M/s. Denis Chem Lab Ltd., Gandhinagar V. The Dy.CIT., Mehsana Circle, Mehsana

ITA 677/AHD/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 56982 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 10 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-01-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 21-08-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 03-03-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Revenue expenditure
• Section: 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, B BENCH, AHMEDABAD BEFORE SHRI MUKUL KUMAR SHRAWAT, JUDICIAL MEMBER AND SHRI A. K. GARODIA, ACCOUNTANT MEMBER I.T.A. NO. 677/ AHD/2010 (ASSESSMENT YEAR 2006-07) DENIS CHEM LAB LIMITED, BLOCK NO.457, CHHATRAL, TAL. KALOL, DISTT. GANDHINAGAR VS. DCIT, MEHSANA CIRCLE, MEHSANA PAN/GIR NO. : AAACD4123C (APPELLANT) .. (RESPONDENT) APPELLANT BY: WRITTEN SUBMISSIONS RESPONDENT BY: SHRI SAMIR TEKRIWAL, SR. DR DATE OF HEARING: 12.12.2011 DATE OF PRONOUNCEMENT: 19.01.2012 O R D E R PER SHRI A. K. GARODIA, AM:- THIS IS ASSESSEES APPEAL DIRECTED AGAINST THE ORD ER OF LD. CIT (A), GANDHINAGAR DATED 11.12.2009 FOR THE ASSESSMENT YEA R 2007-08. THE ASSESSEE HAS RAISED VARIOUS GROUNDS BUT THE ONLY GR IEVANCE OF THE ASSESSEE IS REGARDIGN CONFIRMATION OF PENALTY OF RS.45,677/- IMPOSED BY THE A.O. U/S 271(1)(C) OF THE ACT. 2. THE BRIEF FACTS TILL THE STAGE OF IMPOSITION OF PENALTY ARE NOTED BY THE LD. CIT(A) IN PARA 2 & 3 OF HIS ORDER WHICH ARE REPRODUCED BELOW: 2. THE BACKGROUND OF THE PENALTY IS THE ADDITION OF RS. 4,56,772/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF RECLASSIFICA TION OF THE LONG TERM CAPITAL GAINS ON SALE OF MUTUAL FUND UNITS TO SHORT TERM CA PITAL GAINS. AS PER THE ASSESSMENT ORDER, THE ASSESSEE WAS ASKED TO PROVIDE DETAILS OF THE LONG TERM CAPITAL GAINS AMOUNTING TO RS. 23,22,883/-. HOWEVER, THE SC RUTINY OF THE CHART SUBMITTED BY I.T.A.NO. 677 /AHD/2010 2 THE ASSESSEE REVEALED THAT SOME OF THESE MUTUAL FUN DS HAVE BEEN HELD FOR LESS THAN ONE YEAR. THE ASSESSEE, WHEN CONFRONTED, ADMITTED T HAT THE AMOUNT OF RS. 4,56,772/- IS SUBJECT TO TAXATION AS SHORT TERM CAPITAL GAINS AND CONSEQUENTLY OFFERED THE SAME. 3. AS PER THE PENALTY ORDER, THE MISTAKE WAS DETECT ED BY THE ASSESSING OFFICER AND THE APPELLANT HAD AN INTEREST IN CLASSI FYING THE SHORT TERM CAPITAL GAINS AS LONG TERM CAPITAL GAINS BECAUSE THE FORMER GETS TAXED AT 10% AND THE LATTER IS TAX FREE. HENCE, ACCORDING TO THE ASSESSING OFFICER IT IS A CASE OF PROVIDING INACCURATE PARTICULARS. 3. THE A.O. IMPOSED PENALTY OF RS.45,677/- AND BEIN G AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE LD. CI T(A) BUT WITHOUT SUCCESS AND NOW, THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 4. NONE APPEARED ON BEHALF OF THE ASSESSEE BEFORE U S BUT WRITTEN SUBMISSIONS OF THE ASSESSEE ARE AVAILABLE ON RECORD AND IT WAS SUBMITTED BY THE ASSESSEE IN THE WRITTEN SUBMISSIONS THAT THE APPEAL MAY BE DECIDED AFTER CONSIDERING THE WRITTEN SUBMISSIONS OF THE AS SESSEE. HENCE, WE PROCEED TO DECIDE THE APPEAL OF THE ASSESSEE AFTER HEARING THE LD. D.R. AND AFTER CONSIDERING THESE WRITTEN SUBMISSIONS OF THE ASSESSEE. 5. IN THE WRITTEN SUBMISSIONS, THE ASSESSEE HAS SUB MITTED THAT OUT OF THE LONG TERM CAPITAL GAIN DECLARED BY THE ASSESSEE AT RS.22,23,883/- ON SALE OF MUTUAL FUND, IT WAS NOTED BY THE A.O. THAT AN AMOUNT OF RS.4,56,771/- IS IN FACTS SHORT TERM CAPITAL GAIN. AGAINST THIS SHORT TERM CAPITAL GAIN, A.O. HAS ALLOWED SET OFF OF SHORT TER M CAPITAL LOSS OF RS.3,31,731/- AND ONLY RS.1,25,041/- WAS TAKEN AS N ET SHORT TERM CAPITAL GAIN BUT THE A.O. DID NOT ALLOW SET OFF OF BUSINESS LOSS AGAINST SUCH SHORT TERM CAPITAL GAIN AS REQUIRED U/S 71(2) OF THE INCO ME TAX ACT, 1961. IT IS FURTHER SUBMITTED THAT THE ASSESSEE HAS FILED AN AP PLICATION U/S 154 DATED 09.06.2009 BEFORE THE A.O. REQUESTING HIM TO RECTIF Y THE MISTAKE IN THE ASSESSMENT ORDER U/S 143 (3) DATED 23.12.2008 FOR S ET OFF OF BUSINESS LOSS I.T.A.NO. 677 /AHD/2010 3 AGAINST THE SHORT TERM CAPITAL GAIN FOR THE PRESENT YEAR AND THIS APPLICATION IS STILL PENDING BEFORE THE A.O. THERE WAS ONE MO RE CONTENTION RAISED IN THE WRITTEN SUBMISSION THAT THE A.O. HAS NOT ISSUED ANY SHOW CAUSE NOTICE TO THE ASSESSEE WITH REGARD TO THE GENUINE MISTAKE OF CLASSIFYING THE ENTIRE SURPLUS OF RS.22,23,883/-. IT IS ALSO SUBMITTED BY THE ASSESSEE THAT IT WAS THROUGH GENUINE MISTAKE DUE TO OVERSIGHT, CERTAIN U NITS OF MUTUAL FUND CLAIMED TO BE CONSIDERED AS LONG TERM CAPITAL ASSET BECAUSE MAJORITY OF OTHER CAPITAL ASSETS WERE HELD FOR MORE THAN ONE YE AR AND HENCE, PENALTY IS NOT JUSTIFIED. RELIANCE WASP LACED ON THE JUDGM ENT OF HONBLE APEX COURT RENDERED IN THE CASE OF CIT VS RELIANCE PETRO PRODUCTS P. LTD. AS REPORTED IN 36 DTR 449. 6. AS AGAINST THIS, LD. D.R. SUPPORTED THE ORDERS O F AUTHORITIES BELOW. RELIANCE WAS PLACED ON THE FOLLOWING JUDGMENTS: (A) A M SHAH & CO. VS CIT 327 ITR 415 (GUJ.) (B) CIT VS ZOOM COMMUNICATION P. LTD. 327 ITR 510 ( DEL.) IT WAS ALSO SUBMITTED BY HIM THAT THE JUDGEMENT OF HONBLE APEX COURT RENDERED IN THE CASE OF RELIANCE PETRO PRODUCTS P. LTD. (SUPRA) IS NOT APPLICABLE IN THE PRESENT CASE. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUSE D THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORIT IES BELOW AND THE JUDGMENTS CITED BY BOTH THE SIDES. 8. FIRST, WE CONSIDER THE JUDGEMENT OF HONBLE GUJA RAT HIGH COURT CITED BY THE LD. D.R. IN THAT CASE, IT WAS HELD BY THE HONBLE GUJARAT HIGH COURT THAT AS PER THE EXPLANATION (1) TO SECTI ON 271(1)(C) OF THE ACT, THE ASSESSEE WAS REQUIRED TO DISCHARGE THE BURDEN O F PROVING THAT THE CONCEALMENT OR INACCURATE PARTICULARS OF INCOME DID NOT ARISE FROM ANY BAD OR ANY GROSS OR WILLFUL NEGLECT ON HIS PART. I T WAS HELD IN THAT CASE I.T.A.NO. 677 /AHD/2010 4 THAT THE BURDEN HAS NOT BEEN DISCHARGED BY THE ASSE SSEE AND HENCE, PENALTY IS JUSTIFIED. IN THE PRESENT CASE, THE ASS ESSEE HAS EXPLAINED THAT BECAUSE OF OVERSIGHT AND GENUINE MISTAKE, CERTAIN U NITS OF MUTUAL FUND WERE CLAIMED TO BE CONSIDERED AS LONG TERM CAPITAL ASSET BECAUSE MAJORITY OF OTHER CAPITAL ASSETS WERE HELD FOR MORE THAN ONE YEAR. WE ALSO FIND THAT OUT OF TOTAL LONG TERM CAPITAL GAIN DECLARED B Y THE ASSESSEE IN THE RETURN OF INCOME OF RS.22.24 LACS, THE DISPUTE IS O NLY FOR AN AMOUNT OF 4.57 LACS AND HENCE, IT IS CLEAR THAT MAJORITY OF C APITAL ASSETS WERE ACCEPTED TO BE LONG TERM CAPITAL ASSETS AND UNDER T HIS SITUATION, THIS EXPLANATION OF THE ASSESSEE THAT THE MISTAKE WAS CO MMITTED BY THE ASSESSEE DUE TO OVERSIGHT, APPEARS TO BE BONA FIDE EXPLANATION AND IT IS CERTAINLY NOT FALSE OR ON ACCOUNT OF ANY FALSE OR G ROSS/WILLFUL NEGLECT ON THE PART OF THE ASSESSEE. HENCE, THIS JUDGMENT OF HONBLE GUJARAT HIGH COURT IS NOT APPLICABLE IN THE PRESENT CASE. 9. NOW, WE CONSIDER THE APPLICABILITY OF THE 2 ND JUDGMENT CITED BY THE LD. D.R. BEING OF HONBLE DELHI HIGH COURT RENDERED IN THE CASE OF ZOOM COMMUNICATION (SUPRA). IN THAT CASE, IT WAS FOUND THAT THE ASSESSEE HAS DEBITED TO P & L ACCOUNT AN AMOUNT O RS.121.50 LACS UNDER THE HEAD EQUIPMENT WRITTEN OFF AND IT WAS STATED BY THE AS SESSEE THAT DUE TO OVERSIGHT, THIS AMOUNT WAS NOT ADDED BACK IN THE CO MPUTATION OF INCOME. THE ASSESSEE ALSO DEBITED AN AMOUNT OF RS. 1 LACS U NDER THE HEAD INCOME TAX PAID AND FOR THIS ALSO, IT WAS CLAIMED BY THE ASSESSEE THAT DUE TO OVERSIGHT, THIS AMOUNT WAS NOT ADDED BACK IN THE CO MPUTATION OF INCOME. IT IS NOTED BY THE HONBLE DELHI HIGH COURT IN THAT CASE THAT THE ASSESSEE IS A COMPANY WHICH DECLARED INCOME OF RS.121.50 LAC S AND THE ACCOUNTS OF THE COMPANY WERE MANDATORILY SUBJECT TO AUDIT AN D IT IS NOT THE CASE OF THE ASSESSEE THAT IT WAS ADVISED THAT THESE AMOUNTS OF INCOME TAX PAID BY I.T.A.NO. 677 /AHD/2010 5 IT COLD BE CLAIMED AS REVENUE EXPENDITURE. IT IS A LSO NOTED BY THE HONBLE DELHI HIGH COURT THAT ASSESSEE IS A COMPANY WHICH W AS HAVING PROFESSIONAL ASSISTANCE IN COMPUTATION OF ITS INCOM E AND ITS ACCOUNTS ARE COMPULSORILY SUBJECT TO AUDIT AND THEREFORE, IT WAS FOUND NOT ACCEPTABLE THAT THESE TWO ITEMS COULD HAVE ESCAPED THE ATTENTI ON OF THE AUDITORS OF THE COMPANY. IN THE PRESENT CASE, THE FACTS ARE DI FFERENT. ALTHOUGH IN THE PRESENT CASE ALSO, THE ASSESSEE IS A COMPANY BUT TH E DISPUTE IS NOT SUCH THAT ANY INADMISSIBLE AMOUNT WAS DEBITED TO P & L A CCOUNT AND WHICH WAS NOT ADDED BACK IN THE COMPUTATION OF INCOME. T HE DISPUTE IS REGARDING THE NATURE OF CAPITAL ASSET SOLD BY THE A SSESSEE AS TO WHETHER IT WAS A LONG TERM CAPITAL ASSET OR SHORT TERM CAPITAL ASSET. IT IS ALSO ADMITTED POSITION THAT MAJORITY OF THE CAPITAL ASSE T WERE LONG TERM CAPITAL ASSETS AND IT IS THE EXPLANATION OF THE ASSESSEE TH AT UNDER THESE FACTS, DUE TO OVERSIGHT, A GENUINE MISTAKE HAD BEEN COMMITTED IN CLASSIFYING THE SHORT TERM CAPITAL ASSET AS LONG TERM CAPITAL ASSET . WE ARE OF THE CONSIDERED OPINION THAT IN THE FACTS OF THE PRESENT CASE, THIS JUDGMENT OF HONBLE DELHI HIGH COURT IS ALSO NOT APPLICABLE. 10. AS PER EXPLANATION (1) TO SECTION 271(1)(C), IF THE ASSESSEE OFFERS AN EXPLANATION AND PROVE IT THAT THE SAME IS BONA F IDE, THEN NO PENALTY IS IMPOSABLE EVEN IF THE ASSESSEE IS NOT ABLE TO SUBST ANTIATE THE EXPLANATION IF IT IS FOUND THAT ALL THE FACTS RELATING TO THE C OMPUTATION OF TOTAL INCOME HAVE BEEN DISCLOSED BY HIM. IN THE PRESENT CASE AL SO, THE EXPLANATION OF THE ASSESSEE COULD NOT BE SUBSTANTIATED BY THE ASSE SSEE BUT WE FIND THAT IN THE FACTS OF THE PRESENT CASE, THE EXPLANATION OF T HE ASSESSEE IS BONA FIDE AND ALL THE FACTS RELATING TO THE COMPUTATION OF TO TAL INCOME HAS BEEN DECLARED BY THE ASSESSEE AND THEREFORE, THIS EXPLAN ATION IS NOT APPLICABLE I.T.A.NO. 677 /AHD/2010 6 AND HENCE, PENALTY IS NOT JUSTIFIED IN THE FACTS OF THE PRESENT CASE. WE, THEREFORE, DELETE THE PENALTY. 8. IN THE RESULT, APPEAL OF THE ASSESSEE STANDS ALL OWED. 9. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE M ENTIONED HEREINABOVE. SD./- SD./- (MUKUL KUMAR SHRAWAT) (A. K. GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER SP COPY OF THE ORDER FORWARDED TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT (APPEALS) 5. THE DR, AHMEDABAD BY ORDER 6. THE GUARD FILE AR,ITAT,AHMEDABAD 1. DATE OF DICTATION 12/1 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 13/1.OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P .S./P.S. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 19/01 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S.23/1 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 23/01/2012 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK .. 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER . 9. DATE OF DESPATCH OF THE ORDER. ..