ACIT CC 47, MUMBAI V. ASHOK R. RUIA, MUMBAI

ITA 6417/MUM/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 1449 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-12-2016
• Appeal Filed By: Department
• Bench Allotted: A
• Assessment Year: 2005-2006
• Appeal Filed On: 20-10-2014
• Court: TRIBUNAL
• Department Lawyers: M V RAJGURU
• Assessee Lawyers: SHALKA SHAH
• Keywords: Business income; Speculation loss; Wrong claim
• Section: 43(5)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A, MUMBAI BEFORE SHRI MAHAVIR SINGH (JUDICIAL MEMBER) AND SHRI ASHWANI TANEJA (ACCOUNTANT MEMBER) I.T.A. NO. 6420 & 6421/MUM/2014 (ASSESSMENT YEARS: 2002-03 & 2003-04) ACIT, CENT.CIR.47, MUMBAI VS AMLA R RUIA 19, RUIA HOUSE, BHAUSAHEB MARG, MALBAR HILL, MUMBAI-6 PAN : ABVPR7369D (APPELLANT) (RESPONDENT) I.T.A. NO. 6415 TO 6417/MUM/2014 (ASSESSMENT YEARS: 2002-03, 2003-04 & 2005-06) ACIT, CENT.CIR.47, MUMBAI VS ASHOK R RUIA R.R. PVT LTD, 464, SENAPATI BAPAT MARG, LOWER PAREL MUMBAI 13 PAN : AAJPR8257M (APPELLANT) (RESPONDENT) REVENUE BY SHRI M.V. RAJGURU ASSESSEE BY MS. SHALKA SHAH DATE OF HEARING : 08-12-2016 DATE OF ORDER : 23 -12-2016 O R D E R PER BENCH THESE APPEALS HAVE BEEN FILED BY THE REVENUE PERTA INING TO RELATED ASSESSEES INVOLVING IDENTICAL ISSUES, THEREFORE THE SE WERE HEARD TOGETHER. 2 I.T.A. NO.6420 & 6421/MUM/2014 I.T.A. NO. 641`5 & 6416/MUM/2014 2. FIRST WE SHALL TAKE UP APPEAL FILED BY THE REVENU E IN THE CASE OF SHRI ASHOK R RUIA IN ITA NO.6415/MUM/2014 FOR A.Y. 2002-0 3 FILED AGAINST THE COMMON ORDER OF COMMISSIONER OF INCOME-TAX (APP EALS)-38, MUMBAI [HEREINAFTER CALLED CIT(A)] DATED 25-07-2014 PASSED AGAINST PENALTY ORDER U/S 271(1)(C) ON THE FOLLOWING GROUNDS:- 1. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE PENALTY LEVIED BY THE AO. THE HON'BLE BOMBAY HIGH COURT HELD THAT THE LOSSES INCU RRED ON DERIVATIVE TRANSACTION TO BE TREATED AS SPECULATIVE LOSSES IN TERMS OF SECTION 43(5) OF THE INCOME TAX ACT.' 2. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD.CIT(A) ERRED IN DELETING THE PENALTY LEVIED BY THE AO AS BY CLAIMING A LOSS, WHICH IS NOT OTHERWISE ALLOWABLE T O BE SET OFF AGAINST REGULAR BUSINESS INCOME, THE ASSESSEE HAS S UBMITTED INACCURATE PARTICULARS OF INCOME FOR PURPOSE OF TAX EVASION.' 3. THE BRIEF BACKGROUND OF THIS CASE AS WAS PUT BEFORE US BY LD. COUNSEL OF THE ASSESSEE IS THAT IN PENALTY WAS LEVI ED IN THESE CASES U/S 271(1)(C)BY TREATING THE LOSS INCURRED ON DERIVATIV E AS SPECULATION LOSS IN TERMS OF SECTION 43(5) OF THE ACT. LD. CIT(A) DEL ETED THE PENALTY BY RELYING UPON THE ORDERS IN THE CASE OF M/S ASHOK APPARELS P VT LTD AND MRS. AMLA ASHOK RUIA. THE REVENUE HAD CARRIED THESE MATTERS BEFORE THE TRIBUNAL WHEREIN THE TRIBUNAL DELETED THE PENALTY ON MERITS UNDER IDENTICAL FACTS AND CIRCUMSTANCES OF THE CASE. UNDER THESE CIRCUMS TANCES, THE PENALTY DESERVES TO BE DELETED IN THIS CASE ALSO. THEREFOR E, ORDER OF THE LD.CIT(A) SHOULD BE UPHELD ON THIS ISSUE. 4. PER CONTRA, THE LD. DR DID NOT MAKE OUT ANY DISTINC TION ON FACTS OR ON LAW. 5. WE HAVE GONE THROUGH THE ORDERS PASSED BY THE LOWER AUTHORITIES 3 I.T.A. NO.6420 & 6421/MUM/2014 I.T.A. NO. 641`5 & 6416/MUM/2014 AS WELL AS THE ORDER PASSED BY THE TRIBUNAL IN THE CASE OF ACIT VS M/S ASHOK APPARELS PVT LTD IN ITA NOS 5701 & 5702/MUM/2 012 AND ACIT VS AMLA ASHOK RUIA (ITA NO.5707/MUM/2012) ORDER DATED 23-07-2015. IT IS NOTED THAT THE FACTS INVOLVED IN THE CASE BEFORE US AND THE CASES DECIDED BY THE TRIBUNAL ARE IDENTICAL. THE TRIBUNAL EXAMIN ED THE ISSUE IN DETAIL BEFORE DELETING THE PENALTY BY OBSERVING AS UNDER:- THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE CLAIMED LOSS ON DERIVATIVE TRANSACTIONS AS BUSINESS LOSS. HOWEVER, THE AO TREATED THE SAME AS SPECULATIVE LOSS BY APPLYING THE PROVIS IONS OF SECTION 43(5) OF THE ACT AND ALSO INITIATED THE PENALTY PRO CEEDINGS. THE ASSESSEE PREFERRED APPEAL BEFORE THE LD. CIT(A) WHO VIDE ORDER DATED 05.09.07 CONFIRMED THE DISALLOWANCE MADE BY T HE AO. THE ASSESSEE CARRIED THE MATTER TO THE TRIBUNAL, THE TR IBUNAL VIDE ORDER DATED 29.04.11 DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. IN PURSUANCE OF THE ORDER OF THE TRIBUNAL IN FAVOUR OF THE ASSESSEE, THE AO DROPPED THE PENALTY PROCEEDINGS. H OWEVER, IN THE MEANWHILE, THE REVENUE CARRIED THE MATTER OF DI SALLOWANCE IN QUANTUM PROCEEDINGS TO THE HON'BLE BOMBAY HIGH C OURT. THE HON'BLE BOMBAY HIGH COURT VIDE ORDER DATED 18.04.11 REVERSED THE ORDER OF THE TRIBUNAL AND DECIDED THE ISSUE IN FAVOUR OF THE REVENUE. THE PENALTY PROCEEDINGS THUS WERE REINITIA TED AGAINST THE ASSESSEE. THE AO IN THE PENALTY PROCEEDINGS OBS ERVED THAT SINCE THE ISSUE HAS BEEN DECIDED IN FAVOUR OF THE R EVENUE BY THE HON'BLE BOMBAY HIGH COURT, HENCE IT WAS A CASE OF L EVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. HE, THE REFORE, LEVIED THE IMPUGNED PENALTY AGAINST THE ASSESSEE ON THE GR OUND THAT THE ASSESSEE HAS MADE A WRONG CLAIM OF BUSINESS LOS S WHICH WAS IN FACT A SPECULATIVE LOSS OF THE ASSESSEE. HOWEVER , IN THE MEANWHILE, THE ASSESSEE CARRIED THE MATTER RELATING TO QUANTUM DISALLOWANCE TO THE HON'BLE SUPREME COURT BY WAY OF SLP. THE HON'BLE SUPREME COURT VIDE ORDER DATED 08.05.12 HAS GRANTED THE LEAVE TO APPEAL AND THUS THE APPEAL IS PENDING BEFORE THE HON'BLE SUPREME COURT RELATING TO QUANTUM DISALLOWA NCE. THE ASSESSEE FILED APPEAL AGAINST THE ORDER OF LEVY OF PENALTY UNDER SECTION 271 (1)(C) BEFORE THE LD. CIT(A). 4 I.T.A. NO.6420 & 6421/MUM/2014 I.T.A. NO. 641`5 & 6416/MUM/2014 4. THE LD. CIT(A). VIDE IMPUGNED ORDER AND AFTER DI SCUSSING IN DETAIL THE CHRONOLOGY OF EVENTS AND THE PROPOSIT ION OF LAW INVOLVED, HELD THAT ON THE MATERIAL AVAILABLE ON R ECORD AND ON THE SAME SET OF FACTS, THE VARIOUS AUTHORITIES HAVE INTERPRETED THE APPLICATION OF PROVISIONS OF SECTION 43( 5) OF THE ACT DIFFERENTLY, THEREFORE IT IS INDICATED THAT IT WAS A CASE OF BONAFIDE CLAIM AND THE ISSUE OF INTERPRETATION OF LAW WAS IN VOLVED AT THE TIME OF FILING OF THE RETURN OF INCOME BY THE ASSES SEE. HE ALSO TOOK NOTICE OF THE RELEVANT AMENDMENT CARRIED OUT V IDE FINANCE ACT, 2005 BY INSERTION OF THE PROVISO (D) TO SECTIO N 43(5) AS PER WHICH THE TRANSACTIONS OF TRADING IN DERIVATIVES AR E NOT TO BE TREATED AS SPECULATIVE TRANSACTIONS W.E.F, A. Y. 20 06-07. HE, THEREFORE, CONSIDERING THE OVERALL FACTS AND CIRCUM STANCES OF THE CASE, HELD THAT IT WAS NOT A CASE OF FURNISHING OF INACCURATE PARTICULARS OF INCOME OR CONCEALMENT OF INCOME: THA T IT WAS A CASE OF BONAFIDE CLAIM AND DEBATABLE ISSUE AND THE MATTER IS STILL PENDING BEFORE THE HON'BLE SUPREME COURT. HE, THERE FORE, DELETED THE PENALTY SO LEVIED BY THE AO. AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE REVENUE HAS COME IN APPEAL B EFORE US. 5. ADMITTEDLY, IT IS NOT A CASE WHERE THE ASSESSEE HAD MADE INTENTIONALLY A WRONG CLAIM. THE ASSESSEE, TO HIS I NTERPRETATION OF THE PROVISIONS, HAS MADE A BONAFIDE CLAIM. EVEN THE CLAIM OF THE ASSESSEE HAS BEEN UPHELD BY THE TRIBUNAL ALSO. THE MATTER INVOLVED IN THIS ISSUE IS RELATING TO THE INTERPRET ATION OF THE RELEVANT PROVISIONS. IT CANNOT BE SAID TO BE A CASE OF FURNISHING OF INACCURATE PARTICULARS OF INCOME OR CONCEALMENT OF INCOME. IT IS ONLY A CASE AS TO UNDER WHAT HEAD, THE INCOME OF TH E ASSESSEE IS TO BE ASSESSED. THE ISSUE IS A DEBATABLE ISSUE WHIC H IS PENDING ADJUDICATION BEFORE THE HON'BLE SUPREME COURT. HENC E, THE LD. CIT(A) HAS RIGHTLY HELD THAT THE PENALTY UNDER SECT ION 271(1)(C) OF THE ACT IS NOT WARRANTED IN THIS CASE. WE DO NOT FI ND ANY INFIRMITY IN THE ORDER OF THE LD. CITCA) IN THIS RE SPECT. THERE IS NO MERIT IN THE APPEALS OF THE REVENUE AND THE SAME AR E ACCORDINGLY DISMISSED. 6. IT IS NOTED THAT THE LD. CIT(A) HAS FOLLOWED HIS OW N ORDER IN THE CASE OF M/S ASHOK APPARELS, IN WHICH THE ASSESSEE IS A D IRECTOR, AND IN THE CASE 5 I.T.A. NO.6420 & 6421/MUM/2014 I.T.A. NO. 641`5 & 6416/MUM/2014 OF MRS. AMLA RUIA, WIFE OF THE ASSESSEE. THE TRIBU NAL HAS HELD WITH THE HELP OF DETAILED REASONING THAT PENALTY IS NOT LIAB LE TO BE LEVIED IN THE GIVEN FACTS AND CIRCUMSTANCES. THUS, FOLLOWING THE ORDER OF THE TRIBUNAL, IT IS HELD THAT PENALTY HAS RIGHTLY BEEN DELETED BY LD . CIT(A), AND THEREFORE NO INTERFERENCE IS CALLED FOR IN HIS ORDER; THUS, R EVENUE APPEALS ARE DISMISSED. 7. NOW WE SHALL TAKE UP REMAINING APPEALS FILED BY T HE REVENUE IN THE CASE OF ASHOK R RUIA IN ITA NO.6416/2014 FOR A.Y. 2003-04; ITA NO. 6417/MUM/2014 FOR A.Y. 2005-06 AND MRS. AMALA A RUIA IN ITA NO 6420/MUM/2014 FOR A.Y. 2004-05; AND ITA NO. 6421/MUM /2014 FOR A.Y. 2005-06. IN THESE APPEALS, THE IDENTICAL ISSUE RAISED BY T HE REVENUE IS AS UNDER:- 1. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE PENALTY LEVIED BY THE AO. THE HON'BLE BOMBAY HIGH COURT HELD THAT THE LOSSES INCU RRED ON DERIVATIVE TRANSACTION TO BE TREATED AS SPECULATIVE LOSSES IN TERMS OF SECTION 43(5) OF THE 1. TAX ACT. ' 2. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE PENALTY LEVIED BY THE AO AS BY CLAIMING A LOSS, WHICH IS NOT OTHERWISE ALLOWABLE T O BE SET OFF AGAINST REGULAR BUSINESS INCOME, THE ASSESSEE HAS S UBMITTED INACCURATE PARTICULARS OF INCOME FOR PURPOSE OF TAX EVASION.' 8. DURING THE COURSE OF HEARING IT WAS STATED BY THE L D. COUNSEL AT THE OUTSET THAT THE DISALLOWANCE MADE BY THE AO IS DELE TED BY THE TRIBUNAL IN THE QUANTUM VIDE ITS ORDER DATED 26-07-2013, THEREF ORE, LEVY OF PENALTY IS NOT JUSTIFIED AND, THEREFORE, ORDER OF LD.CIT(A) DE LETING THE PENALTY SHOULD BE UPHELD. 6 I.T.A. NO.6420 & 6421/MUM/2014 I.T.A. NO. 641`5 & 6416/MUM/2014 9. PER CONTRA, THE LD. DR DID NOT DISPUTE THE SUBMISSI ONS MADE BY THE ASSESSEE. 10. WE HAVE GONE THROUGH THE ORDER PASSED BY THE TRIBUN AL DATED 26- 07-2013 IN THE CASE OF SHRI ASHOK R RUIA AND SMT. A MLA RUIA AND NOTED THAT THE DISALLOWANCE MADE BY THE AO HAS BEEN DELET ED BY THE TRIBUNAL. THEREFORE, PENALTY SHOULD ALSO NOT SURVIVE. UNDER THESE CIRCUMSTANCES, WE UPHOLD THE ORDER OF THE LD. CIT(A) IN DELETING T HE PENALTY. NO INTERFERENCE IS CALLED FOR IN HIS ORDER. THE GROUN DS RAISED BY THE REVENUE AS WELL AS THE APPEALS FILED BY THE REVENUE ARE DIS MISSED. 11. AS A RESULT, ALL THE APPEALS FILED BY THE REVENUE A RE DISMISSED. ORDER WAS PRONOUNCED IN THE OPEN COURT AT THE CONCL USION OF THE HEARING. SD/- SD/- (MAHAVIR SINGH) (ASHWANI TANEJA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DT: 23 RD DECEMBER, 2016 PK/- COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. THE CIT 5. THE LD. DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE , G-BENCH (TRUE COPY) BY ORDER ASSTT.REGISTRAR, ITAT, MUMBAI BENCHES