DCIT 4(1), MUMBAI V. CLARIDGES INVESTMENTS AND FINANCE P.LTD, MUMBAI

ITA 410/MUM/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 92472 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 3 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-05-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 03-02-2015
• Assessment Year: 2003-2004
• Appeal Filed On: 14-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PREMANAND J
• Assessee Lawyers: SHRI
• Keywords: Speculation loss; Difference of opinion; Revised return
• Section: 143(3)

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL,MUMBAI - C BENCH , , BEFORE S/SH. I P BANSAL,JUDICIAL MEMBER & RAJENDRA,ACCOUNTANT MEMBER /. ITA NO. 410 /MUM/201 1 , / ASSESSMENT YEAR - 2003 - 04 ACIT - 4(1), 6 TH FLOOR ROOM NO.640, AAYKAR BHAVAN,M K MARG, MUMBAI - 20 . VS M/S. CLARIDGES INVESTMENTS AND FINANCE P. LTD. 107, DOCTOR CENTRE, 135, AUGUST KRANTI MAIDAN, KEMPS CORNER,MUMBAI - 400038 PAN:AAACC1607 M ( / APPELLANT ) ( / RESPONDENT ) / REVENUE BY : SHRI PREMANAND J. /ASSESSEE BY :SHRI PANKAJ R. TOPRANI & MS. KRUPA P. TOPRANI / DATE OF HEARING : 07 - 05 - 2015 / DATE OF PRONOUNCEMENT : 07 - 05 - 2015 , 1961 254 ( 1 ) ORDER U/S.254(1)OF THE INCOME - TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDER DT.20.10.2010 OF THE CIT(A) - 9,MUMBAI, A SSESS ING OFFICER (AO) HAS RAISED FOLLOWING GROUNDS OF APPEAL: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN CANCELLING THE PENALTY OF RS.7,45,180/ - LEVIED U/S.271(1)(C) OF THE I.T. ACT HOLDING THAT FURNISHING ITS RETURN OF INCOME THE ASSESSEE HAS NEITHER CONCEALED ITS INCOME NO R FURNISHED INAPPROPRIATE PARTICULARS OF INCOME AND MERE TREATMENT OF BUSINESS LOSS AS PECULATION LOSS BY A.O. DO NOT AUTOMATICALLY WARRANT THE INFERENCE OF CONCEALMENT OF INCOME WITHOUT APPRECIATING THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF DHARMENDRA TEXTILE PROCESSORS REPORTED IN 306 ITR 277 WHEREIN IT IS HELD THAT THE ELEMENT OF MENSREA IS NOT ESSENTIAL FOR LEVY OF PENALTY. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE IMPUGNED ORDER OF THE LD. CIT(A) IS CONTRARY TO LAWS TO BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. ASSESSEE - COMPANY, ENGAGED IN THE BUSINESS OF SHARE BROKING, FILED IT RETURN OF INCOME ON 01.12. 2003, DE CLARING LOSS OF RS.1.28 CRORES. LATER ON IT FILE D A REVISED RETURN ON 31.03.2005, DECLARING LOSS OF RS.1.17 CRORES. THE AO COMPLETED THE ASSESSMENT ON 28.02.2006, U NDER SECTION 143(3) OF THE ACT, ASSESSING THE TOTAL LOSS AT RS.50.33 LAKHS. 2. EFFECTIVE GROUND OF APPEAL IS ABOUT DELETION OF PENALTY, AMOUNTING TO RS.7.45 LAKHS. DU RING THE ASSESSMENT PROC EEDINGS, THE AO MADE ADDITION ON ACCOUNT OF SHARE TRADING LOSS DEEMED TO BE SPECULATION LOSS(20.27 LAKHS), SE B I FEE S(56.12 LAKHS),BROKERAGE INCOME( 1.16 LACS ) NON - PAYMENT OF SERVICE TAX( RS. 2 , 000) AND ADDITION AL DIVIDEND INCOME (RS.46078) .A G GRIEVED BY THE ORDE R OF THE AO, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE F IRST A PPELLATE A UTHORITY (FAA) WHO CONFIRMED THE ADDITIONS IN RESPECT OF SHARE TRADING LOSS AND EXPENSES ATTRIBUTABLE TO SUCH LOSSES. HE ALSO CONFIRMED THE ADDITION ON ACCOUNT OF SE BI FEES, BUT DIRECTED THE AO TO ALLOW THE SAME IN THE YEAR OF ACTUAL EXPENDITURE.BESIDES, THE FAA DELETED THE ADDITION IN RESPECT OF BROKERAGE INCOME AND DIRECTED THE AO TO VERIFY THE OTHER EXPENSES. THE ASSESSEE CHALLENGED THE ORDER OF ITA/ 410/ /MUM/ 11 ,AY.03 - 04,CIFPL 2 THE FAA BEFO RE THE TRIBUNAL. VID E ITS ORDER,DATED10.09.2009, THE TRIBUNAL RESTORED BACK THE MATTER TO THE FILE OF THE AO FOR FRESH ADJUDICATION. IN THE MEANWHILE, THE AO ISSUED A SHOW CAUSE NOTICE U/S.271(1)(C) OF THE ACT TO THE ASSESSEE ASKING IT TO EXPLAIN AS TO WHY PENALTY SHOULD NOT B E LEVIED FOR FILING IN ACCURATE PARTICULARS AND CONCEALING THE PARTICULARS OF INCOME. AFTER CONSIDERING SUBMISSION OF THE ASSESSEE THE AO LEVIED PENALTY OF RS.7,45,180/ - VIDE HIS ORDER DATED 31 ST MARCH 2009. 3. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE FAA AND CONTENDED THAT THE DISALLOWANCE MADE BY THE AO HAD CONVERTED THE BUSINESS LOSS INTO SPECULATIVE LOSS FOLLOWING THE PROVISION OF EXPLANATION TO SECTION 73 OF THE ACT, THAT THE ADDITION WERE MADE ON ACCOUNT OF APPLICATION OF DEEMING PROVISIONS AND NO T ON ACCOUNT OF ANY CONCEALMENT OF ANY PARTICULAR OF INCOME, THAT ASSESSEE HAD NOT SUPPRESSED ANY INCOME OR CLAIM ED ANY WRONG EXPENDITURE, THAT AT THE T IME OF FILING OF RETURN THE ASSESSEE HAD MENTIONED ABOUT THE DEALING WITH SHARES OF OTHER COMPANY, THAT THE AO HAD FOUND ABOUT THE LOSS FROM THE PROFIT AND LOSS ACCOUNT FILED BY THE A SSESSEE. THE ASSESSEE RELIED UPON THE JUDGMENT OF THE HONBLE SUPREME COURT DELIVERED IN THE CASE OF RELIANCE PETRO PRODUCTS LTD.(322ITR 158 ). IT WAS FURTHER ARGUED THAT THERE WAS NO CHANGE IN AMOUNT OF TOTAL INCOME WHICH WAS A LOSS , THAT MERELY A CHANGE OF TREATMENT OF LOSS DID NOT TANT AMOUNT TO CONCEALMENT OF INCOME/ FI LING OF INACCURATE PARTICULARS. ASSESSEE RELIED UPON CASES OF AURIC INVESTMEN TS AND SECURITIES LTD.(310ITR 121 )AND BHARTESH JAIN(323ITR 58 ) IN ITS SUPPORT. THE FAA CONSIDERED THE SUBMISSION OF THE ASSESSEE AND THE PENALTY ORDER OF THE AO. HE HELD THAT IN THE MATTER UNDER APPEAL SHARE TRADING LOSS WERE TREATED SPECULATIVE LOSSES, THAT ONLY HEAD OF INCOME HAS CHANGED, THAT ENTIRE FACTS WERE ON RECORD, DISALLOWANCE OF PROPORTIONATE EXPENSES COULD NOT BE BASIS FOR LEVYING PENALTY U/S.271(1)(C) OF THE ACT. REFERRING TO THE DECISION OF AURICH INVESTMENT AND SECURITIES LTD. (SUPRA)THE FAA DELETED THE PENALTY LEVIED BY THE AO. 4 . BEFORE US,DEPARTMENTAL REPRESENTATIVE(DR) RELIED UPON THE ORDER O F THE AO.AUTHORISED REPRESENTATIVE(AR) SUPPORTED THE ORDER OF THE FAA AND ARGUED THAT THE ASSESSEE HAD NOT CONCEALED ITS PARTICULARS OF INCOME, THAT THE AO WAS NOT JUSTIFIED LEVY IN PENALTY JUS T BECAUSE PARTICULAR ITEM OF INCOME WAS ASSESSED UNDER DIFFERENT HEAD OF INCOME. HE RELIED UPON THE CASE AURIC INVESTMENTS AND SECURITIES LTD. (SUPRA). 5 . WE HAVE HEARD THE RIVAL SUBMISSION AND PERUSED THE MATERIAL ON RECORD. WE FIND THE AO HAD LEVIED PENAL TY U / S . 271(1)(C) AS SPECULATIVE LOSS WAS ASSESSED UNDER THE HEAD BUSINESS LOSS. WE ARE OF OPINION THAT MERE CHANGE OF HEAD OF INCOME SHOULD NOT RESULT IN AUTOMAT IC LEVY OF CONCEALMENT PENALTY. THE DETAIL ABOUT THE SPECULATIVE LOSS WAS AVAILABLE ON THE RECO RD. THEREFORE, IT CANNOT BE HELD THAT ASSESSEE HAD FILED INACCURATE PECULIARS OF INCOME OR HAD CONCEAL ED THE PARTICULARS O F INCOME. EVEN IF A UNSUBSTANTIATED CLAIM IS MADE I N THE RETURN OF INCOME, IT CANNOT BE HELD THAT THE ASSESSEE IS LIABLE FOR LEVY OF PENALTY U/S.271(1)(C). DIFFERENCE OF OPINION BETWEEN THE AO AND THE ASSESSEE ABOUT HEAD OF INCOME UNDER WHICH PARTICULAR ITEM IS TO BE ASSESSE D WAS AND WOULD REMAIN A BONE OF CONTENTION BETWEEN THE AO AND THE ASSESSEE. BUT SUCH DIFFE RENCE S SHOULD NOT AND CANNOT RESULT INVOKING THE PENAL PROVISION OF CHAPTER XXI OF THE ACT. WE WOULD LIKE TO REFER TO THE JUDGMENT OF THE HONBLE DELHI HIGH COURT AURIC INVESTMENTS AND SECURITIES LTD. (SUPRA) RELIED UPON BY THE FAA IN THAT MATTER THE CLAIM OF BUSINESS LOSS WAS DISALLOWED AND IT WAS HELD THAT LOSS WAS TO BE ASSESSED UNDER THE HEAD SPECULATIVE LOSS. THE AO LEVIED PENALTY U/S.271(1)(C) FOR CONCEALMENT OF PARTICULARS OF INCOME. WHEN THE MATTER TRAVELED TO THE HONBLE HIGH COURT, IT DECIDED THE ISSUE AS UNDER: ITA/ 410/ /MUM/ 11 ,AY.03 - 04,CIFPL 3 DURING THE ASSESSMENT PROCEEDINGS FOR THE ASSESSMENT YEAR 2001 - 02 , THE ASSESSING OFFICER FOUND THAT THE LOSS CLAIMED BY THE ASSESSEE WAS SPECULATIVE IN NATURE TO BE ADJUSTED AGAINST SPECULATIVE INCOME ONLY AND AS THE INCOME WAS ASSESSED A T A LOSS, THE LOSS SHOWN BY THE ASSESSEE COULD NOT BE ADJUSTED. THEREFORE, THE ASSESSING OFFICER INITIATED PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE INCOME - TAX ACT, 1961, AND IMPOSED PENALTY. THE PENALTY WAS CANCELLED BY THE COMMISSIONER OF INCOME - TAX (APPEALS) AND THIS WAS UPHELD BY THE TRIBUNAL. . THERE WAS NOTHING ON RECORD TO SHOW THAT IN FURNISHING ITS RETURN OF INCOME, THE ASSESSEE HAD EITHER CONCEALED ITS INCOME OR HAD FURNISHED ANY INACCURATE PARTICULARS OF INCOME. THE MERE TREATMENT OF TH E BUSINESS LOSS AS SPECULATION LOSS BY THE ASSESSING OFFICER DID NOT AUTOMA TICALLY WARRANT THE INFERENCE OF CONCEALMENT OF INCOME. THE CANCELLATION OF PENALTY WAS VALID. RESPECTFULLY FOLLOWING THE ABOVE, WE DECIDE THE EFFECTIVE GROUND OF APPEAL AGAINST THE AO. IN THE RESULT, APPEAL FILED THE AO STANDS DISMISSED. . ORDER PRONOUNC ED IN THE OPEN COURT ON 7 TH , MAY ,2015. 7 , 2015 SD/ - SD/ - ( /I P BANSAL) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / MUMBAI, /DATE: 07 .0 5 .2015 PATEL. PS / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR C BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , / ITAT, MUMBAI.