MINAL NIRVAN SANGHAVI, MUMBAI V. ACIT 16(2), MUMBAI

ITA 5651/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 88671 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 15-01-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 05-09-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASGHAR ZAIN V P
• Assessee Lawyers: INDIRA G ANAND
• Keywords: Bonafide belief

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH B , MUMBAI BEFORE SHRI B.R. BASKARAN , ACCOUNTANT MEMBER AND SHRI SANJAY GARG , JUDICIAL MEMBER ITA NO. 5651/M/2013 ASSESSMENT YEAR: 2005 - 06 MS. MINAL NIRVAN SANGHAVI, 62, CASA GRANDA, 22, K.S. TAYABI M ARG, MUMBAI 400 006 PAN: AANPS8906J VS. ACIT 16(2) JADHAV SHUKRACHARYA, INCOME TAX OFFICE, M.K. ROAD, MUMBAI - 40000 1 (APPELLANT) (RESPONDENT) ASSESSEE BY : SMT. INDIRA G. ANAND, A.R. REVENUE BY : SHRI ASGHAR ZAIN V.P., D.R. DATE OF HEARING : 15.01 .201 5 DATE OF PRONOUNCEMENT : 31.03. 2015 O R D E R PER SANJAY GARG, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSESSEE AGAINST THE ORDER DATED 12.08.2013 OF THE COMMISSI ONER OF INCOME TAX (APPEALS) [(HEREINAFTER REFERRED TO AS CIT(A)] RELEVANT TO ASSESSMENT YEAR 2005 - 06 AGITATING THE CONFIRMATION OF THE PENALTY OF RS. 2,50,183/ - LEVIED UNDER SECTION 271(1)(C) OF THE ACT. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSES SEE IS AN INDIVIDUAL AND A PARTNER IN P R EMIN SECURITIES A FIRM DEALING IN SHARE S AND SECURITIES. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER (HEREINAFTER REFERRED TO AS THE AO) OBSERVED THAT THE ASSESSEE HAD CLAIMED SHORT TERM CAP ITAL GAINS ON MUTUAL FUNDS ON WHICH THE ASSESSEE HAD RECEIVED DIVIDENDS. THE AO ITA NO.5651/M/2013 MS. MINAL NIRVAN SANGHAVI 2 DISALLOWED SUCH LOSS TO THE EXTENT OF DIVIDEND RECEIVED AMOUNTING TO RS. 7,09,788/ - AS PER THE PROVISIONS OF SECTION 94(7) OF THE INCOME TAX ACT. 3. THE LD. CIT(A) ALSO CONF IRMED THE SAID DISALLOWANCE. THE AO ALSO INITIATED PENALTY PROCEEDINGS. IN THE PENALTY PROCEEDINGS, IT WAS CONTENDED BY THE ASSESSEE THAT ALL THE DETAILS REGARDING SALE AND PURCHASE OF MUTUAL FUNDS, DIVIDEND RECEIVED ON SUCH MUTUAL FUNDS AND SHORT TERM C APITAL LOSS INCURRED BY THE ASSESSEE IN THE SALE OF SUCH MUTUAL FUNDS WERE DULY RECORDED IN THE RETURN OF INCOME. HENCE, IT WAS NOT A CASE OF FURNISHING OF INACCURATE PARTICULARS OF INCOME OR CONCEALMENT OF INCOME . IT WAS ALSO SUBMITTED THAT THE ASSESSEE HAD NOT RECEIVED ANY DIVIDEND ON ANY MUTUAL FUND UNITS DURING THE YEAR UNDER CONSIDERATION, THEREFORE THE ASSESSEE THOUGH T THAT THE PROVISIONS OF SECTION 94(7) WERE NOT APPLICABLE AND THAT THE ASSESSEE WAS ENTITLED TO CLAIM THE SHORT TERM CAPITAL LOSS INC URRED ON SALE OF MUTUAL FUND UNITS. THE LD. AO, HOWEVER, WAS NOT SATISFIED WITH THE EXPLANATION GIVEN BY THE ASSESSEE. HE HELD THAT THE ASSESSEE HAD TRIED TO CIRCUMVENT THE PROVISIONS OF SECTION 94(7) IN ORDER TO EVADE THE TAX. HE THEREFORE LEVIED PENAL TY OF RS. 1,38,900/ - UNDER SECTION 271(1)(C) OF THE ACT. 4. IN APPEAL, THE LD. CIT(A) CONFIRMED THE PENALTY SO LEVIED BY THE AO. THE ASSESSEE HAS, THUS, COME IN APPEAL BEFORE US. 5. THE LD. A.R. OF THE ASSESSEE HAS STATED THAT THE ASSESSEE HAD DISCLO SED THE ENTIRE DETAILS IN THE RETURN OF INCOME AND AS SUCH IT WAS NEITHER A CASE OF FURNISHING OF INACCURATE PARTICULARS OF INCOME NOR CONCEALMENT OF INCOME . T HAT THE NON DEDUCTION OF THE DIVIDEND OUT OF THE SHORT TERM CAPITAL LOSS ON SALE OF MUTUAL FUNDS WAS NOT INTENTIONAL BUT WAS DUE TO BONAFIDE ERROR. IT HAS BEEN FURTHER SUBMITTED THAT IN SOME CASES THE DIVIDEND HAD BEEN RECEIVED ON MUTUAL FUND IN FINANCIAL YEAR 2003 - 04 I.E. PRIOR TO THE YEAR UNDER CONSIDERATION. THE ITA NO.5651/M/2013 MS. MINAL NIRVAN SANGHAVI 3 AMENDMENT TO SECTION 94(7) CAME I NTO EFFECT FROM 01.04.2005 AND THE ASSESSEE WAS UNDER BONAFIDE BELIEF THAT THE AMENDED PROVISIONS WOULD NOT BE APPLICABLE ON THE TRANSACTIONS CONCLUDED PRIOR TO THE DATE OF AMENDMENT TO SECTION 94(7) OF THE ACT. THE LD. A.R. HAS FURTHER RELIED UPON THE DE CISION OF THE CO - ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF SISTAS PRIVATE LIMITED VS. ITO IN ITA NO.13 54/M/2013, A.Y. 2005 - 06 DECIDED ON 09.01.2015 WHEREIN THE TRIBUNAL , UNDER SOMEWHAT SIMILAR CIRCUMSTANCES, HAD DELETED THE PENALTY LEVIED BY THE LOWE R AUTHORITIES UNDER SECTION 94(7) OF THE ACT. THE RELEVANT PART OF THE FINDINGS OF THE TRIBUNAL, FOR THE SAKE OF CONVENIENCE, IS REPRODUCED AS UNDER: 12. IN THE PRESENT CASE, IT IS NOT THE CASE OF THE REVENUE THAT THE ASSESSEE HAS FAILED TO FURNISH ALL PARTICULARS OF INCOME. AS NOTICED EARLIER, THE ASSESSEE HAS INDICATED IN ITS RETURN OF INCOME THAT IT WAS CONSCIOUS OF THE PROVISIONS OF SEC. 94(7) OF THE ACT. THE ASSESSEE HAD ATTACHED A NOTE ALSO IN THIS REGARD EXPRESSING ITS VIEW ABOUT THE APPLICABILITY OF THE PROVISIONS OF SEC. 94(7) OF THE ACT. IN THE ASSESSMENT PROCEEDINGS, THE ASSESSEE HAS CONTENDED THAT THE ITA NO.1354/M/2013 AMENDED PROVISIONS SHOULD NOT BE APPLIED ON THE TRANSACTIONS CONCLUDED PRIOR TO THE DATE OF RECEIPT OF ASSENT OF HON'BLE PRES IDENT OF INDIA. THUS, IN OUR VIEW, THE ASSESSEE WAS UNDER BONA FIDE BELIEF THAT THE AMENDED PROVISIONS WILL NOT BE APPLICABLE FOR THE TRANSACTIONS CONCLUDED ATLEAST UPTO THE DATE OF RECEIPT OF ASSENT OF THE HON'BLE PRESIDENT TO FINANCE (NO.2) BILL , 2004. IN OUR VIEW, THE SAID BELIEF CANNOT BE ALTOGETHER REJECTED, SINCE THE SAID CLAIM OF THE ASSESSEE IS A DEBATABLE ONE. EVEN OTHERWISE, WE ARE OF THE VIEW THAT THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF RELIANCE PETRO PRODUCTS (SUPRA) SUPPORTS THE C ASE OF THE ASSESSEE, I.E., A CLAIM WHICH IS NOT SUSTAINABLE IN LAW BY ITSELF WOULD NOT LEAD TO FURNISHING OF INACCURATE PARTICULARS OF INCOME. 13. IN VIEW OF THE FOREGOING, WE ARE OF THE VIEW THAT THE PENALTY LEVIED ON THE DISALLOWANCE MADE U/S 94(7) OF T HE ACT IS LIABLE TO BE DELETED. ACCORDINGLY WE SET ASIDE THE ORDER OF LD CIT(A) ON THIS ISSUE AND DIRECT THE ASSESSING OFFICER TO DELETE THE PENALTY LEVIED ON THE DISALLOWANCE MADE U/S 94(7) OF THE ACT. 6. WE FIND THAT THE CASE OF THE ASSESSEE IS COVERED BY THE ABOVE DECISION OF THE TRIBUNAL. MOREOVER, AS HELD BY THE HONBLE SUPREME COURT IN THE CASE OF CIT V. RELIANCE PETROPRODUCTS (P.) LTD. [2010] 322 ITR 158 (SC), EVERY CASE OF DISALLOWANCE CANNOT BE A CASE OF FURNISHING OF INACCURATE PARTICULARS OF INCOME OR CONCEALMENT OF INCOME. WE, THEREFORE, ARE OF THE VIEW THAT PENALTY ITA NO.5651/M/2013 MS. MINAL NIRVAN SANGHAVI 4 UNDER SECTION 271(1)(C) OF THE ACT IS NOT ATTRACTED IN THIS CASE ON ACCOUNT OF DISALLOWANCE UNDER SECTION 94(7) OF THE ACT. THE SAME IS THEREFORE ORDERED TO BE DELETED. 7 . I N THE RESULT, THE APPEAL OF THE ASSESSEE IS HEREBY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 31.03. 201 5 . SD/ - SD/ - ( B.R. BASKARAN ) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 31.03.2015 . * KISHORE , SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT ( A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.