M/S.ARUP TRADING PRIVATE LIMITED, MUMBAI V. INCOME TAX OFFICER WARD-12(1)(2), MUMBAI

ITA 7252/MUM/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 2959 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-03-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2014-2015
• Appeal Filed On: 21-12-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SATISH CHANDRA RAJORE
• Assessee Lawyers: RISHABH
• Keywords: Speculation loss; Wrong claim; Difference of opinion
• Section: 271(1)(c); 143(3)

Judgement Text

IN THE INC OME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI BEFORE HONBLE SH. SANDEEP GOSAIN, JM & HONBLE SH. G. MANJUNATHA, AM ./ I.T.A. NO . 7252 /MUM/2017 ( / ASSESSMENT YEAR: 2014 - 15 ) M/S ARUP TRADING PVT. LTD , B - 206, OXFORD CHAMBERS, OPP - MTNL EXCHANGE, OFF - SAKI VIHAR ROAD, ANDHERI EAST, MUMBAI 400 072 / VS. ITO - 12 (1) (2) , AAYAKAR BHAVAN, M. K. ROAD, MUMBAI - 400 020 ./ ./ PAN NO. A A KCA7817N ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI RISHABH , AR / RESPONDENTBY : SHRI SATISHCHANDRA RAJORE , D R / DATE OF HEARING : 16 .01 .201 9 / DATE OF PRONOUNCEMENT : 01.03.2019 / O R D E R PER SANDEEP GOSAIN, J UDICIAL MEMBER : THE P RESENT APPE AL FILED BY THE ASSESSEE IS AGAINST THE ORDER OF LD. CIT (APPEAL) 20 , MUMBAI DATED 29.09 .2017 F OR AY 2014 - 15 ON THE GROUNDS MENTIONED HEREIN BELOW: - 2 I.T.A. NO. 7252 /MUM/201 7 M/S ARUP TRADING PVT. LTD. 1) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF THE LEARNED ASSESSING OFFICER IN L EVYING A PENALTY OF RS.44,531/ - U/S. 271(1)(C) OF THE INCOME TAX ACT, 1961, BEING 100% OF THE TAX SOUGHT TO BE EVADED, WITHOUT CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE. 2) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF THE LEARNED ASSESSING OFFICER IN LEVYING A PENA LTY WITHOUT CREATING CHARGE WHETHER IT IS FOR CONCEALMENT OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME. 3) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF LEARNED ASSE SSING OFFICER IN LEVYING A PENALTY OF U/S.271(1)(C) OF THE INCOME TAX ACT' 1961, ON THE ISSUE OF ADDITION MADE OF RS.1,40,988/ - ON ACCOUNT OF CAPITAL LOSS ON SALE OF MUTUAL FUND BEING WRONGLY TREATED AS BUSINESS EXPENSE, WITHOUT CONSIDERING THE FACTS AND C IRCUMSTANCES OF THE CASE. 4) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF LEARNED ASSESSING OFFICER IN 3 I.T.A. NO. 7252 /MUM/201 7 M/S ARUP TRADING PVT. LTD. LEVYING A PENALTY OF U/S.271(1)(C) OF THE INCOME TAX ACT' 1961, ON THE IS S UE OF ADDITION MADE OF RS.3,125/ - ON ACCOUNT OF ALLEGED MISMATCH OF AIR, WITHOUT CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE. 5) THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER OR DELETE THE SAID GROUND OF APPEAL. 2. T HE BRIEF FACTS OF THE CASE ARE THAT T HE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF TRADING IN COMMODITIES. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED ON 28 - 09 - 2014 DECLARING TOTAL INCOME OF RS.1 ,61,361/ - . CONSEQUENTLY, ASSESSMENT ORDER WAS PASSED ON 30 .08.16 U/S.143(3) OF THE ACT, DETERMINING THE TOTAL INCOME AT RS. 3,05,470/ - AND MADE CERTAIN ADDITIONS /DISALLOWANCES UNDER DIFFERENT HEADS. HOWEVER, NO APPEAL WAS FILED BY THE ASSESSEE AGAINST THE ORDER OF ASSESSMENT. DURING THE COURSE OF ASSESSMENT P ROCEEDINGS, AO INITIATED PENALTY U/S 271(1)(C) OF THE ACT ON THE GROUND THAT ASSESSEE HAD FURNISHED INACCURATE PARTICULARS OF INCOME AND AFTER PROVIDING SUFFICIENT OPPORTUNITY OF HEARING TO THE ASSESSEE, AO IMPOSED PENALTY OF RS. 44,531/ - . 4 I.T.A. NO. 7252 /MUM/201 7 M/S ARUP TRADING PVT. LTD. 3. AGGRIEVED BY THE PENALTY ORDER PASSED BY AO, ASSESSEE PREFERRED APPEAL BEFORE LD. CIT(A) AND LD. CIT(A) AFTER CONSIDERING THE CASE OF BOTH THE PARTIES, DISMISSED THE APPEAL OF THE ASSESS EE AND UPHELD THE ORDER OF LEVY OF PENALTY. 4. NOW BEFORE US, THE ASSESSEE HAS PREFERRED THE PRESENT APP EAL BY RAISING THE ABOVE GROUND S. GROUND NO. 1 , 3 & 4 5 . THESE GROUND S RAISED BY THE ASSESSEE ARE INTER CONNECTED AND INTER RELATED AND RELATES TO CHA LLENGING THE ORDER OF LD. CIT(A) IN CONFIRMING THE ACTION OF THE AO IN L EVYING A PENALTY OF U/S. 271(1)(C) OF THE INCOME TAX ACT, 1961, THEREFORE WE THOUGHT IT FIT TO DISPOSE OF THE SAME BY THIS COMMON ORDER. 6 . WE HAVE HEARD COUNSELS FOR BOTH THE PARTIES AT LENGTH AND WE HAVE ALSO PERUSED THE MATERIAL PLACED ON RECORD , JUDG MENT CITED BY THE PARTIES AS WELL AS THE ORDERS PASSED BY REVENUE AUTHORITIES. WE FIND FROM THE RECORDS THAT THE ONLY REASON FOR IMPOSING THE PENALTY IS ON ACCOUNT OF INACCURATE PARTICULARS OF 5 I.T.A. NO. 7252 /MUM/201 7 M/S ARUP TRADING PVT. LTD. INCOME WITHIN THE MEANING OF SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961 . 7. AS PER THE FACTS OF THE PRESENT CASE, THE ASSESSEE CLAIMED THAT THE TRANSACTIONS RELATING TO MUTUAL FUND CONSTITUTED PART OF HIS BUSINESS AND THEREFORE THE LOSS ARISING OUT OF THE TRANSACTIONS IN THE MUTUAL FUND UNITS WAS TO BE TREATED AS ITS BUSINESS LOSS. HOWEVER, AO REJECTED THE CLAIM OF THE ASSESSEE AND HELD THAT THE TRANSACTIONS IN THE MUTUAL FUND DID NOT CONSTITUTE ASSESSEES BUSINESS TRANSACTIONS. THUS, AO TREATED THE LOSS AS SHORT TERM CAPITAL LOSS OF THE ASSESSEE. 8. LD. AR SUBMITTED THAT ASSESSEE HAD MADE CLAIM WHICH WAS BONAFIDE AND THE SAME WAS COUPLED WITH DOCUMENTARY EVIDENCE, BUT NOTHING WAS BROUGHT ON RECORD BY THE AO. IT WAS FURTHER SUBMITTED THAT THERE WAS NO MALIFIDE ON THE PART OF THE ASSESSEE WHILE RAISING ITS CL AIM AND THUS RELIED UPON THE DECISION OF THE COORDINATE BENCH OF ITAT IN THE CASE OF CIT VRS. M/S TCFC FINANCE LTD. (ITA NO. 1581/MUM/2016 DATED 20.12.17) , 6 I.T.A. NO. 7252 /MUM/201 7 M/S ARUP TRADING PVT. LTD. WHEREIN IDENTICAL CIRCUMSTANCE OF PENALTY WAS DELETED BY THE COORDINATE BENCH. 9. ON THE OTHER HAN D, LD. DR RELIED UPON THE ORDERS PASSED BY THE REVENUE AUTHORITIES. 10. AFTER HAVING GONE THROUGH THE FACTS OF THE PRESENT CASE MINUTELY, WE FIND THAT ASSESSEE HAD DULY DISCLOSED THE LOSS IN ITS RETURN OF INCOME. THE CLAIM OF ASSESSEE BUSINESS LOSS WAS TREATED BY THE AO AS SHORT TERM CAPITAL LOSS, WHEREAS IT IS A SETTLED LEGAL POSITION THAT MERE MAKING OF CLAIM WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS OF INCOME REGARDING THE INCOME OF THE ASSESSEE . THIS PROPOSITION HAS ALREADY BEEN SETTLED BY THE HONBLE APEX COURT IN THE CASE OF CIT VS. RELIANCE PETRO PR ODUCTS (P.) LTD. (322 ITR 158) , WHEREIN IT WAS HELD THAT THE DISALLOWANCE MADE BY THE A O IN THE ASSESSMENT ORDER UNDER SECTION 143(3) OF THE ACT W ERE SOLELY ON ACCOUNT OF DIFFERENT VIEWS TAKEN ON THE SAME SET OF FACTS AND, THEREFORE, THEY COULD, AT THE MOST, BE TERMED, AS DIFFERENCE OF OPINION BUT NOTHING TO DO 7 I.T.A. NO. 7252 /MUM/201 7 M/S ARUP TRADING PVT. LTD. WITH THE FURNISHING OF INACCU RATE PARTICULARS OF SUCH INCOME BY THE ASSESSEE. 11. WHILE TAKING INTO CONSIDERATION THE ABOVE JUDGMENT AND THE PROPOSITION LAID DOWN BY THE HONBLE APEX COURT, WE ARE ALSO OF THE VIEW THAT IF THE ASSESSEE MAKES MAKES A PURPORTED WRONG CLAIM IN RETURN OF INCOME, B UT THE SAME IS DISCLOSED IN RETURN OF INCOME , PENA LT Y IS NOT LEVIABLE. SUCH VIEW HAD ALREABY BEEN TAKEN BY THE HON'BLE BOMBAY HIGH COURT, BEING THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. NALIN P. SHAH (HUF) (40 TAXMANN.COM 86) . 12. FROM THE FACTS OF THE PRESENT CASE, WE NOTICE THAT ASSESSEE HA D CLAIMED THAT THE TRANSACTIONS RELATING TO MUTUAL FUND CONSTITUTED PART OF HIS BUSINESS AND THEREFORE THE LOSS ARISING OUT OF THE TRANSACTIONS IN THE MUTUAL FUND UNITS WAS TO BE TREATED AS ITS BUSINESS LOSS. HOWEVER, AO REJECTED THE CLAIM OF THE ASSESSEE AND HELD THAT THE TRANSACTIONS IN THE MUTUAL FUND DID NOT CONSTITUTE ASSESSEES BUSINESS TRANSACTIONS AND TREATED THE LOSS AS SHORT TERM CAPITAL LOSS OF THE ASSESSEE. 8 I.T.A. NO. 7252 /MUM/201 7 M/S ARUP TRADING PVT. LTD. 13. FURTHER, THE HONBLE BOMBAY HIGH COURT IN THE CASE OF SESA RESOURCES LTD VS. ACIT (219 TAXMAN 92) HAD HELD THAT WHERE THERE WAS NO DISPUTE THAT THE ASSESSEE DISCLOSED ALL THE FACTS AND THE ASSESSEE DID NOT CONCEAL ANY FACTS, AND, FURTHER THAT BASED ON THE DISCLOSED MATERIAL, THE ASSESSEE SOUGHT THE DEDUCTION WHIC H WAS DENIED ON THE GROUND THAT IT WAS NOT ENTITLED TO THE SAME AS A MATTER OF LAW, THE HON'BLE TRIBUNAL WAS IN ERROR IN HOLDING THAT MERELY BECAUSE THE CLAIM FOR DE DUCTION WAS DENIED, THEN THE ASSESSEE IS LIABLE TO PAY A PENALTY. 