WAVELENGTH CAPITAL & FINANCE P. LTD, MUMBAI V. DCIT RG 8(3), MUMBAI

ITA 7201/MUM/2010

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 71281 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 11 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-09-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 26-09-2013
• Assessment Year: 2003-2004
• Appeal Filed On: 20-10-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R M MADHAVI
• Keywords: Business income; Opportunity of being heard; Speculation loss
• Section: 143(3)

Judgement Text

IN THE INCO ME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI SANJAY GARG, JUDICIAL MEMBER ./I.T.A. NO. 7201/M/2010 ( / ASSESSMENT YEAR : 2003 - 20 04 ) WAVELENGTH CAPITAL & FINANCE P. LTD ., 124 ANDHERI UNIVERSAL INDL. PREMISES, J.P. ROAD, ANDHERI (W), MUMBAI 400 058. / VS. DCIT - RANGE - 8(3), AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400 020. ./ PAN : AAACW 4646 H ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : SHRI VIPUL JOSHI / RESPONDENT BY : SHRI R.M. MADHAVI, DR / DATE OF HEARING : 26.9 .2013 / DATE OF PRONOUNCEMENT : 26.9 .2013 / O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE ASSESSEE ON 20.10.2010 IS AGAINST THE ORDER OF THE CIT (A) - 18, MUMBAI DATED 8.9.2010 FOR THE ASSESSMENT YEAR 2003 - 2004. 2. IN THIS APPEAL, ASSESSEE RAISED THE ONLY EFFECTIVE GROUND WHICH READS AS UNDER: 1. THE LD CIT (A) ERRED IN CONFIRMING THE ACTION OF THE AO IN LEVY OF PENALTY U/S 271(1)(C) AND WRONGLY DIRECTED HIM TO LEVY PENALTY ON 26,10,000/ - WITHOUT APPRECIATING THE FACT THAT THE APPELLANT DI SCLOSED ALL FACTS AND FIGURES FOR THE VALUATION OF THE UNQUOTED SHARES. 2. THE LD CIT (A) ERRED IN CONFIRMING THE ACTION OF THE AO IN DISALLOWING THE CLAIM OF REDUCTION OF 35% AND 30% FROM THE BOOK VALUE OF THE SHARES WITHOUT APPRECIATING THE FACT THAT SUC H REDUCTION IS NECESSARY FOR THE VALUATION OF UNQUOTED SHARES AGAINST THE UNCERTAINTIES. 3. THE LD CIT (A) ERRED IN CONFIRMING THE LEVY OF PENALTY U/S 271(1)(C) WITHOUT APPRECIATING THE FACT THAT THE APPELLANT HAS NOT RECEIVED THE INFLATED SALE CONSIDERATI ON AND THE VALUATION WAS PURELY ON NOTIONAL BASIS. 3. BRIEFLY STATED RELEVANT FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE INVESTMENT BUSINESS. ASSESSEE FILED THE RETURN OF INCOME DECLARING THE LOSS AT 2 RS. 50,85,881/ - , WHICH INCLUDES LONG TERM CAPITAL LOSS OF RS. 49,85,000/ - . THE CASE WAS SELECTED FOR THE SCRUTINY AND THE ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT ON 30.12.2005 AND THE INCOME OF THE ASSESSEE WAS DETERMINED AT RS. 8,89,119/ . DURING THE ASSESSMENT PROCEEDINGS, AO OBSERV ED THAT THE ASSESSEE HAS DEBITED AN AMOUNT OF RS. 49,85,000/ - ON ACCOUNT OF LOSS ON SALE OF SHARES AND ASSESSEE WAS ASKED TO EXPLAIN THE SAME. NOT SATISFIED WITH THE PARTICULARS FURNISHED BY THE ASSESSEE, AO HELD THAT SINCE, THE ASSESSEES MAIN ACTIVITY IS NOT TRADING IN SHARES, THE SAME IS NOT ALLOWABLE AS BUSINESS INCOME AND INVOKED THE PROVISIONS OF EXPLANATION TO SECTION 73 OF THE ACT. ACCORDINGLY, OUT OF THE LOSS OF RS. 49,85,000/ - , AO REDUCED RS. 23,75,000/ - AND HELD AS SPECULATION LOSS WHICH I S NOT ALLOWED TO BE SET OFF AGAINST THE BUSINESS INCOME OF THE ASSESSEE. ON APPEAL, CIT (A) CONFIRMED THE ACTION OF THE AO VIDE HIS ORDER DATED 16.7.2007. ACCORDINGLY, PENALTY PROCEEDINGS U/S 271(1)(C) WERE INITIATED AND MINIMUM PENALTY OF RS. 18,31,990/ - WAS LEVIED @ 100% ON THE AMOUNT SOUGHT TO BE EVADED. AGGRIEVED, ASSESSEE FILED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY AGAINST THE ORDER OF THE PENALTY LEVIED U/S 271(1)(C) OF THE ACT. 4. DURING THE PROCEEDINGS BEFORE THE FIRST APPELLATE AUTHORITY, CIT (A) CONSIDERED THE SUBMISSIONS MADE BY THE ASSESSEE AND PARTLY ALLOWED THE ASSESSEES APPEAL RELYING ON THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF GOLD COIN HEALTH FOODS PVT. LT D . VS. CIT 304 ITR 308 (SC) AND DIRECTED THE AO TO LEVY THE PENALTY ON LOSS REDUCED TO RS. 26,10,000/ - (RS. 49,85,000 RS. 23,75,000). AGGRIEVED WITH THE DECISION OF THE CIT (A), ASSESSEE FILED THE PRESENT APPEAL BEFORE THE TRIBUNAL BY RAISING THE ABOVE MENTIONED GROUNDS. 5. DURING THE PROCEEDINGS BEFORE US, AT THE OUTSET, SHRI VIPUL JOSHI, LD COUNSEL FOR THE ASSESEE BROUGHT OUR ATTENTION TO PARA 7 OF THE IMPUGNED ORDER AND MENTIONED THAT THE CIT (A) DECIDED THE ISSUE RELYING ON THE JUDGMENT OF THE HONB LE SUPREME COURT IN THE CASE OF GOLD COIN HEALTH FOODS PVT. LTD. ( 304 ITR 308 ) AND WITHOUT GOING INTO THE MERITS ON THE LEVYABILITY OF THE PENALTY U/S 271(1)(C) OF THE ACT. LD COUNSEL FURTHER SUBMITTED THAT THE CIT (A) HAS NOT ADJUDICATED THE ISSUE ON MER ITS OF THE PENALTY. THEREFORE, THERE IS A NEED FOR REMANDING THE MATTER TO THE 3 FILES OF THE CIT (A) FOR ADJUDICATING THE ISSUE AFRESH CONSIDERING THE SUBSEQUENT LEGAL DEVELOPMENTS ON THE SUBJECT. 6. ON THE OTHER HAND, LD DR RELIED ON THE ORDER OF THE CIT (A). 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS THE MATERIAL PLACED BEFORE US. ON HEARING BOTH THE PARTIES, WE FIND MERIT IN THE ARGUMENT OF THE LD COUNSE L TO REMAND THE MATTER TO THE CIT (A) . ACCORDI NGLY, SET ASIDE THE ORDER OF THE CIT (A) AND REMIT THE MATTER TO THE FILES OF THE CIT (A) . WE DIRECT HIM TO ADJUDICATE THE ISSUE ON MERITS AFRESH AFTER CONSIDERING THE LATEST DEVELOPMENTS ON THE SUBJECT AND AFTER GRANTING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AND HE IS DIRECTED TO PASS A SPEAKING ORDER IN ACCORDANCE WITH LAW. ACCORDINGLY, GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. OR DER PRONOU NCED IN THE OPEN COURT ON 26 TH SEPTEMBER , 2013. SD/ - SD/ - ( SANJAY GARG ) (D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; 26 .9 .2013 . . ./ OKK , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// 4 / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI