A.C.I.T. 18(2), MUMBAI V. RAJESH M. SANGHVI, MUMBAI

ITA 5466/MUM/2012

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 8097 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-10-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 08-09-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 30-08-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PITAMBER DAS
• Assessee Lawyers: DI LIP J THAKKAR
• Keywords: Business income; Bonafide belief; Transactions in derivatives; Wrong claim; Difference of opinion

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE HONBLE S/SHRI H.L. KARWA, PRESIDENT AND B. R.BASKARAN (AM) . . , . . , ./I.T.A. NO.5466/MUM/2012 ( / ASSESSMENT YEAR :2008-09) ASSTT COMMISSIONER OF INCOME TAX, 18(2), PIRAMAL CHAMBERS, PAREL, MUMBAI-400012. / VS. SHRI RAJESH M SANGHVI, SANGHVI SADAN, RANADE ROAD, SHIVAJI PARK, DADAR (W), MUMBAI-400028. ( / APPELLANT) .. ( ! / RESPONDENT) ./ '# ./ PAN/GIRNO.:ABVPR1751P $ / APPELLANT BY : SHRI PITAMBER DAS ! % $ /RESPONDENT BY : S/SHRI DILIP J THAKKAR & RAJESH P SHAH & ' % ( ) / DATE OF HEARING : 8.9.2014 *+ % ( ) /DATE OF PRONOUNCEMENT : 17. 10.2014 / O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: THE APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 19-06- 2012 PASSED BY LD CIT(A)-29, MUMBAI AND IT RELATES TO THE ASSESSMENT YEAR 2008-09. THE REVENUE IS AGGRIEVED BY THE DECISION OF LD CIT(A) IN DELETING PARTIALLY DELETING THE PENALTY LEVIED BY THE AO U/ S 271(1)(C) OF THE ACT. 2. THE FACTS THAT LED TO LEVY OF PENALTY ARE DISCUS SED IN BRIEF. THE ASSESSEE FILED HIS RETURN OF INCOME FOR THE YEAR UNDER CONSI DERATION DECLARING A TOTAL INCOME OF RS.38,56,600/-. IT WAS NOTICED THAT THE ASSESSEE HAD CLAIMED SET OFF OF BROUGHT FORWARD LOSS OF RS.23,04,228/- RELATING TO THE AY 2007-08, I.E., THE LOSS OF IMMEDIATELY PRECEDING YEAR. HOWEVER, ON EXAMINA TION OF RECORD, IT WAS NOTICED THAT THE ASSESSEE HAD FILED THE RETURN OF I NCOME FOR AY 2007-08 U/S 139(4) OF THE ACT, I.E.,THE RETURN OF INCOME WAS NO T FILED WITHIN THE TIME LIMIT PRESCRIBED U/S 139(1) OF THE ACT. HENCE, THE ASSES SEE BECAME INELIGIBLE TO CARRY I.T.A. NO.5466/MUM/2012 2 FORWARD LOSS AND SET OFF OF LOSS PERTAINING TO AY 2 007-08 IN VIEW OF THE PROVISIONS OF SEC. 80 R.W.S 139(3) OF THE ACT. ACCORDINGLY, T HE CLAIM OF SET OFF OF RS.23,04,228/- TURNED OUT TO BE NOT SUSTAINABLE AND ACCORDINGLY THE AO DISALLOWED THE SAID CLAIM. THE ASSESSEE HAD ALSO O FFERED INCOME FROM SHARE TRADING AND F&O ACTIVITY AS CAPITAL GAINS, WHICH WA S ASSESSED BY THE AO AS BUSINESS INCOME. THE AO LEVIED PENALTY U/S 271(1)( C) OF THE ACT ON THE ABOVE SAID DISALLOWANCE AS WELL AS ON CHANGE OF HEAD OF I NCOME. THE LD CIT(A) DELETED THE PENALTY RELATING TO THE DISALLOWANCE OF SET OFF OF BROUGHT FORWARD LOSS. AGGRIEVED, THE REVENUE HAS FILED THIS APPEAL BEFORE US. 3. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORD. FROM THE PENALTY ORDER, WE NOTICE THAT THE ASSESSEE HAS OFFERED EXPL ANATIONS IN THE PENALTY PROCEEDINGS, WHICH HAS BEEN SUMMARIZED AS UNDER:- (A) RELYING UPON VARIOUS JUDICIAL DECISIONS, ASSES SEE SUBMITTED THAT THERE WAS NO DELIBERATE OR WILLFUL CONCEALMENT OF INCOME. (B) THERE IS NO RECORDING OF SATISFACTION BY THE A O EITHER OR CONCEALMENT OR OF FURNISHING OF INACCURATE PARTICULARS OF INCOM E. (C) CLAIM OF BUSINESS INCOME AS SHORT TERM CAPITAL GAIN WAS MADE ON BONAFIDE BELIEF ON THE ADVICE OF A QUALIFIED CHARTE RED ACCOUNTANT. (D) IN RESPECT OF SET OFF OF LOSS, IT HAS BEEN SU BMITTED THAT IT IS A MATTER OF LITIGATION. (E) NO PENALTY IS LEVIABLE IN CASE OF ADDITIONS / DISALLOWANCES MADE ON ACCOUNT OF DIFFERENCE OF OPINION. BEFORE US, THE LD A.R SUBMITTED THAT THE HONBLE BO MBAY HIGH COURT IN THE CASE OF TELSTER ADVERTISING PVT LTD VS. CIT (116 ITR 610 ) HAS HELD THAT THE LOSS CAN BE CARRIED FORWARD IF THE RETURN OF INCOME IS FILED WI THIN THE TIME SPECIFIED U/S 139(4) OF THE ACT. ACCORDINGLY, THE LD A.R SUBMITTED THAT THE ASSESSEE IS SUPPORTED BY THE ABOVE SAID DECISION. FURTHER THE LD A.R ALSO P LACED STRONG RELIANCE ON THE DECISION RENDERED BY HONBLE SUPREME COURT IN THE C ASE OF RELIANCE PETROPRODUCTS (P) LTD (322 ITR 158)(SC) AND SUBMITT ED THAT THE CLAIM MADE BY THE ASSESSEE WHICH IS NOT SUSTAINABLE IN LAW WILL N OT GIVE RISE TO PENALTY. 4. ON THE CONTRARY, THE LD D.R PLACED STRONG RE LIANCE ON THE DECISION RENDERED BY HONBLE DELHI HIGH COURT IN THE CASE OF ZOOM COM MUNICATION (191 TAXMANN 179) AND SUBMITTED THAT THE CLAIM OF SET OFF OF BRO UGHT FORWARD LOSS WAS PATENTLY INADMISSIBLE CLAIM AND HENCE IT WOULD AMOUNT TO CON CEALMENT OF INCOME. HE FURTHER SUBMITTED THAT THE HONBLE DELHI HIGH COURT HAS RENDERED THE DECISION IN THE ABOVE CITED CASE AFTER DULY CONSIDERING THE DEC ISION RENDERED BY HONBLE I.T.A. NO.5466/MUM/2012 3 SUPREME COURT IN THE CASE OF RELIANCE PETRO PRODUCT S (P) LTD (SUPRA). HE FURTHER SUBMITTED THAT THE PROVISIONS OF SEC. 80 OF THE ACT PROHIBITS CARRY FORWARD AND SET OFF OF LOSS, IF THE RETURN OF INCOME IS NOT FILED IN TERMS OF SEC. 139(3), WHICH IN TURN SPECIFIES THAT THE RETURN OF INCOME S HOULD BE FILED WITHIN THE TIME PRESCRIBED U/S 139(1) OF THE ACT. 5. IT IS WELL SETTLED PROPOSITION OF LAW THAT THE EXPLANATION OFFERED BY THE ASSESSEE DURING THE COURSE OF PENALTY PROCEEDING HA S TO BE TESTED IN TERMS OF EXPLANATION 1 TO SEC. 271(1)(C) OF THE ACT. THE AS SESSEE HAS SUBMITTED THAT THE CLAIM OF SET OFF OF BROUGHT FORWARD LOSSES IS A MAT TER OF LITIGATION, MEANING A DEBATABLE ISSUE. TO SUPPORT THIS CLAIM, THE ASSESS EE HAS TAKEN SUPPORT OF THE DECISION RENDERED BY HONBLE BOMBAY HIGH COURT IN T HE CASE OF TELSTER ADVERTISING PVT LTD (SUPRA). HOWEVER, IT IS PERTIN ENT TO NOTE THAT THE SAID DECISION HAS BEEN RENDERED BY THE JURISDICTIONAL HIGH COURT IN THE CONTEXT OF LAW THAT WAS EXISTING IN AY 1964-65 AND THE LAW HAS UNDERGONE A CHANGE SUBSEQUENTLY AND HENCE THE ASSESSEE WAS NOT RIGHT IN PLACING RELIANC E ON THE SAME. HOWEVER, THE QUESTION OF APPLICATION OF CORRECT LAW WOULD BE REL EVANT FOR ASSESSMENT PROCEEDINGS. HERE, WE ARE CONCERNED WITH THE PENAL TY PROCEEDINGS, WHEREIN THE BONAFIDES OF THE EXPLANATIONS GIVEN BY THE ASSESSEE NEED TO BE TESTED IN TERMS OF EXPLANATION 1 TO SEC. 271(1)(C) OF THE ACT. 6. FURTHER, THE CLAIM OF SET OFF OF BROUGHT F ORWARD LOSS CAME TO BE REJECTED IN VIEW OF THE SPECIFIC PROVISIONS CONTAINED IN SEC. 8 0 OF THE ACT. THUS, IT IS SEEN THAT THE CLAIM MADE BY THE ASSESSEE COULD NOT BE AL LOWED, SINCE THE SAME WAS NOT ALLOWABLE DUE TO A BAR CONTAINED IN THE ACT, I. E., THE CLAIM BECAME UNSUSTAINABLE IN LAW. HENCE THE DECISION OF HONBL E SUPREME COURT IN THE CASE OF RELIANCE PETRO PRODUCTS (P) LTD (REFERRED SUPRA) WOULD COME TO THE HELP OF THE ASSESSEE IN THE FACTS PREVAILING IN THE INSTANT CAS E. 7. IN VIEW OF THE FOREGOING DISCUSSIONS, WE ARE OF THE VIEW THAT THE IMPUGNED PENALTY ORDER IS LIABLE TO SET ASIDE. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE VIEW THAT THE DECISION RENDERED BY HO NBLE DELHI HIGH COURT IN THE CASE OF ZOOM COMMUNICATIONS (SUPRA) MAY NOT BE APPL ICABLE HERE, SINCE THE ISSUE BEFORE US IS NOT RELATED TO THE WRONG CLAIM O F ANY EXPENDITURE. ACCORDINGLY I.T.A. NO.5466/MUM/2012 4 WE SET ASIDE THE ORDER OF LD CIT(A) AND DIRECT THE AO TO CANCEL THE PENALTY LEVIED U/S 271(1)(C) OF THE ACT IN THE YEAR UNDER CONSIDER ATION. 8. IN THE RESULT, THE APPEAL FILED BY THE REVE NUE IS DISMISSED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN C OURT ON 17TH OCT , 2014. *+ & , -. / 0 17TH OCT , 2014 + % 1' 2 SD SD ( . . / H.L. KARWA) ( . . ,/ B.R. BASKARAN) / PRESIDENT / ACCOUNTANT MEMBER - & ' MUMBAI: 17TH OCT,2014. . . ./ SRL , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. ! / THE RESPONDENT. 3. & 4( ( ) / THE CIT(A)- CONCERNED 4. & 4( / CIT CONCERNED 5. 6. 56 1 (7 , ) 7 , - & ' / DR, ITAT, MUMBAI CONCERNED 1 8 ' / GUARD FILE. 9 & / BY ORDER, TRUE COPY : ' (ASSTT. REGISTRAR) ) 7 , - & ' /ITAT, MUMBAI