SOUND CAPITAL MARKETS LTD, MUMBAI V. DCIT 10(2), MUMBAI

ITA 667/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 56027 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-11-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: I
• Next Hearing Date: 31-10-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 27-01-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: O A MAO
• Assessee Lawyers: JA YANT R BHATT
• Keywords: Capital asset; Business income; Bonafide belief; Cost of acquisition; Wrong claim

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH I, MUMBAI. BEFORE B.R. MITTAL, JUDICIAL MEMBER AND SHRI P.M. JAGTAP, ACCOUNTANT MEMBER I.T.A. NO. 667/MUM/2010 ASSESSMENT YEAR : 2004-05. M/S SOUND CAPITAL MARKETS LTD., DY. COMMISSIONER OF INCOME-TAX, 151, MITTAL COURT, A WING, VS. 10(2), MUMBAI. MARIMAN POINT, MUMBAI 400021. PAN AACCS2093J. APPELLANT. RESPONDENT. APPELLANT BY : SHRI JAYANT R. BHATT. RESPONDENT BY: SHRI O.A. MAO. DATE OF HEARING : 31-10-2011. DATE OF PRONOUNCEMENT : 18-11-2011. O R D E R. PER P.M. JAGTAP, A.M. : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF LEARNED CIT(APPEALS)-22, MUMBAI DATED 18-12-2009 WHEREBY HE CONFIRMED THE PENALTY OF RS.15 LAKHS IMPOSED BY THE AO U/S 271(1)(C). 2. THE ASSESSEE IN THE PRESENT CASE IS AN INVESTMEN T COMPANY WHICH IS ENGAGED IN THE BUSINESS OF TRADING IN SHARES AND SECURITIES . THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED BY IT ON 18-10-2004 D ECLARING LOSS OF RS.8,88,478/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTICED BY THE AO THAT THE 2 ITA NO.667/MUM/2010 ASSESSMENT YEAR : 2004-05. ASSESSEE HAS CLAIMED LOSS OF RS.37,09,018/- IN RES PECT OF UNITS OF BIRLA INDEX FUND PLAN-A. HE NOTED THAT THE RELEVANT DETAILS SUC H AS PURCHASE AND SALES VALUE OF THE SAID UNITS, HOWEVER, WERE NOT GIVEN BY THE ASS ESSEE IN RESPECT OF THE SAID LOSS IN THE STATEMENT FILED ALONG WITH THE RETURN OF INC OME GIVING SIMILAR DETAILS IN RESPECT OF PROFIT OR LOSS SUFFERED IN OTHER TRANSAC TIONS. AS NOTED BY HIM IN THE ASSESSMENT ORDER, THE LOSS OF RS.37,09,019/- IN RES PECT OF UNITS OF BIRLA INDEX FUND PLAN-A WAS ONLY INDICATED IN THE LAST COLUMN OF THE SAID STATEMENT WITHOUT GIVING ANY DETAILS OR PARTICULARS THEREOF. THE ASSESSEE, T HEREFORE, WAS CALLED UPON BY THE AO TO FURNISH THE DETAILS OF SUCH LOSS. ACCORDINGLY THE REQUIRED DETAILS WERE FURNISHED BY THE ASSESSEE WHICH REVEALED THAT THE A SSESSEE HAD PURCHASED THE UNITS OF BIRLA INDEX FUND ON 17-10-2003 FOR RS.1 CRORE, THE MARKET VALUE OF WHICH WAS ADOPTED BY THE ASSESSEE AT RS.62,90,982/- AS ON 31- 03-2004 AND THE RESULTANT LOSS DUE TO DIMINUTION IN THE VALUE OF UNITS AMOUNTING T O RS.37,09,018/- WAS CLAIMED BY REDUCING THE SAME FROM THE PROFITS FROM TRADING IN SHARES. ON PERUSAL OF THE BALANCE SHEET OF THE ASSESSEE, THE AO FOUND THAT TH E BIRLA INDEX FUND UNITS WERE SHOWN BY THE ASSESSEE AS INVESTMENT AND NOT STOCK I N TRADE. HE NOTED THAT SIMILARLY UNITS OF OTHER MUTUAL FUNDS PURCHASED BY THE ASSESS EE IN THE EARLIER YEARS WERE SHOWN AS INVESTMENT IN THE BALANCE SHEET AS ON 31-0 3-2003 AT COST PRICE. HE NOTED THAT THE ASSESSEE, ON THE OTHER HAND, HAD SHOWN INV ENTORY OF SHARES AS STOCK IN TRADE AND THE SAME WAS VALUED AT COST OR MARKET PRI CE WHICHEVER IS LOWER. ACCORDING TO THE AO, THE UNITS OF MUTUAL FUNDS THUS WERE TREATED BY THE ASSESSEE AS INVESTMENT ALL ALONG IN THE EARLIER YEARS AS WELL A S IN THE YEAR UNDER CONSIDERATION AND THE SAME NOT BEING ITS STOCK IN TRADE, THEIR VA LUE SHOULD HAVE BEEN TAKEN AT COST AND THE ASSESSEE WAS NOT ENTITLED TO CLAIM THE LOSS ON ACCOUNT OF DIMINUTION IN THE MARKET VALUE OF BIRLA INDEX FUND UNITS. ACCORDINGLY THE CLAIM OF THE ASSESSEE FOR THE LOSS WAS DISALLOWED BY THE AO. HE ALSO INITIATE D PENALTY PROCEEDINGS U/S 3 ITA NO.667/MUM/2010 ASSESSMENT YEAR : 2004-05. 271(1)(C) FOR THE WRONG CLAIM OF LOSS MADE BY THE A SSESSEE OBSERVING THAT WHILE MAKING THE SAID CLAIM, THE RELEVANT DETAILS WERE NO T FURNISHED BY THE ASSESSEE. 3. DURING THE COURSE OF PENALTY PROCEEDINGS, NO REP LY WAS FILED BY THE ASSESSEE IN RESPONSE TO THE NOTICE ISSUED BY THE AO U/S 271( 1)(C) READ WITH SECTION 274. IN THE ABSENCE OF ANY REPLY FILED BY THE ASSESSEE, THE AO PROCEEDED TO IMPOSE PENALTY OF RS.15 LAKHS U/S 271(1)(C) FOR THE FOLLOWING REAS ONS GIVEN IN THE PENALTY ORDER : (I) THE ASSESSEE IS A COMPANY INCORPORATED UNDER T HE COMPANIES ACT. THE ACCOUNTS OF THE COMPANY ARE DULY AUDITED UNDER THE PROVISIONS OF COMPANIES ACT APPROVED AND PASSED BY THE BOARD OF C OMPANY AND THE SAME IS FILED WITH THE REGISTRAR OF COMPANY. (II) ONCE THE BALANCE SHEET OF THE COMPANY HAS BEEN PASSED BY THE BOARD AND THE GENERAL BODY OF THE COMPANY AND FURNISHED T O ROC, THERE IS NO SCOPE FOR AMENDMENT OF THE SAME. IF AN ITEM HAS BEE N SHOWN AS INVESTMENT IN THE BALANCE SHEET IT IS DEEMED TO BE SHOWN. (III) SINCE THE YEAR OF THE PURCHASE, I.E. F.Y. 200 2-03, THE ASSESSEE HAS BEEN DISCLOSING THE MUTUAL FUND UNITS AS INVESTMEN T AT COST AND NOT AS STOCK-IN-TRADE. (IV) IT IS SEEN FROM THE RECORDS THAT ASSESSEE HAS CLAIMED LOSS OF RS.37.09 LACS AGAINST UNITS OF BIRLA INDEX FUND, HOWEVER, NO DISCLOSURE IN THE STATEMENT HAS BEEN MADE ABOUT THE VALUE OF SALES OR PURCHASE COST. MERELY, LOSS OF RS.37.09 LACS HAS BEEN SHOWN IN THE LAST CO LUMN OF THE STATEMENT. FOR THE REASONS GIVEN ABOVE, THE AO HELD THAT THE A SSESSEE HAS FURNISHED INACCURATE PARTICULARS OF ITS INCOME AND IT IS LIABLE FOR PENA LTY U/S 271(1)(C). ACCORDINGLY THE PENALTY OF RS.15 LAKHS WAS IMPOSED BY HIM U/S 271(1 )(C). 4. THE PENALTY IMPOSED BY THE AO WAS CHALLENGED BY THE ASSESSEE IN AN APPEAL FILED BEFORE THE LEARNED CIT(APPEALS). DURING THE C OURSE OF APPELLATE PROCEEDINGS 4 ITA NO.667/MUM/2010 ASSESSMENT YEAR : 2004-05. BEFORE THE LEARNED CIT(APPEALS), IT WAS SUBMITTED O N BEHALF OF THE ASSESSEE THAT THE LOSS IN RESPECT OF BIRLA INDEX FUND WAS CLAIMED AS A BUSINESS LOSS UNDER THE BONAFIDE BELIEF THAT THE INVESTMENT IN THE SAID UNI TS REPRESENTED ITS TRADE INVESTMENT. IT WAS CONTENDED THAT THE LOSS IN RESPE CT OF SIMILAR UNITS WAS CONSISTENTLY CLAIMED BY THE ASSESSEE AS BUSINESS LO SS UNDER THE BONAFIDE BELIEF THAT THE SAID UNITS REPRESENTED ITS BUSINESS ASSETS. IT WAS CONTENDED THAT THE SAID BONAFIDE BELIEF WAS BASED ON THE NORMAL PRACTICE PR EVAILING IN THE PRUDENTIAL ACCOUNTING NORMS. IT WAS CONTENDED THAT ALTHOUGH TH E UNITS WERE CLASSIFIED AS INVESTMENT, THE SAME WERE IN THE NATURE OF TRADE IN VESTMENT AND NOT LONG TERM INVESTMENT. 5. THE LEARNED CIT(APPEALS) DID NOT FIND MERIT IN T HE SUBMISSIONS MADE ON BEHALF OF THE ASSESSEE. ACCORDING TO HIM, WHEN THE BALANCE SHEET WAS PREPARED BY THE ASSESSEE COMPANY AS PER THE PROVISIONS OF COMPA NIES ACT AND THE SAME WAS APPROVED BY THE SHAREHOLDERS AND WAS ALSO FILED WIT H THE REGISTRAR, THE ASSESSEE COULD NOT TAKE THE PLEA THAT TREATMENT GIVEN TO THE UNITS IN THE ACCOUNTS WAS WRONG. HE NOTED THAT EVEN IN THE IMMEDIATELY PRECEDING YEA R, THE ASSESSEE COMPANY HAD SHOWN THE UNITS OF MUTUAL FUNDS AS INVESTMENT AND N OT AS STOCK IN TRADE AND THE SAME WERE VALUED AT COST. HE ALSO NOTED THAT THE RE LEVANT PARTICULARS IN RESPECT OF LOSS CLAIMED BY THE ASSESSEE ON BIRLA INDEX FUND UN ITS WERE NOT FURNISHED BY THE ASSESSEE GIVING VALUE OF PURCHASE AND SALES. HE HEL D THAT ALL THESE FACTS MADE IT QUITE CLEAR THAT THE ASSESSEE HAD DELIBERATELY AND KNOWINGLY MADE WRONG CLAIM ON ACCOUNT OF LOSS TO SET IT OFF AGAINST THE BUSINESS INCOME AND IT WAS A CLEAR CASE OF FURNISHING OF INACCURATE PARTICULARS OF ITS INCOME BY THE ASSESSEE. ACCORDINGLY HE CONFIRMED THE PENALTY IMPOSED BY THE AO U/S 271(1)( C) RELYING INTER ALIA, ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF UN ION OF INDIA VS. DHARMENDRA 5 ITA NO.667/MUM/2010 ASSESSMENT YEAR : 2004-05. TEXTILE PROCESSOR 306 ITR 277. AGGRIEVED BY THE ORD ER OF THE LEARNED CIT(APPEALS), THE ASSESSEE HAS PREFERRED THIS APPEA L BEFORE THE TRIBUNAL. 6. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT THE LOSS CLAIMED BY THE ASSESSEE AS A RESULT OF REVALUATION OF MUTUAL FUNDS UNIT WAS DISALLOWED BY THE AO TREATING THE SAME AS A CAPITAL LOSS. HE SUBMITTED T HAT THE BUSINESS OF THE ASSESSEE IS DEALING IN SHARES AND SECURITIES AND THE UNITS OF B IRLA INDEX FUNDS PURCHASED DURING THE YEAR UNDER CONSIDERATION WERE SHOWN AS I NVESTMENT IN THE BOOKS OF ACCOUNTS BY MISTAKE. HE INVITED OUR ATTENTION TO TH E COPY OF CERTIFICATE ISSUED BY AUDITORS OF THE ASSESSEE COMPANY PLACED AT PAGE NO. 23 OF ITS PAPER BOOK AND SUBMITTED THAT THE MISTAKE IN SHOWING THE SAID UNIT S UNDER THE HEAD INVESTMENT AS AGAINST CURRENT ASSETS WAS PURELY A PRESENTAT ION ERROR. HE CONTENDED THAT THE SAID UNITS AS CERTIFIED BY THE AUDITORS REPRESENTED STOCK IN TRADE OF THE ASSESSEE COMPANY FOR ALL PRACTICAL PURPOSES AND THE PROFIT A RISING OUT OF SALE OF THE SAID UNITS WAS RIGHTLY CLAIMED AS A BUSINESS LOSS. HE CO NTENDED THAT THERE IS NO DISPUTE THAT THE ASSESSEE HAS ACTUALLY SUFFERED THE LOSS CL AIMED BY IT AND THE ONLY DISPUTE IS WHETHER THE SAME IS A CAPITAL OR REVENUE LOSS. HE C ONTENDED THAT THE ASSESSEE WAS UNDER A BONAFIDE BELIEF THAT THE UNITS OF BIRLA IND EX FUND REPRESENTED ITS TRADING ASSETS/INVESTMENT AND UNDER THIS BONAFIDE BELIEF, T HE LOSS ARISING FROM THE SALE OF THE SAID UNITS WAS CLAIMED BY IT AS A BUSINESS LOSS . HE SUBMITTED THAT THE ASSESSEE COMPANY AS PER ACCOUNTING STANDARD 13 ISSUED BY THE ICAI WAS REQUIRED TO VALUE THE CURRENT INVESTMENTS AT COST OR MARKET PRICE WHI CHEVER IS LOWER AND ANY DEDUCTION IN THE VALUE OF SUCH INVESTMENTS WAS TO B E DISCLOSED/REFLECTED IN THE PROFITS AND LOSS STATEMENT. HE CONTENDED THAT THE A SSESSEE COMPANY WAS THUS REQUIRED TO RECOGNIZE THE IMPAIRMENT LOSS IN RESPEC T OF UNITS OF BIRLA INDEX FUND WHICH REPRESENTED ITS CURRENT INVESTMENT/ASSET. HE ALSO CONTENDED THAT WHILE MAKING THE CLAIM OF LOSS, NO INACCURATE PARTICULARS WERE FURNISHED BY THE ASSESSEE 6 ITA NO.667/MUM/2010 ASSESSMENT YEAR : 2004-05. AND EVEN THE AO HAS NOT MADE OUT ANY SUCH CASE. RE LYING ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF RELIANCE PETRO PRODUCTS P. LTD. 322 ITR 158 (SC), HE CONTENDED THAT THE CASE OF THE ASSESSEE IS NOT A FIT CASE TO IMPOSE PENALTY U/S 271(1)(C). HE ALSO RELIED ON THE DECISION OF HO NBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. ARISUDANA SPINNING MI LLS LTD. 326 ITR 429 TO CONTEND THAT WHEN THE ASSESSEE HAS ACTED IN A BONAF IDE MANNER WHILE MAKING A CLAIM, THE DISALLOWANCE OF SUCH CLAIM DOES NOT ATT RACT PENALTY U/S 271(1)(C). 7. THE LEARNED DR, ON THE OTHER HAND, STRONGLY RELI ED ON THE ORDERS OF THE AUTHORITIES BELOW IN SUPPORT OF REVENUES CASE THAT THE PRESENT CASE IS A FIT CASE TO IMPOSE PENALTY U/S 271(1)(C). HE SUBMITTED THAT THE UNITS OF MUTUAL FUNDS WERE SHOWN BY THE ASSESSEE AS INVESTMENT IN THE EARLIER YEAR AS WELL AS IN THE YEAR UNDER CONSIDERATION AND THERE WAS NOTHING BROUGHT ON RECO RD TO SHOW THAT THE SAID UNITS REPRESENTED ITS CURRENT ASSETS OR STOCK IN TRADE. HE SUBMITTED THAT EVEN THE RELEVANT DETAILS WHILE MAKING THE LOSS IN RESPECT OF UNITS O F BIRLA INDEX FUND WERE NOT FULLY AND TRULY FURNISHED BY THE ASSESSEE AND IT WAS ONLY AS A RESULT OF ENQUIRY MADE BY THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS THAT THE WRONG CLAIM MADE BY THE ASSESSEE TREATING THE SAID LOSS AS BUSINESS LOS S WAS DETECTED. HE CONTENDED THAT THE SAID WRONG CLAIM THUS WAS MADE BY THE ASSESSEE WITH A CLEAR INTENTION TO REDUCE HIS TAXABLE INCOME AND THERE BEING NOTHING T O ESTABLISH THE BONAFIDE OF THE ASSESSEE FOR MAKING SUCH A WRONG CLAIM, PENALTY U/S 271(1)(C) WAS RIGHTLY IMPOSED BY THE AO AND CONFIRMED BY THE LEARNED CIT(APPEALS) . AS REGARDS THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF RELIANCE PETRO PRODUCTS P. LTD. (SUPRA) RELIED UPON BY THE LEARNED COUNSEL FOR THE ASSESSEE , HE CONTENDED THAT THE FACTS INVOLVED IN THE PRESENT CASE ARE ALTOGETHER DIFFERE NT FROM THE FACTS INVOLVED IN THE SAID CASE DECIDED BY THE HONBLE SUPREME COURT. IN SUPPORT OF THIS CONTENTION, HE 7 ITA NO.667/MUM/2010 ASSESSMENT YEAR : 2004-05. RELIED ON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. ZOOM COMMUNICATION (P) LTD. REPORTED IN 327 ITR 510. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND ALS O PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS OBSERVED THAT THE LOSS AS A RESULT OF REVALUATION OF UNITS OF BIRLA INDEX FUND WAS CLAIMED BY THE ASSESSEE AS DE DUCTION IN COMPUTING ITS BUSINESS INCOME. SINCE THE SAID UNITS WERE IN THE N ATURE OF INVESTMENT I.E. CAPITAL ASSET AS PER THE TREATMENT GIVEN BY THE ASSESSEE IN ITS BOOKS OF ACCOUNT, THE AO HELD THAT THE LOSS CLAIMED BY THE ASSESSEE WAS NOT ALLOWABLE AND THE DEDUCTION CLAIMED BY THE ASSESSEE WAS DISALLOWED BY HIM. HE A LSO IMPOSED PENALTY U/S 271(1)(C) IN RESPECT OF ADDITION MADE ON ACCOUNT OF DISALLOWANCE OF ASSESSEES CLAIM FOR THE SAID LOSS HOLDING THAT BY MAKING A WR ONG CLAIM FOR THE SAID LOSS, THE ASSESSEE FURNISHED INACCURATE PARTICULARS OF ITS I NCOME. 9. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE HAS CONTENDED THAT THE UNITS OF BIRLA INDEX FUND ACTUALLY REPRESENTED THE STOCK IN TRADE FORMING PART OF CURRENT ASSETS OF THE ASSESSEE COMPANY AND THE SAME WERE SH OWN AS INVESTMENT IN THE BOOKS OF ACCOUNT BY MISTAKE. HE HAS ALSO CONTENDED THAT THE SAID UNITS EVEN OTHERWISE REPRESENTED CURRENT INVESTMENTS OF THE AS SESSEE COMPANY AND AS PER THE ACCOUNTING STANDARD 13, THE SAME WERE REQUIRED TO B E VALUED AT COST OR MARKET PRICE WHICHEVER IS LOWER AND THE LOSS AS A RESULT OF REDU CTION IN THE VALUE OF CURRENT INVESTMENT WAS REQUIRED TO BE RECOGNIZED AND REFLEC TED IN THE PROFIT AND LOSS STATEMENT. AFTER PERUSING THE RELEVANT MATERIAL ON RECORD, WE FIND IT DIFFICULT TO ACCEPT THESE CONTENTIONS OF THE LEARNED COUNSEL FOR THE ASSESSEE. 10. IT IS OBSERVED THAT IN ITS AUDITED BALANCE SHEE T AS ON 31-03-203, THE UNITS OF OTHER MUTUAL FUNDS PURCHASED BY THE ASSESSEE COMPAN Y IN THE FINANCIAL YEAR 2002- 03 WERE SHOWN UNDER THE CAPTION INVESTMENT AND TH E VALUE THEREOF WAS TAKEN AT 8 ITA NO.667/MUM/2010 ASSESSMENT YEAR : 2004-05. COST. IN THE STATEMENT OF SIGNIFICANT ACCOUNTING PO LICIES ANNEXED TO AND FORMING PART OF THE BALANCE SHEET AS ON 31 ST MARCH, 2003, IT WAS CLEARLY MENTIONED THAT THE ASSESSEE COMPANY CARRIED ON THE BUSINESS OF TRADING IN SHARES AND SECURITIES DURING THE FINANCIAL YEAR 2002-03 AND THE INVENTORIES OF S HARES WERE VALUED AT COST OR MARKET PRICE WHICHEVER IS LESS. IT WAS ALSO CLEARLY STATED THAT THE INVESTMENT IN DIFFERENT MUTUAL FUNDS, HOWEVER, WERE TREATED AS LO NG TERM INVESTMENT. IN THE BALANCE SHEET AS ON 31 ST MARCH, 2004, THE ASSESSEE AGAIN DISCLOSED THE UNIT S OF BIRLA INDEX FUND PURCHASED DURING THE YEAR UNDER CONSIDER ATION UNDER THE SAME CAPTION VIZ. INVESTMENT AND THERE IS NOTHING IN THE STATE MENT OF SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS ANNEXED TO AND FORM ING PART OF THE BALANCE SHEET AS ON 31 ST MARCH, 2004 TO SHOW THAT THERE WAS ANY SIGNIFICANT CHANGE IN THE ACCOUNTING POLICIES RELATING TO THE INVESTMENT. IT, THEREFORE, FOLLOWS THAT THE UNITS OF BIRLA INDEX FUND PURCHASED BY THE ASSESSEE IN THE Y EAR UNDER CONSIDERATION REPRESENTED ITS LONG TERM INVESTMENT AND THE SAME, THEREFORE, WERE REQUIRED TO BE VALUED AT COST. 11. THE LEARNED COUNSEL FOR THE ASSESSEE HAS MADE A N ATTEMPT TO CONTEND THAT THE UNIT OF BIRLA INDEX FUND PURCHASED BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION ACTUALLY REPRESENTED ITS STOCK IN TRA DE OR CURRENT INVESTMENTS AND THE SAME WERE WRONGLY SHOWN UNDER THE CAPTION INVESTME NT BY MISTAKE IN THE BOOKS OF ACCOUNT. THE STAND TAKEN BY THE LEARNED COUNSEL FOR THE ASSESSEE, HOWEVER, IS CONTRARY TO THE EVIDENCE PLACED ON RECORD BEFORE US INCLUDING THE AUDITED BALANCE SHEET OF THE ASSESSEE COMPANY WHICH WAS DULY APPROV ED BY THE SHAREHOLDERS AND WAS ALSO FILED WITH THE REGISTRAR OF COMPANIES. EVE N THE CERTIFICATE ISSUED BY THE AUDITORS OF THE ASSESSEE COMPANY TO THE EFFECT THAT UNITS WERE SHOWN UNDER THE HEAD INVESTMENT ERRONEOUSLY AS AGAINST CURRENT AS SETS AND THE SAME REPRESENTED STOCK IN TRADE OF THE ASSESSEE COMPANY IS CONTRARY TO THE PARTICULARS FURNISHED BY 9 ITA NO.667/MUM/2010 ASSESSMENT YEAR : 2004-05. THEM IN FORM NO. 3CD ALONG WITH THE TAX AUDIT REPOR T. COLUMN NO. 28A OF FORM NO. 3CD REQUIRES THE AUDITORS TO GIVE QUANTITATIVE DETAILS OF PRINCIPAL ITEMS TRADED BY THE ASSESSEE AND SUCH DETAILS FURNISHED BY THE A UDITORS AS ARE AVAILABLE ON PAGE NO. 51 OF THE ASSESSEES PAPER BOOK CLEARLY SHOW TH AT THE UNITS OF BIRLA INDEX FUND WERE NOT INCLUDED IN THE SAID DETAILS MEANING THERE BY THAT THE SAID UNITS DID NOT REPRESENT THE ITEMS TRADED BY THE ASSESSEE COMPANY. THE CERTIFICATE ISSUED BY THE AUDITORS AND RELIED UPON BY THE LEARNED COUNSEL FOR THE ASSESSEE IN SUPPORT OF THE ASSESSEES CASE, IN OUR OPINION THEREFORE, CANNOT B E RELIED UPON TO ACCEPT THE STAND OF THE ASSESSEE. SIMILARLY THE ACCOUNTING STANDARD 13 RELIED UPON BY THE LEARNED COUNSEL FOR THE ASSESSEE IS OF NO HELP TO THE ASSES SEES CASE AS THE SAME REQUIRES THE ASSESSEE TO RECOGNIZE ANY LOSS AS A RESULT OF REDUC TION IN THE VALUE OF CURRENT INVESTMENTS AND NOT THE LONG TERM INVESTMENTS. THE SAID ACCOUNTING STANDARD ACTUALLY SUPPORTS THE CASE OF THE REVENUE BECAUSE I T SPECIFIES THAT THE LONG TERM INVESTMENTS ARE USUALLY VALUED AT COST. IN OUR OPIN ION, THE ASSESSEE THUS HAS COMPLETELY FAILED TO SUBSTANTIATE ITS EXPLANATION I N REGARD TO ITS CLAIM FOR LOSS AS A RESULT OF REDUCTION IN THE VALUE OF UNITS OF BIRLA INDEX FUND AS BUSINESS LOSS AND IT, THEREFORE, CANNOT BE SAID THAT THERE WAS ANY BASIS WHATSOEVER TO CLAIM SUCH LOSS IN COMPUTING ITS BUSINESS INCOME BY THE ASSESSEE. THE SAID CLAIM, THEREFORE, CANNOT BE REGARDED AS A BONAFIDE CLAIM MADE BY THE ASSESSE E. 12. AT THE TIME OF HEARING BEFORE US, THE LEARNED C OUNSEL FOR THE ASSESSEE HAS RELIED ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF RELIANCE PETRO PRODUCTS P. LTD. (SUPRA) IN SUPPORT OF THE ASSESSE ES CASE. IT IS OBSERVED THAT THE SAID DECISION OF THE HONBLE SUPREME COURT WAS RELI ED UPON ON BEHALF OF THE ASSESSEE BEFORE THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. ZOOM COMMUNICATION P. LTD. REPORTED IN 327 ITR 510 WHERE IN THE ISSUE INVOLVED WAS 10 ITA NO.667/MUM/2010 ASSESSMENT YEAR : 2004-05. RELATING TO THE PENALTY IMPOSED U/S 271(1)(C) IN R ESPECT OF DISALLOWANCE OF ASSESSEES CLAIM FOR DEDUCTION ON ACCOUNT OF EQUIP MENT WRITTEN OFF. THE HONBLE DELHI HIGH COURT, HOWEVER, FOUND THE CASE O F RELIANCE PETRO PRODUCTS P. LTD. (SUPRA) DECIDED BY THE HONBLE SUPREME COURT T O BE DISTINGUISHABLE ON FACTS BY OBSERVING THAT THE ASSESSEE IN THAT CASE HAD CLA IMED INTEREST U/S 36(1)(III) OF THE ACT WHICH WAS PAID ON THE LOAN WHICH THE ASSESSEE H AD UTILIZED FOR PURCHASING SOME IPL SHARES BY WAY OF ITS BUSINESS POLICY. THE ASSESSEE, HOWEVER, DID NOT EARN ANY INCOME BY WAY OF DIVIDEND FROM THOSE SHARE S. IT WAS SUBMITTED BEFORE THE HONBLE SUPREME COURT THAT THE ASSESSEE COMPANY WAS AN INVESTMENT COMPANY AND THAT IN ITS OWN CASE FOR THE ASSESSMENT YEAR 20 00-01, THE LEARNED CIT(APPEALS) HAD DELETED THE DISALLOWANCE OF INTEREST MADE BY TH E AO AND TRIBUNAL HAD ALSO CONFIRMED THE STAND OF THE LEARNED CIT(APPEALS) FOR THAT YEAR. IT WAS ON THE BASIS OF THIS THAT THE EXPENDITURE ON ACCOUNT OF INTEREST WAS CLAIMED BY THE ASSESSEE. THE TRIBUNAL HAD, HOWEVER, RESTORED THE ISSUE BACK TO T HE AO. IN THE APPEAL ARISING OUT OF THE PENALTY PROCEEDINGS, THE TRIBUNAL, IN THE CI RCUMSTANCES, WAS OF THE VIEW THAT THE CONFIRMATION OF DISALLOWANCE BY THE TRIBUNAL DI D NOT MEAN THAT THE ASSESSEE HAD CONCEALED THE INCOME OR HAD FURNISHED INACCURAT E PARTICULARS THEREOF. NOTICING THAT THE ASSESSEE HAD GIVEN AN EXPLANATION VIDE ITS LETTER DATED 22 ND MARCH,2006 GIVING REASONS FOR CLAIMING THE INTEREST AS A DEDUC TION, THE TRIBUNAL WAS OF THE VIEW THAT THE ONUS SHIFTED ON THE REVENUE TO PROVE THAT EXPLANATION OFFERED BY THE ASSESSEE WAS FALSE. THE TRIBUNAL FELT THAT THE BONA FIDES OF THE EXPLANATION WERE CLEARLY PROVED FROM THE FACT THAT THE HIGH COURT AD MITTED THE APPEAL OF THE ASSESSEE ABOUT THE DISALLOWANCE OF THE INTEREST. THE TRIBUNA L HELD THAT IF THERE COULD BE TWO VIEWS ABOUT THE CLAIM OF THE ASSESSEE, THE EXPLANAT ION OFFERED BY IT CANNOT BE SAID TO BE FALSE. THE PENALTY WAS ACCORDINGLY DELETED BY THE TRIBUNAL. THE ORDER OF THE TRIBUNAL WAS MAINTAINED BY THE HIGH COURT AND THE D ECISION OF THE HIGH COURT WAS 11 ITA NO.667/MUM/2010 ASSESSMENT YEAR : 2004-05. UPHELD BY THE SUPREME COURT HOLDING THAT MAKING AN INCORRECT CLAIM IN LAW CANNOT TANTAMOUNT TO FURNISHING OF INACCURATE PARTICULARS. AFTER ANALYZING THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF RELIANCE PETRO PRODUCTS P. LTD. (SUPRA) IN THE LIGHT OF FACTS AND CIRCUMSTANCES INVOLVED IN TH AT CASE, THE HONBLE DELHI HIGH COURT HELD IN THE CASE OF ZOOME COMMUNICATION P. LT . (SUPRA) THAT THE PROPOSITION OF LAW WHICH EMERGES FROM THE SAID CASE WHEN CONSID ERED IN THE BACK DROP OF THE FACTS OF THE CASE BEFORE THE COURT, IS THAT SO LONG AS THE ASSESSEE HAS NOT CONCEALED ANY MATERIAL FACT OR THE FACTUAL INFORMATION GIVEN BY HIM HAS NOT BEEN FOUND TO BE INCORRECT, HE WILL NOT BE LIABLE TO IMPOSITION OF P ENALTY U/S 271(1)(C) OF THE ACT EVEN IF THE CLAIM MADE BY HIM IS UNSUSTAINABLE IN L AW, PROVIDED THAT HE EITHER SUBSTANTIATES THE EXPLANATION OFFERED BY HIM OR THE EXPLANATION, EVEN IF NOT SUBSTANTIATED, IS FOUND TO BE BONAFIDE. IT WAS HELD THAT IF THE EXPLANATION IS NEITHER SUBSTANTIATED NOR SHOWN TO BE BONAFIDE, EXPLANATION 1 TO SECTION 271(1)(C) WOULD COME INTO PLAY AND THE ASSESSEE WILL BE LIABLE TO T HE PRESCRIBED PENALTY. 13. AS ALREADY DISCUSSED, THE EXPLANATION OFFERED B Y THE ASSESSEE IN THE PRESENT CASE IN RESPECT OF ITS CLAIM FOR DEDUCTION ON ACCOU NT OF LOSS AS A RESULT OF REDUCTION IN THE VALUE OF UNITS OF BIRLA INDEX FUND IN COMPUT ING THE BUSINESS INCOME WAS NEITHER SUBSTANTIATED BY THE ASSESSEE NOR THERE WAS ANYTHING TO SHOW THAT THE SAME WAS BONAFIDE. MOREOVER, THE RELEVANT DETAILS OR PAR TICULARS RELATING TO ITS CLAIM FOR THE SAID LOSS WERE NOT FURNISHED BY THE ASSESSEE AN D IT WAS ONLY AS A RESULT OF ENQUIRY MADE BY THE AO DURING THE COURSE OF ASSESSM ENT PROCEEDING THAT THE FALSITY OF THE ASSESSEES CLAIM FOR THE SAID LOSS W AS DETECTED. HAVING REGARD TO ALL THESE FACTS OF THE CASE AND KEEPING IN VIEW THE DEC ISION OF HONBLE DELHI HIGH COURT IN THE CASE OF ZOOM COMMUNICATION (P) LTD. (S UPRA), WE ARE OF THE VIEW THAT IT IS A FIT CASE TO IMPOSE PENALTY U/S 271(1)( C). IN THAT VIEW OF THE MATTER, WE 12 ITA NO.667/MUM/2010 ASSESSMENT YEAR : 2004-05. UPHOLD THE PENALTY IMPOSED BY THE AO AND CONFIRMED BY THE LEARNED CIT(APPEALS) AND DISMISS THIS APPEAL OF THE ASSESSEE. 14. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THI S 18 TH DAY OF NOV., 2011. SD/- SD/- (B.R. MITTAL) (P.M. JAGTAP ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 18 TH NOV., 2011. COPY TO : 1. APPELLANT 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. DR, I-BENCH. 6. GUARD FILE. (TRUE COPY ) BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI. WAKODE