DHARTI INVESTMENT & HOLDINGS P.LTD, MUMBAI V. DCIT CIR 6(2), MUMBAI

ITA 5629/MUM/2015

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8835 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-11-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2007-2008
• Appeal Filed On: 14-12-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SAURABH DESH
• Keywords: Avoidance of tax
• Section: 6

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, D MUMBAI , , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO.5629/MUM/2015 ASSESSMENT YEAR: 2007-08 DHARTI INVESTMENT & HOLDINGS PVT. LTD. JAI CENTRE, 1 ST FLOOR, P.D. MELLO ROAD, OPP. RED GATE, MASJID, MUMBAI-400009 / VS. DCIT, CIRCLE-6(2), AAYAKAR BHAVAN, M.K. ROAD, MUBMAI-400020 ( !' # /ASSESSEE) ( $ / REVENUE) PAN. NO. AACCD2509C $% & # ' / DATE OF HEARING : 01/11/2017 & # ' / DATE OF ORDER: 03/11/2017 !' # ! / ASSESSEE BY SHRI MADHUR AGARWAL $ ! / REVENUE BY SHRI SAURABH DESHPANDE-DR ITA NO. 5629/MUM/2015 DHARTI INVESTMENT & HOLDINGS PVT. LTD. 2 / O R D E R PER JOGINDER SINGH (JUDICIAL MEMBER) THE ASSESSEE IS AGGRIEVED BY THE IMPUGNED ORDER DAT ED 09/09/2015 OF THE LD. FIRST APPELLATE AUTHORITY, MU MBAI, CONFIRMING THE PENALTY IMPOSED U/S 271(1)(C) OF THE INCOME TAX ACT, 1961 (HEREINAFTER THE ACT), IGNORING THE C ONTENTION OF THE ASSESSEE, THAT THE ASSESSEE, NEITHER CONCEAL ED ITS INCOME NOR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. 2. DURING HEARING, SHRI MADHUR AGARWAL, LD. COUNSEL FOR THE ASSESSEE, EXPLAINED THAT NO APPEAL WAS FILED BY THE ASSESSEE ON QUANTUM ADDITION BY FURTHER CONTENDING SECTION 94(7) OF THE ACT IS NOT APPLICAB LE IN THE APPEAL OF THE ASSESSEE AS THE SALE IS NOT WITHIN TH REE MONTHS. OUR ATTENTION WAS INVITED TO PARA-4 OF THE PENALTY ORDER AS WELL AS SECTION 94(7) OF THE ACT. IT WAS E XPLAINED THAT THE SALE IS AFTER 19/03/2007, WHICH FACT HAS A LSO BEEN ACCEPTED BY THE ASSESSING OFFICER HIMSELF. THEREFOR E, FOR IMPOSING PENALTY U/S 94(7), ALL THE THREE CONDITION HAS TO BE FULFILLED. ON THE OTHER HAND, THE LD. DR, SHRI S AURABH ITA NO. 5629/MUM/2015 DHARTI INVESTMENT & HOLDINGS PVT. LTD. 3 DESHPANDE, DEFENDED THE IMPOSITION/CONFIRMATION OF PENALTY. 2.1. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE FACTS , IN BRIEF, ARE THAT THE ASSESSEE IS A PUBLIC LIMITED CO MPANY, ENGAGED IN THE BUSINESS OF DEALING IN SECURITIES AN D OTHER FINANCIAL INSTRUMENTS. THE ASSESSEE COMPANY IS REGI STERED WITH RBI AS A NON-BANKING FINANCIAL COMPANY. THE ASSESSEE DECLARED INCOME OF RS.9,11,06,201/- IN ITS RETURN FILED ON 29/10/2007 AND THE ASSESSMENT WAS COMPLETE D ON 30/12/2009, U/S 143(3), DETERMINING THE TOTAL INCOM E AT RS.22,20,68,300/-, AFTER MAKING THE ADDITION OF RS.70,29,979/- U/S 94(7) OF THE ACT. THE LD. ASSESS ING OFFICER IMPOSED PENALTY U/S 271(1)(C) FOR FURNISHIN G INACCURATE PARTICULARS OF INCOME. THE LD. COMMISSIO NER OF INCOME TAX (APPEAL), CONFIRMED THE PENALTY, WHICH I S UNDER CHALLENGE BEFORE THIS TRIBUNAL. BEFORE ADVERTING FU RTHER, WE ARE REPRODUCING HEREUNDER THE PROVISION OF SECTION 94(7) OF THE ACT FOR READY REFERENCE AND ANALYSIS:- 94. (1) WHERE THE OWNER OF ANY SECURITIES (IN THIS SUB -SECTION AND IN SUB-SECTION (2) REFERRED TO AS 'THE OWNER') SELLS O R TRANSFERS THOSE SECURITIES, AND BUYS BACK OR REACQUIRES THE SECURIT IES, THEN, IF THE RESULT OF THE TRANSACTION IS THAT ANY INTEREST BECO MING PAYABLE IN ITA NO. 5629/MUM/2015 DHARTI INVESTMENT & HOLDINGS PVT. LTD. 4 RESPECT OF THE SECURITIES IS RECEIVABLE OTHERWISE T HAN BY THE OWNER, THE INTEREST PAYABLE AS AFORESAID SHALL, WHETHER IT WOULD OR WOULD NOT HAVE BEEN CHARGEABLE TO INCOME-TAX APART FROM THE P ROVISIONS OF THIS SUB-SECTION, BE DEEMED, FOR ALL THE PURPOSES OF THI S ACT, TO BE THE INCOME OF THE OWNER AND NOT TO BE THE INCOME OF ANY OTHER PERSON. EXPLANATION. THE REFERENCES IN THIS SUB-SECTION TO BUYING BACK OR REACQUIRING THE SECURITIES SHALL BE DEEMED TO INCLU DE REFERENCES TO BUYING OR ACQUIRING SIMILAR SECURITIES, SO, HOWEVER , THAT WHERE SIMILAR SECURITIES ARE BOUGHT OR ACQUIRED, THE OWNE R SHALL BE UNDER NO GREATER LIABILITY TO INCOME-TAX THAN HE WOULD HAVE BEEN UNDER IF THE ORIGINAL SECURITIES HAD BEEN BOUGHT BACK OR REACQUI RED. (2) WHERE ANY PERSON HAS HAD AT ANY TIME DURING ANY PREVIOUS YEAR ANY BENEFICIAL INTEREST IN ANY SECURITIES, AND THE RESULT OF ANY TRANSACTION RELATING TO SUCH SECURITIES OR THE INCO ME THEREOF IS THAT, IN RESPECT OF SUCH SECURITIES WITHIN SUCH YEAR, EITHER NO INCOME IS RECEIVED BY HIM OR THE INCOME RECEIVED BY HIM IS LE SS THAN THE SUM TO WHICH THE INCOME WOULD HAVE AMOUNTED IF THE INCO ME FROM SUCH SECURITIES HAD ACCRUED FROM DAY TO DAY AND BEEN APP ORTIONED ACCORDINGLY, THEN THE INCOME FROM SUCH SECURITIES F OR SUCH YEAR SHALL BE DEEMED TO BE THE INCOME OF SUCH PERSON. (3) THE PROVISIONS OF SUB-SECTION (1) OR SUB-SECTIO N (2) SHALL NOT APPLY IF THE OWNER, OR THE PERSON WHO HAS HAD A BEN EFICIAL INTEREST IN THE SECURITIES, AS THE CASE MAY BE, PROVES TO THE S ATISFACTION OF THE ASSESSING OFFICER ( A ) THAT THERE HAS BEEN NO AVOIDANCE OF INCOME-TAX, O R ( B ) THAT THE AVOIDANCE OF INCOME-TAX WAS EXCEPTIONAL AND NOT SYSTEMATIC AND THAT THERE WAS NOT IN HIS CASE IN ANY OF THE TH REE PRECEDING YEARS ANY AVOIDANCE OF INCOME-TAX BY A TRANSACTION OF THE NATURE REFERRED TO IN SUB-SECTION (1) OR SUB-SECTION (2). (4) WHERE ANY PERSON CARRYING ON A BUSINESS WHICH C ONSISTS WHOLLY OR PARTLY IN DEALING IN SECURITIES, BUYS OR ACQUIRE S ANY SECURITIES AND SELLS BACK OR RETRANSFERS THE SECURITIES, THEN, IF THE RESULT OF THE TRANSACTION IS THAT INTEREST BECOMING PAYABLE IN RE SPECT OF THE SECURITIES IS RECEIVABLE BY HIM BUT IS NOT DEEMED T O BE HIS INCOME BY REASON OF THE PROVISIONS CONTAINED IN SUB-SECTION ( 1), NO ACCOUNT SHALL BE TAKEN OF THE TRANSACTION IN COMPUTING FOR ANY OF THE PURPOSES OF THIS ACT THE PROFITS ARISING FROM OR LOSS SUSTAI NED IN THE BUSINESS. (5) SUB-SECTION (4) SHALL HAVE EFFECT, SUBJECT TO A NY NECESSARY MODIFICATIONS, AS IF REFERENCES TO SELLING BACK OR RETRANSFERRING THE SECURITIES INCLUDED REFERENCES TO SELLING OR TRANSF ERRING SIMILAR SECURITIES. (6) THE ASSESSING OFFICER MAY, BY NOTICE IN WRITING , REQUIRE ANY PERSON TO FURNISH HIM WITHIN SUCH TIME AS HE MAY DI RECT (NOT BEING LESS THAN TWENTY-EIGHT DAYS), IN RESPECT OF ALL SEC URITIES OF WHICH SUCH PERSON WAS THE OWNER OR IN WHICH HE HAD A BENE FICIAL INTEREST AT ANY TIME DURING THE PERIOD SPECIFIED IN THE NOTICE, SUCH PARTICULARS AS HE CONSIDERS NECESSARY FOR THE PURPOSES OF THIS SEC TION AND FOR THE ITA NO. 5629/MUM/2015 DHARTI INVESTMENT & HOLDINGS PVT. LTD. 5 PURPOSE OF DISCOVERING WHETHER INCOME-TAX HAS BEEN BORNE IN RESPECT OF THE INTEREST ON ALL THOSE SECURITIES. (7) WHERE ( A ) ANY PERSON BUYS OR ACQUIRES ANY SECURITIES OR UNI T WITHIN A PERIOD OF THREE MONTHS PRIOR TO THE RECORD DATE; ( B ) SUCH PERSON SELLS OR TRANSFERS ( I ) SUCH SECURITIES WITHIN A PERIOD OF THREE MONTHS A FTER SUCH DATE; OR ( II ) SUCH UNIT WITHIN A PERIOD OF NINE MONTHS AFTER SU CH DATE; ( C ) THE DIVIDEND OR INCOME ON SUCH SECURITIES OR UNIT RECEIVED OR RECEIVABLE BY SUCH PERSON IS EXEMPT, THEN, THE LOSS, IF ANY, ARISING TO HIM ON ACCOUNT O F SUCH PURCHASE AND SALE OF SECURITIES OR UNIT, TO THE EXT ENT SUCH LOSS DOES NOT EXCEED THE AMOUNT OF DIVIDEND OR INCOME RECEIVED OR RECEIVABLE ON SUCH SECURITIES OR UNIT, SHALL BE IGNORED FOR THE PURPOSES OF COMPUTIN G HIS INCOME CHARGEABLE TO TAX. (8) WHERE ( A ) ANY PERSON BUYS OR ACQUIRES ANY UNITS WITHIN A PE RIOD OF THREE MONTHS PRIOR TO THE RECORD DATE; ( B ) SUCH PERSON IS ALLOTTED ADDITIONAL UNITS WITHOUT ANY PAYMENT ON THE BASIS OF HOLDING OF SUCH UNITS ON SUCH DATE; ( C ) SUCH PERSON SELLS OR TRANSFERS ALL OR ANY OF THE UNITS REFERRED TO IN CLAUSE ( A ) WITHIN A PERIOD OF NINE MONTHS AFTER SUCH DATE, W HILE CONTINUING TO HOLD ALL OR ANY OF THE ADDITIONAL UNI TS REFERRED TO IN CLAUSE ( B ), THEN, THE LOSS, IF ANY, ARISING TO HIM ON ACCOUNT O F SUCH PURCHASE AND SALE OF ALL OR ANY OF SUCH UNITS SHALL BE IGNORED F OR THE PURPOSES OF COMPUTING HIS INCOME CHARGEABLE TO TAX AND NOTWITHS TANDING ANYTHING CONTAINED IN ANY OTHER PROVISION OF THIS A CT, THE AMOUNT OF LOSS SO IGNORED SHALL BE DEEMED TO BE THE COST OF P URCHASE OR ACQUISITION OF SUCH ADDITIONAL UNITS REFERRED TO IN CLAUSE ( B ) AS ARE HELD BY HIM ON THE DATE OF SUCH SALE OR TRANSFER. EXPLANATION. FOR THE PURPOSES OF THIS SECTION, ( A ) 'INTEREST' INCLUDES A DIVIDEND; ( AA ) 'RECORD DATE' MEANS SUCH DATE AS MAY BE FIXED BY ( I ) A COMPANY FOR THE PURPOSES OF ENTITLEMENT OF THE HOLDER OF THE SECURITIES TO RECEIVE DIVIDEND; OR ( II ) A MUTUAL FUND OR THE ADMINISTRATOR OF THE SPECIFI ED UNDERTAKING OR THE SPECIFIED COMPANY AS REFERRED TO IN THE EXPLANATION TO CLAUSE ITA NO. 5629/MUM/2015 DHARTI INVESTMENT & HOLDINGS PVT. LTD. 6 ( 35 ) OF SECTION 10, FOR THE PURPOSES OF ENTITLEMENT OF THE HOLDER OF THE UNITS TO RECEIVE INCOME, OR ADDITIONAL UNIT WIT HOUT ANY CONSIDERATION, AS THE CASE MAY BE; ( B ) 'SECURITIES' INCLUDES STOCKS AND SHARES; ( C ) SECURITIES SHALL BE DEEMED TO BE SIMILAR IF THEY ENTITLE THEIR HOLDERS TO THE SAME RIGHTS AGAINST THE SAME PERSONS AS TO CAPI TAL AND INTEREST AND THE SAME REMEDIES FOR THE ENFORCEMENT OF THOSE RIGHTS, NOTWITHSTANDING ANY DIFFERENCE IN THE TOTAL NOMINAL AMOUNTS OF THE RESPECTIVE SECURITIES OR IN THE FORM IN WHICH THEY ARE HELD OR IN THE MANNER IN WHICH THEY CAN BE TRANSFERRED; ( D ) 'UNIT' SHALL HAVE THE MEANING ASSIGNED TO IT IN C LAUSE ( B ) OF THE EXPLANATION TO SECTION 115AB. 2.2. SECTION 94 OF THE ACT DEALS WITH AVOIDANCE OF TAX BY CERTAIN TRANSACTIONS IN SECURITIES. AS PER SUB-S ECTION - 7(B)(I), SUCH SECURITIES ARE TO BE SOLD OR TRANSFER RED WITHIN A PERIOD OF THREE MONTHS AFTER SUCH DATE, WHEREAS, TH E RECORD DATE (PARA-4 OF THE PENALTY ORDER) IS 19/12/2006 AN D THE DATE OF PURCHASE IS 21/09/2006 (CONDITION-1 IS FULF ILLED), WHEREAS, THE DATE OF SALE IS AFTER 19/03/2007 (AS A CCEPTED BY THE ASSESSING OFFICER HIMSELF), THEREFORE, AS PE R THE AFORESAID PROVISION, AT LEAST, THE PENALTY IS NOT L EVIABLE. IT MAY BE A GOOD CASE FOR QUANTUM ADDITION, BUT IN OUR HUMBLE OPINION, NOT FOR PENALTY PROCEEDINGS, BECAUS E FOR IMPOSING PENALTY U/S 271(1)(C) EITHER THERE SHOULD BE CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF SUCH INCOME. AT THE SAME TIME, THE P ENALTY U/S 271(1)(C) IS DEPENDENT UPON FULFILLMENT OF ALL THE ITA NO. 5629/MUM/2015 DHARTI INVESTMENT & HOLDINGS PVT. LTD. 7 CONDITIONS PROVIDED U/S 94(7) OF THE ACT. THUS, WE DELETE THE PENALTY. FINALLY, THE APPEAL OF THE ASSESSEE IS ALLOWED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF THE LD. REPRESENTATIVE FROM BOTH SIDES AT THE CONCLUSION OF THE HEARING ON 01/11/2017. SD/- SD/- ( RAJESH KUMAR ) (JOGINDER SINGH) '!# / ACCOUNTANT MEMBER $!# /JUDICIAL MEMBER % MUMBAI; ) DATED : 03/11/2017 F{X~{T? P.S / /. . . %$&'()(*& / COPY OF THE ORDER FORWARDED TO : 1. +,-. / THE APPELLANT (RESPECTIVE ASSESSEE) 2. /0-. / THE ASSESSEE. 3. 1 1 2# ( +, ) / THE CIT, MUMBAI. 4. 1 1 2# / CIT(A)- , MUMBAI, 5. 4$5 /# , 1 +,' + 6 , % / DR, ITAT, MUMBAI 6. ! 7% / GUARD FILE. ! / BY ORDER, 04,# /# //TRUE COPY// /! (DY./ASSTT. REGISTRAR) , % / ITAT, MUMBAI