GAURANG M. GORADIA, MUMBAI V. ITO 25(2)(4), MUMBAI

ITA 7235/MUM/2010

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 88056 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 2 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-01-2015
• Appeal Filed By: Assessee
• Bench Allotted: G
• Next Hearing Date: 01-10-2014
• Assessment Year: 2004-2005
• Appeal Filed On: 21-10-2010
• Court: TRIBUNAL
• Department Lawyers: R N DSOUZA
• Section: 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER ./I.T.A. NO.7235/M/2010 ( / ASSESSMENT YEAR: 2004 - 2005 ) SHRI GAURANG GORADIA, 42, ANURADHA, MANEK NAGAR, CHANDAVARKAR ROAD, BORIVALI (W), MUMBAI 400 092. / VS. ITO - 25(2)(4), AAYAKAR BHAVAN, MUMBAI 400 020. ./ PAN : AAACE 7941H ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : SHRI NISHIT GANDHI, AR / RESPONDENT BY : SHRI R.N. DSOUZA, DR / DATE OF HEARING : 17.12.2014 / DATE OF PRONOUNCEMENT : 14 .01.2015 / O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT (A) - 35, DATED 19.8.2010 FOR THE AY 2004 - 2005 IN CONNECTION WITH PENALTY U/S 271(1)(C) OF THE ACT AMOUNTING TO RS. 50,000/ - . 2. BRIEFLY STATED RELEVANT FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF SHARES. ASSESSEE CLAIMED SHORT TERM CAPITAL GAINS AND THE SAME WAS COMPUTED AFTER DEBITING INTEREST EXPENDITURE OF RS. 1,36,694/ - . ASSESSEE CLAIMED THE SAME AS ALLOWED EXPENDITURE U/S 48 OF THE ACT. FO R FAILURE OF THE ASSESSEE TO DEMONSTRATE THE NEXUS OF THE SAME WITH THE SHARES ACQUIRED WHICH IS THE SUBJECT MATER OF CAPITAL GAINS, ASSESSING OFFICER MADE THE SAID ADDITION AND INITIATED PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT. ON APPEAL, CIT (A) CON FIRMED THE ADDITION. HOWEVER, ASSESSING OFFICER LEVIED PENALTY U/S 271(1)(C) OF THE ACT VIDE HIS ORDER DATED 31.3.2009 AFTER HEARING THE ASSESSEE AND CONSIDERING THE ASSESSEES REPLY WHICH WAS REPRODUCED IN HIS ORDER. 2 3. CIT (A) GAVE AN OPPORTUNITY TO THE ASSESSEE TO EXPLAIN WHY THE DECISION OF THE ASSESSING OFFICER SHOULD NOT BE UPHELD AND THE ASSESSEE THE WRITTEN REPLY DATED 17.3.2009 AND REQUESTED FOR DELETION OF THE SAME. IN THE SUBMISSIONS ASSESSEE MENTIONED THAT THE INTEREST COULD BE CLAIMED AGAINST THE SHORT TERM CAPITAL GAINS AS THE SAID INTEREST RELATES TO THE BORROWINGS WHICH WERE TAKEN TO CLEAR THE OLD BORROWINGS, WHICH WERE INVESTED IN THE SHARES WHICH IS THE SOURCE OF THE CAPITAL GAINS. IT WAS ALSO ARGUED THAT MERE ON THE FACT THAT THE ADDITI ONS ARE CONFIRMED, THE CONCEALMENT PENALTY NEED NOT BE LEVIED. CIT (A) CONSIDERED THE SAME AND COMMENTED THAT THE ASSESSEE FAILED TO ESTABLISH THE NEXUS BETWEEN THE EXPENDITURE AND THE CAPITAL GAINS AGAINST WHICH THE DEDUCTION IS CLAIMED. HE ALSO MENTIONE D THAT THE BORROWINGS OF WHICH INTEREST EXPENDITURE INCURRED WERE USED FOR THE PURPOSE OF REPAYING THE LOANS TO DIFFERENT PERSONS AND PART OF THE BORROWINGS WERE UTILIZED FOR BUYING KVPS. THUS, HE ACCEPTED THE ASSESSING OFFICERS VIEW AND CONFIRMED THE PE NALTY. 4. DURING THE PROCEEDINGS BEFORE US, LD COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENTION TO PAGE 1 OF THE PAPER BOOK AND MENTIONED THAT DISPLAYED THE MANNER IN WHICH RELEVANT DETAILS WERE FOUND IN THE COMPUTATION. WE FIND THE ASSESSEE REDUCED THE INT EREST ON LOAN AMOUNTING TO RS. 1,36,694/ - FROM THE SHORT TERM CAPITAL GAINS THEREFORE THERE IS NO DEFAULT OF DISCLOSURE ON THIS ISSUE. HE ALSO MENTIONED THAT HE WAS IN THE BONA FIDE BELIEF THAT THE SAID EXPENDITURE IS ALLOWABLE AND RELIED ON VARIOUS DECIS IONS INCLUDING THAT OF THE HARSHAD N PATEL VS. ITO AND ACIT VS. RAJENDRA S. KHEMKA. F URTHER, HE SUBMITTED THAT ALLOWABILITY OF SUCH EXPENDITURE AGAINST THE CAPITAL GAINS AT THE MAXIMUM IS THE SUBJECT MATTER OF DEBATE. FURTHER, HE ALSO MENTIONED THAT ASSESSING OFFICER HAS NOT MADE OUT ANY CASE THAT THE FUNDS HAVE NOT GONE INTO THE TRANSACT IONS THAT GAVE RISE TO THE IMPUGNED CAPITAL GAINS. WHEN THE ASSESSEE HAS DISCLOSED FULLY THE RELEVANT DETAILS AND BONA FIDE OF THE SAME IS DISPLAYED THE PENALTY SHOULD NOT BE LEVIED. 5. ON THE OTHER HAND, LD DR RELIED HEAVILY ON THE ORDERS OF THE ASSESSIN G OFFICER AND THE CIT (A). HE MENTIONED THAT THE ADDITION IS CONFIRMED BY THE CIT (A) AND ASSESSEE ACCEPTED THE SAID DECISION ON MERITS. HE ALSO MENTIONED THAT ASSESSEE FAILED TO ESTABLISH THE NEXUS OF THE IMPUGNED EXPENDITURE WITH THAT OF THE CAPITAL GA INS. IN SUCH CIRCUMSTANCES, THE PENALTY SHOULD BE SUSTAINABLE. 3 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS THE PAPER BOOK FILED BEFORE US. THE PENALTY OF RS. 50,000/ - LEVIED I N CONNECTION WITH THE INTERE ST EXPENDITURE AS EVIDENT FROM THE PAGE 1 OF THE PAPER BOOK I.E., COMPUTATION OF INCOME. THUS, THERE IS NO CONCEALMENT OF PARTICULARS AS EVIDENT FROM THE DOCUMENTS PLACED IN THE PAPER BOOK. IT IS ALSO SUBMITTED THAT SIMILAR EXPENDITURE IS FOUND ALLOWABLE AGAINST THE SHORT TERM CAPITAL GAINS AS HELD BY THE TRIBUNAL IN THE CASE OF HARSHAD N PATEL VS. ITO VIDE ITA NO. 1252 AND 1958/M/2010 (AYS 2005 - 06 AND 2006 - 07), DATED 15.7.2011 AND ALSO IN THE CASE OF ACIT VS. RAJENDRA S. KHEMKA VIDE ITA NO.6641/M/2010 (A Y 2006 - 07), DATED 11.5.2012. THUS, THE ALLOWABILITY OF INTEREST EXPENDITURE ON THE LOANS AGAINST THE CAPITAL GAINS COMPUTED U/S 148 OF THE ACT IS A MATTER OF DEBATE. THUS, WHEN THERE IS NO DEFAULT OF DISCLOSURE OF PARTICULARS AND WHEN THE ALLOWABILITY IS A MATTER OF DEBATE, IN OUR OPINION, THE PENALTY SHOULD NOT BE LEVIED U/S 271(1)(C) OF THE ACT AND IT IS A SETTLED LAW. FURTHER, THERE IS NO FACT OF FINDING ON WHETHER THE RELEVANT BORROWINGS HAVE NOT GONE INTO THE INVESTMENTS IN THE SHARES WHETHER DIRECT LY OR INDIRECTLY AND THE ASSESSING OFFICER MADE ADDITION ONLY RELYING ON THE PRINCIPLE RELATING TO DISCHARGING OF ONUS ON THE ASSESSEES FAILURE IN THIS REGARD. THEREFORE, WHEN THERE IS NO CLEAR CUT FINDING ON THIS ISSUE AND WHEN THE ASSESSEE HAS NOT CONC EALED THE PARTICULARS TO THE REVENUE, IN OUR OPINION, THE PENALTY U/S 271(1)(C) IS NOT SUSTAINABLE. ACCORDINGLY, APPEAL OF THE ASSESSEE IS ALLOWED. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUN CED IN THE OPEN COURT ON 1 4 T H JANUAR Y, 2015. S D / - S D / - (VIJAY PAL RAO) (D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; 1 4 .1.2015 . . ./ OKK , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 4 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI