ROSY BLUE (I) P.LTD, MUMBAI V. DCIT CEN CIR 46, MUMBAI

ITA 490/MUM/2014

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 2816 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-10-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 21-10-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 21-01-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: NITESH JOSHI SHRI P P BHANDARI
• Keywords: Revised return
• Section: 143(3); 32; 132

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 NO. 490/MUM/2014 ( / ASSESSMENT YEAR:2006-07 M/S. ROSY BLUE (INDIA) PVT. LTD., 1608/09, PRASAD CHAMBERS, OPERA HOUSE, MUMBAI-400 004 / VS. THE ACIT, CENTRAL CIRCLE-46 AAYAKAR BHAVAN, MUMBAI-400 020 ./ ./ PAN/GIR NO. : AAACR 2413B ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY: SHRI NITESH JOSHI SHRI P.P. BHANDARI / RESPONDENT BY: SHRI SANJEEV KASHYAP / DATE OF HEARING :21.10.2015 ! / DATE OF PRONOUNCEMENT :28.10.2015 '# / O R D E R PER N.K. BILLAIYA, AM: THIS APPEAL BY THE ASSESSEE IS PREFERRED AGAINST T HE ORDER OF THE LD. CIT(A)-38, MUMBAI DATED 26.12.2013 PERTAIN ING TO ASSESSMENT YEAR 2006-07. 2. THE SOLE GRIEVANCE OF THE ASSESSEE IS THAT THE L D. CIT(A) ERRED IN CONFIRMING THE LEVY OF PENALTY OF RS. 14 LAKHS U /S. 271(1)(C) OF THE ACT. ITA. NO. 490/M/2014 2 3. THE ROOTS FOR THE LEVY OF PENALTY LIE IN THE ASS ESSMENT ORDER DATED 29.12.2008 MADE U/S. 143(3) OF THE ACT. DURI NG THE COURSE OF THE SCRUTINY ASSESSMENT PROCEEDINGS, IT CAME TO THE NOTICE OF THE ASSESSING OFFICER THAT PURSUANT TO A SEARCH ACTION U/S. 32 OF THE ACT CONDUCTED IN COMMODITIES MARKET GROUP OF CASES ON 1 9.6.2007, THE ASSESSEE WAS FOUND TO BE ENGAGED IN LARGE NUMBER OF CLIENT CODE MODIFICATIONS. THE AO FURTHER FOUND THAT THE ASSES SEE HAS SHOWN ITS INABILITY TO SUBSTANTIATE THE LOSS INCURRED BY IT FOR CERTAIN TRANSACTIONS OF COMMODITY TRADING THROUGH MULTI CO MMODITY EXCHANGE (MCX) FOR WHICH THE ASSESSEE HAS OFFERED R S. 16 CRORES FOR A.Y. 2007-08. HOWEVER, THE ASSESSEE COULD NOT PROV IDE THE BASIS FOR COMPUTATION AND THE MODUS OPERANDI ADOPTING THE CAL CULATION OF LOSSES AND THE SAME TIME, THE ASSESSEE SUBMITTED TH AT ON HAVING RE- LOOK AT THE TRANSACTIONS OUT OF THE TOTAL LOSSES OF RS. 16 CRORES AN AMOUNT OF RS. 20,49,773/- FALLS IN THE PREVIOUS YEA R I.E. A.Y. 2006-07. THE AO NOT ONLY DISALLOWED RS. 20,49,773/- ON ACCOU NT OF LOSSES ON COMMODITY TRADING BUT ALSO INITIATED PENALTY PROCEE DINGS U/S. 271(1)(C) OF THE ACT FOR CONCEALING THE PARTICULARS OF INCOME AND FURNISHING INACCURATE PARTICULARS OF INCOME. 3.1. AS NO APPEAL WAS PREFERRED AGAINST THE ASSESSM ENT ORDER, THE AO PROCEEDED BY INITIATING PENALTY PROCEEDINGS U/S. 271(1)(C) OF THE ACT. ONCE AGAIN , THE ASSESSEE WAS ASKED TO FURNIS H THE DETAILS OF THE TRANSACTIONS IN RESPECT OF THE TRADES OF COMMODITY FUTURES IN MCX LTD. IN RESPONSE, THE ASSESSEE VIDE LETTER DATED 1 2.9.2007 STATED THAT WE HAD ENTERED INTO CERTAIN TRANSACTIONS OF COMMODI TY TRADING THROUGH MULTI COMMODITY EXCHANGE AND HAD INCURRED L OSSES. WE WILL NOT BE IN A POSITION TO SUBSTANTIATE BEFORE THE TAX AUTHORITIES THE ABOVE ITA. NO. 490/M/2014 3 REFERRED LOSSES. IN ORDER TO AVOID LITIGATION AND BUY PEACE WE HAVE EXPRESSED OUR WILLINGNESS TO PAY THE TAXES DUE THER EON. 3.2. THE ASSESSEE FURTHER CLAIMED THAT THOUGH THE T OTAL OFFER WAS OF RS. 16 CRORES SUBSEQUENTLY IT CAME TO THE NOTICE OF THE ASSESSEE THAT AN AMOUNT OF RS. 20,49,773/- FALLS IN THE ASSESSMEN T YEAR 2006-07. THE ASSESSEE STRONGLY CONTENDED THAT THIS AMOUNT HA S ALREADY BEEN OFFERED AND TAXED IN A.Y. 2007-08 AND THE SAME IS O NCE AGAIN TAXED IN A.Y 2006-07 THEREFORE THERE IS NO QUESTION OF CONCE ALING ANY PARTICULARS OF INCOME. THIS EXPLANATION OF THE ASS ESSEE DID NOT FIND ANY FAVOUR WITH THE AO. THE AO WAS OF THE FIRM BEL IEF THAT HAD THERE BEEN NO SEARCH, ASSESSEE WOULD HAVE CONCEALED THIS INCOME AND FURTHER HAD THERE BEEN NO SCRUTINY PROCEEDINGS, THE ASSESSEE WOULD NOT HAVE DISCLOSED THE TRUE INCOME. ON THE TAX SOU GHT TO BE EVADED AT RS. 6,89,954/-, THE AO LEVIED A PENALTY OF RS. 14 L AKHS, WHICH IS ROUGHLY MORE THAN 200% OF THE TAX SOUGHT TO BE EVAD ED. 4. AGGRIEVED BY THIS, THE ASSESSEE CARRIED THE MATT ER BEFORE THE LD. CIT(A) BUT WITHOUT ANY SUCCESS. 5. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE REIT ERATED WHAT HAS BEEN STATED BEFORE THE LOWER AUTHORITIES. IT IS TH E SAY OF THE LD. COUNSEL THAT THE TOTAL LOSS OF RS. 16 CRORES WHICH WAS OFFERED IN A.Y. 2007-08 WAS FINALLY ASSESSED AT RS. 17.66 CRORES WH ICH ALSO INCLUDED THE LOSS OF RS. 20,49,773/- WHICH PERTAINS TO THE Y EAR UNDER CONSIDERATION. IT IS THE SAY OF THE LD. COUNSEL TH AT THE ASSESSEE HAS INFACT BEING DOUBLE TAXED FOR THE SAME AMOUNT ONCE IN A.Y. 2007-08 AND ANOTHER IN A.Y. 2006-07. THE LD. COUNSEL CONTI NUED BY STATING THAT THOUGH THE ASSESSEE DID NOT PREFER ANY APPEAL AGAINST THE ITA. NO. 490/M/2014 4 ASSESSMENT ORDER BUT THAT CANNOT BE THE SOLE REASON FOR THE LEVY OF PENALTY U/S. 271(1)(C) OF THE ACT. ALTERNATIVELY, THE LD. COUNSEL STATED THAT THE LEVY OF PENALTY @ MORE THAN 200% IS UNREASONABLE AND MINIMUM PENALTY SHOULD BE LEVIED. 6. THE LD. DEPARTMENTAL REPRESENTATIVE STRONGLY REL IED UPON THE FINDINGS OF THE LOWER AUTHORITIES. 7. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE ORDERS OF THE AUTHORITIES BELOW. LET US SEE THE CONDUCT OF THE A SSESSEE. THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE YEAR UN DER CONSIDERATION ON 30.11.2006. THE RETURN WAS SELECTED FOR SCRUTIN Y ASSESSMENT ON 5.10.2007. A SEARCH OPERATION U/S. 132 OF THE ACT WAS CONDUCTED IN THE COMMODITY MARKET GROUP OF CASES ON 19.6.2007. IF THE ASSESSEE WAS SO HONEST IN ITS STATEMENT OF AFFAIRS, NOTHING PREVENTED IT FROM FILING A REVISED RETURN OF INCOME. SUBSEQUENT TO T HE SEARCH ON 19.6.2007, ON 12.9.2007 THE ASSESSEE FILED A LETTER TO THE ADDITIONAL DIRECTOR OF INVESTIGATION OFFERING LOSSES INCURRED BY IT BY TRADING IN MCX. ON 15.10.2007, THE ASSESSEE QUANTIFIED THE LO SSES AT RS. 16 CRORES WHICH WAS OFFERED FOR A.Y. 2007-08. THROUGH OUT THIS PROCESS, THE ASSESSEE DID NOT CARE TO FILE A REVISED RETURN OF INCOME FOR A.Y. 2006-07. IT WAS ONLY DURING THE COURSE OF THE ASSE SSMENT PROCEEDINGS, THE ASSESSEE CAME UP WITH THIS CLAIM O F LOSS OF RS. 20,49,773/- PERTAINS TO A.Y. 2006-07 WHICH IS WRONG LY OFFERED IN THE CONSOLIDATED FIGURE OF RS. 16 CRORES FOR A.Y. 2007- 08. 7.1. AT NO STAGE, THE ASSESSEE FILED THE DETAILS OF HOW THIS LOSS IS COMPUTED NOR THE TRANSACTIONS WERE GIVEN ON WHICH T HE ASSESSEE HAD INCURRED THESE LOSSES. THE ASSESSEE HAS SIMPLY STA TED THAT IT IS NOT IN ITA. NO. 490/M/2014 5 A POSITION TO SUBSTANTIATE BEFORE THE TAX AUTHORITI ES. THEREFORE, IN ORDER TO AVOID LITIGATION AND BUY PEACE, THE ASSESS EE AGREED TO PAY THE TAX. THIS EXPLANATION OF THE ASSESSEE IS NOT A CCEPTABLE AS THE CONDUCT OF THE ASSESSEE THROUGHOUT THE FACTUAL MATR IX DISCUSSED HEREINABOVE IS NOT ACCEPTABLE. 7.2. THE OFFER MADE BY THE ASSESSEE WAS SUBSEQUENT TO THE SEARCH WHICH ITSELF PROVES THAT HAD THERE BEEN NO SEARCH, THERE WOULD NEVER HAVE BEEN ANY OFFER. CONSIDERING THE FACTUAL MATRI X AND THE CONDUCT OF THE ASSESSEE, IN OUR CONSIDERED OPINION, THIS IS A FIT CASE FOR THE LEVY OF PENALTY U/S. 271(1)(C) OF THE ACT THOUGH AT THE SAME TIME, WE FIND THAT THE LEVY OF PENALTY @ MORE THAN 200% IS E XCESSIVE. WE, ACCORDINGLY MODIFY THE FINDINGS OF THE LD. CIT(A) A ND DIRECT THE AO TO LEVY THE PENALTY @ 100% OF THE TAX SOUGHT TO BE EVA DED. THE ASSESSEE WILL GET A RELIEF OF RS. 7,10,046/-. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. 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 ITA. NO. 490/M/2014 6 !' #' / 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