DCIT 8(3), MUMBAI V. VARUN RESORTS LTD, MUMBAI

ITA 6224/MUM/2013

• Counselvise Citation: 622419914 RSA 2013
• Duration Of Justice: 1 year(s) 7 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-06-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2007-2008
• Appeal Filed On: 24-10-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MADHU VANI V
• Assessee Lawyers: HARESH P SHAH
• Keywords: Business income; Wrong claim; Difference of opinion
• Section: 27

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E, MUMBAI .. , , #$, % & BEFORE SHRI R.C.SHARMA, AM AND MS.SUSHMA CHOWLA, JM ITA NO.6224/MUM/2013 : ASST.YEAR 2007-2008 THE DY.COMMISSIONER OF INCOME-TAX CIRCLE 8(3) MUMBAI. . APPELLANT VS. M/S.VARUN RESORTS LIMITED 3 RD FLOOR, LUTHIA HOUSE ANANDRAO DEVALE ROAD, JUHU MUMBAI 400 049 . RESPONDENT PAN : AAACV1683R. '( /APPELLANT BY : SHRI MADHU VANI V '( /RESPONDENT BY : SHRI HARESH P.SHAH / DATE OF HEARING : 01.06.2015 / DATE OF PRONOUNCEMENT : 05.06.2015. / O R D E R PER SUSHMA CHOWLA (JM) : THE PRESENT APPEAL FILED BY THE REVENUE IS AGAINST THE ORDER OF COMMISSIONER OF INCOME-TAX (APPEALS), DATED 13.08.2 013, RELATING TO ASSESSMENT YEAR 2007-2008 AGAINST LEVY OF PENALTY U /S.271(1)(C) OF THE INCOME-TAX ACT, 1961. 2. THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPE AL:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD.CIT(A) ERRED IN DELETING THE PENALTY IM POSED U/S ITA NO.6224/MUM/2013. M/S.VARUN RESORTS LIMITED. 2 271(1)(C) OF THE ACT, OBSERVING THAT MERE DISALLOWA NCE OF A CLAIM WOULD NOT ENTAIL IMPOSITION OF PENALTY U/S 27 1(1)(C) OF THE ACT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LED.CIT(A) ERRED IN DELETING THE PENALTY I MPOSED U/S 271(1)(C) OF THE ACT, HOLDING THAT DISALLOWANCE OF MERE A CLAIM WOULD NOT ATTRACT PENALTY U/S 271(1)(C) OF THE ACT, WITHOUT APPRECIATING THAT A) THE ASSESSEE HAS BEEN CARRYING ON THE BUSINESS OF SHARE TRADING AND HAD SHOWN PROFITS FROM SHARE TRAD ING BUSINESS TILL A.Y. 2005-06 WHICH IT ARBITRARILY CHA NGED TO SHORT TERM CAPITAL GAINS SOLELY WITH THE INTENTION TO PAY TAX AT THE LESSER RATE APPLICABLE TO SHORT TERM CAPITAL GAINS. B) AS FOUND BY THE LD.CIT(A) DURING QUANTUM APPEAL AND AS SUBSEQUENTLY UPHELD BY THE ITAT, THE SHARE TRADING BUSINESS CARRIED ON BY THE ASSESSEE TILL A.Y. 2005-06 REMAIN ED THE SAME IN A.Y. 2006-07 & 2007-08 AND THEREFORE, THE S HORT TERM CAPITAL GAINS ON SHARE TRADING BUSINESS CLAIMED BY THE ASSESSEE WAS A FALSE CLAIM. C) THE LD.CIT(A) IN THE ORDER IN QUANTUM APPEAL FO UND THAT THE FACT OF CLOSING STOCK OF SHARES OF RS.3,82,77,5 23/- AS ON 31.03.2005 HAD BEEN CONCEALED BY THE ASSESSEE IN IT S RETURN FOR A.Y. 2006-07 AND THEREFORE, HAD THE CASE NOT BE EN SELECTED FOR SCRUTINY, THE FACT OF THE ASSESSEE CARRYING ON SHARE TRADING BUSINESS WOULD NOT HAVE COME TO LIGHT. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD.CIT(A) ERRED IN DELETING THE PENALTY IM POSED U/S 271(1)(C) OF THE ACT, IGNORING THE RATIO OF THE DEC ISION OF THE DELHI HIGH COURT IN THE CASE OF CIT VS. ZOOM COMMUN ICATIONS PVT. LTD. (DEL.) (327 ITR 510). 4. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A ) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE A.O. BE R ESTORED. ITA NO.6224/MUM/2013. M/S.VARUN RESORTS LIMITED. 3 5. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUNDS OR ADD A NEW GROUND WHICH MAY BE NECESSARY. 3. THE ONLY ISSUE RAISED IN THE PRESENT APPEAL IS A GAINST LEVY OF PENALTY U/S 271(1)(C) OF THE ACT. THE LEARNED AR FOR THE AS SESSEE AT THE OUTSET POINTED OUT THAT THE ISSUE OF LEVY OF PENALTY U/S 2 71(1)(C) OF THE ACT, IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE O RDER OF THE TRIBUNAL IN ASSESSEES OWN CASE RELATING TO ASSESSMENT YEAR 200 6-2007. THE LEARNED DR FOR THE REVENUE, ON THE OTHER HAND, PLACED RELIA NCE ON THE ORDERS OF THE ASSESSING OFFICER. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RECORDS. IN THE FACTS OF THE PRESENT CASE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE A.O. NOTED THAT THE ASSESSEE HAD DECLARED INCOM E FROM SHORT TERM CAPITAL GAIN ON SALE OF SHARES AND MUTUAL FUNDS. TH E ASSESSEE WAS SHOW CAUSED AS TO WHY THE SAID INCOME SHOULD NOT BE ASSE SSED AS BUSINESS INCOME IN THE HANDS OF THE ASSESSEE. REJECTING THE EXPLANATION OF THE ASSESSEE, THE A.O. ASSESSED THE SAID INCOME UNDER T HE HEAD `INCOME FROM BUSINESS. PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT WERE INITIATED AGAINST THE ASSESSEE. THE AO NOTED IN THE ORDER LEVYING PEN ALTY U/S 271(1)(C) OF THE ACT, THAT THE FACTS OF THE CASE WERE IDENTICAL TO T HE FACTS IN ASSESSMENT YEAR 2006-2007 AND FOLLOWING THE SAME, PENALTY U/S. 271( 1)(C) WAS LEVIED FOR FILING INACCURATE PARTICULARS OF INCOME AT RS.71,16,704. 4.1 THE CIT(A), IN TURN, FOLLOWING HIS ORDER IN AS SESSEES OWN CASE FOR ASSESSMENT YEAR 2006-2007, DELETED THE SAID PENALTY LEVIED U/S 271(1)(C) OF ITA NO.6224/MUM/2013. M/S.VARUN RESORTS LIMITED. 4 THE ACT. THE REVENUE IS IN APPEAL AGAINST THE SAID DELETION OF PENALTY LEVIED U/S 271(1)(C). 4.2 WE FIND THAT THE TRIBUNAL IN ASSESSEES OWN CAS E RELATING TO ASSESSMENT YEAR 2006-2007 IN ITA NO.5015/MUM/2013 V IDE ORDER DATED 31.10.2014, ON IDENTICAL ISSUE OF LEVY OF PENALTY U /S 271(1)(C) OF THE ACT, ON TREATMENT OF TRANSACTIONS IN SHARES AND MUTUAL FUND S WHETHER ASSESSABLE UNDER THE HEAD `INCOME FROM SHORT TERM CAPITAL GAIN S AS DECLARED BY THE ASSESSEE AND WHETHER TO BE ASSESSED UNDER THE HEAD `INCOME FROM BUSINESS, HAD HELD AS UNDER:- 6. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED MAT ERIAL BEFORE US. WE FIND THAT THE AO HAD HELD THAT ASSESS EE COMPANY WAS ENGAGED TRADING IN SHARE AND HAD NOT MADE INVES TMENTS, THAT FIRST APPELLATE AUTHORITY (FAA) HAD UPHELD THE QUANTUM ORDER PASSED BY THE AO, THAT THE AO HAD LEVIED PENA LTY INVOKING THE PROVISIONS OF SECTION 271(1)(C) OF THE ACT BUT WAS SAME DELETED BY THE FAA. WE FURTHER FIND THAT TILL LAST ASSESSMENT YEAR THE ASSESSEE WAS SHOWING INCOME FROM SHARE BUSINESS UNDER THE HEAD BUSINESS INCOME, THAT DURING THE YEAR IT H AD CONVERTED ITS STOCK IN TRADE IN TO INVESTMENT, THAT IT WAS MA INTAINING TWO PORTFOLIOS IN THE YEAR UNDER APPEAL, THAT IT HAD SH OWED INCOME FROM CERTAIN SHARE TRANSACTION UNDER THE BUSINESS H EAD. AS PER THE PROVISIONS OF THE ACT, THE ASSESSEE CAN CONVERT HIS STOCK IN TRADE IN TO INVESTMENT. SO, IF IN THE YEAR UNDER CO NSIDERATION, IT HAD OPTED FOR THAT OPTION, THERE WAS NO REASON TO R EJECT ITS CLAIM. IT HAD PASSED NECESSARY ENTRIES IN THE BOOKS OF ACC OUNTS. THEREFORE JUST BECAUSE OF A DECISION TAKEN IN QUANT UM PROCEEDINGS, IT CANNOT BE HELD THAT THE ASSESSEE HA D CONCEALED PARTICULARS OF INCOME. IT IS SAID THAT DECISION IN THE ASSESSMENT PROCEEDINGS DO NOT RESULT IN AUTOMATIC IMPOSITION O F PENALTY. IN THE MATTER BEFORE US, THE ASSESSEE HAD FILED ALL TH E NECESSARY DETAILS BEFORE THE AO. THERE WAS DIFFERENCE OF OPTI ON BETWEEN THE ASSESSEE AND THE AO ABOUT THE TREATMENT TO BE G IVEN TO THE ITA NO.6224/MUM/2013. M/S.VARUN RESORTS LIMITED. 5 SHARE TRANSACTIONS UNDERTAKEN BY THE ASSESSEE. THE ADMISSION OF THE APPEAL BY THE HONBLE JURISDICTIONAL HIGH CO URT AGAINST THE QUANTUM PROCEEDINGS PROVE THAT THERE IS DIFFERENCE OF OPINION ABOUT THE ISSUE IN QUESTION. IN SUCH MATTERS, IN OU R OPINION, PENALTY SHOULD NOT BE LEVIED. SO, CONSIDERING THE P ARTICULAR FACTS AND CIRCUMSTANCES OF THE CASE, WE HOLD THAT THE ORD ER OF THE FAA DOES NOT SUFFER FROM ANY LEGAL INFIRMITY. CONFI RMING HIS ORDER, WE DECIDE THE EFFECTIVE GROUND OF APPEAL AGA INST THE AO. 4.3 BOTH THE AUTHORITIES BELOW BEFORE US HAVE FOLL OWED THE RESPECTIVE ORDERS IN ASSESSMENT YEAR 2006-2007 WHILE DECIDING THE ISSUE OF LEVY OF PENALTY U/S 271(1)(C) OF THE ACT IN THE CASE OF THE ASSESSEE FOR THE INSTANT ASSESSMENT YEAR. THE ISSUE AND FACTS ARISING IN THE PRESENT APPEAL IS IDENTICAL TO THE ISSUE AND FACTS BEFORE THE TRIBUNA L (SUPRA) IN ASSESSEES OWN CASE AND FOLLOWING THE SAME PARITY OF REASONING, WE CONFIRM THE ORDER OF THE CIT(A) IN DELETING THE PENALTY LEVIED U/S 271(1)(C) . ACCORDINGLY, GROUNDS OF APPEAL RAISED BY THE REVENUE ARE DISMISSED. 5. !'# IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED ON THIS 5 TH DAY OF JUNE, 2015. $%&'(%)* SD/- SD/- (R.C.SHARMA) (SUSHMA CHOWLA) / ACCOUNTANT MEMBER % / JUDICIAL MEMBER ) MUMBAI; (%) DATED : 5 TH JUNE, 2015. DEVDAS* ITA NO.6224/MUM/2013. M/S.VARUN RESORTS LIMITED. 6 '*%+,-.-#+ / COPY OF THE ORDER FORWARDED TO : / BY ORDER, -. //TRUE COPY// / (DY./ASSTT. REGISTRAR) , ) / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. $ $ / ( ) / THE CIT, MUMBAI. 4. $ $ / / CIT(A)- , MUMBAI 5. -2* ..34 , $ 34 , ) / DR, ITAT, MUMBAI 6. *678 / GUARD FILE.