M/S. SUNIL S. RATHI, MUMBAI V. THE ITO 25(2)(3), MUMBAI

ITA 736/MUM/2008

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 8433 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-02-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 14-12-2010
• Assessment Year: 1998-1999
• Appeal Filed On: 01-02-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D SONGATE
• Assessee Lawyers: VIPUL JOSHI SHRI SAMEER DALAL
• Keywords: Business income; Bonafide belief; Question of law; Difference of opinion
• Section: 27

Judgement Text

1 ITA 736/MUM/08, MR.SUNIL S. RATHI IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E BEFORE SHRI D. MANMOHAN, V.P. AND SHRI P.M. JAGTAP, A.M. ITA NO. 736/MUM/2008 ASSESSMENT YEAR 1998-99 MR. SUNIL S. RATHI, 1008, YOGI TOWER SOCIETY, YOGI NAGAR, BORIVALI (W), MUMBAI 400091. PAN AAAPR 8528 E VS. INCOME TAX OFFICER 25(2)(3), AAYAKAR BHAWAN, M.K. ROAD, MUMBAI.20 APPELLANT RESPONDENT APPELLANT BY SHRI VIPUL JOSHI SHRI SAMEER DALAL RESPONDENT BY SHRI D. SONGATE ORDER PER P.M. JAGTAP, A.M. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF LD. CIT(A) XXV, MUMBAI DATED 30.11.2007 WHEREBY HE CONFIRMED THE PE NALTY OF ` 13,25,000/- IMPOSED BY THE A.O. U/S 271(1)(C). 2. THE RELEVANT FACTS OF THE CASE GIVING RISE TO TH IS APPEAL ARE THAT THE ASSESSEE CLAIMS TO BE A TRADER IN SHARES SINCE A.Y. 1995-96. DURIN G THE F.Y. 1995-96, THE ASSESSEE HAD PURCHASED 7,10,600/- SHARES OF M/S CHOPRA FINVEST P VT. LTD. ( A FAMILY CONCERN) @ ` 10/- PER SHARE FOR A SUM OF ` 71,80,000/- AND REFLECTED THE SAME IN ITS CLOSING STOCK ALONG WITH OTHER SHARES. DURING THE F.Y. 97-98 RELEVANT TO A. Y. UNDER CONSIDERATION, THE ASSESSEE SOLD 5 LACS SHARES OF M/S CHOPRA FINVEST PVT. LTD. @ ` 1/- PER SHARE FOR A TOTAL SUM OF ` 5 LACS TO M/S GALAXY FINVEST PVT. LTD. (A FAMILY CONC ERN) AND TREATED THE IMPUGNED LOSS OF ` 45 LACS AS BUSINESS LOSS WHICH THE ASSESSING OFFIC ER TREATED AS CAPITAL LOSS. THE ASSESSING OFFICER FOUND THAT THE ASSESSEE AND HIS F AMILY MEMBERS WERE DIRECTORS IN 2 ITA 736/MUM/08, MR.SUNIL S. RATHI CHOPRA FINVEST PVT. LTD. FROM WHICH THE SHARES WERE PURCHASED AND ALSO THE DIRECTORS IN M/S GALAXY FINVEST PVT. LTD. TO WHOM THE SHARES WER E SOLD AND THEY HAD CONTROLLING INTEREST IN THE AFORESAID COMPANIES. THE ASSESSING OFFICER FURTHER FOUND THAT M/S CHOPRA FINVEST PVT. LTD. HAD ADVANCED LOAN OF ` 20 LACS TO THE ASSESSEE FOR PURCHASE OF ITS OWN SHARES WHICH WAS SHOWN TO BE OUTSTANDING AS ON 31.3 .98 IN THE BALANCE SHEET. FURTHER THE A.O. NOTICED THAT THE ASSESSEE HAD MADE HUGE BORROW INGS ( ` 40,67,488/- AS ON 31.3.98) FROM M/S GALAXY FINVEST PVT. LTD. ACCORDING TO THE A.O., THE ASSESSEE HAD SOLD THE SHARES OF M/S CHOPRA FINVEST PVT. LTD. TO M/S GALAX Y FINVEST PVT. LTD. AS PART REPAYMENT OF THE OUTSTANDING LOAN. THE A.O. HELD THAT THE ASS ESSEE THUS WAS HOLDING THE AFORESAID SHARES AS INVESTMENT AND NOT AS STOCK IN TRADE. AGA INST THE ORDER OF THE A.O. THE ASSESSEE FILED AN APPEAL BEFORE CIT(A). THE CIT(A) VIDE HIS APPELLATE ORDER DATED 24.10.03 DIRECTED THE ASSESSING OFFICER TO ALLOW THE ASSESSE ES CLAIM FOR BUSINESS LOSS OF ` 45,00,000/-. AGAINST THE ORDER OF THE CIT(A), THE D EPARTMENT FILED AN APPEAL BEFORE ITAT. THE ITAT VIDE ITS ORDER NO. ITA NO. 99/MUM/2 000 DATED 17.11.06 REVERSED THE ORDER OF THE CIT(A) AND RESTORED THE ORDER OF THE A .O. THEREAFTER, THE A.O. ISSUED NOTICE REQUIRING THE ASSESSEE TO SHOW CAUSE AS TO WHY PENA LTY U/S 271(1)(C) SHOULD NOT BE IMPOSED. IN REPLY, NEITHER ANYONE ATTENDED BEFORE T HE A.O. ON BEHALF OF THE ASSESSEE NOR WRITTEN REPLY WAS SUBMITTED. HE THEREFORE DECIDED T O LEVY PENALTY ON THE BASIS OF MATERIAL AVAILABLE ON RECORD PRESUMING THAT ASSESSEE HAD NO EXPLANATION TO OFFER FOR FURNISHING INACCURATE PARTICULARS OF INCOME. ACCORDINGLY, HE L EVIED MINIMUM PENALTY @ 100% AMOUNTING TO ` 13,25,000/-. 3. THE PENALTY IMPOSED BY THE ASSESSING OFFICER U/S 271(1)(C) WAS CHALLENGED BY THE ASSESSEE IN AN APPEAL FILED BEFORE THE LD. CIT(A). BEFORE THE LD. CIT(A), THE ASSESSEE PLEADED THAT PROPER AND SUFFICIENT OPPORTUNITY WAS NOT GIVEN BY THE A.O. TO OFFER HIS EXPLANATION DURING THE COURSE OF PENALTY PROCEEDING S. THE LD. CIT(A), THEREFORE, AFFORDED AN OPPORTUNITY TO THE ASSESSEE TO MAKE HIS SUBMISSI ON IN WRITING AND FORWARDED A COPY OF THE SAID SUBMISSION TO THE ASSESSING OFFICER SEEKIN G HIS REMAND REPORT. THE REMAND REPORT SUBMITTED BY THE ASSESSING OFFICER WAS ALSO CONFRONTED BY THE LD. CIT(A) TO THE 3 ITA 736/MUM/08, MR.SUNIL S. RATHI ASSESSEE GIVING HIM A FURTHER OPPORTUNITY TO MAKE H IS SUBMISSIONS. AVAILING SUCH OPPORTUNITY, IT WAS SUBMITTED BY THE ASSESSEE THAT HE HAS OFFERED EXPLANATION DURING ASSESSMENT PROCEEDINGS AS WELL AS APPELLATE PROCEED INGS. IT WAS ALSO SUBMITTED THAT THE SAID EXPLANATION WAS SUBSTANTIATED WITH VARIOUS SUP PORTING DOCUMENTS AND METICULOUS VERIFICATION. THE ASSESSEE PLEADED THAT EVEN AT APP EAL STAGE, HIS WRITTEN SUBMISSIONS WERE SUBSTANTIATED THROUGH VARIOUS DOCUMENTS. THE ASSESS EE RELIED ON THE DECISION OF ITAT MUMBAI I BENCH IN THE CASE OF TELEBUILD CONSTRUCT ION (P) LTD. VS. ACIT 9(3) [ITA NO. 1164/MUM OF 2006] IN WHICH IT WAS HELD THAT FOR GEN UINE DIFFERENCE OF OPINION ON LAW, PENALTY COULD NOT BE LEVIED. HE ALSO RELIED ON THE DECISION OF SUPREME COURT IN THE CASE OF DILIP N. SHROFF VS. JCIT 291 ITR 519 (SC). HE AR GUED THAT THERE SHOULD BE CONSCIOUS ATTEMPT OF CONCEALMENT WHICH IS NOT THERE HENCE ADD ITION MADE TO HIS INCOME SHOULD NOT BE TREATED AS CONCEALMENT. HE FURTHER ARGUED THAT SATISFACTION OF A.O. IS MUST IN ASSESSMENT ORDER BEFORE LEVYING PENALTY. ON THE BA SIS OF THESE SUBMISSIONS, IT WAS REQUESTED THAT THE PENALTY MAY BE CANCELLED. 4. AFTER TAKING INTO CONSIDERATION THE SUBMISSIONS MADE BY THE ASSESSEE BEFORE HIM AS WELL AS MATERIAL AVAILABLE ON RECORD, THE LD. CI T(A) HELD THAT IT WAS A CASE WHEREIN THE ASSESSEE WAS FOUND TO HAVE CREATED LOSS IN THE BUSI NESS OF SHARES WITH THE INTENTION TO AVOID PAYMENT OF TAX. HE CAME TO THIS CONCLUSION F OR THE FOLLOWING REASONS GIVEN IN PARAGRAPH NO. 9 OF HIS IMPUGNED ORDER:- THE A.O. HAS MADE THE IMPUGNED ADDITION OF ` 45 LACS TO THE DECLARED INCOME BY TREATING LOSS ON SALE OF SHARES OF M/S CH OPRA FINVEST P. LTD. CAPITAL LOSS. THE APPELLANT CLAIMS TO BE A TRADER IN SHARES SINCE A.Y. 1995-96. DURING THE FY 1995-96 THE APPELLANT HAD PURCHASED 7,10,600 SHARES OF M/S CHOPRA FINVEST P. LTD. ( A FAMILY CONCERN) @ ` 10/- PER SHARE FOR A SUM OF ` 71,06,000/- AND REFLECTED THE SAME IN ITS CLOSING ALONG WITH OTHER SHARES. DURIN G FY 1997-98 RELEVANT TO THE AY UNDER APPEAL THE APPELLANT HAS SOLD 5 LACS SHARES O F M/S CHOPRA FINVEST P. LTD. ( A FAMILY CONCERN) AND THUS TREATED THE IMPUGNED LOSS OF ` 45 LACS AS BUSINESS LOSS. THE A.O. EXAMINED THE CLAIM OF THE APPELLANT AND HE LD THAT THE IMPUGNED LOSS WAS IN THE NATURE OF CAPITAL LOSS. HE FOUND THAT THE A PPELLANT AND HIS FAMILY MEMBERS WERE DIRECTORS OF M/S GALAXY FINVEST PVT. LTD. TO W HICH THE SHARES WERE SOLD AND THAT THEY HAD CONTROLLING INTEREST IN THE AFORESAID COMPANIES. THE A.O. FURTHER FOUND THAT CHOPRA FINVEST P. LTD. HAD ADVANCED LOAN OF ` 20 LACS TO THE APPELLANT FOR 4 ITA 736/MUM/08, MR.SUNIL S. RATHI PURCHASE OF ITS OWN SHARES FOR WHICH A SUM OF ` 21,96,904/- HAS BEEN SHOWN TO THE OUTSTANDING LOAN PAYABLE TO CHOPRA FINVEST P. LTD. AS ON 31.3.98 IN THE BALANCE SHEET. THE A.O. FURTHER NOTED THAT THE APPELLANT H AD MADE HUGE BORROWING ( ` 40,67,488/- AS ON 31.3.98) FROM GALAXY FINVEST PVT. LTD. ACCORDING TO THE A.O. THE APPELLANT HAD SOLD THE SHARES OF CHOPRA FINVEST PVT . LTD. IN M/S GALAXY FINVEST PVT. LTD. AS PART REPAYMENT OF THE OUTSTANDING LOAN. FO R THE REASONS GIVEN BY HIM IN THE ASSESSMENT ORDER, THE A.O. HELD THAT THE APPELLANT WAS HOLDING THE AFORESAID AS INVESTMENT AND NOT AS STOCK IN TRADE. THE ENTIRE SERIES OF TRANSACTION AS BROUGHT ON REC ORD CLEARLY INDICATE THAT THESE TRANSACTIONS WERE NOT EXECUTED FOR THE PURPOS E OF PURCHASE AND SALE OF SHARES. THE APPELLANT AND HIS FAMILY MEMBERS ARE DIRECTORS IN BOTH THE AFORESAID COMPANIES. LOANS HAVE BEEN TAKEN AND GIVEN TO THE COMPANIES FR OM WHICH THE SHARES WERE PURCHASED AND TO WHICH THEY WERE SOLD. IT IS UNLIK ELY IN SUCH A SITUATION THAT A PERSON WOULD PURCHASE SHARES JUST TO SUFFER LOSS ON THEIR SALE TO A SISTER CONCERN WITHIN THE GROUP. IN MY VIEW, THE FACTS ON RECORD DO NOT ESTABLISH THE GENUINENESS OF LOSS AS BUSINESS LOSS. MERE ENTRIES IN THE BOOK S OF ACCOUNT ARE NOT DECISIVE. THESE TRANSACTIONS WERE NOT GUIDED BY TRADING CONSI DERATION. ACCORDINGLY, THE PENALTY IMPOSED BY THE A.O. U/S 27 1(1)(C) WAS CONFIRMED BY THE LD. CIT(A) HOLDING THAT IT WAS A CASE OF FURNISHING OF INACCURATE PARTICULARS OF INCOME BY THE ASSESSEE. AGGRIEVED BY THE ORDER OF THE LD. CIT(A) , THE ASSESSEE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 5. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT THE ASSESSEE IS A DEALER IN SHARES AND THE LOSS ARISING FROM THE SALE OF SHARES WAS CLAIMED BY HIM AS BUSINESS LOSS. HE SUBMITTED THAT THE ASSESSING OFFICER NEVER DISPU TED THE GENUINENESS OF THE SAID LOSS AND THE SAME WAS DISALLOWED BY HIM ONLY ON THE GROU ND THAT IT WAS A CAPITAL LOSS. HE SUBMITTED THAT THE LD. CIT(A), HOWEVER, ALLOWED THE CLAIM OF THE ASSESSEE FOR THE SAID LOSS VIDE APPELLATE ORDER PASSED IN THE QUANTUM PROCEEDI NGS AFTER OBTAINING REMAND REPORT FROM THE ASSESSING OFFICER. HE SUBMITTED THAT THE T RIBUNAL HAS REVERSED THE ORDER OF THE LD. CIT(A) GIVING RELIEF TO THE ASSESSEE IN THE QUA NTUM PROCEEDINGS ON THIS ISSUE AND THE APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF T HE TRIBUNAL HAS ALREADY BEEN ADMITTED BY THE HONBLE BOMBAY HIGH COURT HOLDING THAT SUBST ANTIAL QUESTION OF LAW IS INVOLVED. HE SUBMITTED THAT THE RELEVANT SHARES, SALE OF WHIC H HAS GIVEN RISE TO THE LOSS IN QUESTION, WERE PURCHASED BY THE ASSESSEE IN THE EARLIER YEARS AND THE SAME WERE TREATED AS STOCK-IN- 5 ITA 736/MUM/08, MR.SUNIL S. RATHI TRADE IN HIS BOOKS OF ACCOUNT. HE SUBMITTED THAT T HIS TREATMENT GIVEN BY THE ASSESSEE TO THE SAID SHARES AS STOCK-IN-TRADE WAS ACCEPTED BY T HE ASSESSING OFFICER IN THE EARLIER YEAR. HE CONTENDED THAT THE INTENTION OF THE ASSESSEE TO PURCHASE AND HOLD THE SAID SHARES AS STOCK-IN-TRADE THUS WAS CLEARLY ESTABLISHED AND THE RE WAS NO REASON FOR THE ASSESSING OFFICER TO TREAT THE LOSS ARISING FROM SALE OF THE SAID SHARES AS CAPITAL LOSS. HE INVITED OUR ATTENTION TO THE OPERATIVE PORTION OF THE ORDER OF THE LD. CIT(A) AS WELL AS THAT OF THE TRIBUNAL PASSED IN THE QUANTUM PROCEEDINGS AND SUBM ITTED THAT GENUINENESS OF LOSS WAS DOUBTED BY THE TRIBUNAL WITHOUT GIVING ANY COGENT R EASON AND WITHOUT CONSIDERING THAT EVEN THE ASSESSING OFFICER HAD NOT DOUBTED THE GENU INENESS OF LOSS AND IT WAS DISALLOWED BY HIM MERELY BECAUSE ACCORDING TO THE ASSESSING OF FICER IT WAS A CAPITAL LOSS. HE INVITED OUR ATTENTION TO THE PENALTY ORDER PASSED B Y THE ASSESSING OFFICER AND SUBMITTED THAT THE ASSESSING OFFICER HAS NOT MADE ANY ALLEGAT ION EVEN WHILE IMPOSING THE PENALTY U/S 271(1)(C) THAT LOSS CLAIMED BY THE ASSESSEE WAS NOT GENUINE. HE CONTENDED THAT THE REAL DISPUTE THUS IS ONLY ABOUT THE HEAD OF INCOME UNDER WHICH THE LOSS IS ASSESSABLE AND A MERE CHANGE IN HEAD OF INCOME CANNOT BE TREATED A S CONCEALMENT SO AS TO ATTRACT PENALTY U/S 271(1)(C). IN SUPPORT OF THIS CONTENTION, THE LEARNED COUNSEL FOR THE ASSESSEE RELIED ON THE FOLLOWING JUDICIAL PRONOUNCEMENTS:- I) T. ASHOK PAI VS. CIT 292 ITR 11 (SC) II) CIT VS. AURIC INVESTMENT AND SECURITIES LTD. 3 10 ITR 121 (DEL) III) ITO VS. ROBORANT INVESTMENTS LTD. [2006] 7 SO T 181 6. THE LEARNED D.R., ON THE OTHER HAND, STRONGLY RE LIED ON THE ORDERS OF THE AUTHORITIES BELOW IN SUPPORT OF THE REVENUES CASE THAT THE ASS ESSEE HAVING FURNISHED INACCURATE PARTICULARS OF ITS INCOME WHILE MAKING A WRONG CLAI M FOR LOSS, IT IS FIT CASE TO IMPOSE PENALTY U/S 271(1)(C). 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND ALS O PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS OBSERVED THAT THE ASSESSEE IN THE PRESENT CASE IS ADMITTEDLY ENGAGED IN THE 6 ITA 736/MUM/08, MR.SUNIL S. RATHI BUSINESS OF SHARE TRADING. DURING THE PREVIOUS YEAR RELEVANT TO A.Y. 1996-97, THE ASSESSEE HAD PURCHASED 7,10,600 SHARES OF M/S CHOPRA FINVEST PVT. LTD. AT THE FACE VALUE OF ` 10/- PER EACH. THE SAID SHARES WERE TREATED AS STOCK-IN- TRADE BY THE ASSESSEE IN HIS BOOKS OF ACCOUNT AND THE TREATMENT SO GIVEN BY THE ASSESSEE WAS ACCEPTED BY THE ASSESSING OFFICER IN THE EARLIER YEARS. DURING THE YEAR UNDER CONSID ERATION, THE ASSESSEE SOLD 5 LACS SHARES OF M/S CHOPRA FINVEST PVT. LTD. FOR A TOTAL CONSIDE RATION OF ` 5 LACS RESULTING A LOSS OF ` 45 LACS WHICH WAS CLAIMED BY THE ASSESSEE AS HIS BU SINESS LOSS. THE ASSESSING OFFICER EXAMINED THE SAID CLAIM OF THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND RECORDED THE FOLLOWING FINDINGS ON SUCH EXAMINATION :- 1. THE ASSESSEE HAD CONTROLLING INTEREST IN THE CO MPANY CHOPRA FINVEST (P) LTD. BEING 70% OF THE ENTIRE SHAREHOLDING. 2. THE ASSESSEE HAD OBTAINED LOAN FROM THE COMPANY CHOPRA FINVEST (P) LTD. FOR INVESTING IN ITS OWN SHARES. 3. THE SHARE BEING THAT OF A PRIVATE LIMITED COMPA NY ARE NOT FREELY MARKETABLE. 4. THE SHARES HAVE BEEN SOLD TO ANOTHER COMPANY GA LAXY FINVEST (P) LTD. IN WHICH HE IS A DIRECTOR FROM WHOM THE ASSESSEE HAS H AD HUGE BORROWINGS. 8. ON THE BASIS OF THE ABOVE FINDINGS, THE A.O. HELD T HAT GOING BY THE NATURE OF TRANSACTIONS AND THE CONDUCT OF THE ASSESSEE, THE S HARES OF M/S CHOPRA FINVEST PVT. LTD. HELD BY THE ASSESSEE WAS HIS INVESTMENT AND NOT STO CK-IN-TRADE. HE, THEREFORE, DISALLOWED THE CLAIM OF THE ASSESSEE THAT THE LOSS ARISING FROM THE SAID SHARES WAS A BUSINESS LOSS AND TREATED THE SAME AS CAPITAL LOSS. ON APPEAL, THE LD. CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE THAT THE SAID LOSS WAS HIS BU SINESS LOSS KEEPING IN VIEW THE NATURE OF ASSESSEES BUSINESS AS WELL AS THE TREATMENT GIV EN TO THE RELEVANT SHARES IN THE BOOKS OF ACCOUNT AS STOCK-IN-TRADE YEAR AFTER YEAR. HE AL SO HELD THAT THE SAID LOSS INCURRED BY THE ASSESSEE WAS A GENUINE BUSINESS LOSS ARISING FR OM SALE OF SHARES HELD BY HIM AS STOCK-IN-TRADE. ON FURTHER APPEAL, THE TRIBUNAL SE T ASIDE THE ORDER OF THE ASSESSING OFFICER ON THIS ISSUE AND RESTORED THAT OF THE ASSE SSING OFFICER. WHILE DOING SO, THE TRIBUNAL HOWEVER DOUBTED THE GENUINENESS OF THE LOS S CLAIMED BY THE ASSESSEE WITHOUT 7 ITA 736/MUM/08, MR.SUNIL S. RATHI APPRECIATING THAT EVEN THE ASSESSING OFFICER HAD NE VER DOUBTED THE GENUINENESS OF THE LOSS WHICH WAS ACTUALLY ALLOWED BY HIM AS A CAPITAL LOSS INSTEAD OF ASSESSEES CLAIM OF THE SAME BEING A BUSINESS LOSS. AS RIGHTLY CONTENDE D BY THE LEARNED COUNSEL FOR THE ASSESSEE BEFORE US, THE CLAIM OF THE ASSESSEE FOR B USINESS LOSS THUS HAS BEEN DISALLOWED AS A RESULT OF CHANGE IN HEAD OF INCOME BY THE ASSE SSING OFFICER FROM PROFITS AND GAINS OF BUSINESS OR PROFESSION TO CAPITAL GAIN. 9. IN THE CASE OF CIT VS. AURIC INVESTMENT & SECUR ITIES LTD. 310 ITR 121CITED BY THE LEARNED COUNSEL, A LOSS ARISING FROM SALE OF SHARES WAS TREATED BY THE ASSESSEE AS BUSINESS LOSS AND THE SAME WAS SET OFF AGAINST BUSINESS INCO ME. THE ASSESSING OFFICER HOWEVER HELD THAT THE LOSS CLAIMED BY THE ASSESSEE WAS SPEC ULATIVE IN NATURE AND THE SAME COULD BE ADJUSTED ONLY AGAINST THE SPECULATIVE INCOME AND NOT AGAINST BUSINESS INCOME. ACCORDINGLY, THE CLAIM OF THE ASSESSEE FOR SET OFF OF THE SAID LOSS AGAINST BUSINESS INCOME WAS DISALLOWED BY HIM. PENALTY U/S 271(1)(C) WAS ALSO IMPOSED BY THE ASSESSING OFFICER AND WHEN THE MATTER REACHED TO THE HONBLE DELHI HIGH COURT, IT WAS HELD BY THEIR LORDSHIPS THAT NO PENALTY U/S 271(1)(C) COULD BE IMPOSED JUST BECAUSE THERE WAS DIFFERENCE IN OPINION BETWEEN THE ASSESSEE AND ASSE SSING OFFICER AS TO THE HEAD UNDER WHICH THE LOSS SHOULD FALL. TO THE SIMILAR EFFECT I S ANOTHER DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. ARETIC INVESTMENT REPORTED IN 190 TAXMAN 157. IN THE CASE OF BTX CHEMICAL LTD. VS. CIT 288 ITR 196 (GUJ. ), THE ASSESSEE HAD CLAIMED LOSS INCURRED AS A RESULT OF DESTRUCTION OF ASSETS AS RE VENUE LOSS. THE ASSESSING OFFICER HOWEVER TREATED THE SAME AS CAPITAL LOSS AND ALSO I MPOSED PENALTY U/S 271(1)(C). HONBLE GUJARAT HIGH COURT CANCELLED THE SAID PENAL TY HOLDING THAT THE CLAIM OF THE ASSESSEE WAS BASED ON A BONAFIDE BELIEF THAT LOSS O CCURRED AS A RESULT OF DESTRUCTION OF ASSETS WAS OF REVENUE NATURE AND ALL THE MATERIAL P ARTICULARS RELATING TO THE SAID CLAIM HAVING BEEN FURNISHED BY THE ASSESSEE, IT WAS NOT A CASE OF CONCEALMENT OF INCOME TO ATTRACT PENALTY U/S 271(1)(C). 8 ITA 736/MUM/08, MR.SUNIL S. RATHI 10. IN THE PRESENT CASE, THE LOSS ARISING FROM THE SALE OF SHARES WAS CLAIMED BY THE ASSESSEE AS A BUSINESS LOSS WHICH CLAIM, IN OUR OPI NION, WAS MADE BONAFIDE KEEPING IN VIEW THE NATURE OF ASSESSEES BUSINESS AS WELL AS T HE TREATMENT GIVEN TO THE RELEVANT SHARES IN ITS BOOKS OF ACCOUNT AS STOCK-IN-TRADE YE AR AFTER YEAR. MOREOVER, ALL THE MATERIAL PARTICULARS RELATING TO THE SAID CLAIM WERE TRULY A ND FULLY FURNISHED BY THE ASSESSEE AND EVEN THE ASSESSING OFFICER HAS NOT POINTED OUT ANY FALSITY IN THE SAID PARTICULARS. HAVING REGARD TO ALL THESE FACTS OF THE CASE AND KEEPING I N VIEW THE JUDICIAL PRONOUNCEMENTS DISCUSSED ABOVE, WE ARE OF THE VIEW THAT IT IS NOT A FIT CASE TO IMPOSE PENALTY U/S 271(1)(C). WE THEREFORE CANCEL THE PENALTY IMPOSED BY THE ASSESSING OFFICER AND CONFIRMED BY THE LD. CIT(A) AND ALLOW THIS APPEAL O F THE ASSESSEE. 11. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED ON 11 TH FEBRUARY, 2011. SD/- SD/- (D. MANMOHAN) (P.M. JAGTAP) VICE PRESIDENT ACCOUNTANT MEMBER MUMBAI, DATED 11 TH FEBRUARY, 2011. RK COPY TO 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) XXV - MUMBAI 4. THE CIT- XXV, MUMBAI 5. THE DR BENCH, E 6. MASTER FILE // TUE COPY// BY ORDER DY/ASSTT. REGISTRAR ITAT, MUMBAI 9 ITA 736/MUM/08, MR.SUNIL S. RATHI DATE INITIALS 1 DRAFT DICTATED ON 2.2.11 SR. PS 2 DRAFT PLACED BEFORE THE AUTHOR 3.2.11 SR. PS 3 DRAFT PLACED BEFORE THE SECOND MEMBER 4 APPROVED DRAFT COMES TO THE SR. PS SR. PS 5 KEPT FOR PRONOUNCEMENT ON SR. PS 6 FILE SENT TO THE BENCH CLERK SR. PS 7 DATE ON WHICH FILE GOES TO THE HEAD CLERK 8 DATE ON WHICH FILE GOES TO THE AR 9 DATE OF DISPATCH OF ORDER