GIRDHARI K AGRAWAL, MUMBAI V. ASST CIT 12(3), MUMBAI

ITA 6292/MUM/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 2886 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-10-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 21-06-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 10-10-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Business income; Speculation loss; Wrong claim; Revised return
• Section: 72(1); 43(5); 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI BEFORE SHRI SANJAY ARORA, A M AND SHRI AMARJIT SINGH , J M ./ I.T.A. NO. 6292/MUM/2014 ( / ASSESSMENT YEAR: 2009 - 10 ) GIRDHARILAL K. AGRAWAL 302, VIKAS BUILDING, 11, BANK STREET, FORT, MUMBAI - 400 001 / VS. ASST. CIT - 12(3), ROOM NO. 658, 6 TH FLOOR, AAYAKAR BHAVAN, M. K. ROAD, MUMBAI - 400 020 ./ ./ PAN/GIR NO. AABPA 1257 E ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : MISS ARATI VISSANJI / RESPONDENT BY : SHRI AIRIJU JAIKARAN / DATE OF HEARING : 23.06.2016 / DATE OF PRONOUNCEMENT : 05 .10 .2016 / O R D E R PER SANJAY ARORA, A. M.: THIS IS AN A PPEAL BY THE ASSESSEE DIRECTED AGAINST THE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 23 , MUMBAI (CIT(A) FOR SHORT) DATED 11.7.2014 , CONFIRMING THE LEVY OF PENALTY U/S. 271(1)(C) OF THE INCOME TAX ACT, 19 61 (THE ACT HEREINAFTER) FOR THE ASSESSMENT YEAR (A.Y.) 2009 - 10 VIDE ORDER DATED 2 2.05 .201 2 . 2. THE FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSEE , AN INDIVIDUAL , CLAIMED SET OFF OF LOSS IN COMMODITIES (RS.1 4 ,16,135 / - ) AGAINST SPECULATIVE INCOME, I.E. , TO THE EXTENT AVAILABLE (RS.5,31,333 / - ), AND THE BALANCE (RS.8,84,802 / - ) AGAINST NON - SPECULATIVE 2 ITA NO. 6292/MUM/2014 (A.Y. 2009 - 10) GIRDHARILAL K. AGRAWAL VS. ASST. CIT BUSINESS INCOME (BY WAY OF INTEREST ON CAPITAL IN A PARTNERSHIP FIRM), PER HIS RETURN OF INCOME FOR THE YE AR. THE B ROKER N OTES REVEALED THE EXPIRY OF THE CON TRACT S TO BE AT A FUTURE DATE. THE COMM ODITY TRADING WAS FURTHER THROUGH NCX OF INDIA LTD. , WHICH EXCHANGE WAS NOT A RECOGNIZED EXCHANGE (AT THE RELEVANT TIME) , BEING NOTIFIED AS SUCH ONLY V IDE N OTIFICATION DATED 2 2 . 5 . 2009. THE LOSS WAS ACCORDINGLY SPECULA TIVE IN NATURE , AND ITS ADJUSTMENT AGAINST NON - SPECULATIVE INCOME, I.E., RS.8,84, 8 02 / - , IN CLEAR CONTRAVENTION OF LAW. IN PENALTY PROCEEDINGS, INITIATED ON THE CONCLUSION OF THE ASSESS MENT PROCEEDINGS, HOLDING THUS (AND, CORRESPONDING LY, ASSESSMENT OF SP EC ULATIVE LOSS OF RS. 8.85 L ACS, ALLOWED TO BE CARR IED FORWARD), THE ASSESSEE, RELYING ON CIT VS. RELIANCE PETROPRODUCTS (P) LTD. [2010] 3 2 2 ITR 158 (SC) , BASED HIS CASE ON HAVING NOT FURNISH ED INACCURATE , OR CONCEALED , ANY PARTICULARS OF INCOME; H IS RETURN C LEARLY STATING BOTH THE NATURE OF THE INCOME/LOSS , I.E., THE LOSS ON COMMODITY TRADING, AS WELL AS IT SET OFF AGAINST NON - SPECULATIVE INCOME. THE A SSESSING O FFICER (AO), HOWEVER, FOUND THE ASSESSEES CLAIM FOR THE IMPUGNED SET OFF AS CLEARLY IMPERMISSIBLE IN LAW, WHICH DID NOT ADMIT OF TWO VIEWS. THIS WAS NOT CO RRECTED EVEN PER THE RE VISED RETURN FILED SUBSEQUENTLY . IN APPELLATE PROCEEDINGS, CONTEST ING THE PENALTY (LEVIED AT THE MINIMUM RATE OF 100% OF THE TAX SOUGHT TO BE EVADED), THE ASSESSEE EMPHASIZED HIS CONDUCT, CLAIMED BONA FIDE , I.E., THAT THE CLAIM WAS MADE UNDER A BONA FIDE BELIEF OF BEING ENTITLED TO THE CLAIM (FOR SET OFF) AS MADE. THE RETURN WAS FILED NOT THROUGH A PROFESSIONAL BUT AN EMPLOYEE. THE SAME, EVEN ASSUMING IT A S A FACT , WAS FOUND NO T RELEVANT IN - AS - M UCH AS THE ASSESSEE HAD, PER HIS RETURN OF INCOME, CLEARLY PREFERRED A WRONG CLAIM. FURTHER, NO BASIS FOR THE FORMATION OF THE BELIEF AS TO THE VALIDITY OF THE SAID CLAIM HAD BEEN DISCLOSED. THE LD. CIT (A) , ACCORDINGLY, RELYING ON CIT VS. ZOOM COMMUNICATION (P) LTD. [2010] 3 2 7 ITR 510 (D EL ) A ND CIT VS. HCIL ARSSPL TRIVENI (IN ITA NO. 481/2012 DATED 29.7.2013) , ALSO QUOTING FROM THE LATTER , CONFIRM ED THE PENALTY, ALSO DISCUSSING THE IMPORT OF THE DECISION IN RELIANCE PETROPRODUCTS (P) LTD. ( SUPRA ) , WHICH HE FOUND , RATHER, AS SUPPORTIVE OF THE R EVENUES CASE, AS WELL AS THE DECISIONS RELIED UPON, 3 ITA NO. 6292/MUM/2014 (A.Y. 2009 - 10) GIRDHARILAL K. AGRAWAL VS. ASST. CIT WHICH WERE CONSIDERED AS INAPPLICABLE ON FACTS. AGGRIEVED, THE ASSESSEE IS IN SECOND APPEAL. 3. W E HAVE HEARD THE PARTIES, AND PERUSED THE MATERIAL ON RECORD. THE KNOWLEDGE OF THE NATURE OF THE LOSS AS SPECULATIVE IS CONFIRMED BY THE FACT OF IT S SET OF F AGAINST SPECULATIVE INCOME (TO THE EXTENT OF THE AVAILABILITY OF SUCH INCOME), RETURNED AS SUCH. THE SAME ALSO PROVES, IF ONE WAS REQUIRED , THAT THE ASSESSEE IS ALSO AWARE ABOUT THE LEGAL DIFFERENCE BETWEEN SPEC ULATIVE AND NON - SPECULATIVE INCOME , AS WELL AS THAT TH E SPECULATIVE LOSS IS ADJUSTABLE ONLY AGAINST INCOME OF THE SAME NATURE, I.E., SPECULAT IVE INCOME. THIS IS AS THE VERY PROVISION THAT A LLOWS SET OFF OF SPECULATIVE LOSS AGAINST SPECULATIVE INCOME, I.E., SECTION 72(1) R/W S.71, WOULD ALSO CLARIFY THAT SUCH LOSS CAN ONLY BE SET OFF AGAINST INCOME OF A SPECULATIVE BUSINESS ONLY. ON WHAT BASIS, TH EN , DOES HE CLAIM THE BALANCE, UNABSORBED SPEC ULATIVE LOSS AGAINST NON - SPECULATIVE INCOME, WHICH THE REFORE REMAINS ONLY UNEXPLAINED ? THE LAW IN THE MATTER IS UNAMBIGUOUSLY C LEAR (REFER EXPLANATION 2 TO SECTION 28 ; SECTIONS 71 AND 72). THE CLAIM IS FATUOUS, IF NOT FALS E . QUA CONDUCT, IT IS , FIRSTLY, TH E CONDUCT IN PREFERRING THE CLAIM THAT IS RELEVANT, AND IS TO BE EXPLAINED. NO BASIS FOR THE SAME HAS BEEN FURNISHED AT ANY STAGE. THE SAME, AS AFORE - STATED, SUGGESTS A CLEAR UNDERSTANDING AND THE KNOWLEDGE OF THE LEGAL CONCEPTS, I.E., AN AWARENESS OF THE RELEVANT PROVISIONS , WHICH CLEARLY PROVIDE FOR THE TWO TO BE ADJUSTED AND CARR IED FORWARD SEPARATELY, BELYING THE CLAIM OF A BONA FIDE CONDUCT. HOW THEN THE SAME BE REGA RDED AS MADE UNDER A MISTAKEN, ALBEIT , BONA FIDE BELIEF . THE ASSESSEES CONDUCT IS , IN FACT, ON THE CONTRARY, NOT BONA FIDE . APART FROM THE MANNER OF MAKING THE CLAIM, SUGGESTING AN AWARENESS OF THE LEGAL CONCEPTS, AS AFORE - NOTED, S OON AFTER RECEIVING A NOTICE U /S. 143 ( 2 ) DATED 18/8/2010, T HE ASSESSEE FILED A REVISED RETURN ON 30/9/2010 SETT ING OFF THE ENTIRE SPECULATIVE LOSS AGAINST NON - SPECULATIVE INCOME, CONTRARY TO TH E UNDERSTANDING CONVEYED PER THE ORIGINAL RETURN . O N WHAT BASIS , ONE MAY ASK ? THE SAME, GIVEN THAT CO MMODITY TRADING IS ADMITTEDLY 4 ITA NO. 6292/MUM/2014 (A.Y. 2009 - 10) GIRDHARILAL K. AGRAWAL VS. ASST. CIT SPECULATIVE, I.E., BY DEFINITION, INEXPLICA BLE; THE ASSESSEE THEREBY , RATHER THAN CORRECTING HIS ERRONEOUS CLAIM, COMPOUNDING IT FURTHER BY CLAIMING THE ENTIRE LOSS ON COMMODITY TRADE AGAINST NON - SPECULATIVE INCOME. AS IT WOULD APPEAR , THE SAME STANDS FILED TO CONVEY THE IMPRESSION THAT THE ASSESSE E WAS NOT AWARE OF THE LOSS ON COMMODITY TRADING, W HICH IS SPECULATIVE BY DEFINITION (SECTION 43(5) ), IS NOT SO. ON WHAT BASIS ? THERE IS NO EXPLANATION FOR THIS STRANGE C ONDUCT. THIS IS PRECISELY WHAT THE AO OBSERVE S WHEN HE STATES THAT THE ASSESSEE DID NO T RECTIFY THE MISTAKE - A CLEAR MISTAKE OF LAW IN THE UNDISPUTED FACTS , EVEN PER THE REVISED RETURN . COULD THE REVISION BE POSSIBLE WITHOUT VISITING THE LAW IN THE MATTER ? THE SAME CA ST S A CLEAR SHADOW AND A SERIOUS AND GRAVE DOUB T ON THE ASSESSEES COND UCT. THE PLEA OF THE RETURN HAVING BE E N FILED THROUGH AN EMPLOYEE IS AGAIN SPECIOUS . THE SAME IS FIRSTLY UNPROVED , WITH THE ASSESSEE BEING REPRESENTED, BOTH BEFORE THE REVENUE AUTHORITIES AS WELL AS BEFORE US, BY CHARTERED ACCOUNTANTS/TAX COUNSELS. THE ARG UMENT IS ALSO WITHOUT ANY FACTUAL BASIS IN VIEW OF THE CLAIM / S MADE AND IN THE MANNER DONE - PER THE ORIGINAL AND THE REVISED RETURNS, WITH NO BASIS FOR THE SAME BEING EXPLAINED AT ANY STAGE. THE SAME IN FACT IS A TACIT ADMISSION OF THE CLAIM BEING WITHOU T ANY LEGAL BASIS. R EFERENCE, APART FROM THE DECISIONS RELIED UPON BY THE LD. CIT(A), MAY BE MADE TO THE DECISION IN CIT VS. N. G. TECHNOLOGIES LTD. (IN ITA NO. 82/2012 DATED 01.1 2.2014), SLP AGAINST WHICH STANDS DISMISSED BY THE HON BLE APEX COURT. THROUGH WHOM, THEN, ONE MAY ASK, WAS THE RETURN REVISED ? GIVEN THE CLEAR PROVISION OF LAW, BOTH EXPLANATION (1A) AND (1B) TO S. 271 (1)(C) ARE ATTRACTED IN THE INSTANT CASE . WE, ACCORDINGLY, CONFIRM THE LEVY OF PENALTY. 4. IN THE RESULT , THE ASSESSEES IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON OCTOBER 05 , 201 6 SD/ - SD/ - ( AMARJIT SINGH ) (S ANJAY ARORA) / J UDICIAL MEMBER / A CCOUNTANT MEMBER 5 ITA NO. 6292/MUM/2014 (A.Y. 2009 - 10) GIRDHARILAL K. AGRAWAL VS. ASST. CIT MUMBAI ; DATED : 05 . 10 .201 6 . . ./ ROSHANI , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F ILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI