M/S. KRISHNA SOYA PRODUCTS PVT. LTD, Indore V. THE DCIT CIRCLE 1(1), Indore

ITA 496/IND/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 2185 (ITAT-INDORE)
• Duration Of Justice: 2 year(s) 2 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-09-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 08-06-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 03-07-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S S DESH
• Keywords: Bonafide belief; Speculation loss; Difference of opinion
• Section: 43(5)

Judgement Text

M/S. KRISHNA SOYA PRODUCTS PVT.LTD V DCIT(APPEALS-I ) ITA NO.496/IND/2015 A.Y. 2009-10 PAGE 1 OF 9 , , IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE .. , ..!,#$ # % BEFORE SHRI C.M. GARG, JUDICIAL MEMBER AND SHRI O.P.MEENA, ACCOUNTANT MEMBER M/S. KRISHNA SOYA PRODUCTS PVT.LTD, 108, KANCHAN BAGH, INDORE (M.P) PAN: AACCK 2102L V. DY. COMMISSIONER OF INCOME TAX, CIRCLE 1(1), INDORE & / APPELLANT ()& / RESPONDENT * !+,-$ / DATE OF HEARING 26.09.2017 ./012 -$ / DATE OF PRONOUNCEMENT 28.09.2017 ORDER PER O.P. MEENA, AM. THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF LD. COMMISSIONER OF INCOME-TAX (APPEALS)-1, INDORE [IN SHORT REFERRED TO AS THE CIT (A)] DATED 23.02.2015 PERTAINING TO ASSE SSMENT YEAR 2009-10. . . ./ I.T.A. NO.496/IND/2015 ! +2 / ASSESSMENT YEAR: 2009-10 &- # / APPELLANT BY SHRI S.S. DESHPANDE, CA ()&- # / RESPONDENT BY SHRI LALCHAND, CIT DR M/S. KRISHNA SOYA PRODUCTS PVT.LTD V DCIT(APPEALS-I ) ITA NO.496/IND/2015 A.Y. 2009-10 PAGE 2 OF 9 2. GROUND NO.1 AND 2 RELATES TO LEVY OF PENALTY OF RS.5,10,000/- U/S 271(1)(C) OF THE I.T. ACT. IGNORING THE FACT T HAT THOUGH THE APPEAL WAS NOT PREFERRED AGAINST THE ASSESSMENT ORD ER BUT THERE WAS DIFFERENCE OF OPINION DUE TO INTERPRETATION OF THE PROVISIONS OF SECTION 43(5) OF THE ACT, HENCE THESE ARE BEING CON SIDERED TOGETHER. 3. SHORT FACTS OF THE CASE ARE THAT THE ASSESSEE HAS FILED RETURN OF INCOME ON 24.09.2009 DISCLOSING TOTAL INCOME OF RS. 81,01,060/- WHICH WAS ASSESSED TO RS.98,05,880/- ON 29.12.11 BY DISALLOWING THE CLAIM OF LOSS OF RS.16,44,817/- ON FORWARD BOOK ING OF OIL CONTRACT WHICH WAS IN THE NATURE OF BUSINESS LOSS. HOWEVER, THE AO WAS OF THE VIEW THAT THE ASSESSEE HAD ENTERED INTO THE CONTRACT OF OIL IN THE MONTH OF JULY, 2008 AND MARCH, 2009 AND THERE WAS PROFIT IN SUCH FORWARD BOOKING CONTRACT IN JULY, 20 08 WHEREAS LOSS HAS OCCURRED IN MARCH, 2009. THE TRANSACTIONS OF M ARCH, 2009 WERE INTER SALE TRANSACTIONS I.E. SETTLED ON THE SA ME DAY THEREFORE THE SAME WERE THE OUTSIDE PURVIEW OF SECTION 43(5) OF THE ACT AND ACCORDINGLY HELD TO BE TREATED AS SPECULATIVE TRANS ACTIONS AND THEREFORE THE LOSS SO CLAIMED WAS TREATED AS SPECUL ATIVE LOSS ON WHICH PENALTY PROCEEDINGS U/S 271(1)(C ) OF THE ACT WERE SEPARATELY INITIATED. ACCORDINGLY NOTICE U/S 274 READ WITH SE CTION 271(1)(C ) WAS ISSUED ON 29.12.2011, FURTHER NOTICE DATED 30.0 5.2012 WAS SERVED ON THE ASSESSEE ON 06.06.2012 WHICH WAS REPL IED BY THE ASSESSEE ON 28.06.2012. THE SUBMISSIONS MADE BY TH E ASSESSEE ARE REPRODUCED IN THE PENALTY ORDER BY THE AO AND A FTER CONSIDERING THE SAME THE AO WAS OF THE VIEW THAT THE CONTENTION OF THE ASSESSEE THAT THE TRANSACTIONS WERE OF SPECULATIVE NATURE IS NOT CORRECT M/S. KRISHNA SOYA PRODUCTS PVT.LTD V DCIT(APPEALS-I ) ITA NO.496/IND/2015 A.Y. 2009-10 PAGE 3 OF 9 THEREFORE THE ASSESSEE HAS CLAIMED WRONG DEDUCTION ON ACCOUNT OF BUSINESS LOSS WHICH IS NOT ALLOWABLE U/S 43(5) OF T HE ACT, HENCE THERE CANNOT BE TWO OPINION AS TO THE NATURE OF TRA NSACTIONS, THEREFORE, THE AO LEVIED PENALTY OF RS.5,10,000/- U /S 271(1)(C ) OF THE ACT BEING MINIMUM PENALTY. 4. BEING AGGRIEVED, THE ASSESSEE WENT IN THE APPEAL BE FORE CIT(A) WHERE SAME TYPE OF SUBMISSIONS WERE REPEATED AS MAD E BEFORE THE AO. HOWEVER, THE CIT(A) WAS OF THE VIEW THE TRANSA CTIONS TOOK PLACE IN MARCH, 2009 WITHOUT ACTUAL DELIVERY OF OIL WERE IN THE NATURE OF SPECULATIVE TRANSACTIONS AGAINST WHICH NO APPEAL HA S BEEN FILED BY THE ASSESSEE AND ASSESSMENT ORDER HAS BECOME FINAL, THEREFORE THERE WAS NO QUESTION OF ANY TWO VIEWS ON SUCH ISS UE, HENCE THE AO WAS CORRECT IN LEVY OF PENALTY ON ACCOUNT OF FAL SE EXEMPTIONS/DEDUCTION CLAIMED IN THE COMPUTATION OF INCOME. 5. BEING AGGRIEVED THE ASSESSEE FILED THIS APPEAL BEF ORE US. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE LOS S IN RESPECT OF TRADING OF COMMODITY EXCHANGE WAS BUSINESS LOSS BUT IT WAS HELD TO BE SPECULATIVE LOSS WITHIN THE MEANING OF SECTION 4 3(5) OF THE INCOME TAX ACT BY THE AO, BECAUSE SOME OF THE TRANS ACTIONS WERE INTRA DAY TRANSACTIONS, HOWEVER, WHILE PASSING THE ASSESSMENT ORDER THE AO DID NOT DOUBT THE GENUINENESS OF THE T RANSACTIONS BUT TREATED IT TO BE A SPECULATIVE TRANSACTIONS AND ALL OWED THE CARRY FORWARD OF LOSS TO BE ALLOWED IN THE SUBSEQUENT YEA R. HE HAS M/S. KRISHNA SOYA PRODUCTS PVT.LTD V DCIT(APPEALS-I ) ITA NO.496/IND/2015 A.Y. 2009-10 PAGE 4 OF 9 MERELY TRANSFERRED THE LOSS FROM ONE HEAD TO ANOTHE R. THE APPEAL WAS NOT FILED BECAUSE OF THE FACT THAT THESE LOSS W OULD HAVE BEEN ALLOWED IN THE SUBSEQUENT YEAR AGAINST THE DERIVATI VE PROFITS. HOWEVER, THE AO HAS NOT VERIFIED WHETHER THE PENALT Y LEVIED ON ACCOUNT OF CONCEALMENT OR ON FURNISHING OF IN ACCUR ATE PARTICULARS. THE ASSESSEE HAS NEITHER CONCEALED ANY INCOME NOR H AVE FURNISHED ANY INACCURATE PARTICULARS OF INCOME, THE TREATMENT OF TRANSACTIONS WHICH IS A MATTER OF INTERPRETATION OF SECTION 43(5 ) OF THE ACT AND IS DEBATABLE SO FAR AS APPLICABILITY OF PROVISION OF S ECTION 43(5) OF THE ACT, THERE BEING DIFFERENCE OF OPINION, NO PENALTY U/S 271(1)(C ) OF THE ACT COULD BE LEVIED, WHEN THERE WAS FULL AND TR UE DISCLOSURE OF ENTIRE FACTS AND SUCH A DISCLOSURE OF ENTIRE FACTS AND WAS ALSO SUPPORTED AND EXPLAINED BY THE DOCUMENTARY EVIDENCE . THE LD. COUNSEL HAS ALSO PLACED RELIANCE IN THE CASE OF JAG ADISH R. ACHARYA V. ACIT, THE ITAT, AHMADABAD IN ITA NO.160/AHD/2013 WHEREIN IT WAS HELD THAT IT CANNOT BE SAID THAT THE ASSESSEES BONAFIDE BELIEF WAS MISPLACED THAT MCS WAS A RECOGNIZED STOCK EXCHA NGE WITHIN THE MEANING OF CLAUSE (3) IN SUB SECTION (5) OF SEC TION 43, WE FURTHER FIND THAT THE ASSESSING OFFICER HAS TREATED THE BUS INESS LOSS CLAIMED BY THE ASSESSEE AS SPECULATIVE LOSS AND SIM PLY CARRY M/S. KRISHNA SOYA PRODUCTS PVT.LTD V DCIT(APPEALS-I ) ITA NO.496/IND/2015 A.Y. 2009-10 PAGE 5 OF 9 FORWARD IT TO BE SET OFF IN FUTURE IN VIEW OF ITS ONLY CHANGE OF INCOME FROM ONE HEAD TO ANOTHER HEAD. THEREFORE THE TRIBU NAL HAS HELD THAT IT WOULD NOT BE A FIT CASE FOR LEVYING PENALTY U/S 271(1)(C ). THE LD.AR FURTHER RELIED IN THE CASE OF CIT V AURICA IN VESTMENT AND SECURITIES LTD (2009) 310 ITR 121 (DEL) WHEREIN IT WAS HELD THAT ALL THE REQUISITE INFORMATION REQUIRED BY THE AO WERE F URNISHED BY THE ASSESSEE AND THERE WAS NOTHING ON RECORD TO SHOW TH AT IN FURNISHING ITS RETURN OF INCOME THE ASSESSEE HAS NO T CONCEALED HIS INCOME OR HAS FURNISHED ANY PARTICULARS OF INCOME. THE MERE TREATMENT OF THE BUSINESS LOSS AS A SPECULATION LOS S BY THE AO DOES NOT AUTOMATICALLY WARRANT ANY CONCEALMENT OF INCOME AND PARTICULARS. SIMILARLY IN THE CASE OF CIT V NAVINC HANDRA & CO. (2014) 42 TAXMANN.COM 28 (GUJ) IT WAS HELD THAT WHE RE THE ASSESSEE TREATED THE LOSS FROM DERIVATIVE TRANSACTI ONS AS NORMAL BUSINESS LOSS, THE AO TREATED IT AS SPECULATIVE IN NATURE AND THEREFORE DISALLOWED THE SAME. PENALTY U/S 271(1)(C ) COULD NOT BE LEVIED AS THERE WERE DIVERSION OF RULES OF THE TRI BUNAL. SIMILARLY THE LD. COUNSEL FURTHER RELIED IN THE CASE OF CIT V OSCAR UDYOG LTD (2014) 42 TAXMANN.COM 258 (KAR) WHEREIN THE CLAIM M ADE BY THE ASSESSEE U/S 80I WAS LEGAL AND VALID. SUBJECT TO VE RIFICATION, M/S. KRISHNA SOYA PRODUCTS PVT.LTD V DCIT(APPEALS-I ) ITA NO.496/IND/2015 A.Y. 2009-10 PAGE 6 OF 9 THEREFORE, IT CANNOT BE SAID THAT THE ASSESSEE DELI BERATELY CLAIMED DEDUCTION AND THAT THERE WAS DISHONEST AND INTENTIO N IN THE PART OF THE ASSESEE FOR CLAIMING DEDUCTION AND THUS PENALTY COULD NOT BE IMPOSED FOR THE SAME. AT LAST THE LD. COUNSEL PL ACED RELIANCE ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE O F CIT V RELIANCE PETRO PRODUCTS PVT. LTD (2010) 322 ITR 158 (SC) WHE REIN IT WAS HELD THAT MERE MAKING OF A CLAIM WHICH IS NOT SUSTAINABL E IN LAW, WILL NOT AMOUNTING TO FURNISHING INACCURATE PARTICULARS OF INCOME. 