SSV SECURITIES & STOCK BROKING P.LTD, MUMBAI V. ACIT 10(1), MUMBAI

ITA 6255/MUM/2011

• Counselvise Citation: 625519914 RSA 2011
• Duration Of Justice: 2 year(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 12-08-2013
• Assessment Year: 2005-2006
• Appeal Filed On: 09-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T ROUNUAN PAITE
• Assessee Lawyers: MEHUL SHAN
• Keywords: Business income; Question of law; Speculation loss

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH E , MUMBAI BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND DR. S.T.M. PAVALAN, JUDICIAL MEMBER ITA NO. 6255/MUM/2011 ASSESSMENT YEAR: 2005-06 SSV SECURITIES & STOCK BROKING PRIVATE LIMITED 217, BHAVESHWAR ARCADE, LBS MARG, OPP. SHREYAS CINEMA, GHATKOPAR WEST, MUMBAI- 400 086 PAN :AAECS 5679 N VS. DCIT 10(2) AAYAKAR BHAVAN CHURCHGATE MUMBAI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI MEHUL SHAN RESPONDENT BY : SHRI T. ROUNUAN PAITE DATE OF HEARING : 12.08.2013 DATE OF PRONOUNCEMENT : 30.09.2013 O R D E R PER DR. S.T.M. PAVALAN, JM: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF THE LD.CIT(A) -22, MUMBAI DATED 28.06.2011 CONFIRMING T HE PENALTY OF RS.16,71,445/- LEVIED BY THE AO U/S 271(1)(C) OF THE INCOME TAX AC T. 2. BRIEFLY STATED, THE ASSESSEE, A COMPANY, ENGAGED IN THE BUSINESS OF DEALING IN SHARES AND SECURITIES WHILE DECLARING A LOSS OF RS. 40,97,295/- DURING THE YEAR UNDER CONSIDERATION, HAD CLAIMED SET OFF OF DERIVATIVE LO SS AMOUNTING TO RS.40,40,764/- AND AN INTEREST OF RS.5,26,963/- ON BORROWED FUNDS AGAINST BUSINESS INCOME. HOWEVER, IN THE ASSESSMENT FRAMED U/S 143(3), THE A O MADE THE DISALLOWANCES/ADDITIONS OF THE SAID AMOUNTS ON THE REASON THAT AS PER THE PROVISIONS OF SECTION 73, THE SPECULATION LOSS IS TO BE ADJUST ED ONLY AGAINST INCOME FROM ITA NO. 6255/MUM/2011 SSV SECURITIES & STOCK BROKING PRIVATE LIMITED ASSESSMENT YEAR : 2005-06 2 SPECULATION BUSINESS. IN RESPECT OF DISALLOWANCE OF INTEREST RS.5,26,963/- ON BORROWED FUNDS, THE AO STATED THAT THE BUSINESS OF THE ASSESSEE WAS DEALING IN SHARES AND SECURITIES AND THEREFORE THERE WAS NO NE XUS FOR SUCH PAYMENT. ON APPEAL, THE SAID DISALLOWANCE HAD BEEN CONFIRMED BY THE LD.CIT(A). CONSEQUENTLY, IN THE PENALTY PROCEEDINGS, THE AO HELD THAT THE AS SESSEE HAD FURNISHED INACCURATE PARTICULARS OF ITS INCOME AND SOUGHT TO EVADE INCOM E TO THE EXTENT OF RS.45,67,727/- AND LEVIED MINIMUM PENALTY U/S 271(1)(C) AMOUNTING TO RS.16,71,445/- WHICH HAD BEEN CONFIRMED BY THE LD.CIT(A) IN THE FIRST APPELL ATE PROCEEDINGS. AGGRIEVED BY THE IMPUGNED ORDER, THE ASSESSEE IS IN APPEAL BEFORE US . 3. AT THE OUTSET, THE LD.AR HAS POINTED OUT THAT TH E ASSESSEES CASE IS COVERED IN ITS FAVOUR BY THE DECISION OF THE ITAT IN THE CA SE OF RADHE KRISHNA FISCAL PVT. LTD. VS. DCIT IN ITA NO. 6256/MUM/2011, THE ORDER IN WHI CH THE PRESENT AM IS ALSO A PARTY AND THE RELEVANT FINDINGS OF THE ITAT IN THE SAID CASE IS EXTRACTED HEREUNDER: WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. ALTHOUGH THE ISSUE RELATING TOE ASSESSEES CLAIM FOR LOSS ON ACCOUNT OF TRADING IN DERIVATIVES BEING A NORMAL BUSINESS LOSS OR SPECULATION LOSS HAS BEEN DECIDED BY THE HONBLE BO MBAY HIGH COURT IN THE CASE OF SHRI BHARAT R. RUIA (HUF) (SUPRA) AGAINST T HE ASSESSEE ON APRIL 18, 2011, THERE WERE DECISIONS RENDERED BY THE TRIBUNAL PRIOR THERETO ACCEPTING THE STAND OF THE ASSESSEE THAT LOSS ON ACCOUNT OF D ERIVATIVE TRADING WAS NOT A SPECULATION LOSS BUT WAS ALLOWABLE AS A BUSINESS LO SS. KEEPING IN VIEW THE SAID DECISIONS OF THE TRIBUNAL CITED BY THE LEARNED COUNSEL FOR THE ASSESSEE, WE AGREE WITH HIS CONTENTION THAT THE VIEW TAKEN BY THE ASSESSEE WHILE CLAIMING THE LOSS ON ACCOUNT OF DERIVATIVE TRADING AS A NORMAL BUSINESS LOSS WAS A POSSIBLE VIEW AND THE CLAIM SO MADE BY ADOPTI NG A POSSIBLE VIEW WAS BONA FIDE. MOREOVER, THE SLP FILED BY THE ASSESSEE AGAINST THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF SHRI BHARA T R. RUIA (HUF) (SUPRA) HAS ALREADY BEEN ADMITTED BY THE HONBLE SUPREME CO URT VIDE ITS ORDER DATED 05.09.2011 WHICH SHOWS THAT THE ISSUE RELATING TO A SSESSEES CLAIM FOR LOSS ON ACCOUNT OF DERIVATIVE TRADING BEING A NORMAL BUSINE SS LOSS INVOLVE A SUBSTANTIAL QUESTION OF LAW AND AS HELD BY THE COOR DINATE BENCH OF THIS TRIBUNAL IN THE CASE OF NAYAN BUILDERS & DEVELOPERS PVT. LTD. (SUPRA), NO PENALTY U/S 271(1)(C) CAN BE IMPOSED IN RESPECT OF DISALLOWANCE ON THE ISSUE WHICH INVOLVES A SUBSTANTIAL QUESTION OF LAW. IT IS ALSO OBSERVED THAT IN THE CASE OF HONGKONG & SJHANGHAI BANKING CORPN. LTD. (S UPRA) CITED BY THE LEARNED COUNSEL FOR THE ASSESSEE, THE PENALTY IMPOS ED U/S 271(1)(C) IN RESPECT OF DISALLOWANCE MADE ON ACCOUNT OF ASSESSEE S CLAIM FOR LOSS RESULTING FROM READY FORWARD TRANSACTION TREATING THE SAME AS SPECULATIVE LOSS WAS CANCELLED BY THE TRIBUNAL HOLDING THAT THE ASSESSEE IN MAKING SUCH CLAIM WAS NOT GUILTY OF CONCEALMENT AS ENVISAGED IN SECTION 2 71(1)(C) JUSTIFYING IMPOSITION OF PENALTY. ITA NO. 6255/MUM/2011 SSV SECURITIES & STOCK BROKING PRIVATE LIMITED ASSESSMENT YEAR : 2005-06 3 IN OUR OPINION, THE VARIOUS JUDICIAL PRONOUNCEMENTS CITED BY THE LEARNED COUNSEL FOR THE ASSESSEE WHICH ARE DISCUSSED ABOVE ARE CLEARLY APPLICABLE TO THE FACTS OF THE PRESENT CASE AND KEEPING IN VIEW T HE RATIO LAID DOWN THEREIN, WE ARE OF THE VIEW THAT THE CLAIM MADE BY THE ASSES SEE ON ACCOUNT OF LOSS IN DERIVATIVE TRADING WAS A BONA FIDE CLAIM BASED ON A POSSIBLE VIEW AND ALL THE MATERIAL FACTS RELEVANT TO THE SAID CLAIM HAVING BE EN FULLY AND TRULY FURNISHED BY THE ASSESSEE, IT IS NOT A FIT CASE TO IMPOSE PEN ALTY U/S 271(1)(C). WE, THEREFORE, CANCEL THE PENALTY IMPOSED BY THE AO AND CONFIRMED BY THE LEARNED CIT(APPEALS) AND ALLOW THIS APPEAL OF THE A SSESSEE. IN VIEW OF THE FACT THAT THE ISSUES INVOLVED IN THE PRESENT CASE BEFORE US ARE IDENTICAL TO THE FACTS OF THE CASE DECIDED BY THE I TAT AS AFOREMENTIONED, WE, BY FOLLOWING THE SAID DECISION DELETE THE IMPUGNED PEN ALTY CONFIRMED/LEVIED BY THE LD.CIT(A)/AO ON THE SIMILAR REASON THAT THE ISSUE R ELATING TO ASSESSEES CLAIM FOR LOSS ON ACCOUNT OF DERIVATIVE TRADING BEING A NORMA L BUSINESS LOSS INVOLVE A SUBSTANTIAL QUESTION OF LAW. 4. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THIS OPEN COURT ON THIS 30 TH DAY OF SEPTEMBER, 2013. SD/- SD/- (P.M. JAGTAP) (DR. S.T.M. PAVALAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 30.09.2013. *SRIVASTAVA COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR E BENCH //TRUE COPY// BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.