SHRI GYAN CHAND MUTHA, Jaipur V. ITO, Jaipur

ITA 718/JPR/2012

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 5407 (ITAT-JAIPUR)
• Duration Of Justice: 3 year(s) 8 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-04-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 06-08-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJ MEHRA JCIT DR DHK
• Keywords: Bonafide belief; Speculation loss; Wrong claim

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES (SMC), JAIPUR JH VKJ-IH-RKSYKUH] U;KF;D LNL; DS LE{K BEFORE: SHRI R.P. TOLANI, JUDICIAL MEMBER VK;DJ VIHY LA-@ ITA NO. 718/JP/2012 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2006-07 SHRI GYAN CHAND MUTHA C-11, RAJA PARK JAIPUR CUKE VS. THE ITO WARD- 6(1) JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO .: ABWPM 9881 G VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI SIDDHARTH RANKA, ADVOCATE JKTLO DH VKSJ LS@ REVENUE BY : SHRI RAJ MEHRA , JCIT- DR LQUOKBZ DH RKJH[K@ DATE OF HEARING : 22/02/2016 ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 07 /04/2016 VKNS'K@ ORDER PER R.P. TOLANI, JM THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF THE LD. CIT(A)-II, JAIPUR DATED 02-05-2012 FOR THE ASSESSM ENT YEAR 2006-07 CHALLENGING THE IMPOSITION OF PENALTY OF RS. 1,11,7 00/- U/S 271(1)( C) OF THE ACT ON ACCOUNT OF SURRENDER OF LOSS BY THE ASS ESSEE TO BUY PEACE WITH THE DEPARTMENT. 2.1 BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE H AD CLAIMED SPECULATION LOSS OF RS. 3,65,020/- IN TRADING ACCOUNT. DURING THE COURSE OF ITA NO. 718/JP/2012 SHRI GYAN CHAND MUTHA VS. ITO, WARD- 6 (1), JAIPUR . 2 ASSESSMENT, THE AO ASKED FOR ALLOW ABILITY THEREOF. THE ASSESSEE ADMITTED THAT THE CLAIM WAS SPECULATION LOSS WAS MADE BY MIS TAKE AND THE SAME WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. PENA LTY PROCEEDINGS WERE INITIATED VIDE REPLY DATED 19-05-2009. THE ASSESSE E CONTENDED AS UNDER:- THE ASSESSEE HAS NOT PRODUCED INACCURATE PARTICULAR. ASSESSEE IS A TRADER AND HAD DONE TRADI NG IN METHA OIL DURING THE NORMAL COURSE OF BUSINESS. SOM E TRANSACTIONS ARE DONE IN PHYSICAL DELIVERY AND SOME IN NCDX AND MCX. DUE TO ASSESSEE IS A TRADER AND HE DO ES TRADING ACTIVITY DURING THE COURSE OF NORMAL BUSINE SS WORKING WITHOUT HIS INTENTION TO DO ONLY SPECULATIO N ACTIVITY, HE DO THESE TYPE OF TRANSACTION TO REDUCE BUSINESS LOSS ON PHYSICAL DELIVERY TRANSACTIONS. SO ASSESSEE HAD SHO WN IT AS NORMAL BUSINESS LOSS. BUT DURING THE SCRUTINY PROCE EDING WHEN QUESTION WAS RAISED ON THE FIGURE SHOWN IN CAP ITAL ACCOUNT AS LOSS IN TRADING OF METHA OIL OF RS. 3,65 ,020.79 IS SPECULATIVE LOSS AND IS NOT ADJUSTABLE FROM NORMAL PROFIT HE ACCEPT IT AND DECIDED TO COOPERATE DEPARTMENT AND T O AVOID LITIGATION AND FOR PEACE OF MIND DECIDED TO ACCEPT DISALLOWANCE AND AGREED THE ADDITION. THE AO HOWEVER IMPOSED THE PENALTY BY HOLDING THAT THE ASSESSEE HAVING ADMITTED THE SPECULATION ON METHA OIL, WAS NOT AVAI LABLE MAKES IT CLEAR THAT THE ASSESSEE HAS WRONGLY DEBITED THE SPECULATI ON LOSS IN TRADING ACCOUNT BY FURNISHING INACCURATE PARTICULARS. THE P ENALTY WAS IMPOSED. 2.2 AGGRIEVED, THE ASSESSEE PREFERRED FIRST APPEAL WHERE THE LD. CIT(A) HELD THAT THE CLAIM OF SPECULATION LOSS WAS FALSE A ND THE CONDUCT OF THE ASSESSEE WAS NOT IN BONAFIDE MANNER. THE ASSESSEE V EHEMENTLY CONTENDED ITA NO. 718/JP/2012 SHRI GYAN CHAND MUTHA VS. ITO, WARD- 6 (1), JAIPUR . 3 THAT EVEN THE AO WAS NOT SURE AS TO WHETHER THE PEN ALTY WAS LEVIED FOR CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE P ARTICULARS OF INCOME WAS DISTINGUISHED BASED ON HON'BLE PUNJAB & HARYAN A HIGH COURT JUDGMENT AND RELYING ON VARIOUS OTHER CASE LAWS. TH E PENALTY WAS IMPOSED. 2.3 AGGRIEVED, THE ASSESSEE IS IN SECOND APPEAL. 2.4 THE LD. COUNSEL FOR THE ASSESSEE CONTENDS THAT ASSESSEE WAS DEALING IN NCDX AND MCX TO ENSURE SMOOTH SELLING IN THE BUS INESS. HEDGING IN COMMODITIES IS REGULAR FEATURE OF THE ASSESSEE'S BU SINESS ACTIVITIES SINCE THE PHYSICAL DELIVERY AND HEDGING COMMODITIES ARE I NEXTRICABLY LINKED WITH THE ASSESSEE BUSINESS. THE ASSESSEE BEING UNDE R BONAFIDE BELIEF TREATED THE ENTIRE BUSINESS OF MAIN COMMODITY AND H EDGING OF COMMODITY AS ONE COMPOSITE BUSINESS AND WORKED OUT PROFIT AND LOSS ON CONSOLIDATED BASIS. THE RETURN OF INCOME WAS FILED ACCORDINGLY. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO RAISED OBJECTION IN THIS BEHALF AND WAS NOT WILLING TO ALLOW SPECULATION LOSS IN THE REGULA R BUSINESS. THE ASSESSEE IN ORDER TO AVID LITIGATION AND TO BUY PEACE AGREED TO THE PREPOSITION. THIS AGREEMENT HAS BEEN MADE THE SOLE BASIS FOR IMPOSITI ON OF PENALTY. THE AO ACCEPTED IT MAKING THIS AS FOUNDATION AND WILY N ILY HELD THAT THE ASSESSEE ACTED IN A MALAFIDE MANNER, WITHOUT OBJECT IVELY ESTABLISHING ITA NO. 718/JP/2012 SHRI GYAN CHAND MUTHA VS. ITO, WARD- 6 (1), JAIPUR . 4 SUCH SERIOUS CHARGE. ALL THE DETAILS PERTAINING TO NCDX AND MCX AND HEDGING BUSINESS WERE DULY DISCLOSED IN THE BOOKS O F ACCOUNT OF THE ASSESSEE. THE AO FOUND OUT THESE FACTS IN THE RETUR N OF INCOME ONLY. ONCE THE RELEVANT DETAILS ARE DISCLOSED AND HON'BLE SUP REME COURT IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCTS (P) LTD. , 322 I TR 158 HAS CLEARLY LAID DOWN THE PROPOSITION THAT WHEN ALL THE RELEVANT DET AILS ARE FURNISHED IN THE RETURN OF INCOME THEN THE DISALLOWANCE OF CLAIM CANNOT LEAD TO PENALTY U/S 271(1)( C) OF THE ACT. THIS SHOWS THAT ALL THE RELEVANT PARTICULARS ARE DISCLOSED IN THE RETURN OF INCOME. IT HAS NOT BEEN DENIED THAT THE ASSESSEE WAS DOING HEDGING TO SAFEGUARD ITS BUSINESS INTERES T WHICH IS PER SE LEGAL. IT HAS NOT BEEN DENIED THAT ASSESSEE HAS STOCK TO T HE EXTENT OF ACTUAL PHYSICAL STOCK HOLDING AND IT HAS NOT BEEN DISPUTED . THE LD. CIT(A) IN THE CASE OF SHRI MOHAN LAL MUTHA FOR THE ASSESSMENT YEA R 2007-08 IN ITA NO. 504/2009 HAS DELETED THE PENALTY ON THE SIMILAR FACTS AND CIRCUMSTANCES OF THE CASE. IT IS CONTENDED THAT THE PENALTY IN QUESTION BEING MORE BASED ON ADMISSION OF THE ASSESSEE AND W ITHOUT BRINGING ON RECORD ANY ADVERSE INFERENCE ON THE BASIS OF COGENT OBSERVATIONS DESERVES TO BE DELETED. 2.5 THE LD. DR RELIED ON THE ORDER OF THE LD. CIT(A ) AND RELIED ON FOLLOWING CASE LAWS:- ITA NO. 718/JP/2012 SHRI GYAN CHAND MUTHA VS. ITO, WARD- 6 (1), JAIPUR . 5 (I) TERA CONSTRUCTION CO. 61 TAXMAN.COM 317 (DEL .)., (II) GAURAV GOENKA, 364 ITR 186 (CALCUTTA) FOR PATE NTLY WRONG CLAIM, (III) CIT VS. ZOOM CONSTRUCTION (P) LTD. 327 ITR 51 0 (DEL.) (IV) CIT VS. ESCORT FINANCE LTD. M, 183 TAXMAN 453 (DEL.) 2.6 I HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE FACTS EMERGES THAT LOWER A UTHORITIES HAVE CONFIRMED THE PENALTY ONLY BASED ON ADMISSION BY TH E ASSESSEE. IN MY CONSIDERED VIEW, THIS IS NOT A FIT CASE FOR IMPOSIT ION OF PENALTY INASMUCH AS THE ASSESSEE HAS EXPLAINED THAT HE BONAFIDELY BE LIEVED THAT BUSINESS OF COMMODITY TRADING AND HEDGING TO THAT EXTENT WAS ON E IN COMPOSITE BUSINESS AND RESULT PROFITS OR LOSS WAS TO BE TREAT ED ON CONSOLIDATED BASIS. NO FINDING HAS BEEN GIVEN THAT THIS BELIEF OF THE A SSESSEE WAS NOT BONA FIDE. ALL THE RELEVANT DETAILS WERE FILED IN THE RE TURN OF INCOME AND THE AO EXTRICATED THE DETAILS FROM THE INFORMATION PROVIDE D IN THE RETURN ITSELF AND RELEVANT DETAILS ARE FURNISHED ALONG WITH RETU RN OF INCOME. THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. RELIA NCE PETRO PRODUCTS (P) LTD. (SUPRA) HAS CLEARLY HELD THAT DISALLOWANCE OF CLAIM ARE IN ADDITION OF INCOME AND IT CANNOT LEAD TO PENALTY IN THE CASE OF SHRI MOHAN LAL MUTHA (SUPRA) WHEREIN THE PENALTY ON THE SIMILAR IS SUE WAS DELETED. IT HAS NOT BEEN INDICATED THAT ITAT HAS TAKEN ANY ADVERSE VIEW THEREON. THUS IN ITA NO. 718/JP/2012 SHRI GYAN CHAND MUTHA VS. ITO, WARD- 6 (1), JAIPUR . 6 THESE FACTS AND CIRCUMSTANCES OF THE CASE, I FIND N O JUSTIFICATION IN IMPOSING THE PENALTY WHICH IS DELETED. THUS THE APP EAL OF THE ASSESSEE IS ALLOWED. 3.0 IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT ON 07/04/2016 . SD/- VKJ-IH-RKSYKUH (R.P.TOLANI) U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 07 /04/ 2016 *MISHRA VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- SHRI GYAN CHAND MUTHA, JAIPUR 2. IZR;FKHZ@ THE RESPONDENT- THE ITO, WARD- 6 (1), JAIPUR 3. VK;DJ VK;QDRVIHY@ CIT(A). 4. VK;DJ VK;QDR@ CIT, 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO. 718/JP/2012) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR