DR MILIND KISHORE MADHANI, MUMBAI V. ACIT 22(1), MUMBAI

ITA 5248/MUM/2012

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 4234 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 7 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-04-2016
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 16-02-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 21-08-2012
• Court: TRIBUNAL
• Assessee Lawyers: DR K SHIVARAM; NEELAM C JADHAV
• Keywords: Business income; Speculation loss
• Section: 43(5)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUM BAI BEFORE SHRI R.C. SHARMA, AM AND SHRI MAHAVIR SINGH, JM ITA NO. 5248/MUM/2012 (ASSESSMENT YEAR: 2008-09) DR. MILIND KISHORE MADHANI, 1202, ADINATH BLDG., SUDHA PARK, SHANTI PATH, GHATKOPAR (EAST), MUMBAI-77. (PAN:AALPM5749D) VS. ASSISTANT COMMISSIONER OF INCOME-TAX-22(1), MUMBAI (APPELLANT) (RESPONDENT) APPELLANT BY : DR. K. SHIVARAM & MS. NEELAM C. JADH AV RESPONDENT BY : SHRI SANJEEV JAIN, DR DATE OF HEARING: 31.03.2016 DATE OF PRONOUNCEMENT: 07.04.2016 O R D E R PER MAHAVIR SINGH, JM: THIS APPEAL BY ASSESSEE IS DIRECTED AGAINST THE ORD ER OF CIT(A)-33, MUMBAI IN APPEAL NO. CIT(A)-33/IT/95/11-12 VIDE ORDER DATED 2 1.06.2012. ASSESSMENT WAS FRAMED BY ADDL. CIT, RANGE-22(1), MUMBAI U/S. 143(3 ) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR AY 2008-09 VIDE HIS ORDER DATED 27.12.2010. PENALTY WAS IMPOSED BY ACIT, RANGE-22( 1), MUMBAI U/S. 271(1)(C) OF THE ACT VIDE HIS ORDER DATED 27.06.2011. 2. THE ONLY ISSUE IN THIS APPEAL OF ASSESSEE IS AGAINS T THE ORDER OF CIT(A) CONFIRMING THE LEVY OF PENALTY U/S. 271(1)(C) OF TH E ACT ON DISALLOWANCE OF LOSS BY TREATING THE SAME AS SPECULATIVE LOSS OF RS.52,79,3 91/-. 3. BRIEFLY STATED FACTS ARE THAT THE AO DURING THE COU RSE OF ASSESSMENT PROCEEDINGS NOTICED THAT THE ASSESSEE IS A TRADER A ND ALSO INDULGING IN DAY 2 ITA NO. 5248/MUM/2012 DR. MILIND KISHORE MADHANI ASST. YEAR 2008-09 TRADING I.E. SALES AND PURCHASES WITHOUT TAKING DEL IVERY WHICH IS SPECULATIVE TRANSACTION. ACCORDING TO HIM, ASSESSEE ENTERED IN TO TOTAL TURNOVER OF RS.563,78,27,294/- AND RESULTED NET GAIN AFTER SETT ING OFF OF LOSS ON SPECULATIVE TRANSACTIONS. ACCORDINGLY, THE AO TREATED THE TRAN SACTION AS SPECULATIVE TRANSACTION AND ASSESSMENT WAS FRAMED. THE AO INIT IATED PENALTY PROCEEDINGS U/S. 271(1)(C) OF THE ACT FOR FURNISHING OF INACCUR ATE PARTICULARS OF INCOME AND LEVIED PENALTY U/S. 271(1)(C) OF THE ACT BY STATING THAT THE SPECULATION LOSS OF RS.52,79,391/- HAS BEEN CLEVERLY EMBEDDED BY THE AS SESSEE IN SHARE TRADING PROFIT AND THEREBY REDUCING HIS SHARE TRADING LOSS. THIS ADDITION WAS NOT CONTESTED BY ASSESSEE. ACCORDINGLY, HE LEVIED THE PENALTY U/S. 271(1)(C) OF THE ACT AMOUNTING TO RS.17,59,621/-. AGGRIEVED, ASSESSEE P REFERRED APPEAL BEFORE CIT(A), WHO ALSO CONFIRMED THE ACTION OF AO BY OBSERVING IN PARA 4.5 AS UNDER: 4.5. THE APPELLANT HAS STATED THAT THESE DETAILS W ERE VERY MUCH AVAILABLE ON THE RECORD IN FORM OF CONTRACT NOTE GIVEN BY THE BR OKER, AND THUS AS PER THE APPELLANT HE HAS NOT FURNISHED ANY INACCURATE PARTI CULARS NOR HAS CONCEALED ANY INCOME AND HENCE THE DISALLOWANCE THOUGH ACCEPT ED AS THE ADDITION WAS MADE ON THE AGREED BASIS DOES NOT CALL FOR LEVY OF PENALTY U/S. 271(1)(C). I HAVE GONE THROUGH THESE SUBMISSIONS, THE BROKERS NO TE, THE TRANSACTION STATEMENTS AS WELL AS THE ARGUMENTS TAKEN BY THE AP PELLANT AND AFTER GOING THROUGH THE SAME, I AM OF THE CONSIDERED VIEW THAT THE APPELLANT DID TRIED TO TAKE ADVANTAGE OF SPECULATION LOSS TO GET THE SET O FF FROM BUSINESS PROFIT ARISING OUT OF TRADING IN SHARES AND HENCE IT IS NO T A CASE OF MERE DISALLOWANCE OF EXPENSES ON ESTIMATION BASIS OR ON TECHNICAL REASONS BUT IT IS A CASE WHERE SPECULATION TRANSACTIONS WERE EMBEDDED IN A WAY THAT BUT FOR A MINUTE ANALYSIS IF WOULD HAVE NOT BEEN POSSIBLE T O WORK OUT FIGURE OF SPECULATION LOSS EMBEDDED IN THIS TRANSACTION SEPAR ATELY. SINCE AS PER PROVISIONS OF SEC. 43(5) SPECULATION LOSS NO WAY CO ULD HAVE BEEN ADJUSTED AGAINST INCOME FROM BUSINESS PROFIT AS THEY CAN ONL Y BE SET OFF ONLY AGAINST SPECULATION PROFIT. THE APPELLANT THUS CANNOT PLEAD IGNORANCE OF PROVISIONS ALSO FOR THE REASONS THAT HE HAS NOT EVEN TRIED TO MAINTAIN A SEPARATE ACCOUNT FOR IN DAY TRADING RESULTING INTO SPECULATION LOSS OF PROFIT. ON THE IDENTICAL FACTS OF THE CASE, DECISION GIVEN IN THE CASE OF IT O VS. M/S. ATHENO FINANCE RESEARCH PVT. LTD. 2010 (TIOL) 80 ITAT, DELHI ALSO DECIDED THAT IT WAS A CLEAR CUT CASE OF SPECULATION LOSS WHERE THE ASSESSEE WAS ENGAGED IN THE CASE OF BUSINESS OF SALE AND PURCHASES OF SHARES AND CLAIME D BUSINESS LOSS BUT THE A.O. HELD THAT TRADING IN SHARE WAS SPECULATIVE LOS S MADE, THE DISALLOWANCE, UPHOLDING THE ADDITION. THE HON'BLE I'I'A'I', MUMBA I BENCH ON SIMILAR ISSUE IN THE CASE OF CIT VS. KNP SECURITIES PVT. LTD. ITA NO . 4412/MUM/2003 THAT SPECULATIVE OF TRANSACTION IS ATTRIBUTED WITH A PAR TICULAR TRANSACTION IS 3 ITA NO. 5248/MUM/2012 DR. MILIND KISHORE MADHANI ASST. YEAR 2008-09 CONSIDERED AS SPECULATIVE U/S. 43(5). IN VIEW OF TH IS, THERE IS INTENTION TO CONCEAL. AGGRIEVED, ASSESSEE IS IN APPEAL BEFORE TRIBUNAL 4. LD. COUNSEL FOR THE ASSESSEE, FIRST OF ALL, TOOK US TO ASSESSEES PAPER BOOK AT PAGES 98 TO 105 WHEREIN THE COPY OF ASSESSMENT ORDE R FOR ASST. YEAR 2009-10 IS ENCLOSED. FROM THIS, LD. COUNSEL FOR THE ASSESSEE DREW OUR ATTENTION TO PAGE 100 AND INNER PAGE 2 OF THE ASSESSMENT ORDER WHEREIN TH E SPECULATION LOSS HAS BEEN DISALLOWED AMOUNTING TO RS.12,60,287/-. HE FURTHER DREW OUR ATTENTION TO THE ORDER OF CIT(A) FOR ASST. YEAR 2009-10, WHICH IS EN CLOSED AT PAGES 106 TO 213 AND PARTICULARLY AT PAGE 112 WHEREIN THE CIT(A) HAS DEL ETED THE SPECULATION LOSS BY OBSERVING AS UNDER: 3. IN THIS GROUND THE APPELLANT IS AGGRIEVED BY TH E ACTION OF THE AO IN CONSIDERING THE DAY TRADING LOSS OF RS.12,60,287/- AS SPECULATION LOSS AND NOT ALLOWING SET OFF OF THE SAME AGAINST HIS BU SINESS INCOME. IT IS SEEN FROM THE RECORD THAT THE APPELLANT IS TRADING IN SHARES AND SECURITIES ON A DAY TO DAY BASIS. THESE SHARES AND SECURITIES ARE HELD AS A STOCK IN TRADE. THE APPELLANT ENTERS INTO INTRA DAY TRANSAC TIONS TO PROTECT HIMSELF AGAINST FALLING PRICE OF THE SHARES AND SECURITIES HELD BY HIM. THEREFORE, THE TRANSACTIONS ENTERED INTO BY THE APPELLANT FALL S UNDER CLAUSE (B) OF SECTION 45(3) OF THE ACT, WHEREIN IT IS CLEAR THAT SUCH TRANSACTIONS ARE NOT TO BE TREATED AS SPECULATIVE TRANSACTIONS. THEREFO RE, I HOLD THAT LOSS ARISING OUT OF INTRA DAY TRANSACTIONS IS TO BE CONS IDERED UNDER THE HEAD BUSINESS INCOME AND NOT UNDER THE HEAD SPECULATIVE INCOME. HENCE, THE APPELLANT GETS RELIEF ON THIS ACCOUNT. THIS GROUND IS ACCORDINGLY ALLOWED. IN VIEW OF THIS LD. COUNSEL FOR THE ASSESSEE STATED THAT REVENUE HAS NOT PREFERRED ANY APPEAL AGAINST THIS ORDER AND ACCEPTE D THE CIT(A)S ORDER. LD. COUNSEL FOR THE ASSESSEE AFTER THIS MADE TWO FOLDS ARGUMENT. FIRST OF ALL, REVENUE HAS ACCEPTED THE CLAIM OF ASSESSEE THAT THI S SPECULATION LOSS IS A GENUINE LOSS AND MOREOVER, THE ASSESSEE HAS FILED A LL PARTICULARS RELATING TO THE SAME. IN VIEW OF THIS, LD. COUNSEL FOR THE ASS ESSEE ARGUED THAT PENALTY U/S. 271(1)(C) OF THE ACT CANNOT BE LEVIABLE BECAUS E FIRSTLY, THE ISSUE IS DEBATABLE AND SECONDLY, THE ASSESSEE HAS FILED COMP LETE PARTICULARS RELATING TO THIS TRANSACTION AND NOTHING WAS CONCEALED. FOR THIS PROPOSITION, LD. COUNSEL FOR THE ASSESSEE RELIED ON THE DECISION OF HONBLE SUPREME COURT IN 4 ITA NO. 5248/MUM/2012 DR. MILIND KISHORE MADHANI ASST. YEAR 2008-09 THE CASE OF CIT VS. RELIANCE PETROPRODUCTS PVT. LTD . (2010) 322 ITR 158. HE ALSO RELIED ON THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF SESA RESOURCES LTD. VS. ACIT (2013) 38 TAXMANN 224 (BOM) WHEREIN IT HAS BEEN HELD AS UNDER: 5. THERE IS NO DISPUTE THAT THE APPELLANT DISCLOSE D ALL THE FACTS. THE APPELLANT DID NOT CONCEAL ANY FACTS. BASED ON THE DISCLOSED MATERIAL, THE APPELLANT SOUGHT THE DEDUCTION WHICH WAS DENIED ON THE GROUND THAT IT WAS NOT ENTITLED TO THE SAME AS A MATTER OF LAW. THE T RIBUNAL WAS IN ERROR IN HOLDING THAT MERELY BECAUSE THE CLAIM FOR DEDUCTION WAS DENIED THE APPELLANT IS LIABLE TO PAY A PENALTY. 6.THE QUESTION RAISED IS ANSWERED IN FAVOUR OF THE ASSESSEE BY THE JUDGMENT OF THE SUPREME COURT IN CIT VS. RELIANCE PETROPRODUCTS (P) LTD. (2010) 322 ITR 158/189 TAXMAN 322 AND A JUDGMENT OF THIS COURT, TO WHICH ONE OF US (S.J. VAZIFDAR, J) WAS A PARTY DATED 14 TH AUGUST, 2012 IN CIT V. ADITYA BIRLA NOVA LTD. (IT APPEAL NO. 3899 OF 2010) . 5. WE FIND FROM THE ABOVE PROPOSITION OF LAW THAT FIRS T OF ALL REVENUE HAS ACCEPTED THE CLAIM OF THE ASSESSEE IN ASSESSMENT YE AR 2009-10 EXACTLY ON IDENTICAL FACTS WHEREIN IT IS HELD BY HIM THAT THE TRANSACTIONS ENTERED INTO BY ASSESSEE CLEARLY FALLS UNDER CLAUSE (B) OF SECTION 45(3) OF THE ACT AND ACCORDINGLY, IT IS CLEAR THAT SUCH TRANSACTIONS ARE NOT TREATED AS SPECULATIVE TRANSACTION. IN SUCH CIRCUMSTANCES, WE ARE OF THE VIEW THAT ASSESSE E IS NOT LIABLE FOR PENALTY U/S. 271(1)(C) OF THE ACT. RESPECTFULLY FOLLOWING THE J UDGMENT OF HONBLE SUPREME COURT IN RELIANCE PETROPRODUCTS (P) LTD., SUPRA AND HONBLE BOMBAY HIGH COURT DECISION IN SESA RESOURCES LTD., SUPRA, WE ALLOW TH E APPEAL OF ASSESSEE. 6. IN THE RESULT, APPEAL OF ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 7TH APRIL, 2016. SD/- SD/- (R.C. SHARMA) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 07TH APRIL, 2016 JD. SR. P.S. 5 ITA NO. 5248/MUM/2012 DR. MILIND KISHORE MADHANI ASST. YEAR 2008-09 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. CIT(A) -33, MUMBAI 4 . CIT - , MUMBAI 5. DR, B BENCH ITAT, MUMBAI 6. GUARD FILE. BY ORDER //TRUE COPY// (ASSTT. REGISTRAR) ITAT, MUMBAI