORDER DATED 23/06/2009 STATED THAT THE ADDITION WAS RIGHTLY MADE, BUT ALLOWED THE SET OFF OF CARRIED FORWARD OF SPECU LATION LOSSES AGAINST THIS SPECULATION INCOME WHICH WAS CONFIRMED BY THE CIT(A). IN VIEW OF THE FACT THAT THE CIT (A) HAD CO NFIRMED THE ADDITION OF SPECULATION PROFIT WHICH WAS NOT SHOWN FOR TAXATION BY THE ASSESSEE, THE AO ISSUED A SHOW CAUSE NOTICE AS TO WHY PENALTY BE 'NOT LEVIED ON THIS ISSUE. THE ASSESSEE REPLIED THAT THE OIT(A) HAS ALREADY ALLOWED SET OFF OF CARRIED FORWARD SPEC ULATION LOSS AGAINST THIS RECOGNITION PROFIT AND HENCE THERE IS NO CHANGE IN RESPECT FINAL TAXABLE INCOME. IN VIEW OF THIS REASO N, NO PENALTY SHOULD BE LEVIED. THE AO DID NOT ACCEPT THIS EXPLAN ATION AND STATED THAT THE ADDITION OF RS. 5,54,284/-WAS CORRE CTLY MADE AS THE ASSESSEE HAD NOT SHOWN THIS SPECULATION PROFIT IN T HE P&L ACCOUNT AND THE ADDITION HAS BEEN CONFIRMED BY THE CIT (A). THE AO I.T.A.NO. 3229 /AHD/2010 3 STATED THAT THE ASSESSEE HAD CONCEALED THE INCOME B Y NOT DISCLOSING THE SAME IN THE INCOME TAX RETURN. IN RESPECT OF TH IS SPECULATION PROFIT OF RS; 5,54,284/-. THE AO LEVIED THE PENALTY ON THIS ADDITION. 4. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE CIT(A) BUT WITHOUT SUCCESS AND NOW, THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 5. IT WAS SUBMITTED BY THE LD. A.R. HAT THERE WAS N O CONCEALMENT BECAUSE THE RECEIPT IN QUESTION WAS SHOWN BY THE AS SESSEE IN THE CAPITAL ACCOUNT AND THERE WAS NO MALA-FIDE INTENTION BECAUS E SET OFF OF BROUGHT FORWARD LOSS WAS AVAILABLE AND THEREFORE, PENALTY I S NOT JUSTIFIED. HE PLACED RELIANCE ON THE JUDGMENT OF HONBLE GUJARAT HIGH COURT RENDERED IN THE CASE OF DAHOD SAHKARI KHARID VECHAN SANGH LT D. VS CIT AS REPORTED IN 282 ITR 321 (GUJ.). 6. AS AGAINST THIS, LD. D.R. OF THE REVENUE SUPPORT ED THE ORDERS OF AUTHORITIES BELOW. HE ALSO SUBMITTED THAT EXPLANAT ION 4 TO SECTION 271(1)(C) IS APPLICABLE IN THE PRESENT CASE. HE AL SO SUBMITTED THAT ALTHOUGH THE INCOME REMAINED THE SAME BECAUSE OF TH E SET OFF OF BROUGHT FORWARD LOSSES BUT CARRY FORWARD OF LOSS WAS REDUCE D AND HENCE, THERE IS CONCEALMENT AND PENALTY IS RIGHTLY IMPOSED BY THE A .O. HE PLACED RELIANCE ON THE JUDGEMENT OF HONBLE DELHI HIGH COU RT RENDERED IN THE CASE OF ZOOM COMMUNICATIONS PVT. LTD. AS REPORTED I N 327 ITR 510 (DEL.). REGARDING THE JUDGEMENT OF HONBLE GUJARAT HIGH COURT CITED BY THE LD. A.R., IT WAS SUBMITTED THAT THE SAME IS NOT APPLICABLE IN THE PRESENT CASE BECAUSE THE FACTS ARE DIFFERENT. HE A LSO SUBMITTED THAT THE ASSESSEE DID NOT PROVE THAT THE MISTAKE IS BONA FID E. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHO RITIES BELOW. AS PER I.T.A.NO. 3229 /AHD/2010 4 THE FACTS OF THE PRESENT CASE, WE FIND THAT THE ASS ESSEE EARNED THIS INCOME OF RS.5,54,284/- ON ACCOUNT OF SPECULATING PROFIT A ND INSTEAD OF CREDITING THE SAME TO THE P & L ACCOUNT, THE SAME WAS CREDITE D BY THE ASSESSEE TO THE CAPITAL ACCOUNT AND IN THE COMPUTATION OF INCOM E ALSO, THIS INCOME WAS NOT OFFERED FOR TAXATION. REGARDING SET OFF OF BROUGHT FORWARD LOSSES, IT IS ADMITTED POSITION THAT HE ASSESSEE WAS ELIGIB LE FOR SET OFF OF BROUGHT FORWARD LOSSES AND AS PER THE APPEAL EFFECT AFTER O RDER PASSED BY THE A.O. ON 17.08.2009, SUCH SET OFF WAS ALLOWED ALSO BUT IT HAS RESULTED INTO REDUCTION IN CARRY FORWARD OF UNABSORBED SPECULATIO N LOSS OF RS.16,95,220/- AS CLAIMED BY THE ASSESSEE TO RS.11, 40,934/-. IN THE LIGHT OF THESE FACTS, NOW WE CONSIDER THE APPLICABILITY O F JUDGEMENT OF HONBLE GUJARAT HIGH COURT CITED BY THE LD. A.R. IN THAT C ASE, FACTS ARE THAT THE ASSESSEE DISCONTINUED THE INSURANCE POLICY FOR GROU P GRATUITY SCHEME AND SUCH DISCONTINUANCE OF INSURANCE POLICY FROM THE SC HEME, AN AMOUNT OF RS.68,332/- WAS RECEIVED BY THE ASSESSEE FROM THE I NSURANCE COMPANY BEING THE TOTAL PREMIUM PAID IN EARLIER YEARS. THE SAME WAS NOT OFFERED BY THE ASSESSEE AS TAXABLE INCOME IN THE YEAR OF RE CEIPT AND IT WAS HELD BY THE A.O. IN THAT CASE THAT THE AMOUNT OF PREMIUM PA ID IN EARLIER YEAR WAS TREATED AND ALLOWED AS TRADING LIABILITY AND SUBSEQ UENT RECEIPT OF RS.68,332/-WAS LIABLE TO BE TREATED AS PROFIT U/S 4 1(1) OF THE INCOME TAX ACT, 1961. UNDER THESE FACTS, ADDITION WAS MADE BY THE A.O. BY INVOKING THE PROVISIONS OF SECTION 41(1) OF THE INCOME TAX A CT, 1961. IN THAT CASE PENALTY WAS DELETED BY HONBLE GUJARAT HIGH COURT M AINLY ON THIS BASIS THAT THE TRIBUNAL FAILED TO TAKE INTO CONSIDERATION THE FINDINGS RECORDED BY LD. CIT(A) TO THE EFFECT THAT THIS WAS NOT A FIT CA SE FOR LEVY OF PENALTY FOR CONCEALMENT AS NO INDIVIDUAL MEMBER OF THE COOPERAT IVE SOCIETY COULD BE PERSONALLY INTERESTED IN CONCEALING THE INCOME AND FURNISHING INACCURATE I.T.A.NO. 3229 /AHD/2010 5 PARTICULARS. IN THE PRESENT CASE, THE ASSESSEE IS A HUF AND DEFINITELY, KARTA OF HUF WILL BE PERSONALLY BENEFITED BY NOT SH OWING SPECULATION PROFIT AS INCOME IN THE PRESENT YEAR. BECAUSE OF T HIS BASIC DIFFERENCE IN THE FACTS, THIS JUDGMENT OF HONBLE GUJARAT HIGH CO URT IS NOT APPLICABLE IN THE PRESENT CASE. 8. NOW, WE CONSIDER THE APPLICABILITY OF THE JUDGEM ENT OF HONBLE DELHI HIGH COURT RENDERED IN THE CASE OF ZOOM COMMU NICATIONS PVT. LTD. (SUPRA) ON WHICH RELIANCE HAS BEEN PLACED BY THE LD. D.R. IN THAT CASE, IT WAS HELD BY THE HONBLE DELHI HIGH COURT T HAT IN THE ABSENCE OF ASSESSEE COMPANY TELLING THE A.O. AS TO WHO COMMITT ED THE OVERSIGHT RESULTING IN FAILURE TO ADD THE AMOUNT IN QUESTION WHILE COMPUTING THE INCOME OF THE ASSESSEE AND UNDER WHAT CIRCUMSTANCES , THE OVERSIGHT OCCURRED AND WHY IT WAS NOT DETECTED BY THE PERSON WHO CHECKED INCOME TAX RETURN WHEN IT WAS FILED AND BY THE AUDITORS OF THE ASSESSEE COMPANY, IT CANNOT BE ACCEPTED THAT IT IS A BONA FIDE MISTA KE. ON PAGE 518 OF 327 ITR, IT IS ALSO OBSERVED BY THE HONBLE DELHI HIGH COURT THAT THE COURT CANNOT OVERLOOK THE FACTS THAT ONLY A SMALL PERCENT AGE OF INCOME TAX RETURNS ARE SELECTED FOR SCRUTINY AND IF THE ASSESS EE MAKES A CLAIM WHICH IS NOT ONLY INCORRECT IN LAW BUT IS ALSO WITHOUT AN Y BASIS AND THE EXPLANATION FURNISHED BY HIM FOR MAKING SUCH CLAIM IS NOT FOUND TO BE BONA FIDE, IT WOULD BE DIFFICULT TO SAY THAT HE WOU LD STILL NOT BE LIABLE TO PENALTY U/S 271(1)(C) OF THE INCOME TAX ACT, 1961. IN THE PRESENT CASE ALSO, THIS IS NOT EXPLAINED BY THE ASSESSEE AS TO W HO COMMITTED THE OVERSIGHT RESULTING IN FAILURE TO ADD THIS AMOUNT I N QUESTION AS INCOME IN THE P & L ACCOUNT AND IN THE COMPUTATION OF TOTAL I NCOME. IT IS ALSO NOT EXPLAINED AS TO HOW AND UNDER WHAT CIRCUMSTANCES, T HE OVERSIGHT OCCURRED AND WHY IT WAS NOT DETECTED BY THE PERSON WHO CHECKED THE I.T.A.NO. 3229 /AHD/2010 6 INCOME TAX RETURN WHEN IT WAS FILED. UNDER THESE F ACTS, WE FIND THAT THIS JUDGMENT OF HONBLE DELHI HIGH COURT IS SQUARELY AP PLICABLE IN THE PRESENT CASE AND BY RESPECTFULLY FOLLOWING THIS JUD GMENT OF HONBLE DELHI HIGH COURT, WE DECLINE TO INTERFERE IN THE OR DER OF LD. CIT(A). 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISS ED. 10. ORDER PRONOUNCED IN THE OPEN COURT ON 20 TH OCT., 2011. SD./- SD./- (T.K. SHARMA) (A. K. GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED : 20.10.2011 SP COPY OF THE ORDER FORWARDED TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT (APPEALS) 5. THE DR, AHMEDABAD BY ORDER 6. THE GUARD FILE AR,ITAT,AHMEDABAD 1. DATE OF DICTATION 18/10 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 19/10.OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P .S./P.S.19/10 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 20/10 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S.20/10 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 20/10/2011 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK .. 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER . 9. DATE OF DESPATCH OF THE ORDER. ..