6. ON THE OTHER HAND THE LD.CIT (DR) RELIED ON THE AU THORITIES BELOW. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS OF BOTH THE PA RTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE PERUS AL OF THE ASSESSMENT ORDER AND THE PENALTY ORDER REVEALS THAT THE AO HAS REJECTED THE CONTENTION OF THE ASSESSEE THAT TRANS ACTIONS ENTERED INTO IN RESPECT OF SOYA OIL IN THE COURSE OF ITS BU SINESS TO GUARD AGAINST LOSS TO FUTURE FLUCTUATION IN RESPECT OF IT S CONTRACT FOR ACTUAL DELIVERY FOR HOLDING OF STOCK OF GOODS MANUFACTURED BY ONE MORE IN THE NATURE OF SPECULATIVE TRANSACTION. THEREFORE T HE BUSINESS LOSS CLAIMED WAS DISALLOWED BY THE A.O AND TREATING THE SAME AS SPECULATIVE TRANSACTION U/S 43(5) OF THE ACT. THUS , THE PERUSAL OF THE ASSESSMENT ORDER REVEALS THAT THE AO HAS MADE D ISALLOWANCE OF SPECULATION LOSS ON THE BASIS OF FACTS AS DISCLOSED BY THE ASSESSEE IN M/S. KRISHNA SOYA PRODUCTS PVT.LTD V DCIT(APPEALS-I ) ITA NO.496/IND/2015 A.Y. 2009-10 PAGE 7 OF 9 THE RETURN OF INCOME AND ALSO DURING THE ASSESSMENT PROCEEDINGS. WE FIND THAT THE ASSESSEE HAS FURNISHED ALL RELEVAN T FACTS AND MERELY BECAUSE THE AO HAS CHANGED THE HEAD OF LOSS FROM BUSINESS LOSS TO SPECULATIVE LOSS AND ALLOWED TO CARRY FORWA RD OF THE SAME THE PENALTY U/S 271(1)(C ) COULD NOT BE LEVIED. WHE RE THE EXPLANATION IS BONAFIDE AND ALL THE FACTS RELATING TO THE SAME HAVE BEEN DISCLOSED THEN THERE IS NO CASE OF LEVY OF PEN ALTY. THE FINDINGS RECORDED IN THE ASSESSMENT ORDER IS NOT CONCLUSIVE FOR DECIDING THE IMPOSITION OF PENALTY AS IT HAS ONLY A PERSUASIVE VALUE AND NON FILING OF APPEAL AGAINST THE SAID DISALLOWANCE DOES NOT MEAN THAT THE PENALTY HAS TO BE IMPOSED AUTOMATICALLY. IT IS TRITE LAW THAT PENALTY PROCEEDINGS ARE DISTINCT AND SEPARATE PROCE EDINGS FROM ASSESSMENT PROCEEDINGS. IT IS SETTLED LAW THAT WHE N THE ISSUE IS DEBATABLE, THEN THE PROVISIONS OF PENALTY U/S 271(1 )(C ) IS NOT ATTRACTED, BECAUSE MENSERA IS NOT ESTABLISHED AGAIN ST THE ASSESSEE. THE LD. COUNSEL HAS PLACED RELIANCE ON THE DECISION IN THE CASE OF CIT V NAVICHANDRA & CO (2014) 42 TAXMANN.COM 28 (GU J) WHEREIN WHILE SUBMITTING THE RETURN OF INCOME, THE ASSESSEE TREATED LOSS FROM DERIVATIVE TRANSACTION AS NORMAL BUSINESS LOSS , WHEREAS THE AO DURING THE ASSESSMENT PROCEEDINGS TREATED THE SA ME AS SPECULATIVE NATURE AND DISALLOWED THE SAME AND CONS EQUENTLY INITIATED PENALTY PROCEEDINGS U/S 271(1)(C) AND THE SAME WAS DELETED BY THE CIT(A)ON THE GROUND THAT IT WAS A BO NAFIDE CLAIM ON THE PART OF THE ASSESSEE, CONSIDERING THESE FACTS, THE HONBLE HIGH COURT HAS HELD THAT SINCE ALL RELEVANT PARTICULARS IN RESPECT OF LOSS WERE CORRECT AND LAW IN RESPECT OF SAID ITEMS WAS N OT VERY CLEAR M/S. KRISHNA SOYA PRODUCTS PVT.LTD V DCIT(APPEALS-I ) ITA NO.496/IND/2015 A.Y. 2009-10 PAGE 8 OF 9 BECAUSE THERE WAS DIVERGENT VIEWS OF THE TRIBUNALS AT RELEVANT TIME AND THEREFORE NO INTERFERENCE OF IMPUGNED ORDER WAS CALLED FOR AND THE PENALTY IS RIGHTLY DELETED BY THE CIT(A) AND CO NFIRMED BY THE ITAT. SINCE THE FACTS OF THE PRESENT CASE ARE SIMI LAR TO THAT CASE, THE RATIO OF THE SAID DECISION IS SQUARELY APPLICA BLE IN THE CASE OF THE ASSESSEE. FURTHER, THE ASSESSEE HAS RELIED IN THE CASE OF JAGDISH R. ACHARYA V CIT 160/(AHD)/2013, CO-ORDINAT E BENCH OF AHMADABAD TRIBUNAL, WHEREIN THE EXPLANATION OFFERED REGARDING SPECULATION LOSS WAS FOUND TO BE ONLY THE CHANGE OF INCOME FROM ONE HEAD TO ANOTHER HEAD AND WHERE THE ASSESSEE HAS DISCLOSED ALL THE MATERIAL FACT AND THE PENALTY U/S 271(1)(C ) OF THE ACT WAS NOT TO BE LEVIED. SIMILARLY DECISIONS OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT V AURICA INVESTMENT & SECURITIES LTD (S UPRA) AND CIT V OSCAR UDYOG LTD OF HONBLE COURT OF KARNATAKA (SUPR A) ALSO SUPPORTS THE CASE OF THE ASSESSEE. THE ASSESSEE HAS ALSO RELIED IN THE CASE OF CIT V SPIC STECH PVT. LTD (2004) 32 ITC 244 (MP) WHICH ALSO SUPPORTS THE CASE OF THE ASSESSEE. THEREFORE W E ARE OF THE CONSIDERED VIEW THAT THE PENALTY IS NOT SUSTAINABLE IN THE LAW IN THE LIGHT OF RATIO LAID DOWN BY SUPREME COURT IN THE CA SE OF CIT V RELIANCE PETRO PRODUCTS PVT. LTD (2010) 322 ITR 158 (SC)/189 TAXMANN 322 (SC) WHEREIN IT WAS HELD THAT MERELY BE CAUSE THE ASSESSEE HAS CLAIMED THE EXPENDITURE, WHICH CLAIM W AS NOT ACCEPTED BY THE REVENUE, THE PENALTY U/S 271(1) (C ) OF THE ACT CANNOT BE ATTRACTED. HAVING CONSIDERED THE ABOVE F ACTS AND JUDICIAL PRONOUNCEMENTS, THE PENALTY LEVIED AT RS.5,10,000/- U/S 271(1)(C ) M/S. KRISHNA SOYA PRODUCTS PVT.LTD V DCIT(APPEALS-I ) ITA NO.496/IND/2015 A.Y. 2009-10 PAGE 9 OF 9 OF THE ACT IS THEREFORE DELETED . THE GROUND NO.1 & 2 OF THE APPEAL ARE THEREFORE ALLOWED . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS STAND ALLOWED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 28.9.2017 . SD/- SD/- ( C.M. GARG) (O.P. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER / DATED : 28 TH SEPTEMBER, 2017 COPY TO: ASSESSEE/AO/PR. CIT/ CIT (A)/ITAT (DR)/GUA RD FILE. BY ORDER ASSISTANT REGISTRAR, INDORE