ASST CIT 2(1), MUMBAI V. BINANI METAS LTD, MUMBAI

ITA 6014/MUM/2011

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 8997 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 4 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-01-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 28-04-2015
• Assessment Year: 2004-2005
• Appeal Filed On: 29-08-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUMAN KUMARDR
• Assessee Lawyers: PARVESH ADVANI ARS; K V BESWAL
• Keywords: Cost of acquisition; Speculation loss; Difference of opinion

Judgement Text

, INCOME-TAX APPELLATE TRIBUNAL -BBENCH MUMBAI , , BEFORE S/SH.RAJENDRA,ACCOUNTANT MEMBER AND AMARJIT SINGH,JUDICIAL MEMBER ./I.T.A./6014/MUM/2011, / ASSESSMENT YEAR: 2004-05 ACIT-2(1) ROOM NO.575, 5 TH FLOOR, M.K. ROAD MUMBAI-400 020. VS. M/S. BINANI METALS LTD. MERCANTILE CHAMBERS, 2 ND FLOOR 12, J.N. HEREDIA MARG, BALLARD ESTATE MUMBAI-400 001. PAN:AAACB 2901 J ( /APPELLANT ) ( / RESPONDENT) / REVENUE BY: SHRI SUMAN KUMAR-DR /ASSESSEE BY: S /SHRI K.V. BESWAL & PARVESH ADVANI- (ARS) / DATE OF HEARING: 15/12/2016 / DATE OF PRONOUNCEMENT:11/01/2017 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) , / PER RAJENDRA A.M. - CHALLENGING THE ORDERS DATED 20/06/2011 OF THE CIT (A)-4,MUMBAI, THE ASSESSING OFFICER(AO) HAS FILED THE PRESENT APPEAL.ASSESSEE-C OMPANY,ENGAGED IN BUSINESS OF TRADING NONFERROUS METALS, SHARES/STOCKS,FILED ITS RETURN O F INCOME ON 30/10/2004, DECLARING TOTAL LOSS OF RS. 78.29 LAKHS. THE AO COMPLETED THE ASSESSMENT U/S.143 (3) OF THE ACT ON 22/12/2006, DETERMINING ITS INCOME AT RS. 80.35 LAKHS. BRIEF FACTS: 2. DURING THE ASSESSMENT PROCEEDINGS,THE AO FOUND THAT THE ASSESSEE HAD SOLD ONE FLAT,PLANT AND MACHINERY AND MOTORCAR DURING THE YEAR UNDER CO NSIDERATION, THAT THE ASSETS IN QUESTION WERE DEPRECIABLE ASSETS THOUGH THE PERIOD OF FOLDIN G OF THE ASSETS WAS MORE THAN 36 MONTHS, THAT SURPLUS ON SALE OF THE ASSETS WAS CONSIDERED U NDER THE HEAD SHORT-TERM CAPITAL GAINS (STCG) AS PER THE PROVISIONS OF SECTION 48 AND 49 O F THE ACT, THAT IT CALCULATED STCG OF RS. 95.81 LAKHS, THAT IT HAD ALSO SOLD SHARE OF DECON M ERCANTILE PRIVATE LTD.,ON WHICH LOSS WAS CALCULATED AT RS. 90 LAKHS, THAT THE PERIOD OF FOLD ING OF THE SHARES WAS MORE THAN ONE YEAR, THAT THE ASSESSEE TREATED THE SHARES UNDER THE HEAD STCG ON THE BASIS OF LEGAL ADVICE THAT SHARES OF UNLISTED COMPANIES WOULD RESULT IN TWO ST CG AS LONG AS THE HOLDING PERIOD WAS LESS THAN 36 MONTHS,THAT IT SET OFF STCG RESULTED O N SALE OF DEPRECIABLE ASSETS AGAINST THE LOSS ON SALE OF SHARES. THE AO DID NOT ALLOW THE SETTING OF AND LOSS ON SHARES WAS RESTRICTED TO RS. 9.69 LAKHS. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY (FAA),WHO ALLOWED THE LOSS AT RS. 90 LAKHS AGAINST SALE OF SH ARES BUT HELD IT IS LONG TERM CAPITAL LOSS(LTCL).THE AO ISSUED A NOTICE TO THE ASSESSEE A S TO WHAT PENALTY SHOULD NOT BE LIVID 6014/M/11-BINANI METALS 2 AGAINST THE CLAIM OF SET OFF OF CAPITAL GAIN AGAINS T CAPITAL LOSS IN THE ABOVE SAID TRANSACTION HAS IT HAD HAD CONCEALED THE INCOME OF FURNISHING I NACCURATE PARTICULARS OF INCOME. AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE,HE LEVIE D A PENALTY OF RS. 35 LAKHS, U/S.271(1)(C) OF THE ACT, WIDE ITS ORDER DATED 26/08/2010. 3. AGGRIEVED BY THE PENALTY ORDER OF THE AO, THE ASSES SEE PREFERRED AN APPEAL BEFORE THE FAA. BEFORE HIM, IT WAS ARGUED THAT THE F AA HAD PARTLY ALLOWED THE APPEAL,THAT IT HAD MADE FULL DISCLOSURE ABOUT THE SALE OF SHARES IN THE COMPUTAT ION OF INCOME AND THE DISCLOSURE WAS BASED ON THE LEGAL OPINION, THAT IT WAS NOT THE CASE OF T HE AO THAT INFORMATION WAS NOT AVAILABLE ON THE RECORD, THAT THE ASSESSEE HAD NOT CONCEDED ANY PARTICULAR ABOUT THE INFORMATION, THAT THE AO HAD LIVID THE PENALTY ON THE BASIS OF THE TREATM ENT GIVEN IN RESPECT OF LONG-TERM VERSUS SHORT-TERM CAPITAL LOSS IN RESPECT OF SALE OF SHARE S. THE SIZE REFERRED TO CERTAIN CASE LAWS INCLUDING CASE OF RELIANCE PETRO PRODUCTS LTD. (322 ITR 158). AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE AN D THE PENALTY ORDER PASSED BY THE AO, THE FAA HELD THAT HE HAD CALLED FOR COMMENTS FROM THE A O ABOUT THE SUBMISSIONS MADE BY THE ASSESSEE, THAT THE AO DID NOT MAKE FURTHER COMMENTS AND RELIED UPON THE PENALTY ORDER ONLY, THAT GAIN FROM DEPRECIABLE ASSET WAS STCG FOR THE P URPOSE OF SECTION 48 AND 49 ONLY, THAT IT DID NOT APPLY TO OTHER PROVISIONS AND THAT IT WAS A VAILABLE FOR SET OFF AGAINST THE LTCL. HE REFERRED TO THE CASES OF WALTER SALDHANA (44SOT 26) , HARSHVARDHAN CHEMICALS AND MINERALS LTD. (259 ITR 212). HE FURTHER HELD THAT THERE WAS NO DISPUTE WITH REGARD TO THE CALCULATION OF STCG ON SALE OF DEPRECIABLE ASSETS, THAT THE DISPUT E WAS RELATING TO COMPUTATION OF CAPITAL LOSS WITH REGARD TO SALE OF SHARES, THAT THE ASSESS EE HAD DISCLOSED THE TRANSACTION IN THE RETURN OF INCOME, THAT ALL THE REQUIRED PARTICULARS HAD BE EN DISCLOSED BY THE ASSESSEE, THAT THE AO HAD TAKEN THE FIGURES FROM THE RETURN ONLY, THAT WH ATEVER WAS RELEVANT ABOUT THE SHARE TRANSACTION HAD BEEN COMPLETELY DISCLOSED BY THE AS SESSEE, THAT THE DETAILS RELATING TO PURCHASE AND SALE OF SHARES, THE NAME OF THE COMPAN Y, COST OF ACQUISITION, NUMBER OF SHARES, DATES OF PURCHASE AND SALE, SALE CONSIDERATION AND THE STATUS OF THE SHARES HAD CLEARLY BEEN DISCLOSED, THAT NO OTHER DATED WAS REQUIRED FOR CAL CULATING THE GAIN/LOSS FOR THE TRANSACTION IN QUESTION FOR TAKING A DECISION WITH REGARD TO NATUR E OF THE LOSS, THAT THE CHANCE OF THE AO OF FURNISHING INACCURATE PARTICULARS WAS COMPLETELY MI SPLACED, THAT NO PENALTY COULD BE LEVIED BECAUSE NO PARTICULARS HAD BEEN CONCEALED OR INACCU RATE PARTICULARS HAD BEEN FILED. RELYING UPON THE JUDGEMENT OF THE HONORABLE SUPREME COURT I N THE CASE OF RELIANCE PETRO PRODUCTS LTD.(SUPRA), HE DELETED THE PENALTY LEVIED BY THE AO. 6014/M/11-BINANI METALS 3 4. DURING THE COURSE OF HEARING BEFORE US, THE DEPARTM ENTAL REPRESENTATIVE (DR) SUPPORTED THE ORDER OF THE AO. THE AUTHORISED REPRESENTATIVE (AR) RELIED UPON THE ORDER OF THE FAA AND REFERRED TO THE CASES OF CLARIDGES INVESTMENTS AND FINANCE PRIVATE LTD (ITA/410/MUM/2011-AY. 2003-04,DATED 07/05/2015, BEN NETT COLEMAN & CO LTD. (ITA(LOD) 2017 OF 2012) OF HONBLE BOMBAY HIGH COUR T, MOONROCK INVESTMENTS AND TRADING COMPANY PRIVATE LTD. (ITA/1710/ MUM/2010). 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE ASSESSEE HAD SOLD DEPRECIABLE ASSETS AND H AD CLAIMED STC G, THAT IT HAD SOLD CERTAIN SHARES OF A COMPANY AND THE LOSS SUFFERED ON SALE O F THE SHARES WAS SET OFF AGAINST THE STCG OF THE DEPRECIABLE ASSETS, THAT WHILE CALCULATING T HE LOSS ON SALE OF SHARES IT HAD TAKEN LEGAL OPINION ABOUT THE NATURE OF THE LOSS, THAT IN THE Q UANTUM PROCEEDINGS THE FAA HAD PARTLY ALLOWED THE APPEAL FILED BY IT, THAT THE AO HAD LEV IED A PENALTY U/S.271(1)(C) AS HE WAS OF THE OPINION THAT THE ASSESSEE HAD FILED INACCURATE PART ICULARS ABOUT THE LOSS TO BE SET OFF. WE FIND THAT THE BASIC ISSUE IS ABOUT THE HEAD UNDER WHICH THE LOSS ARISING ON SALE OF SHARES SHOULD BE ASSESSED. IN OUR OPINION,PENALTY U/S.271(1)(C) CANN OT BE LEVIED AUTOMATICALLY IF THE ISSUE IS ONLY ABOUT HAD UNDER WHICH THE PARTICULAR INCOME SH OULD BE ASSESSED. IN THE CASE UNDER CONSIDERATION,THE ASSESSEE HAD FILED ALL THE NECESS ARY DETAILS ABOUT THE SHARE TRANSACTION, THAT THE AO AND THE ASSESSEE HAD DIFFERENCE OF OPINION A BOUT THE TREATMENT TO BE GIVEN TO THE SAID TRANSACTION. ALL THE DETAILS OF THE TRANSACTIONS WE RE AVAILABLE TO THE AO. THEREFORE,IT COULD NOT BE HELD THAT ASSESSEE HAD FILED INACCURATE PARTICUL ARS OF INCOME HAD CONCEALED THE PARTICULARS OF INCOME. WE WOULD LIKE TO REFER TO THE JUDGMENT O F THE HONBLE DELHI HIGH COURT AURIC INVESTMENTS AND SECURITIES LTD. (SUPRA) RELIED UPON BY THE FAA IN THAT MATTER THE CLAIM OF BUSINESS LOSS WAS DISALLOWED AND IT WAS HELD THAT L OSS WAS TO BE ASSESSED UNDER THE HEAD SPECULATIVE LOSS. THE AO LEVIED PENALTY U/S.271(1)( C)(1)(C) FOR CONCEALMENT OF PARTICULARS OF INCOME. WHEN THE MATTER TRAVELED TO THE HONBLE HIG H COURT, IT DECIDED THE ISSUE AS UNDER: DURING THE ASSESSMENT PROCEEDINGS FOR THE AY. 2001-02 , THE ASSESSING OFFICER FOUND THAT THE LOSS CLAIMED BY THE ASSESSEE WAS SPECULATI VE IN NATURE TO BE ADJUSTED AGAINST SPECULATIVE INCOME ONLY AND AS THE INCOME WAS ASSES SED AT A LOSS, THE LOSS SHOWN BY THE ASSESSEE COULD NOT BE ADJUSTED. THEREFORE, THE ASSESSING OFFICER INITIATED PENALTY PROCEEDINGS U/S.271(1)(C)(1)(C) OF THE INCOME-TAX A CT, 1961, AND IMPOSED PENALTY. THE PENALTY WAS CANCELLED BY THE COMMISSIONER OF IN COME-TAX (APPEALS) AND THIS WAS UPHELD BY THE TRIBUNAL. . THERE WAS NOTHING ON REC ORD TO SHOW THAT IN FURNISHING ITS RETURN OF INCOME, THE ASSESSEE HAD EITHER CONCEALED ITS INCOME OR HAD FURNISHED ANY 6014/M/11-BINANI METALS 4 INACCURATE PARTICULARS OF INCOME. THE MERE TREATMEN T OF THE BUSINESS LOSS AS SPECULATION LOSS BY THE ASSESSING OFFICER DID NOT A UTOMATICALLY WARRANT THE INFERENCE OF CONCEALMENT OF INCOME. THE CANCELLATION OF PENAL TY WAS VALID. SIMILAR VIEW HAS BEEN TAKEN BY THE HONBLE BOMBAY H IGH COURT IN THE MATTER OF BENNETT COLEMAN & CO LTD. (SUPRA).RESPECTFULLY FOLLOWING TH E ABOVE JUDGMENTS WE ARE DECIDING THE EFFECTIVE GROUND OF APPEAL AGAINST THE AO. AS A RESULT,APPEAL FILED BY T HE AO STANDS DISMISSED. !'# $%&' . ORDER PRONOUNCED IN THE OPEN COURT ON 11 TH JANUARY, 2017. , 2017 SD/- SD/- ( $ / AMARJIT SINGH ) ( / RAJENDRA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 11. 01.2017. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR B BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.