14. FURTHER, T HE HON'B LE BOMBAY HIGH COURT IN THE CASE OF DIT VS. ADMINISTRATOR OF THE ESTATE OF LATE MR. E.F. DINSHAW (218 TAXMAN 125) HAD HELD THAT PENALTY FOR CONCEALMENT OF INCOME, CANNOT BE LEVIED FOR CLAIM BEING REJECTED BY REVENUE, WHERE FULL DETAILS WERE DISCLOSED IN RE TURN. THAT WAS THE CASE IN WHICH THE APPELLANT CLAIMED THAT SECTION 94(7) OF THE ACT DID NOT APPLY TO ITS CASE SINCE THAT PROVISION REFERS TO 'SALE' WHEREAS THE ASSESSEE 'S CASE WAS THAT OF REDEMPTION. THE HON'BLE BOMBAY HIGH COURT, FOLLOWED THE RATIO LAID DOWN IN THE DECISION OF RELIANCE PETROPRODUCTS (SUPRA) A ND HELD THAT SINCE THE 9 I.T.A. NO. 7252 /MUM/201 7 M/S ARUP TRADING PVT. LTD. ASSESSEE HAD GIVEN ALL THE DETAILS AND ITS CLAIM WAS BASED ON BONA FIDE BELIEF, PENALTY UNDER SECTION 271(1)(C) OF THE ACT WAS NOT LEVIABLE. 15. SIMILARLY, THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. M/S.ADITYA BIRLA NOVA LIMITED (ITA NO. 3899 OF 2010) HAD HELD THAT THE ASSESSEE HAD FURNISHED ALL THE DETAILS OF ITS EXPENDITURE AS WELL AS INCOME IN ITS ROI, WHICH DETAILS, IN THEMSELVES, WERE NOT FOUND TO BE INACCURATE NOR COULD BE VIEWED AS THE CONCEALMENT OF INCOME ON ITS PART. IT WAS UP TO THE AUTHORITIES TO ACCEPT ITS CLAIM IN THE RETURN OR NOT. 16. THE HON'BLE BOMBAY HIGH COURT FURTHER HELD THAT MERELY BECAUSE THE ASSESSEE HAD CLAIMED THE EXPENDITURE, WHICH CLAIM WAS NOT ACCEPTED OR WAS NOT ACCEPTABLE TO THE REVENUE, THAT BY ITSELF WOULD NOT ATTRACT PENALTY UNDER SECTION 271(1)(C) OF THE ACT. THE HON'BLE BOMBAY HIGH COURT ALSO REJECTED THE DEPARTMENT'S ARGUMENT THAT THE DECISION IN CASE OF RELIANCE PETROPRODUCTS (S UPRA) WAS PER INCURIM BECAUSE IT DID NOT REFER TO EXPLANATION 1 TO SECTION 271(1)(C) OF THE ACT. THIS WAS THE CASE 10 I.T.A. NO. 7252 /MUM/201 7 M/S ARUP TRADING PVT. LTD. WHERE THE ASSESSEE 'S CLAIM FOR A DEDUCTION UNDER SECTION 350 OF THE ACT AND PROVISION FOR DIMINUTION IN THE VALUE OF INVESTMENTS WAS COMPLETE LY REJECTED BY THE HONBLE TRIBUNAL IN THE QUANTUM APPEAL, YET, THE HON'BLE TRIBUNAL DELETED THE PENALTY UNDER SECTION 271(1)(C) OF THE ACT SINCE THE APPELLANT HAD DISCLOSED ALL THE RELEVANT DETAILS. 17 . WE ALSO FIND THAT ON SIMILAR CIRCUMSTANCE THE HON' BLE DELHI HIGH COURT IN THE CASE OF CIT V. AURIC INVESTMENT AND SECURITIES LTD (SUPRA) HELD THAT THERE WAS NOTHING ON RECORD TO SHOW THAT ON FURNISHING ITS RETURN OF INCOME, THE ASSESSEE HAD EITHER CONCEALED ITS INCOME OR HAD FURNISHED ANY INACCURATE PARTI CULARS OF INCOME. THE MERE TREATMENT OF BUSINESS LOSS AS SPECULATION LOSS BY THE ASSESSING OFFICER DID NOT AUTOMATICALLY WARRANT THE INFERENCE OF CONCEALMENT OF INCOME. FOLLOWING THIS DECISION THE COORDINATE BENCH IN THE CASE OF ACIT V. M/S. CLARIDGES INVE STMENTS AND FINANCE P. LTD (SUPRA) HELD AS UNDER: - 3. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE FAA AND CONTENDED THAT THE DISALLOWANCE MADE BY THE AO 11 I.T.A. NO. 7252 /MUM/201 7 M/S ARUP TRADING PVT. LTD. HAD CONVERTED THE BUSINESS LOSS INTO SPECULATIVE LOSS FOLLOWING THE PROVISION OF EXPLANATION TO SECTION 73 OF THE ACT, THAT THE ADDITION WERE MADE ON ACCOUNT OF APPLICATION OF DEEMING PROVISIONS AND NOT ON ACCOUNT OF ANY CONCEALMENT OF ANY PARTICULAR OF INCOME, THAT ASSESSEE HAD NOT SUPPRESSED ANY INCOME OR CLAIMED ANY WRONG EXPENDITURE, THAT AT THE TIME OF FILING OF RETURN THE ASSESSEE HAD MENTIONED ABOUT THE DEALING WITH SHARES OF OTHER COMPANY, THAT THE AO HAD FOUND ABOUT THE LOSS FROM THE PROFIT AND LOSS ACCOUNT FILED BY THE ASSESSEE. THE ASSESSEE RELIED UPON THE JUDGMENT OF THE HONBLE SUPREME CO URT DELIVERED IN THE CASE OF RELIANCE PETRO PRODUCTS LTD.(322ITR158). IT WAS FURTHER ARGUED THAT THERE WAS NO CHANGE IN AMOUNT OF TOTAL INCOME WHICH WAS A LOSS, THAT MERELY A CHANGE OF TREATMENT OF LOSS DID NOT TANTAMOUNT TO CONCEALMENT OF INCOME/FILING OF INACCURATE PARTICULARS. ASSESSEE RELIED UPON CASES OF AURIC INVESTMENTS AND SECURITIES LTD.(310ITR121) AND BHARTESH JAIN(323ITR58) IN ITS SUPPORT. THE FAA CONSIDERED THE SUBMISSION OF THE 12 I.T.A. NO. 7252 /MUM/201 7 M/S ARUP TRADING PVT. LTD. ASSESSEE AND THE PENALTY ORDER OF THE AO. HE HELD THAT IN THE MATTE R UNDER APPEAL SHARE TRADING LOSS WERE TREATED SPECULATIVE LOSSES, THAT ONLY HEAD OF INCOME HAS CHANGED, THAT ENTIRE FACTS WERE ON RECORD, DISALLOWANCE OF PROPORTIONATE EXPENSES COULD NOT BE BASIS FOR LEVYING PENALTY U/S.271(1)(C) OF THE ACT. REFERRING TO THE DECISION OF AURICH INVESTMENT AND SECURITIES LTD. (SUPRA)THE FAA DELETED THE PENALTY LEVIED BY THE AO. 18 . AFTER CONSIDERING THE ABOVE DISCUSSIONS AND WHILE TAKING INTO CONSIDERATION THE FACTS OF THE PRESENT CASE, WE ARE OF THE CONSIDERED VIEW T HAT ME RE CHANGE OF HEAD OF INCOME SHOULD NOT RESULT IN AUTOMATIC LEVY OF PENALTY. THE DETAIL S ABOUT THE BUSINESS LOSS OR SHORT TERM CAPITAL LOSS WERE AVAILABLE ON THE RECO RD. THEREFORE, IT CANNOT BE SAID THAT ASSESSEE HAD FILED INACCURATE PARTICULARS OF I NC OME . EVEN IF A UNSUBSTANTIATED CLAIM IS MADE IN THE RETURN OF INCOME, IT CANNOT BE HELD THAT THE ASSESSEE IS LIABLE FOR LEVY OF PENALTY U/S.271(1)(C). DIFFERENCE OF OPINION BETWEEN THE AO AND THE ASSESSEE ABOUT HEAD OF INCOME 13 I.T.A. NO. 7252 /MUM/201 7 M/S ARUP TRADING PVT. LTD. UNDER WHICH PARTICULAR I TEM IS TO BE ASSESSED WAS AND WOULD REMAIN A BONE OF CONTENTION BETWEEN THE AO AND THE ASSESSEE. BUT SUCH DIFFERENCES SHOULD NOT AND CANNOT RESULT IN INVOKING THE PENAL PROVISION S OF CHAPTER XXI OF THE ACT. THEREFORE, WE DELETE THE PENALTY AND ALLOWED THESE GROUNDS RAISED BY THE ASSESSEE. GROUND NO. 2. 1 9 . THIS GROUND HAS NOT BEEN PRESSED BY THE ASSESSEE, THEREFORE THIS GROUND RAISED BY THE ASSESSEE BECOMES INFRUCTUOUS. GROUND NO. 5 . 20 . THIS GROUND RAISED BY THE ASSESSEE IS GENERAL IN NATURE, T HUS REQUIRES NO SPECIFIC ADJUDICATION. 21 . IN THE NET RESULT , THE APPEAL FILED BY THE ASSESSEE STANDS ALLOWED WITH NO ORDER AS TO COST. ORDER PRONOUNCED IN THE OPEN COURT ON 1 ST MARCH , 2019. SD/ - SD/ - ( G. MANJUNATHA ) (SANDEEP GOSAIN) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI ; DATED : 01. 0 3 .201 9 SR.PS . DHANANJAY 14 I.T.A. NO. 7252 /MUM/201 7 M/S ARUP TRADING PVT. LTD. / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F I LE / BY ORDER, . / (DY./ ASSTT.REGISTRAR) , / ITAT, MUMBAI