HARISH Z. BHUPTANI, MUMBAI V. ITO (IT) 3(1), MUMBAI

ITA 5711/MUM/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75743 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Next Hearing Date: 06-01-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 11-09-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SU RENDRA KUMAR
• Assessee Lawyers: SITANSH P RAICHURA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI . . , . . , BEFORE SHRI B R MITTAL, JM & SHRI B R BASKARAN , AM ./I.T.A. NO.5711/MUM/2012 ( ' ' ' ' ' '' ' / ASSESSMENT YEAR: 2007-08) HARISH Z BHUPTANI 64/65 RATNA JYOTI INDL ESTATE IRLA LANE, VILLE PARLE (W) MUMBAI 56 / VS. THE INCOME TAX OFFICER(IT) 3(1), MUMBAI ./PAN AAAPB7643Q ( % /APPELLANT ) ( &'% / RESPONDENT ) % ( / APPELLANT BY : SHRI SITANSH P RAICHURA &'% ( / RESPONDENT BY : SHRI SURENDRA KUMAR, DR ( + /DATE OF HEARING : 26.02.2014 ( + / DATE OF PRONOUNCEMENT :28 TH ,FEB 2014 / O R D E R PER B R BASKARAN, AM : THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 29-06- 2012 PASSED BY LD CIT(A)-10, MUMBAI AND IT RELATES TO THE ASSESSMENT YEAR 2007- 08. THE PENALTY OF RS.29,258/- LEVIED BY THE AO, H AVING BEEN CONFIRMED BY LD CIT(A), THE ASSESSEE HAS FILED THIS APPEAL BEFORE U S. 2. THE FACTS RELATING TO THE SAME ARE DISCUSSED IN BRIEF. THE ASSESSEE HAD CLAIMED DEDUCTION OF FEE PAID TO PORTFOLIO MANAGER AMOUNTING TO RS.2,60,764/- AGAINST THE SHORT TERM CAPITAL GAIN, CLAIMING THE S AME AS EXPENDITURE INCURRED HARISH Z BHUPTANI 2 WHOLLY AND EXCLUSIVELY IN CONNECTION WITH THE TRANS FER OF SHARES. THE AO DISALLOWED THE SAID CLAIM AND THE LD CIT(A) ALSO UPHELD THE SA ID DISALLOWANCE. SUBSEQUENTLY, THE AO COMMENCED THE PENALTY PROCEEDINGS U/S 271(1) (C) OF THE ACT AGAINST THE ABOVE SAID ADDITION OF RS.2,60,764/-. THE ASSESSEE SUBMITTED THAT HE HAD CLAIMED THE DEDUCTION, CITED ABOVE, ON THE BASIS OF VARIOUS COURT DECISIONS. HE FURTHER SUBMITTED THAT THE ADDITION HAS BEEN MADE DUE TO DI FFERENCE OF OPINION ON THE MATTER AND ACCORDINGLY PRAYED THAT THE PENALTY SHOU LD NOT BE LEVIED. THE AO WAS NOT CONVINCED WITH THE EXPLANATIONS OF THE ASSESSEE AND ACCORDINGLY LEVIED A PENALTY OF RS.29,258/-, BEING 100% OF THE TAX SOUGHT TO BE EVADED, U/S 271(1)(C) OF THE ACT, BY HOLDING THAT THE ASSESSEE HAS FURNISHED INA CCURATE PARTICULARS OF INCOME AND TRIED TO CONCEAL THE INCOME FOR WHICH NO SATISFACTO RY EXPLANATION WAS OFFERED. IN THIS REGARD, THE AO PLACED RELIANCE ON THE DECISION OF HONBLE KERALA HIGH COURT IN THE CASE OF CIT VS. A. SREENIVASA PAI (242 ITR 29)( KER), WHEREIN IT WAS HELD THAT THE PROVISIONS OF EXPLANATION 1 TO SEC. 271 SHALL HAVE AUTOMATIC OPERATION. THE LD CIT(A) ALSO UPHELD THE PENALTY ON THE REASONING THA T THE ASSESSEE HAS MADE A CLAIM WHICH IS NOT TENABLE IN LAW. AGGRIEVED, THE ASSESS EE HAS FILED THIS APPEAL BEFORE US. 3. THE LD AR, BY PLACING RELIANCE ON THE FOLLOWING CASE LAW, SUBMITTED THAT THE PENALTY IS NOT EXIGIBLE ON THE DISALLOWANCES MADE I N THE ASSESSMENT PROCEEDINGS, WHEN NO FAULT WAS FOUND WITH THE PARTICULARS FURNIS HED BY THE ASSESSEE. (A) M/S ELLORA INVESTMENT CO. P LTD VS. ITO (ITA N O.3020/MUM/2010) (B) MR. SATISH M GUPTA VS. ACIT (ITA NO.3990/MUM/2 010) (C) MR. MUKESH M GUPTA (ITA NO.3989/MUM/2010) 4. ON THE CONTRARY, THE LD D.R PLACED STRONG REL IANCE ON THE ORDER PASSED BY LD CIT(A). HARISH Z BHUPTANI 3 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. ACCORDING TO LD CIT(A), THE ASSESSEE HAS MADE A CLAIM WHICH IS UNTE NABLE IN LAW AND WITH THESE OBSERVATIONS, THE LD CIT(A) HAS CONFIRMED THE PENAL TY LEVIED BY THE AO U/S 271(1)(C) OF THE ACT. ACCORDING TO THE AO, THE AS SESSEE HAS FAILED TO DISCHARGE THE BURDEN PLACED UPON HIM UNDER EXPLANATION 1 TO SEC. 2 71 OF THE ACT. 6. HOWEVER, WE NOTICE THAT THE ASSESSEE HAS FUR NISHED AN EXPLANATION TO THE EFFECT THAT HE HAD CLAIMED THE DEDUCTION OF PORTFOL IO MANAGEMENT FEE AGAINST THE SHORT TERM CAPITAL GAIN ON THE BASIS OF DECISIONS R ENDERED BY THE TRIBUNAL. IN THE WRITTEN SUBMISSION, THE ASSESSEE HAS POINTED OUT TH AT THE MUMBAI BENCH OF TRIBUNAL IN THE CASE OF KRA HOLDING & TRADING P LTD VS. DCIT AND ALSO IN THE CASE OF ITO VS. RADHA BIRJU PATEL (MUM) (CITATION NOT GIVEN) HAS TA KEN THE VIEW THAT THE PORTFOLIO MANAGEMENT CHARGES ARE DEDUCTIBLE AS EXPENSES. THU S, WE NOTICE THAT THE ASSESSEE HAS DRAWN SUPPORT FOR THE CLAIM MADE BY HIM FROM TH E TWO TRIBUNAL DECISIONS REFERRED ABOVE. THUS, IT IS SEEN THAT THE ASSESSEE HAS OFFERED AN EXPLANATION IN TERMS OF EXPLANATION 1 TO SEC. 271 AND THE SAID EXPL ANATION WAS NOT FOUND TO BE FALSE, THOUGH THE AO HAD A DIFFERENT VIEW WITH REGA RD TO DEDUCTIBILITY OF THE SAID CLAIM. UNDER EXPLANATION 1 TO SEC. 271, IF THE EXPL ANATION OFFERED BY THE ASSESSEE IS NOT FOUND TO BE FALSE, THEN THE ADDITION WOULD NOT GIVE RISE TO THE PRESUMPTION THAT IT REPRESENTS THE INCOME, PARTICULARS OF WHICH HAVE BEEN CONCEALED. 7. IN THE THREE CASES RELIED UPON BY THE ASSESS EE, THE CO-ORDINATE BENCHES OF THE TRIBUNAL HAVE PLACED RELIANCE ON THE DECISION OF HO NBLE SUPREME COURT IN THE CASE HARISH Z BHUPTANI 4 OF RELIANCE PETROPRODUCTS (P) LTD (322 ITR 158), WH EREIN THE HONBLE APEX COURT NOTED THAT IN THIS CASE, THERE IS NO FINDING THAT ANY DETAILS SUPPLIED BY THE ASSESSEE IN ITS RETURN WERE FOUND TO BE INCORRECT OR ERRONEO US OR FALSE AND ADDED THAT SUCH BEING THE CASE, THERE WOULD BE NO QUESTION OF INVIT ING THE PENALTY UNDER SECTION 271(1)(C) OF THE ACT AND THAT A MERE MAKING OF TH E CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING OF INACCURATE PARTICULARS REGARDING INCOME OF THE ASSESSEE. IN THE INSTANT CASE ALSO , THERE IS NO FINDING THAT THE DETAILS SUPPLIED BY THE ASSESSEE WAS FOUND TO BE IN CORRECT OR FALSE. 8. IT IS FURTHER TO BE NOTICED THAT IT IS A SET TLED PROPOSITION OF LAW THAT THE ADDITION OR DISALLOWANCES MADE IN THE ASSESSMENT PROCEEDINGS WOULD NOT AUTOMATICALLY GIVE RISE TO PENALTY AND HENCE IN THE PENALTY PROCEEDING S, THE ENTIRE MATTER HAS TO BE LOOKED INTO AFRESH, THOUGH THE FINDING GIVEN IN THE ASSESSMENT PROCEEDINGS CAN BE TAKEN HELP OF. HENCE, THE VIEW ENTERTAINED BY THE LD CIT(A), IN OUR VIEW, IS NOT SUSTAINABLE. WE HAVE ALSO SEEN THAT THE VIEW ENTER TAINED BY THE ASSESSING OFFICER WITH REGARD TO THE COMPLIANCE OF EXPLANATION 1 TO SE C 271 IS ALSO NOT CORRECT. HENCE, IN OUR VIEW, THE ASSESSING OFFICER WAS NOT J USTIFIED IN LEVYING PENALTY U/S 271(1)(C) OF THE ACT ON THE DISALLOWANCE OF PORTFOL IO MANAGEMENT CHARGES AND FURTHER THE LD CIT(A) WAS ALSO NOT CORRECT IN SUSTA INING THE PENALTY. 9. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD CI T(A) AND DIRECT THE AO TO DELETE THE PENALTY OF RS.29,258/- LEVIED U/S 271(1)(C) OF THE ACT FOR THE YEAR UNDER CONSIDERATION. HARISH Z BHUPTANI 5 10. IN THE RESULT, THE APPEAL FILED BY THE ASSE SSEE IS ALLOWED. / '/ ( ( ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH FEB 2014 . ( 28TH, FEB 2014 ( SD/- SD/- ( B R MITTAL ) ( B R BASKARAN ) / JUDICIAL MEMBER /ACCOUNTANT MEMBER MUMBAI; 7 DATED 28 TH , FEB 2014 . . ./ RAJ , SR. PS ( (( ( &8 &8 &8 &8 98 98 98 98 /COPY OF THE ORDER FORWARDED TO : 1. % / THE APPELLANT 2. &'% / THE RESPONDENT. 3. : ( ) / THE CIT(A)- 4. : / CIT 5. 8 & , , / DR, ITAT, MUMBAI 6. ' / GUARD FILE. / BY ORDER, '8 & //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI