DCIT, New Delhi V. M/s. ACEE Enterprises, New Delhi

ITA 6516/DEL/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 3601 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 11 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-11-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2005-2006
• Appeal Filed On: 01-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SATENDRA PAL
• Keywords: Business income; Speculation loss
• Section: 27

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: A NEW DELHI BEFORE SHRI B.P.JAIN, ACCOUNTANT MEMBER AND SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA NO. 6516/DEL /2014 ASSTT. YEAR: 2005-06 ITA NO. 6517/DEL /2014 ASSTT. YEAR: 2005-06 ITA NO. 6518/DEL /2014 ASSTT. YEAR: 2007-08 ITA NO. 6519/DEL /2014 ASSTT. YEAR: 2008-09 DCIT, CIRCLE 1(2), NEW DELHI. VS ACEE ENTERPRISES, PUNJABI BHAVAN, 4 TH FLOOR, 10, ROUSE AVENUE, NEW DELHI-110002 (PAN: AAACA0857G) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SATENDRA PAL, SR. DR RESPONDENT BY : SHRI M.P. RASTOGI, ADV. DATE OF HEARING : 01.11.2017 DATE OF PRONOUNCEMENT: 13.11.2017 ORDER PER BENCH: THESE FOUR APPEALS HAVE BEEN FILED BY THE DEPARTMEN T AND CHALLENGE THE ACTION OF THE LD. COMMISSIONER OF INC OME TAX ITA NO.6516 TO 6519/D/2014 AYS 2005-06 TO 2008-09 2 (APPEALS) IV, NEW DELHI IN DELETING THE PENALTY I MPOSED UNDER SECTION 271 (1) (C) OF THE INCOME TAX ACT, 1961 (HE REINAFTER CALLED THE ACT). SINCE ALL THE APPEALS HAVE IDENTICAL IS SUE, THEY WERE HEARD TOGETHER AND THEY ARE BEING DISPOSED OF THROU GH THIS COMMON ORDER. 2. THE BRIEF FACTS IN ASSESSMENT YEAR 200506 ARE T HAT THE ASSESSMENT WAS COMPLETED AT AN INCOME OF RS. 43,63, 166/- AGAINST THE RETURNED INCOME OF RS. 43,23,166/-. WHI LE MAKING THE ASSESSMENT, THE AO TREATED INCOME FROM SHORT-TE RM CAPITAL GAINS AMOUNTING TO RS. 42,09,883/- AS BUSINESS INCO ME. AGAINST THE ORDER OF THE ASSESSING OFFICER, THE ASSESSEE SU CCESSFULLY CONTESTED BEFORE THE FIRST APPELLATE AUTHORITY. HOW EVER, THE ITAT DECIDED THE ISSUE IN FAVOUR OF THE INCOME TAX DEPAR TMENT AND UPHELD THE FINDINGS OF THE AO. THE CHANGE OF HEAD O F INCOME FROM CAPITAL GAINS TO BUSINESS INCOME RESULTED IN DIFFER ENCE IN THE TAX RATE. SUBSEQUENT TO THE ORDER OF THE ITAT, THE AO H ELD THAT CHANGE OF HEAD OF INCOME AMOUNTED TO FURNISHING OF INACCURATE PARTICULARS OF INCOME AND PROCEEDED TO IMPOSE PENAL TY OF RS. 15,10,295/- UNDER SECTION 271 (1) (C) OF THE ACT. O N APPEAL, THIS PENALTY WAS DELETED BY THE LD. CIT (APPEALS) VIDE O RDER DATED ITA NO.6516 TO 6519/D/2014 AYS 2005-06 TO 2008-09 3 15/09/2014. NOW, THE DEPARTMENT HAS APPROACHED THE ITAT AND HAS CHALLENGED THE DELETION OF PENALTY BY THE LD. CIT (APPEALS). 2.1 SIMILARLY, FOR ASSESSMENT YEAR 200607, THE ASS ESSEE FILED ITS RETURN OF INCOME DECLARING INCOME OF RS. 75,08, 999/- ON ACCOUNT OF SHORT-TERM CAPITAL GAINS ARISING ON ACCO UNT OF SALE OF SHARES HELD BY IT AS AN INVESTMENT. IN THE ASSESSME NT ORDER PASSED UNDER SECTION 143 (3) OF THE ACT, THE AO HEL D THAT THE INCOME WAS FROM BUSINESS AS THE ASSESSEE WAS A TRAD ER IN SHARES AS AGAINST THE CLAIM OF THE ASSESSEE THAT INCOME WA S FROM SHORT- TERM CAPITAL GAIN. THE ASSESSEE TOOK THE MATTER TO THE LD. CIT (APPEALS) WHO DECIDED THE ISSUE AGAINST THE ASSESSE E. THEREAFTER, THE ASSESSEE FILED AN APPEAL BEFORE THE ITAT WHO CO NFIRMED THE VIEW OF THE AO AND OF THE LD. CIT (APPEALS) THAT TH E INCOME WAS TO BE TREATED AS BUSINESS INCOME AND NOT AS SHORT T ERM CAPITAL GAIN. THEREAFTER, THE AO IMPOSED PENALTY OF RS. 16, 86,000/- FOR FURNISHING INACCURATE PARTICULARS OF INCOME. THIS P ENALTY WAS DELETED BY THE LD. CIT (APPEALS) VIDE ORDER DATED 1 5/09/2014 AND NOW THE DEPARTMENT HAS APPROACHED THE ITAT AND HAS CHALLENGED THE ACTION OF THE LD. CIT (APPEALS) IN D ELETING THE SAID PENALTY. ITA NO.6516 TO 6519/D/2014 AYS 2005-06 TO 2008-09 4 2.2 FOR ASSESSMENT YEAR 200708, THE RETURN OF INCO ME WAS FILED DECLARING INCOME OF RUPEES 25,35,470/- ON ACC OUNT OF SHORT- TERM CAPITAL GAIN FROM SALE OF SHARES HELD BY THE A SSESSEE AS INVESTMENT. HOWEVER, THE AO PROCEEDED TO HOLD THAT THE INCOME WAS FROM BUSINESS AND NOT FROM SHORT-TERM CAPITAL G AINS. THE AOS VIEW WAS CONFIRMED BY THE LD. CIT (APPEALS) A S WELL AS BY THE ITAT. THEREAFTER, THE AO IMPOSED A PENALTY OF R S. 5,69,000/- UNDER SECTION 271(1)(C) OF THE ACT, WHICH ON APPEAL , WAS DELETED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS) VID E ORDER DATED 15/09/2014. NOW, THE DEPARTMENT HAS APPROACHE D THE ITAT AND HAS CHALLENGED THE AFORESAID DELETION OF T HE PENALTY BY THE LD. CIT (APPEALS). 2.3 FOR ASSESSMENT YEAR 200809, THE RETURN OF INCO ME WAS FILED DECLARING AN INCOME OF RS. 80,81,01,397/- WHI CH INCLUDED AN AMOUNT OF RS. 60,60,894/- ON ACCOUNT OF SHORT-TE RM CAPITAL GAIN ARISING ON ACCOUNT OF SALE OF SHARES HELD AS I NVESTMENT BY THE ASSESSEE. HOWEVER, IN THE ASSESSMENT ORDER PASS ED UNDER SECTION 143 (3) OF THE ACT, THE AO HELD THAT THE IN COME OF RS. 60,60,894/- WAS FROM BUSINESS AS THE ASSESSEE WAS A TRADER IN SHARES. BOTH, THE LD. CIT (APPEALS) AS WELL AS THE ITAT CONFIRMED ITA NO.6516 TO 6519/D/2014 AYS 2005-06 TO 2008-09 5 THE VIEW OF THE AO. THEREAFTER, THE AO IMPOSED A PE NALTY OF RS. 13,34,000/- FURNISHING INACCURATE PARTICULARS. ON A PPEAL, THE LD. CIT (APPEALS) DELETED THE PENALTY VIDE ORDER D ATED 15/09/2014. NOW, THE DEPARTMENT HAS APPROACHED THE ITAT AND HAS CHALLENGED THE DELETION OF THE PENALTY BY THE L D. CIT (APPEALS). 3. THE LD. SENIOR DEPARTMENTAL REPRESENTATIVE SUBMI TTED THAT A CLOSE LOOK AT SECTION 271 (1) (C) OF ACT ALONG WI TH EXPLANATION 1 THERETO WOULD SHOW THAT IN COURSE OF ANY PROCEEDING S UNDER THE ACT, IF THE AO IS SATISFIED THAT A PERSON HAS CONCE ALED THE PARTICULARS OF INCOME OR HAS FURNISHED INACCURATE P ARTICULARS OF SUCH INCOME, SUCH PERSON MAY BE DIRECTED TO PAY PEN ALTY. IT WAS FURTHER SUBMITTED THAT THE QUANTUM OF PENALTY IS PR ESCRIBED IN CLAUSE (III) AND THAT EXPLANATION 1 PROVIDES THAT I F A PERSON FAILS TO OFFER AN EXPLANATION OR THE EXPLANATION OFFERED BY SUCH PERSON IS FOUND TO BE FALSE OR THE EXPLANATION OFFERED BY HIM IS NOT SUBSTANTIATED AND HE FAILS TO PROVE THAT SUCH EXPLA NATION IS BONA FIDE AND THAT ALL THE FACTS RELATING TO THE SAME AND MA TERIAL TO THE COMPUTATION OF TOTAL INCOME HAVE BEEN DISCLOSED, TH E AMOUNT ADDED OR DISALLOWED IN COMPUTING THE TOTAL INCOME I S DEEMED TO ITA NO.6516 TO 6519/D/2014 AYS 2005-06 TO 2008-09 6 REPRESENT THE CONCEALED INCOME. THE LD. SR. DR SUBM ITTED THAT THIS PENALTY IS NEITHER CRIMINAL NOR QUASI-CRIMINAL BUT A CIVIL LIABILITY AND IN SUCH CASES MENS REA WAS NOT ESSENTIAL. IT WAS SUBMITTED THAT ON FACTS, THE PENALTY HAD BEEN RIGHT LY IMPOSED. RELIANCE WAS ALSO PLACED BY THE LD. SR. DR ON THE J UDGMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT V. ZOOM COMMUNICATIONS LTD REPORTED IN 327 ITR 510(DEL) FOR THE PROPOSITION THAT A CLAIM WHOLLY UNTENABLE IN LAW AN D LACKING BONA FIDE WILL ATTRACT PENALTY. 4. IN RESPONSE, THE LD. AUTHORISED REPRESENTATIVE S UBMITTED THAT THE PENALTY WAS IMPOSED ONLY ON A DIFFERENCE O F OPINION AS TO WHETHER A PARTICULAR ITEM OF INCOME WAS TAXABLE UND ER SHORT- TERM CAPITAL GAINS OR UNDER BUSINESS INCOME. THE LD. AUTHORISED REPRESENTATIVE SUBMITTED THAT THE ASSESS EE HAD NEITHER CONCEALED ANY INCOME NOR FURNISHED ANY INAC CURATE PARTICULARS OF INCOME. IT WAS SUBMITTED THAT THERE WAS ONLY CHANGE OF INCOME HEAD FROM SHORT-TERM CAPITAL GAIN S TO BUSINESS INCOME AND THE ISSUE WAS AT BEST DEBATAB LE. IT WAS SUBMITTED THAT THE CHANGE OF INCOME HEAD DOES NOT T ANTAMOUNT TO FURNISHING OF INACCURATE PARTICULARS OF INCOME A S ALL THE ITA NO.6516 TO 6519/D/2014 AYS 2005-06 TO 2008-09 7 MATERIAL FACTS HAD BEEN DULY DISCLOSED BY THE ASSES SEE. IT WAS SUBMITTED THAT THE TRANSACTION DETAILS OF PURCHASE AND SALE OF SHARES WERE DULY DISCLOSED IN THE RETURN OF INCOME AND IT WAS NOT A CASE WHERE THE ASSESSEE HAD FAILED TO DISCLOSE TH E PARTICULARS OF INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOM E. IT WAS FURTHER SUBMITTED THAT ASSESSEE WAS BOTH AN INVESTO R AS WELL AS A TRADER OF SHARES AND DURING THE COURSE OF HIS ASSES SMENT PROCEEDINGS, NO INACCURACY WAS FOUND IN THE DETAILS FURNISHED BY THE ASSESSEE. THE LD. AUTHORISED REPRESENTATIVE ALS O PLACED RELIANCE ON JUDGMENT OF THE HONBLE DELHI HIGH COUR T IN THE CASE OF COMMISSIONER OF INCOME TAX VERSUS AURIC INVESTMENT AND SECURITIES LTD REPORTED IN 310 ITR 121 (DELHI) WHER EIN THE HONBLE DELHI HIGH COURT HAD HELD THAT MERE TREATME NT OF BUSINESS LOSS AS A SPECULATION LOSS BY THE AO DID N OT AUTOMATICALLY WARRANT THE INFERENCE OF CONCEALMENT OF INCOME. RELIANCE WAS ALSO PLACED ON ANOTHER JUDGMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. AMIT JAIN R EPORTED IN 351 ITR 74 (DELHI) WHEREIN, ON IDENTICAL FACTS, THE ORD ER OF THE ITAT WAS UPHELD BY HONBLE DELHI HIGH COURT. ITA NO.6516 TO 6519/D/2014 AYS 2005-06 TO 2008-09 8 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE PER USED THE MATERIAL ON RECORD. THE FACTS OF THE CASE ARE UNDIS PUTED. IT IS UNDISPUTED THAT PENALTY HAS BEEN LEVIED ONLY ON THE CHANGE OF HEAD OF INCOME FROM SHORT-TERM CAPITAL GAINS TO BUSINESS INCOME. ALTHOUGH THE ITAT HAS UPHELD THE VIEW OF T HE AO THAT THE IMPUGNED INCOME WAS CHARGEABLE UNDER THE HEAD SHORT-TERM CAPITAL GAINS IN ALL THE FOUR YEARS, IT IS SETTLED LAW THAT ASSESSMENT AND PENALTY PROCEEDINGS ARE DISTINCT. TH E HONBLE APEX COURT HAS HELD THAT THE FINDINGS RECORDED IN T HE ASSESSMENT PROCEEDINGS MAY CONSTITUTE EVIDENCE IN THE COURSE O F PENALTY PROCEEDINGS BUT THEY CANNOT BE REGARDED AS CONCLUSI VE. IN THE INSTANT APPEALS, IT CANNOT BE SAID THAT THE ASSESSE E HAD WITHHELD ANY RELEVANT INFORMATION REGARDING ITS RECEIPTS AND INCOME FROM THE AO. WITH REGARD TO THE PROVISIONS OF SECTION 27 1 (1) (C) OF THE ACT PERTAINING TO PENALTY, THE HONBLE APEX COURT H AS LAID DOWN THAT MAKING OF A CLAIM BY THE ASSESSEE WHICH IS NOT SUSTAINABLE WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULAR S. IN THE CASE OF CIT VERSUS RELIANCE PETROPRODUCTS (P) LTD REPORTED IN 322 ITR 158 (SC), THE HONBLE APEX COURT HELD AS FOLLOWS A GLANCE AT THIS PROVISION WOULD SUGGEST THAT IN O RDER TO BE COVERED, THERE HAS TO BE CONCEALMENT OF THE PARTICU LARS OF THE ITA NO.6516 TO 6519/D/2014 AYS 2005-06 TO 2008-09 9 INCOME OF THE ASSESSEE. SECONDLY, THE ASSESSEE MUST HAVE FURNISHED INACCURATE PARTICULARS OF HIS INCOME. THE PRESENT IS NOT A CASE OF CONCEALMENT OF INCOME. THAT IS NOT TH E CASE OF THE REVENUE EITHER. HOWEVER, THE LD. COUNSEL FOR TH E REVENUE SUGGESTED THAT BY MAKING INACCURATE CLAIM FOR THE EXPENDITURE ON INTEREST, THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF THE INCOME. AS PER LAW LE XICON, THE MEANING OF THE WORD PARTICULAR IS A DETAIL OR DET AILS (IN PLURAL SENSE); THE DETAILS OF A CLAIM, OR THE SEPAR ATE ITEMS OF AN ACCOUNT. THEREFORE, THE WORD PARTICULARS USED IN THE SECTION 271 (1) (C) WOULD EMBRACE THE MEANING OF TH E DETAILS OF THE CLAIM MADE. IT IS AN ADMITTED POSITION IN TH E PRESENT CASE THAT NO INFORMATION GIVEN IN THE RETURN WAS FO UND TO BE INCORRECT OR INACCURATE. IT IS NOT AS IF ANY STATEM ENT MADE OR ANY DETAIL SUPPLIED WAS FOUND TO BE FACTUALLY INCOR RECT. HENCE, AT LEAST, PRIMA FACIE, THE ASSESSEE CANNOT B E HELD GUILTY OF FURNISHING INACCURATE PARTICULARS. THE LD . COUNSEL ARGUED THAT SUBMITTING AN INCORRECT CLAIM IN LAW F OR THE EXPENDITURE ON INTEREST WOULD AMOUNT TO GIVING INAC CURATE PARTICULARS OF SUCH INCOME. WE DO NOT THINK THAT S UCH CAN BE THE INTERPRETATION OF THE CONCERNED WORDS. THE WORD S ARE PLAIN AND SIMPLE. IN ORDER TO EXPOSE THE ASSESSEE T O THE PENALTY UNLESS THE CASE IS STRICTLY COVERED BY THE PROVISION, THE PENALTY PROVISION CANNOT BE INVOKED. BY ANY STR ETCH OF IMAGINATION, MAKING AN INCORRECT CLAIM IN LAW CANNO T TANTAMOUNT TO FURNISHING INACCURATE PARTICULARS. IN CIT VERSUS ATUL MOHAN BINDAL (2009) 9 SCC 589, WHERE THIS COUR T WAS CONSIDERING THE SAME PROVISION, THE COURT OBSERVED THAT THE ASSESSING OFFICER HAS TO BE SATISFIED THAT A PERSON HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHE D INACCURATE PARTICULARS OF SUCH INCOME. THIS COURT R EFERRED TO ANOTHER DECISION OF THIS COURT IN UNION OF INDIA VE RSUS DHARAMENDRA TEXTILE PROCESSORS (2008) 13 SCC 369 AS ALSO, THE DECISION IN UNION OF INDIA VERSUS RAJASTHAN SPG . & WVG. MILLS (2009) 13 SCC 448 AND REITERATED IN PARAGRAPH 13 THAT (PAGE 13 OF 317 ITR): 13. IT GOES WITHOUT SAYING THAT FOR APPLICABILITY OF SECTION 271 (1) (C), CONDITIONS STATED THEREIN MUST EXIST. ITA NO.6516 TO 6519/D/2014 AYS 2005-06 TO 2008-09 10 5.1 THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VERSUS AMIT JAIN (SUPRA) UPHELD THE ORDER OF THE ITAT UPHOLDING THE DELETION OF THE PENALTY BY THE LD. CIT (APPEALS) ON FACTS SI MILAR TO THE FACTS IN THE PRESENT APPEALS. IN THIS CASE THE ASSE SSEE HAD DECLARED AN INCOME OF RUPEES 2,60,73,558/- FROM SHO RT-TERM CAPITAL GAINS. THE AO, ON AN INTERPRETATION OF THE RELEVANT PROVISIONS AND HAVING REGARD TO THE NATURE OF TRANS ACTIONS TREATED IT AS INCOME FROM BUSINESS. HE ALSO LEVIED PENALTY UNDER SECTION 271 (1) (C) OF THE ACT TO THE TUNE OF RS. 5 8,45,899/- ON THE GROUND THAT THE ASSESSEE HAD FURNISHED INACCURATE P ARTICULARS OF INCOME. THE COMMISSIONER (APPEALS) CANCELLED THE PE NALTY. THIS DELETION BY THE CIT (APPEALS) WAS CONFIRMED BY THE ITAT. ON AN APPEAL BY THE DEPARTMENT, THE HONBLE HIGH COURT OF DELHI HELD DISMISSING THE APPEAL THAT THE AMOUNT IN QUESTION, WHICH FORMED THE BASIS FOR THE AO TO LEVY PENALTY, WAS IN FACT T O FULLY REPORTED IN THE RETURNS. THE HONBLE DELHI HIGH COURT HELD T HAT IN VIEW OF THIS CIRCUMSTANCE, THAT THE AO CHOSE TO TREAT THE I NCOME UNDER SOME OTHER HEAD COULD NOT CHARACTERISE THE PARTICUL ARS REPORTED IN THE RETURN AS INACCURATE PARTICULARS OR AS SUP PRESSION OF FACTS. THE HONBLE DELHI HIGH COURT HELD THAT THE I TAT WAS NOT IN ITA NO.6516 TO 6519/D/2014 AYS 2005-06 TO 2008-09 11 ERROR IN DELETING THE PENALTY WHILE PLACING RELIANC E UPON THE DECISION IN CIT VERSUS RELIANCE PETROPRODUCTS PRIVATE LIMITED (SUPRA). 5.2 IN THE APPEALS BEFORE US, IT IS UNDISPUTED THA T THE IMPUGNED AMOUNTS, WHICH FORMED THE BASIS FOR THE AO TO LEVY PENALTY, WERE IN FACT FULLY REPORTED IN THE RETURNS . THE FACT THAT THE AO CHOSE TO TREAT THE INCOME UNDER SOME OTHER H EAD CANNOT CHARACTERISE THE PARTICULARS REPORTED IN THE RETURN AS INACCURATE PARTICULARS OR AS SUPPRESSION OF FACTS. RESPECTFUL LY APPLYING THE RATIO OF THE DECISIONS OF THE HONBLE APEX COURT IN THE CASE OF RELIANCE PETROPRODUCTS PRIVATE LIMITED (SUPRA) AND OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VERSUS AMIT JAI N (SUPRA), WE FIND NO REASON TO INTERFERE WITH THE ADJUDICATION O F THE LD. CIT (APPEALS) IN DELETING THE IMPUGNED PENALTIES IN ALL THE FOUR YEARS UNDER CONSIDERATION. ACCORDINGLY, WE REFUSE TO INTE RFERE AND UPHOLD THE ORDERS OF THE LD. CIT (APPEALS) FOR ALL THE FOUR YEARS UNDER CONSIDERATION. 6. IN THE FINAL RESULT ALL THE FOUR APPEALS OF THE DEPARTMENTS STAND DISMISSED. ITA NO.6516 TO 6519/D/2014 AYS 2005-06 TO 2008-09 12 ORDER IS PRONOUNCED IN THE OPEN COURT ON 13 TH NOVEMBER, 2017. SD/- SD/- (B.P. JAIN ) (SUDHANSHU SRIVASTAVA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 13 TH NOVEMBER, 2017 GS COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER ASSISTANT REGI STRAR