MITA J JHAVERI, MUMBAI V. ACIT 16(1), MUMBAI

ITA 6210/MUM/2012

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 3334 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 10 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 24-02-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 10-10-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S RAVICHANDRANDR
• Keywords: Business income; Bonafide belief; Tax effect

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL, MUMBAI B BENCH . . , BEFORE S/SH. MAHAVIR SINGH,JM & B.R. BASKARAN,AM ./ ITA NO./6210/MUM/2012, / ASSESSMENT YEARS: 2008-09 MS. MITA J. JHAVERI A-10, WALKESHWAR TRIVENI CHS LTD. 66, WALKESHWAR ROAD MUMBAI-400 006. PAN:AADPJ 7504 M VS. THE ACIT-16(1) 2ND FLOOR, MATRUMANDIR, TARDEO MARG MUMBAI-400 007. ( /APPELLANT ) ( / RESPONDENT ) REVENUE BY: SHRI S. RAVICHANDRAN-DR ASSESSEE BY: SHRI VIPUL JOSHI / DATE OF HEARING: 30.08.2016 / DATE OF PRONOUNCEMENT:30.08.2016 ,1961 254(1) ORDER U/S 254(1) OF THE INCOME-TAX ACT, 1961(THE AC T) O R D E R PER MAHAVIR SINGH,JM : THIS APPEAL BY THE ASSESSEE IS ARISING OUT OF ORDER OF CIT(A)-27, MUMBAI, IN APPEAL NO.CIT(A)-27/ACIT 16(1) /84/2011-12, ORDER D ATED 30/08/2012. ASSESSMENT WAS FRAMED BY ACIT-16 (1), MUMBAI UNDER SECTION 143 (3) OF THE INCOME TAX ACT, 1961 ( HEREIN AFTER REFERRED TO AS THE ACT) FOR T HE ASSESSMENT YEAR 2008-09 VIDE HIS ORDER DATED 27/12/2010. 6210/M/12 MITA JHAVERI 2 2. THE ONLY ISSUE IN THIS APPEAL OF THE ASSESSEE IS AGAINST THE ORDER OF CIT(A) CONFIRMING THE LEVY OF PENALTY BY THE ASSESSING OFF ICER U/S.271(1)(C ) OF THE ACT FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME. 3. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE IS EA RNING INCOME MAINLY ON CAPITAL GAINS BY DEALING IN SHARES AND SECURITIES AND ALSO INCOME FROM OTHER SOURCES. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAS DISCL OSED BUSINESS INCOME OF RS.344/-, SHORT TERM CAPITAL GAIN OF RS.49,98,803/- AND INCOM E FROM OTHER SOURCES AT RS.2,92,796/-. ASSESSING OFFICER NOTED THAT ASSESS EES IS ENGAGED IN THE DERIVATIVE TRANSACTION ACTIVITY AND THE INCOME ARISING OUT OF THE SAME AS IS TO BE TREATED AS BUSINESS INCOME AS AGAINST CAPITAL GAINS DECLARED B Y ASSESSEE . THE ASSESSEE HAS NOT DISPUTED THE CHANGE OF HEAD FROM CAPITAL GAIN TO BU SINESS INCOME IN THE QUANTUM ASSESSMENT. THE ASSESSING OFFICER INITIATED PENALTY PROCEEDINGS FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME FOR THE REASON THA T ASSESSEE HAD DISCLOSED DERIVATIVE TRANSACTIONS AS CAPITAL GAINS INSTEAD OF BUSINESS I NCOME. THE ASSESSING OFFICER LEVIED THE PENALTY DESPITE THE FACT THAT ASSESSEE FILED EX PLANATION THAT HE ACTUALLY WAS OF THE VIEW THAT THE ENTIRE ACTIVITY OF SHARE MARKET IS TO BE TREATED AS CAPITAL GAIN EITHER SHORT TERM OR LONG TERM . BUT AO HAS NOT ACCEPTED THE EXP LANATION OF THE ASSESSEE AND LEVIED PENALTY FOR FURNISHING INACCURATE PARTICULARS OF IN COME U/S.271 (1) (C ) OF THE ACT. CIT(A) ALSO CONFIRMED THE ACTION OF THE ASSESSING O FFICER. AGGRIEVED, NOW ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE THR OUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. FIRST OF ALL IT IS TO BE MENTIONED THAT THE ASSESSMENT HAS 6210/M/12 MITA JHAVERI 3 BECOME FINAL AND ASSESSEE ACCEPTED THE CHANGE OF HE AD OF INCOME MADE BY AO. WE FIND THAT THE AO IN ASSESSMENT ORDER TREATED DERIVA TIVE TRANSACTION ACTIVITY AS BUSINESS ACTIVITY INSTEAD OF INVESTMENT ACTIVITY CLAIMED BY THE ASSESSEE. THE AO ASSESSED SHORT TERM CAPITAL GAIN DECLARED BY THE ASSESSEE AS BUSIN ESS INCOME FROM THESE DERIVATIVE TRANSACTION ACTIVITIES. ASSESSEES EXPLANATION BEFO RE LOWER AUTHORITIES WAS THAT THE VIEW OF THE ASSESSEE WAS SUPPORTED BY VARIOUS JUDIC IAL DECISIONS IN ITS FAVOUR TREATING THE ACTIVITY OF BUYING AND SELLING OF SHARES AND TR ADING IN DERIVATES AND ALSO FUTURE & OPTIONS AS INVESTMENT ACTIVITY AND NOT BUSINESS ACT IVITY. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE STATED THAT ASSESSEE HAS NOT FURNISHED INACCURATE PARTICULARS OF INCOME AS IT HAS FURNISHED ALL THE DETAILS RELATING TO HER DE RIVATIVE TRANSACTION AND ADMITTEDLY THE SAME WAS CORRECT. ACCORDING TO THE LD. COUNSEL FOR THE ASSESSEE THERE IS ONLY CHANGE OF HEAD OF INCOME AND THERE IS NO ADDITION TO THE I NCOME OF THE ASSESSEE. HE ADMITTED THAT THERE IS TAX EFFECT FOR RATE PURPOSE BECAUSE B USINESS INCOME IS ASSESSED AT HIGHER RATE OF TAX THAN SHORT TERM CAPITAL GAIN. THE LD. C OUNSEL FOR THE ASSESSEE REFERRED TO THE DECISION OF HON'BLE BOMBAY HIGH COURT WHEREIN THE P ENALTY FOR CONCEALMENT U/S. 271(1)(C) OF THE ACT FOR CHANGE OF HEAD OF INCOME A ND CONSEQUENT CLAIM OF EXEMPTION WAS DELETED. HON'BLE BOMBAY HIGH COURT IN THE CASE OF BENNETT COLEMAN & CO. LTD. 259 CTR 383(BOM.) HAS HELD THAT THE AO CONSIDERED T HE PREMIUM RECEIVED ON REDEMPTION OF DEBENTURES TO BE TAXABLE UNDER THE HE AD INCOME FROM OTHER SOURCES WHILE THE ASSESSEE CONSIDERED THE SAME TO BE TAXABL E UNDER THE HEAD CAPITAL GAINS AND HON'BLE HIGH COURT HELD THAT THERE IS ONLY CHANGE OF HEAD OF INCOME AND IN THE ABSENCE OF ANY EVIDENCE THAT THE CLAIM OF THE ASSE SSEE WAS NOT BONAFIDE, TRIBUNAL HAS 6210/M/12 MITA JHAVERI 4 RIGHTLY DELETED THE PENALTY. THE RELATED FINDING OF HON'BLE HIGH COURT IN PARA-3 READS AS UNDER:- 3. SO FAR AS QUESTION (II) IS CONCERNED, THE RESPON DENT- ASSESSEE HAD CLAIMED PREMIUM ON REDEMPTION OF DEBENTURES AS INCOME FROM CAPITAL GAINS. WHEREAS THE ASSESSING OFFICER HELD THAT THE REDEMPTION OF D EBENTURES IS REVENUE RECEIPT ASSESSABLE TO TAX UNDER THE HEAD INCOME FROM OTHER SOURCES. THE CIT(A) CONFIRMED THE ORDER OF THE ASSESSING OFFICER. THE RESPONDENT-ASSESSEE DID NOT FILE ANY FURTHER APPEAL ON THE QUANTUM PROCEEDINGS. THEREAFTER, THE ASSESSING OFFICER LEVIED PENALTY UNDER SECTION 271(1)(C) OF T HE ACT ON THE RESPONDENT- ASSESSEE. THE CIT(A) ALSO CONFIRMED THE LEVY OF PEN ALTY UPON THE RESPONDENT- ASSESSEE. ON FURTHER APPEAL, THE TRIBUNAL HELD THA T THERE IS NO DISPUTE WITH REGARD TO THE FACT THAT THE RESPONDENT- ASSESSEE H AD DISCLOSED THAT THE AMOUNT RECEIVED AS PREMIUM ON REDEMPTION OF DEBENTURES IN ITS COMPUTATION OF INCOME. FURTHER, THE TRIBUNAL RECORDS THAT IT IS NO T THE CASE OF THE DEPARTMENT THAT THE RESPONDENT-ASSESSEE HAD CONCEALED ANY PART ICULARS OF INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME BY STATI NG INCORRECT FACTS. THE ASSESSING OFFICER CONSIDERED THE SAID PREMIUM RECEI VED ON REDEMPTION OF DEBENTURES TO BE TAXABLE UNDER THE HEAD INCOME FROM OTHER SOURCES WHILE THE RESPONDENT-ASSESSEE CONSIDERED THE SAME TO BE TAXAB LE UNDER THE HEAD CAPITAL GAINS. IN VIEW OF THE FACT THAT THERE IS ONLY A CH ANGE OF HEAD OF INCOME AND IN THE ABSENCE OF ANY FACTS THAT THE CLAIM OF THE ASS ESSEE WAS NOT BONAFIDE, THE TRIBUNAL DELETED THE PENALTY IMPOSED UNDER SECTION 271(1)(C) OF THE ACT. THE REVENUE HAS NOT BEEN ABLE TO POINT OUT THAT THE FIN DING OF THE TRIBUNAL IS PERVERSE. IN THESE CIRCUMSTANCES, WE SEE NO REASON TO ENTERTAIN THE PROPOSED QUESTION (II). 5. WE FIND THAT THE ABOVE, THAT THE ASSESSEE HAS DE CLARED THE INCOME ARISING OUT OF DERIVATIVE TRANSACTION ACTIVITY AS SHORT TERM CAPIT AL GAIN AS AGAINST ASSESSED BY AO AS BUSINESS INCOME. FOR THIS ASSESSEE HAS FILED AN EXP LANATION THAT ASSESSEE WAS UNDER BONAFIDE BELIEF THAT THE ENTIRE ACTIVITY OF SHARE T RADING EARNS ONLY CAPITAL GAIN AND NOT BUSINESS INCOME. IT WAS ALSO THE ARGUMENT OF THE AS SESSEE THAT HE HAS NOT INDULGED INTO ANY CONCEALMENT OF INCOME OR FURNISHING OF INACCURA TE PARTICULARS OF INCOME. THE FINDINGS OF AO ARE UNWARRANTED THAT HE IS IN ORGANI ZED BUSINESS ACTIVITY BUT ONLY IN THIS YEAR HELD THE TRANSACTION OF DERIVATIVE ACTIVI TY AS BUSINESS. THE LD. COUNSEL FOR THE 6210/M/12 MITA JHAVERI 5 ASSESSEE BEFORE US FILED COMPLETE DETAILS OF TRANSA CTIONS RELATING TO DERIVATIVE TRANSACTIONS/ACTIVITIES. IN VIEW OF THE ABOVE EXPLA NATION AND BY GOING THROUGH THE CASE RECORDS, WE ARE OF THE VIEW THAT THE REVENUE HAS NO T BEEN ABLE TO CONTROVERT THE EXPLANATION OF THE ASSESSEE OR SAME IS HELD TO BE F ALSE. IN SUCH CIRCUMSTANCES, WE HAVE NO HESITATION IN DELETING THE PENALTY AND ACCORDING LY THE PENALTY IS DELETED. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH AUGUST, 2016 30 , 2016 SD/- SD/- ( . . / B.R. BASKARAN) ( / MAHAVIR SINGH ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER /MUMBAI, /DATE: 30.08.2016 . . . JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ ! ' #$ , 4. THE CONCERNED CIT / ! ' #$ ; 5. DR A BENCH, ITAT, MUMBAI / % , B , . . . 6. GUARD FILE/ & //TRUE COPY// / BY ORDER, DY./ASST. REGISTRAR , /ITAT, MUMBAI.