THE ASHOK CONSTRUCTION & INVESTMENT CO. P.LTD, MUMBAI V. ITO WD 2(1)*(1), MUMBAI

ITA 5795/MUM/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 4212 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-04-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 15-09-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ARVIND KUMARDR
• Keywords: Business income
• Section: 143(3)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A, MUMBAI , , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI RAJENDRA, ACCOUNTANT MEMBER ITA NOS.5795 & 5796/MUM/2014 ASSESSMENT YEARS- 2006-2007 & 2007-08 M/S ASHOK CONSTRUCTION & INVESTMENT CO. PVT. LTD. RAHIMTULLA HOUSE, 7, HOMJI STREET, FORT, MUMBAI-400001 / VS. INCOME TAX OFFICER, WARD-2(1)(1), MUMBAI PAN NO. AAACT3150F ( / ASSESSEE) ( / REVENUE) / ASSESSEE BY SHRI HITEN VASANT / REVENUE BY SHRI ARVIND KUMAR-DR / DATE OF HEARING : 06/04/2016 / DATE OF ORDER: 06/04/2016 ITA NO.5795 & 5796/MUM/2014 M/S ASHOK CONSTRUCTION INVESTMENT CO. PVT. LTD. 2 / O R D E R PER JOGINDER SINGH (JUDICIAL MEMBER) BOTH THESE APPEAL ARE BY THE ASSESSEE AGAINST THE IMPUGNED ORDERS BOTH DATED 09/07/2014 OF THE COMMISSIONER OF INCOME TAX (APPEAL), MUMBAI. FIRST, WE SHALL TAKE UP THE APPEAL OF THE ASSESSEE FOR A.Y. 2 006-07 (ITA NO.5795/MUM/2014), WHEREIN, THE ONLY GROUND RA ISED PERTAINS TO HOLDING THE CAPITAL GAIN OF RS.28,23,81 5/-, ON SALE OF SHARES, AS BUSINESS INCOME. 2. DURING HEARING, THE LD. COUNSEL FOR THE ASSESSE E, SHRI HITEN VASANT, CONTENDED THAT IN THE CASE OF TH E ASSESSEE FOR A.Y. 20050-06 (EARLIER YEAR), THE ASSE SSEE WAS TREATED AS INVESTOR. OUR ATTENTION WAS INVITED TO PAGES 45 TO 47 OF THE PAPER BOOK. LD. COUNSEL DREW OUR ATTEN TION TO PAGE 5 OF THE PAPER BOOK, WHEREIN, THE TRANSACTIONS WERE REARRANGED AND THE DELIVERY OF THE SHARES COULD NOT BE MADE, THEREFORE, WITHOUT ANY JUSTIFICATION, THE LD. ASSESSING OFFICER TREATED THEM AS SIXTY TWO TRANSACTION. IT WAS EXPLAINED BY THE COUNSEL THAT IF BOTH THE TRANSACTI ON ARE CONSIDERED, THERE IS LOSS OF RS.34. IT WAS FURTHER EXPLAINED THAT FOR A.Y. 2005-06, THERE WERE 30 TRANSACTION OF MORE THAN 100 DAYS AND IN THE PRESENT APPEAL, THERE ARE ONLY 32 TRANSACTIONS. THE CRUX OF ARGUMENT IS IN RELIANCE U PON ASSESSMENT ORDER 2005-06. ON THE OTHER HAND, THE L D. DR, DREW OUR ATTENTION TO PAGE-42 OF THE PAPER BOOK BY ITA NO.5795 & 5796/MUM/2014 M/S ASHOK CONSTRUCTION INVESTMENT CO. PVT. LTD. 3 CONTENDING THAT THE TRIBUNAL SET ASIDE THE MATTER T O THE FILE OF THE LD. ASSESSING OFFICER, THEREFORE, THE PRESEN T APPEAL MAY ALSO BE SET-ASIDE. 2.1. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE FACTS , IN BRIEF, ARE THAT THE ASSESSEE, A PRIVATE LIMITED COMPANY, M ADE INVESTMENT IN SHARES AND THE ORIGINAL ASSESSMENT WA S FINALIZE ON 12/12/2008, U/S 143(3) OF THE INCOME TA X ACT, 1961 (HEREINAFTER THE ACT), WHEREIN, CLAIMED SHORT TERM CAPITAL GAIN, ON SALE OF SHARES WAS CONSIDERED AS BUSINESS INCOME. 2.2. ON APPEAL, BEFORE THE COMMISSIONER OF INCOME TAX (APPEAL), THE STAND OF THE LD. ASSESSING OFFICE R WAS AFFIRMED AGAINST WHICH THE ASSESSEE IS IN APPEAL BE FORE THE TRIBUNAL. WE HAVE PERUSED THE MATERIAL AVAILABLE ON RECORD AND FIND THAT THE MAJOR GAIN/LOSS IS FROM TWO SCRIP S ONLY AND THE LD. ASSESSING OFFICER COULD NOT PROPERTY AP PRECIATE THE MAJOR SCRIPS AND REACHED TO A CONCLUSION BY HOL DING THAT IT IS A BUSINESS INCOME OF THE ASSESSEE AS 62 TRANSACTION WERE MADE AND EARNED SHORT TERM CAPITAL GAIN. THE OBSERVATION OF THE LD. ASSESSING OFFICER WAS TH AT OUT OF 32 TRANSACTIONS, THE HOLDING PERIOD WAS LESS THAN 1 00 DAYS AND IN FIFTEEN CASES, IT WAS WITHIN A WEEK. HOWEVE R, WE FIND THAT FOR A.Y. 2005-06, THE ASSESSEE WAS TREATE D AS INVESTOR, WHEREIN, FACTS ARE IDENTICAL. THE MAJOR T WO SCRIPS, ITA NO.5795 & 5796/MUM/2014 M/S ASHOK CONSTRUCTION INVESTMENT CO. PVT. LTD. 4 WERE TRANSACTED BY THE ASSESSEE, FOR WHICH DELIVERY WAS NOT MADE ON THE SAME DAY. THE SAME FIGURES ARE REFLECTE D AS OPENING/CLOSING, THEREFORE, THE LD. ASSESSING OFFIC ER DID NOT APPRECIATE THE FACTUAL MATRIX AND EVEN DID NOT MAKE ANY ENQUIRY, IF HE WAS NOT SATISFIED BY THE EXPLANATION OF THE ASSESSEE. IT IS NOTICED THAT THE MAJOR TRANSACTION S ARE OF ITC LTD. AND RELIANCE INDUSTRIES LTD. (PAGE-5 OF TH E PAPER BOOK). CONSIDERING THE TOTALITY OF FACTS, WE ARE S ATISFIED THAT ASSESSEE IS AN INVESTOR, THEREFORE, THE GAIN I S TO BE TREATED AS CAPITAL GAIN AND NOT BUSINESS INCOME AS HAS BEEN PROPOSED BY THE LD. ASSESSING OFFICER. THE RAT IO LAID DOWN IN THE CASE OF GOPAL PUROHIT AND THE FINDING G IVEN HONBLE JURISDICTIONAL HIGH COURT SUPPORTS THE CASE OF THE ASSESSEE. THUS, THE APPEAL OF THE ASSESSEE IS ALLOW ED. 3. NOW, WE SHALL TAKE UP THE APPEAL OF THE ASSESSE E FOR A.Y. 2007-08 (ITA NO.5796/MUM/2014), WHEREIN, IMPOSITION OF PENALTY U/S 271(1)(C) OF THE ACT AMOU NTING TO RS.1 LAKH HAS BEEN CHALLENGED. AT THE OUTSET, THE L D. COUNSEL FOR THE ASSESSEE CLAIMED THAT THE CASE OF T HE ASSESSEE IS SQUARELY COVERED BY THE DECISION OF THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF KAMALAKAR MANO HAR HAVAL VS ITO (ITA NO.1170 TO 1173/PN/2010) ORDER DA TED 30/12/2011 BY CONTENDING THAT PENALTY HAS BEEN MERE LY IMPOSED ON NOTIONAL INCOME/NOTIONAL RENT BY EXPLAIN ING THAT THERE IS NO CONCEALMENT OF INCOME OR FURNISHIN G OF INACCURATE PARTICULARS OF SUCH INCOME. ON THE OTHE R HAND, ITA NO.5795 & 5796/MUM/2014 M/S ASHOK CONSTRUCTION INVESTMENT CO. PVT. LTD. 5 THE LD. DR, JUSTIFIED THE PENALTY, IMPOSED BY THE L D. ASSESSING OFFICER. 3.1. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE FACTS , IN BRIEF, ARE THAT THE ASSESSING OFFICER INITIATED PENALTY PR OCEEDINGS U/S 271(1)(C) OF THE ACT, IN RESPECT OF NOTIONAL C OMPUTATION OF PROPERTY INCOME, WHICH WAS OBJECTED BY THE ASSES SEE VIDE LETTER DATED 14/02/2012. THE LD. ASSESSING OFF ICER IMPOSED PENALTY OF RS.1 LAKH. ON APPEAL, BEFORE THE COMMISSIONER OF INCOME TAX (APPEAL), THE PENALTY WA S CONFIRMED AND THE ASSESSEE IS IN APPEAL BEFORE THIS TRIBUNAL. BEFORE COMING TO ANY CONCLUSION, WE ARE REPRODUCING HEREUNDER THE RELEVANT PORTION FROM THE ORDER OF THE TRIBUNAL (PUNE BENCH) IN THE CASE OF KAMALAK AR MANOHAR HAVAL VS ITO (ITA NO.1170 TO 1173/PN/2010) ORDER DATED 30/12/2011 FOR READY REFERENCE AND ANAL YSIS:- KAMALAKAR MANOHAR HAVAL A'YS. 2001-02 TO 2004-05 IN THE PRESENT CASE BEFORE US, THE EXPLANATION SUBMITTED B Y THE ASSESSEE THAT THE ASSESSEE HAD REFLECTED ALL HIS 4 DIFFERENT HOUSE PROPERTIES IN THE BALANCE SHEET AND NO ACTUAL RENT WAS RECEIVED FROM THESE PROPERTIES HAS NOT BEEN FOUND B Y THE A.O TO BE FALSE. ADMITTEDLY, THE ADDITION ON ACCOUNT OF RENTAL INCOME FROM THOSE HOUSE PROPERTIES HAS BEEN MADE ON NOTIONAL AND ESTIMATE BASIS. THUS, IT CANNOT BE SAI D BEYOND DOUBT THAT THERE WAS CONCEALMENT OF PARTICULARS OF INCOME OR ITA NO.5795 & 5796/MUM/2014 M/S ASHOK CONSTRUCTION INVESTMENT CO. PVT. LTD. 6 FURNISHING INACCURATE PARTICULARS THEREOF ON THE PA RT OF ASSESSEE TOWARDS THE INCOME FROM THOSE HOUSE PROPER TY TO ATTRACT THE PENAL PROVISION U/S 271(1)(C ) OF THE A CT. ON HAVING GONE THROUGH THE PROVISIONS OF EXPLANATION 1 REPROD UCED HEREINABOVE, WE ALSO NOTE THAT THERE IS WORD 'OR' B ETWEEN THE CLAUSES (A) AND (B) TO THE EXPLANATION 1 OF THE SEC TION 271(1)(C) OF THE ACT. WE ARE THUS OF THE VIEW THAT THERE WAS NO JUSTIFICATION FOR THE A.O TO LEVY PENALTY IN QUESTI ON, UPHELD BY THE LD CIT(A). WE THUS WHILE SETTING ASIDE ORDERS O F THE AUTHORITIES BELOW IN THIS REGARD DIRECT THE A.O TO DELETE THE PENALTY IN QUESTION LEVIED DURING THE A.YS. UNDER CONSIDERATION. THE GROUND IS ACCORDINGLY ALLOWED IN FAVOUR OF THE ASSESSEE. 3.2. CONSIDERING THE AFORESAID DECISION, IT CAN B E CONCLUDED THAT IT MAY BE A GOOD CASE FOR QUANTUM AD DITION AND SINCE, THE ASSESSEE HAD DULY REFLECTED THE PROP ERTY IN THE BALANCE SHEET AND NO ACTUAL RENT WAS RECEIVED F ROM THE CONCERNED PROPERTY AND THE RENT WAS CALCULATED ON NOTIONAL/ESTIMATE BASIS, THEREFORE, IT CAN BE SAID THAT NEITHER THERE IS CONCEALMENT NOR FURNISHING OF INAC CURATE PARTICULARS OF INCOME, BECAUSE, NO ACTUAL INCOME AC CRUED TO THE ASSESSEE, THEREFORE, THERE IS NO QUESTION OF CONCEALMENT, CONSEQUENTLY, PENALTY WILL NOT SURVIVE , THUS, THE LD. ASSESSING OFFICER IS DIRECTED TO DELETE THE PENALTY, THEREFORE, THE APPEAL OF THE ASSESSEE IS ALLOWED. ITA NO.5795 & 5796/MUM/2014 M/S ASHOK CONSTRUCTION INVESTMENT CO. PVT. LTD. 7 FINALLY, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOW ED. THIS ORDER WAS PRONOUNCED IN THE OPEN IN THE PRESENCE OF LD. REPRESENTATIVES FROM BOTH SIDES AT THE CONCLUSION OF THE HEARING ON 06/04/2016. SD/- SD/- (RAJENDRA) (JOGINDER SINGH) ' # / ACCOUNTANT MEMBER $ # / JUDICIAL MEMBER MUMBAI; # DATED : 06/04/2016 F{X~{T? P.S/. .. !%$&'()(*& / COPY OF THE ORDER FORWARDED TO : 1. %& '( / THE APPELLANT (RESPECTIVE ASSESSEE) 2. )*'( / THE RESPONDENT. 3. ++ , ( %& ) / THE CIT, MUMBAI. 4. ++ , / CIT(A)- , MUMBAI, 5. /01)2 , +%& %23 , / DR, ITAT, MUMBAI 6. 145 / GUARD FILE. ! / BY ORDER, */&) //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI