Diligent Services (P) Ltd., Delhi V. ACIT, New Delhi

ITA 510/DEL/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 81847 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 8 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-10-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 12-08-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 01-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHIMA NEB
• Assessee Lawyers: AJAY VOH RA GAURAV JAIN
• Keywords: Business income; Speculation loss
• Section: 14A

Judgement Text

ITA NO. 510/DEL/2012 ASSTT.YEAR: 2006-07 PG. 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH `B NEW DELHI BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT AND SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER I.T.A.NO.510/DEL/2012 ASSESSMENT YEAR : 2006-07 DILIGENT SERVICES (P) LTD., VS ACIT, CIRCLE 10(1), 201, S-524, AGARWAL COMPLEX, NEW DELHI . VIKAS MARG, SHAKARPUR, DELHI-110092 (PAN: AAACD4289R) (APPELLANT) (RESPONDENT) APPELLANT BY: S/SHRI AJAY VOH RA, GAURAV JAIN, ADV. RESPONDENT BY : MISS ASHIMA NEB, SR.DR O R D E R PER CHANDRA MOHAN GARG, JUDICIAL MEMBER THIS APPEAL HAS BEEN PREFERRED BY THE ASSESSEE AGAI NST THE ORDER OF CIT(A)-XVIII, NEW DELHI DATED 21.11.2011 IN APPEAL NO.55/10-11 FOR AY 2006-07 BY WHICH THE CIT(A) UPHELD THE PENALTY ORDE R DATED 30.03.2010 PASSED U/S 271(1)(C) OF THE INCOME TAX ACT, 1961. 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS IN THI S APPEAL:- 1. THAT THE CIT(A) ERRED ON FACTS AND IN LAW IN UPHOLDING THE LEVY OF PENALTY UNDER SECTION 271 (1) ( C) OF THE ACT HOLDING THAT THE APPELLANT HAS FURNISHED INACCU RATE PARTICULARS ON INCOME. ITA NO. 510/DEL/2012 ASSTT.YEAR: 2006-07 PG. 2 2. WITHOUT PREJUDICE TO GROUND NO 1, THAT CIT(A) ERRED IN FACTS AND IN LAW IN UPHOLDING THE QUANTUM OF PENALTY OVERLOOKING THE FACT THAT NO TAX COULD HAVE BEEN EV ADED ON FOLLOWING ITEMS: A) RETURNED TAX B) AMOUNT OF ALLOWANCE OF INTEREST AND OTHER EXPENS ES PROPORTIONATE TO EARNING OF INCOME ASSESSED AS BUSI NESS INCOME. C) REBATE U/S 88E ON SECURITIES TRANSACTION TAX (STT) WHICH WAS ELIGIBLE FOR DEDUCTION. 3. BRIEFLY STATED THE FACTS GIVING RISE TO THIS APP EAL ARE THAT THE AO LEVIED PENALTY OF RS.37,11,280/- AT MINIMUM RATE, TAKING T AX SOUGHT TO BE EVADED AT THE SAME AMOUNT. DURING QUANTUM PROCEEDINGS, THE AO MA DE ADDITIONS ON TWO COUNTS. THE FIRST DISALLOWANCE RELATES TO DISALLOW ANCE OF EXEMPTION U/S 10(38) OF THE ACT ON AN AMOUNT OF RS.53,61,68,729/- WHICH HAS BEEN SHOWN AS LONG TERM CAPITAL GAIN (LTCG) BY THE ASSESSEE BUT THE AO TREATED THE SAME AS BUSINESS INCOME. THE AO ALSO TREATED AN AMOUNT OF RS. 1,10,25,787/- SHOWN AS SHORT TERM CAPITAL GAIN (STCG) WHICH WAS ALSO TREA TED AS BUSINESS INCOME BY THE AO. THE SECOND ISSUE WAS PERTAINING TO DISALLO WANCE OF RS. 10 LAKH U/S 14A OF THE ACT IN THE CONTEXT OF EARNING EXEMPT INC OME. THE AO INITIATED PENALTY PROCEEDINGS AND LEVIED PENALTY OF RS. 37,11 ,280/- U/S 271(1)(C) OF THE ACT. THE AGGRIEVED ASSESSEE PREFERRED AN APPEAL BU T REMAINED EMPTY HANDED AS THE APPEAL WAS DISMISSED BY THE CIT(A) BY PASSING T HE IMPUGNED ORDER. NOW, ITA NO. 510/DEL/2012 ASSTT.YEAR: 2006-07 PG. 3 THE ASSESSEE HAS PREFERRED THIS SECOND APPEAL BEFOR E THE TRIBUNAL WITH THE GROUNDS AS REPRODUCED HEREINABOVE. 4. WE HAVE HEARD ARGUMENTS OF BOTH THE SIDES AND CA REFULLY PERUSED THE RELEVANT MATERIAL PLACED ON RECORD. LD. COUNSEL FO R THE ASSESSEE HAS DRAWN OUR ATTENTION TOWARDS ORDER OF ITAT DELHI B BENCH DAT ED 6.1.2012 IN ASSESSEES OWN CASE I.E. ITA NO. 3299/DEL/2009 FOR AY 2006-07 WHEREIN THE ORDER OF THE CIT(A) IN QUANTUM PROCEEDINGS HAS BEEN UPHELD BY CO NFIRMING THE ACTION OF THE AO WHICH TREATED LONG TERM CAPITAL GAIN AND SHORT T ERM CAPITAL GAIN AS BUSINESS INCOME OF THE ASSESSEE. LD. COUNSEL PLACED HIS REL IANCE ON THE RECENT DECISION OF HONBLE JURISDICTIONAL HIGH COURT OF DELHI IN THE C ASE OF CIT VS AMIT JAIN (2013) 351 ITR 74 (DEL) WHEREIN IT WAS HELD THAT THE AMOUNT IN QUESTION WHICH FORMS THE BASIS FOR THE AO TO LEVY THE PENALT Y WAS IN FACT TRUTHFULLY REPORTED IN THE RETURN OF INCOME OF THE ASSESSEE. THEIR LORDSHIPS FURTHER HELD THAT IN VIEW OF THESE CIRCUMSTANCES, THE AO CHOSE T O TREAT THE INCOME UNDER SOME OTHER HEAD CANNOT CHARACTERISE THE PARTICULARS REPORTED IN THE RETURN AS INACCURATE PARTICULARS OR AS CONCEALMENT OR SUPPRES SION OF FACTS. FINALLY, IN THIS CASE OF AMIT JAIN (SUPRA), IT WAS HELD THAT WHEN AM OUNT OF INCOME IS REPORTED IN THE RETURNS AND THE AO HAS REPORTED THE SAME IN THE RETURN OF INCOME UNDER A PARTICULAR HEAD AND AO IS TREATING THE SAME INCOME UNDER SOME OTHER HEAD, IT CANNOT BE SAID TO BE FURNISHING OF INACCURATE PARTI CULARS AND PENALTY IS NOT LEVIABLE IN THIS SITUATION. ITA NO. 510/DEL/2012 ASSTT.YEAR: 2006-07 PG. 4 5. LD. DR SUPPORTED THE ORDERS OF THE AUTHORITIES B ELOW AND SUBMITTED THAT THE ASSESSEE HAS CONCEALED PARTICULARS OF ITS INCOM E AND HAS FURNISHED WRONG PARTICULARS OF ITS INCOME, THEREFORE, THE AO WAS RI GHT IN LEVYING PENALTY WHICH WAS UPHELD BY THE CIT(A) ON JUSTIFIED REASONS. 6. ON CAREFUL CONSIDERATION OF ABOVE RIVAL CONTENTI ONS AND SUBMISSIONS, AT THE OUTSET, WE OBSERVE THAT THE ADDITIONS MADE BY T HE AO TREATING THE LONG TERM CAPITAL GAIN AND SHORT TERM CAPITAL GAIN AS BUSINES S INCOME HAS BEEN UPHELD BY THE TRIBUNAL IN ITS ORDER DATED 6.1.2012 (SUPRA). THE RELEVANT OPERATIVE PARAGRAPH NO. 7.4 OF THE TRIBUNAL READS AS UNDER:- 7.4 AS REGARDS SHORT TERM CAPITAL GAIN MADE BY THE ASSESSEE, LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS GIVEN A FINDING THAT EVEN THOUGH ALL THE SHARES HAVE BEEN HELD AS INVESTMENT IN THE BALANCE SHEET, THERE WERE A LARGE NUMBER OF SHARES TRANSACTED RELATING TO A VARIETY OF SHARES W HEREIN THE FREQUENCY OF TRANSACTIONS IS CLEARLY REFLECTED. IT WAS FURTHER FOUND THAT THERE ARE MANY INSTANCES WHERE THE HOLDI NG PERIOD OF SHARES IS ALSO VERY SHORT AND IT CLEARLY INDICATES THE INTENTION OF THE ASSESSEE TO EARN SHORT TERM PROFIT BY PURCHASIN G AND SELLING OF SHARES IN THE MARKET. IN THIS REGARD, CERTAIN SA MPLES TRANSACTION AS UNDER:- NAME OF THE COMPANY DATE OF PURCHASE OF SHARES DATE OF SALE OF SHARES TNPL SEPTEMBER, 2005 OCTOBER, 2005 RAJAPAMIL SEPTEMBER, 2005 OCTOBER, 2005 PATEL ENGINEERING JULY, 2005 DECEMBER, 2005 MADRAS CEN SEPTEMBER, 2005 SEPTEMBER, 2005 MADRAS CEN SEPTEMBER, 2005 OCTOBER, 2005 JINDAL POLY SEPTEMBER, 2005 OCTOBER, 2005 GULF OIL DECEMBER, 2005 JANUARY, 2006 IDFC SEPTEMBER, 2005 NOVEMBER, 2005 IFSI SEPTEMBER, 2005 MARCH, 2006 ITA NO. 510/DEL/2012 ASSTT.YEAR: 2006-07 PG. 5 THE ABOVE CLEARLY INDICATE THAT THESE SHARES WERE H ELD WITH THE INTENTION OF EARNING PROFITS AND NOT EARNI NG DIVIDEND. THUS, IT IS FOUND THAT WITH RESPECT TO THESE SHARES TRANSACTION, THE TRANSACTIONS WERE REGULARLY ENTERED DURING THE YEAR; PURCHASE AND SALE OF SHARES WERE CONTINUOUS; HOLDIN G PERIOD WAS VERY SHORT; CIRCUMSTANCES CLEARLY INDICATE THAT THE INTENTION OF THE ASSESSEE WAS NOT TO EARN THE DIVIDEND BUT TO EARN PROFIT ON SALE AND PURCHASE OF SHARES. THE ASSESSEE HAS AL SO SHOWN SPECULATION LOSS WHICH INDICATE THAT SHARE TRANSACT IONS IN THE NATURE OF BUSINESS WERE ALSO BEING CARRIED OUT BY T HE ASSESSEE. LD. COMMISSIONER OF INCOME TAX (APPEALS) IS CORRECT IN HOLDING THAT WHENEVER ANY INVESTMENT IS MADE BY A P ERSON, A REASONABLE TIMEFRAME HAS TO BE KEPT IN MIND BEFORE THE SHARES ARE SOLD, UNLESS THERE ARE CERTAIN EXCEPTIONAL CIRC UMSTANCES. IN THE PRESENT CASE, THE SHARES HAVE BEEN CLAIMED TO B E SHOWN AS INVESTMENT HAVE NOT BEEN HELD AS INVESTMENT WITH TH E INTENTION OF EARNING DIVIDENDS AND THEREFORE, MERELY BECAUSE THEY HAVE BEEN SHOWN AS INVESTMENT IN THE BALANCE SHEET DOES NOT STRENGTHEN THEIR CLAIM THAT SALE OF THESE SHARES SH OULD BE TREATED AS CAPITAL GAIN AND NOT BUSINESS INCOME. TH E FACTS CLEARLY INDICATE THAT KEEPING IN VIEW OF THE FREQUE NCY OF TRANSACTION, INTENTION OF THE ASSESSEE TO EARN PROF ITS AS WELL AS MOST OF THESE SHARES HAVING BEEN HELD IN A SEPARATE DEMAT ACCOUNT, IS POINTING TOWARDS THE FACT THAT TO THE E XTENT OF THESE SHARES THE ASSESSEE WAS CARRYING OUT BUSINESS TRANS ACTIONS. THUS, WE AGREE WITH THE FINDING THAT LD. COMMISSION ER OF INCOME TAX (APPEALS) WITH REGARD TO THESE SHARES WH ICH HAVE BEEN SHOWN AS SHORT TERM CAPITAL GAIN, THESE TRANSA CTIONS CANNOT BE TREATED AS SHORT TERM CAPITAL GAINS AND H AVE TO BE CONSIDERED AS BUSINESS INCOME OF THE ASSESSEE. THER EFORE, WE UPHOLD THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ON THE ISSUE OF LONG TERM CAPITAL GAIN AN D SHORT TERM CAPITAL GAIN. THE LONG TERM CAPITAL GAIN IS TO BE H ELD AS LONG TERM CAPITAL GAIN AND SHORT TERM CAPITAL GAIN IS TO BE HELD AS BUSINESS INCOME. 7. IN VIEW OF ABOVE, WE TAKE COGNIZANCE OF THE RECE NT DECISION OF JURISDICTIONAL HIGH COURT OF DELHI IN THE CASE OF A MIT JAIN (SUPRA) WHEREIN IT WAS HELD THUS:- ITA NO. 510/DEL/2012 ASSTT.YEAR: 2006-07 PG. 6 3. THIS COURT NOTICES THAT THE TRIBUNAL WHILE UPHOLDING THE ORDER OF THE APPELLATE COMMISSIONER R ELIED UPON THE DECISION IN CIT VS. RELIANCE PETROPRODUCTS PVT. LTD. (2010) 322 ITR 158 (SC). FURTHERMORE, THE RECO RD REVEALS THAT THE AMOUNT IN QUESTION, WHICH FORMED T HE BASIS FOR THE ASSESSING OFFICER TO LEVY PENALTY WAS IN FA CT TRUTHFULLY REPORTED IN THE RETURNS. IN VIEW OF THIS CIRCUMSTAN CE, THAT THE ASSESSING OFFICER CHOSE TO TREAT THE INCOME UND ER SOME OTHER HEAD CANNOT CHARACTERIZE THE PARTICULARS OR R EPORTED IN THE RETURN AS AN INACCURATE PARTICULARS OR AS SU PPRESSION OF FACTS. THE COURT IS ALSO CONSCIOUS OF THE DECISI ON OF THE SUPREME COURT IN CALCUTTA DISCOUNT CO. LTD. VS. INC OME TAX OFFICER (1961)41 ITR 191 (SC) WHERE IT WAS HELD THAT IT IS UP TO THE ASSESSING OFFICER TO INTERPRET THE RET URN AND DISCERN AS TO WHICH HEAD OF INCOME THE AMOUNT HAD T O BE BROUGHT TO TAX. 8. IN VIEW OF ABOVE FACTUAL MATRIX OF THE PRESENT C ASE, WE ARE INCLINED TO HOLD THAT IF THE ASSESSEE HAS DECLARED INCOME UNDER A PARTICULARS HEAD WHICH WAS TREATED BY THE AO UNDER INCOME OF SOME OTHER HEAD A ND THE FINDINGS OF THE AO WERE CONFIRMED UPTO THE TRIBUNAL, THEN, IT CANNOT B E PRESUMED AND CONCLUDED THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICUL ARS OR WRONG PARTICULARS OF ITS INCOME AND PENALTY IN THIS SITUATION IS NOT LEVIABL E IN THE LIGHT OF RATIO OF THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN TH E CASE OF CIT VS AMIT JAIN (SUPRA). 9. ACCORDINGLY, BOTH THE GROUNDS OF ASSESSEE APPELL ANT ARE ALLOWED AND AO IS DIRECTED TO DELETE THE PENALTY. ITA NO. 510/DEL/2012 ASSTT.YEAR: 2006-07 PG. 7 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 28.10.2014. SD/- SD/- (G.D. AGRAWAL) (CHANDRAMOHAN GARG) VICE PRESIDENT JUDICIAL MEMBER DT. 28 TH OCTOBER, 2014 GS COPY FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. C.I.T.(A) 4. C.I.T. 5. DR BY ORDER ASSTT.REGISTRAR