DCIT, New Delhi V. M/s. Priyanka Oversease (P) Ltd., New Delhi

ITA 6156/DEL/2013

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 0193 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 6 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-06-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 08-05-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 18-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIKRAM SAHAY
• Assessee Lawyers: O P MODY
• Keywords: Principle of natural justice; Initiation of penalty proceedings; Speculation loss; Difference of opinion

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : F , NEW DELHI BEFORE SHRI J.SUDHAKAR REDDY, ACCOUNTANT MEMBER AND SHRI AT VARKEY, JUDICIAL MEMBER I.T.A.NO. 6156 /DEL/201 3 A.Y. 200 8 - 09 DCIT, CIRCLE 14(1) NEW DELHI VS. PRIYANKA OVERSEAS P.LTD. FLAT NO. 112 A, COMPETENT HOUSE F 14, CONNAUGHT PLACE NEW DELHI 110 001 PAN: AAACP 0070 G (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. O.P.MODY, ADV. DEPARTMENT BY : SH. VI KRAM SAHAY, SR. DR ORDER PER J. SUDHAKAR REDDY, ACCOUNTANT MEMBER THIS IS AN APPEAL FILED BY THE REVENUE DIRECTED AGAINST THE ORDER OF THE LD.CIT(A) - XVII, NEW DELHI DATED 2 2. 8.201 3 PERTAINING TO THE ASSESSMENT YEAR (AY) 200 8 - 09 . 2. FACTS IN BRIEF: - THE ASSESSEE IS A COMPANY AND IS IN THE BUSINESS OF EXPORT, MANUFACTURING AND TRADING. IT FILED ITS RETURN OF INCOME ON 29.9.2008 DECLARING NIL INCOME. THE ASSESSEE DEBITED AN AMOUNT OF RS.1,69,75,525/ - UNDER THE HEAD OTHER EXPENSES , BEING LOSS ON ACCOUNT OF TRANSACTIONS IN SHARES. THE AO TREATED THIS LOSS, AS LOSS ARISING FROM SPECULATIVE BUSINESS, ON THE GROUND THAT THE ASSESSEE COULD NOT FURNISH ANY PROOF REGARDING ACTUAL DELIVERY OF SHARES ON WHICH THE LOSSES WERE INCURRED. HE ALSO RECORDED THAT THE TRANSACTIONS IN SHARES WERE OF BIG MAGNITUDE AND THE ASSESSEE UNDERTOOK PURCHASE AND SALES ACTIVITY OF SUCH NATURE ITA NO. 6156/DEL/2013 AY: 2008 - 09 PRIYANKA OVERSEAS P.LTD., NEW DELHI 2 THROUGHOUT THE YEAR. WHILE GIVING A FINDING THAT THIS ACTIVITY CONSTITUTES BUSINESS, THE AO CAME TO A CONCLUSION THAT THE LOSS IN QUESTION, IS LOSS FROM THE SPECULATIVE BUSINESS. HE INITIATED PENALTY PROCEEDINGS U/S 271(1)(C ) OF THE ACT. 2.1. AGGRIEVED THE ASSESSEE CARR IED THE MATTER IN APPEAL. THE FIRST APPELLATE AUTHORITY HELD THAT THE ASSESSEE HAD DISCLOSED ALL PARTICULARS AND THE AO HAS NOT STATED THAT THE PARTICULARS FURNISHED WERE NOT CORRECT OR WERE INACCURATE. THE LD.CIT(A) FURTHER HELD THAT IT IS NOT THE CASE OF THE AO THAT THE CLAIM OF THE ASSESSEE WAS FALSE OR FABRICATED AND HE ACCEPTED THE CLAIM OF THE ASSESSEE. LD.CIT(A) WAS OF THE OPINION THAT THIS CASE OF DIFFERENCE OF OPINION ON THE ISSUE AS TO WHETHER THE LOSS CLAIMED BY THE ASSESSEE IS BUSINESS LOSS O R SPECULATIVE LOSS. HE GRANTED RELIEF. AGGRIEVED THE REVENUE IS IN APPEAL BEFORE US. 3 . HEARD SHRI O.P.MODY, THE LD.COUNSEL FOR THE ASSESSEE AND SHRI VI KRAM SAHAY, LD.SR. D.R. ON BEHALF OF THE REVENUE . 4 . ON A CAREFUL CONSIDERATION OF THE FACTS AND CIR CUMSTANCES OF THE CASE, ON PERUSAL OF MATERIAL ON RECORD, ORDERS OF THE AUTHORITIES BELOW, CASE LAWS CITED, WE HOLD AS FOLLOWS. 5 . THE ASSESSING OFFICER (AO) IN THIS CASE HAS NOT FOUND , THAT THE CLAIM OF THE ASSESSEE THAT IT HAD INCURRED A LOSS OF RS.1,69,75,525/ - IN THE BUSINESS OF PURCHASE AND SALE OF SHARES AS EITHER FALS E OR FABRICATED. HE HAD INFACT ACCEPTED THIS FIGURE OF LOSS. ALL THE TRANSACTIONS IN QUESTION WERE DISCLOSED BY T HE ASSESSEE IN THE BOOKS OF ACCOUNTS. THE PROFIT AND LOSS A/C WAS AUDITED. THE ASSESSEE HAD IN ITS LETTER DT. 12.10.2010 FURNISHED ALL THE DETAILS TO THE AO. THE DETAILS OF ST T PAID ALONG WITH PHOTO COPIES OF CERTIFICATES IN FORM NO.10 DB, BEARING CODE OF TRANSACTIONS ETC. THESE CODE OF TRANSACTIONS INDICATED AS TO WHETHER THE TRANSACTIONS WERE SETTLED BY ACTUAL DELIVERY OR NOT. ITA NO. 6156/DEL/2013 AY: 2008 - 09 PRIYANKA OVERSEAS P.LTD., NEW DELHI 3 6. UNDER THESE CIRCUMSTANCES WE ARE OF THE CONSIDERED OPINION THAT THE ISSUE IN QUESTION BOILS DOWN TO WHETHER THE LOSS IN QUE STION SHOULD BE TREATED AS BUSINESS LOSS OR AS SPECULATIVE LOSS. THIS IS A DEBATABLE ISSUE. 7. THE HON BLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. MANJUNATHA COTTON AND GINING FACTORY , MANJUNATHA GINNING AND PRESSING, VEERABHADRAPPA SANGAPPA AND CO ., V.S. LAD AND SONS, G.M. EXPORTS (2013) 359 ITR 565 (KARN) IN ITA NOS. 2564 OF 2005, 2565 OF 2005, 5020 OF 2009, 5022 AND 5023 OF 2009, 5025 AND 5026 OF 2010 JUDGMENT DATED 13 TH DECEMBER, 2012 CONCLUDED AS UNDER . (A) PENALTY UNDER SECTION 271(1)(C ) IS A CIVIL LIABILITY. (B) MENS REA IS NOT AN ESSENTIAL ELEMENT FOR IMPOSING PENALTY FOR BREACH OF CIVIL OBLIGATIONS OR LIABILITIES. (C) WILFUL CONCEALMENT IS NOT AN ESSENTIAL INGREDIENT FOR ATTRACTING CIVIL LIABILITY. (D) EXISTENCE OF CONDITIONS STIPULATED IN SECTION 271(1)(C) IS A SINE QUA NON FOR INITIATION OF PENALTY PROCEEDINGS UNDER SECTION 271. (E) THE EXISTENCE OF SUCH CONDITIONS SHOULD BE DISCERNIBLE FROM THE ASSESSMENT ORDER OR ORDER OF THE APPELLATE AUTHORITY OR REVISIONAL AUTHORITY. (F) EVEN IF THERE IS NO SPECIFIC FINDING REGARDING THE EXISTENCE OF THE CONDITIONS MENTIONED IN SECTION 271(1)(C), AT LEAST THE FACTS SET OUT IN EXPLANATION L1(A) AND (B) IT SHOULD BE DI SCERNIBLE FROM THE SAID ORDER WHICH WOULD BY A LEGAL FICTION CONSTITUTE CONCEALMENT BECAUSE OF DEEMING PROVISION. (G) EVEN IF THESE CONDITIONS DO NOT EXIST IN THE ASSESSMENT ORDER PASSED, AT LEAST, A DIRECTION TO INITIATE PROCEEDINGS UNDER SECTION 271(1) (C) IS A SINE QUA NON FOR THE ASSESSMENT OFFICER TO INITIATE THE PROCEEDINGS BECAUSE OF THE DEEMING PROVISION CONTAINED IN SECTION 1 (B). (H) THE SAID DEEMING PROVISIONS ARE NOT APPLICABLE TO THE ORDERS PASSED BY THE COMMISSIONER OF APPEALS AND THE COMMI SSIONER. (I) THE IMPOSITION OF PENALTY IS NOT AUTOMATIC. (J) IMPOSITION OF PENALTY EVEN IF THE TAX LIABILITY IS ADMITTED IS NOT AUTOMATIC. (K) EVEN IF THE ASSESSEE HAS NOT CHALLENGED THE ORDER OF ASSESSMENT LEVYING TAX AND INTEREST AND HAS PAID TAX AN D INTEREST THAT BY ITSELF WOULD NOT BE SUFFICIENT FOR THE AUTHORITIES ITA NO. 6156/DEL/2013 AY: 2008 - 09 PRIYANKA OVERSEAS P.LTD., NEW DELHI 4 EITHER TO INITIATE PENALTY PROCEEDINGS OR IMPOSE PENALTY, UNLESS IT IS DISCERNIBLE FROM THE ASSESSMENT ORDER THAT, IT IS ON ACCOUNT OF SUCH UNEARTHING OR ENQUIRY CONCLUDED BY AUTHORITIES IT HAS RESULTED IN PAYMENT OF SUCH TAX OR SUCH TAX LIABILITY CAME TO BE ADMITTED AND IF NOT IT WOULD HAVE ESCAPED FROM TAX NET AND AS OPINED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER. (L) ONLY WHEN NO EXPLANATION IS OFFERED OR THE EXPLANATION OF FERED IS FOUND TO BE FALSE OR WHEN THE ASSESSEE FAILS TO PROVE THAT THE EXPLANATION OFFERED IS NOT 'BONAFIDE, AN ORDER IMPOSING PENALTY COULD BE PASSED. (M) IF THE EXPLANATION OFFERED, EVEN THOUGH NOT SUBSTANTIATED BY THE ASSESSEE, BUT IS FOUND TO BE BON AFIDE AND ALL FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM, NO PENALTY COULD BE IMPOSED. (N) THE DIRECTION REFERRED TO IN EXPLANATION IB TO SECTION 271 OF THE ACT SHOULD BE CLEAR AND WITHOUT AN Y AMBIGUITY. (O) IF THE ASSESSING OFFICER HAS NOT RECORDED ANY SATISFACTION OR HAS NOT ISSUED ANY DIRECTION TO INITIATE PENALTY PROCEEDINGS, IN APPEAL, IF THE APPELLATE AUTHORITY RECORDS SATISFACTION, THEN THE PENALTY PROCEEDINGS HAVE TO BE INITIATED BY THE APPELLATE AUTHORITY AND NOT THE ASSESSING AUTHORITY. (P) NOTICE UNDER SECTION 274 OF THE ACT SHOULD SPECIFICALLY STATE THE GROUNDS MENTIONED IN SECTION 271(1)(C), I.E., WHETHER IT IS FOR CONCEALMENT OF INCOME OR FOR FURNISHING OF INCORRECT PARTICULAR S OF INCOME (Q) SENDING PRINTED FORM WHERE ALL THE GROUND MENTIONED IN SECTION 271 ARE MENTIONED WOULD NOT SATISFY REQUIREMENT OF LAW. (R) THE ASSESSEE SHOULD KNOW THE GROUNDS WHICH HE HAS TO MEET SPECIFICALLY. OTHERWISE, PRINCIPLES OF NATURAL JUSTICE IS OFFENDED. ON THE BASIS OF SUCH PROCEEDINGS, NO PENALTY COULD BE IMPOSED TO THE ASSESSEE. (S) TAKING UP OF PENALTY PROCEEDINGS ON ONE L IMB AND FINDING THE ASSESSEE GUILTY OF ANOTHER LIMB IS BAD IN LAW. (T) THE PENALTY PROCEEDINGS ARE DISTINCT FROM THE ASSESSMENT PROCEEDINGS. THE PROCEEDINGS FOR IMPOSITION OF PENALTY THOUGH EMANATE FROM PROCEEDINGS OF ASSESSMENT, IT IS INDEPENDENT AND SE PARATE ASPECT OF THE PROCEEDINGS. (U) THE FINDINGS RECORDED IN THE ASSESSMENT PROCEEDINGS INSOFAR AS 'CONCEALMENT OF INCOME' AND 'FURNISHING OF INCORRECT PARTICULARS' WOULD NOT OPERATE AS RES JUDICATA IN THE PENALTY PROCEEDINGS. IT IS OPEN TO THE ASSESSE E TO CONTEST THE SAID PROCEEDINGS ON MERITS. HOWEVER, ITA NO. 6156/DEL/2013 AY: 2008 - 09 PRIYANKA OVERSEAS P.LTD., NEW DELHI 5 THE VALIDITY OF THE ASSESSMENT OR REASSESSMENT IN PURSUANCE OF WHICH PENALTY IS LEVIED, CANNOT BE THE SUBJECT MATTER OF PENALTY PROCEEDINGS. THE AS7ESSMEN OR REASSESSMENT CANNOT BE DECLARED AS INVALID I N THE PENALTY PROCEEDINGS. 8. THE LD.COUNSEL FOR THE ASSESSEE RELIED ON THE DECISION OF DELHI C BENCH OF THE TRIBUNAL IN ITA 156/DEL/2010 FOR THE AY 1997 - 98 IN THE CASE OF ITO VS. M/S HT FERRO PVT.LTD. WHERE IN AT PARA 5 IT WAS HELD AS FOLLOWS. 5. IN T HE ABSENCE OF THE ASSESSEE ON THE DATE OF HEARING, WE HEARD THE LD.D.R. WHO STRONGLY JUSTIFIED IMPOSING OF PENALTY U/S 271(1)(C ) OF THE ACT, HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE DISCUSSED IN THE ASSESSMENT ORDER. IN OUR VIEW PENALTY U /S 271(1)(C ) WAS RIGHTLY BEEN CANCELLED BY THE LD.CIT(A). WE AGREE WITH THE VIEW OF THE LD.CIT(A) THAT THE ASSESSEE HAD DISCLOSED ALL THE PARTICULARS OF INCOME AND HAS NOT FURNISHED ANY INACCURATE PARTICULARS IN RESPECT OF THE ISSUE IN DISPUTE. FROM OUT OF THE DETAILS FURNISHED ONLY, THE AO HAS WENT ON TO CONSIDER THE TRADING LOSS AS A SPECULATION LOSS IN TERMS OF PROVISIONS OF EXPLANATION TO S.73 OF THE ACT. ON THE PART OF THE ASSESSEE HE HAS DISCLOSED ALL THE MATERIAL DETAILS WHICH COULD ENABLE THE DE PARTMENT TO COME TO A PROPER CONCLUSION. THE LD.CIT(A), IN DELETING THE PENALTY, HAS FOLLOWED THE DECISION OF DELHI HIGH COURT IN THE CASE OF CIT VS. AURIC INVESTMENT AND SECURITIES LTD., 310 ITR 121 (DEL.), INASMUCH AS THE ASSESSEE HAS DISCLOSED ALL PART ICULARS OF INCOME AND HAS NOT CONCEALED ANY PARTICULARS THEREOF. IN THE LIGHT OF THE DETAILS THAT IT HAD FURNISHED, IT CANNOT BE SAID THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME. SO THE QUESTION OF LEVYING OF PENALTY U/S 271(1)(C ) DOES NOT ARISE. THE LD.CIT(A) HAS CORRECTLY CANCELLED THE PENALTY AND WE DECLINE TO INTERFERE. THE APPEAL IS DISMISSED. 8.1. APPLYING THE PROPOSITIONS LAID DOWN IN THESE CASE LAWS TO THE FACTS OF THE CASE ON HAND, WE HAVE TO NECESSARILY UPHOLD THE ORDER OF THE FIRST APPELLATE AUTHORITY AND DISMISS THE APPEAL OF REVENUE. 9. IN THE RESULT THE REVENUE S APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COUR T ON 11 TH JUNE, 2015. SD/ - SD/ - [ A.T.VARKEY ] [J. SUDHAKAR REDDY] JUDICIAL MEMBER ACCOUNTANT MEMBER DT. THE 11 TH JUNE, 2015 MANGA ITA NO. 6156/DEL/2013 AY: 2008 - 09 PRIYANKA OVERSEAS P.LTD., NEW DELHI 6 COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES