AMIT R. AGARWAL, MUMBAI V. ASST CIT 12(2), MUMBAI

ITA 7548/MUM/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 2705 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-10-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 18-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bonafide belief; Cost of acquisition; Wrong claim
• Section: 143(3)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI BEFORE HONBLE S/SHRI JOGINDER SINGH (JM), AND RAJESH KUMAR, ( AM ) ./ I.T.A. NO . 7548 / MUM/20 1 4 ( / ASSESSMENT YEAR : 20 0 9 - 10 ) SHRI AMIT R AGARWAL, 221, KEWAL INDUSTRIAL ESTATE, SENAPATI BAPAT MARG, LOWER PAREL (W), MUMBAI - 400013 / VS. ASSTT. COMMISSIONER OF INCOME TAX, 12( 2 ) , AAYAKAR BHAVAN, M K ROAD, MUMBAI - 400020. ( / APPELLANT ) .. ( / R ESPONDENT ) ./ ./PAN NO. : AAAPA7489D / APPELLANT BY: MS NEELAM JADHAV / RESPONDENT BY SHRI KAILASH KANOJIA / DATE OF HEARING : 2 1 .7 .201 6 / DATE OF PRONOUNCEMENT : 6.10 .2016 / O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER : THIS IS AN APPEAL BY THE ASSESSEE AND IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(A) - 23 , MUMBAI D A T ED 28.10.2014 PERTAINING TO A .Y. 20 0 9 - 10 . 2. THE ISSUE RAISED IN GROUNDS OF APPEAL NO.1 AND 2 IS AGAINST THE CONFIRMATION OF PENALTY LEVIED UNDER SECTION 271(1) (C) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT ) BY THE LD. CIT(A) AS LEVIED BY ITA NO 7548/ M/ 201 4 2 THE AO ON THE DISAL LOWANCE OF RS.8,83,883/ - MADE UNDER DEEMING PROVISIONS OF SECTION 94(7) OF THE ACT . 3. FACTS OF THE CASE ARE THAT THE ASSESSEE FILED HIS RETURN OF INCOME ON 30.9.2009 DECLARING TOTAL LOSS OF RS.1,71,87,067/ - . THE CASE OF THE ASSESSEE WAS SELECTED FO R SCRUTINY AND THE ASSESSMENT WAS FRAMED VIDE ORDER DATED 12.12.2011 PASSED UNDER SECTION 143(3) OF THE ACT AT A TOTAL LOSS OF RS.1,60,54,886/ - BY MAKING TWO DISALLOWANCES . O NE OF RS.8,83,883/ - BEING DIVIDEND ON MUTUAL FUNDS WHICH WAS CLAIMED AS EXEMPT U/S 10(35) OF THE ACT BY THE ASSESSEE TREATING THE SAME AS DEEMED INTEREST UNDER DEEMING PROVISIONS OF SECTION 94(7) OF THE ACT AND SECOND RS. 1,78,227/ - WHICH RELATES TO COST OF ACQUISITION OF BIRLA SUNLIFE INCOME PLUS. THE PENALTY PROCEEDINGS UND ER SECTION 271(1)(C) OF THE ACT WERE INITIATED AND SHOW CAUSE NOTICE DATED 12.11.2011 ISSUED . THE ASSESSEE REPLIED THAT SINCE THE ASSESSEE HAS FULLY AND TRULY MADE DISCLOSURE OF ALL PARTICULARS QUA THE SAID ITEMS IN THE RETURN OF INCOME AND WERE SO TREATED UNDER THE BONAFIDE BELIEF AND A LSO THAT DURING THE COUR S E OF ASSESSMENT PROCEEDING S ON HIS OWN OFFERED THE SAME FOR ADDITION AND ACCORDINGLY THE LOSS WAS REDUCED BY T HE AO. THE AO NOT FINDING ANY SUBSTANCE IN THE SUBMISSIONS OF THE ASSESSEE IMPOS ED A PENALTY OF RS.3,28,192/ - U/S 271(1)( C) OF THE ACT VIDE ORDER DATED 27.6.2012 ON THE GROUND THAT THE ASSESSEE DID NOT DISCLOSE FULL PARTICULARS OF INCOME. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPEL LATE AUTHORITY (FAA) WHO DELETED THE PENALTY ON THE ITA NO 7548/ M/ 201 4 3 DISALLOWANCE OF RS.1,78,227/ - WHILE UPHOLDING THE PENALTY ON SECOND ITEM OF DISALLOWANCE OF RS.8,83,883/ - AND THUS PARTLY ALLOWED THE APPEAL OF THE ASSESSEE BY RELYING ON THE DECISION OF THE HONBLE SU PREME COURT IN THE CASE OF RELIANCE PETROPRODUCT PVT LTD REPORTED IN 322 ITR 158 (SC) ON THE GROUND THAT THE EXPLANATION OF THE ASSESSEE WAS FOUND TO BE TRUE AND BONAFIDE . 4. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL P LACED BEFORE US INCLUDING THE ORDERS OF AUTHORITIES BELOW. WE FIND THAT PENALTY WAS IMPOSED ON TWO ITEMS, ONE OF WHICH WAS DELETED BY THE LD. CIT(A) AND SECOND ITEM OF DISALLOWANCE ON WHICH THE PENALTY WAS UPHELD IS IN RESPECT OF SHORT TERM CAPITAL LOSS OF RS.8,83,883/ - IN RESPECT OF RELIANCE MUTUAL FUNDS WHICH WAS REJECTED BY THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS UNDER THE PROVISIONS OF SECTION 94( 8 ) OF THE ACT AND CORRESPONDINGLY THE INCOME OF THE ASSESSEE WE N T UP . P ERUSAL OF THE SE FACTS CLEARLY REVEALS THAT THE ASSESSEE HAS FULLY DISCLOS ED ALL THE PARTICULARS OF LOSS QUA THE SAID SHORT TERM CAPITAL LOSS OF RS.8,83,883/ - FROM MUTUAL FUND IN THE RETURN OF INCOME AND THUS HAS NOT FURNISHED INACCURATE PARTICULARS QUA THE SAID SHOR T TERM LOSS . THE LD. AR VEHEMENTLY SUBMITTED THAT THE PENALTY U/S 271(1)9C) OF THE ACT WAS NOT IMPOSABLE IN RESPECT OF RS.8,83,883/ - BEING SHORT TERM CAPITAL LOSS ON MUTUAL FUNDS, THE FULL PARTICULARS OF WHICH STANDS DISCLOSED IN THE RETURN OF INCOME FIL ED BY THE ASSESSEE. LD AR SUBMITTED THAT THIS HAS HAPPENED DUE TO BONAFIDE AND INADVERTENT MISTAKE ITA NO 7548/ M/ 201 4 4 COMMITTED BY THE ACCOUNTANT OF THE APPELLANT. THE LD. AR STRONGLY RELIED ON THE DECISION OF THE CO - ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF JANU S INVESTMENT FUND V/S DY. DIRECTOR OF INCOME TAX (INTERNATIONAL TAXATION) IN ITA NO.6975/MUM/2010, ASSESSMENT YEAR: 2007 - 08, DATED 4.7.2012, WHICH AS PER THE LD.AR DIRECTLY COVERS THE CASE OF THE ASSESSEE . WE ALSO NOT E THAT THE SHORT TERM CAPITAL LO SS ON THE MUTUAL FUNDS WAS DISALLOWED BY APPLYING DEEMING PROVISIONS OF SECTION 94( 8 ) OF THE ACT. THE LD. AR SUBMITTED THAT IN VIEW OF THE BONAFIDE ERROR COMMITTED BY THE ACCOUNTANT AND THE FACTS BEING FULLY DISCLOSED, THE PENALTY WAS WRONGLY UPHELD BY THE LD. CIT(A) AND DESERVED TO BE DELETED . ON THE CONTRARY, THE LD. DR RELIED ON THE ORDERS OF AUTHORITIES BELOW. 5 . WE FIND THAT IN THE CASE OF RELIANCE PETRO PRODUCT PVT LTD REPORTED (SUPRA), IN WHICH IT HAS BEEN HELD THAT IN ORDER TO EXPOSE TO THE V IGOUR OF PENAL PROVISION, THE CASE IS REQUIRED TO BE STRICTLY COVERED BY THE PROVISIONS OF SECTION 271(1)(C) OF THE ACT. IT WAS FURTHER HELD THAT WRONG CLAIM MADE BY THE ASSESSEE WHICH IS NOT ACCEPTED TO THE REVENUE CANNOT BE SUBJECTED TO THE PRO V ISIONS OF SECTION 271(21)( C ) OF T HE ACT MERELY ON THE GROUND THAT THE CLAIM OF THE ASSESSEE WAS WRONG. IN THIS CASE, THE ASSESSEE HAD MADE GENUINE CLAIM WHICH W A S FOUND TO BE WRONG BY APPLYING DEEMING PROVISIONS OF SECTION 94( 8 ) OF THE ACT AND THUS THE PEN ALTY WAS IMPOSED BY THE AO AND ALSO SUSTAINED BY THE LD. CIT(A). IN THE CASE OF ZOOM COMMUNICATIONS P LTD (2010) 191 TAXMANN 179, RELIED UPON BY THE LD CIT(A), THE HONBLE ITA NO 7548/ M/ 201 4 5 HIGH COURT HAS HELD THAT WHERE THE ASSESSEE MAKES A CLAIM WHICH IS NOT ONLY I NCORRECT IN LAW BUT ALSO WHOLLY WITHOUT ANY BASIS AND EXPLANATION S FURNISHED BY HIM ARE NOT BONAFIDE FOR MAKING SUCH CLAIM . I N THAT CASE, THE PENALTY WOULD BE LEVIED UNDER SECTION 271(1)(C) OF THE ACT. IN OUR OPINION THE CASE OF THE ASSESSEE IS SQUARELY COVERED BY THE RATIO LAID DOWN IN THE CASE OF RELIANCE PETRO PRODUCTS LTD (SUPRA) . THE FACTS OF THE CASE IN ZOOM COMMUNICATIONS P LTD (SUPRA) ARE DISTINGUISHABLE FROM THAT OF THE ASSESSEES CASE, AS IN THE CASE OF ASSESSEE WRONG CLAIM WAS UNDER BONAFID E BELIE F OF THE ACCOUNTANT WHICH WAS DISALLOWED UNDER THE DEEMING PROVISIONS OF SECTION 94( 8 ) OF THE ACT AND THEREFORE, THE LD.CIT(A) HAS W RONGLY RELIED ON THE D ECISION IN ORDER TO UPHOLD THE ORDER OF THE AO. IN VIEW OF THE ABOVE DISCUSSION AND LEGAL POS IT I ON , WE SET ASIDE THE ORDER OF T HE LD. CIT(A) AND DIRECT THE AO TO DELETE THE PENALTY. 6 . IN THE RESULT , THE APPEAL OF T HE ASSESSEE IS ALLOWED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 6 TH OCT , 2016 . 6 TH OCT , 2016 S D SD (JOGINDER SINGH ) ( RAJESH KUMAR ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI: 6 TH OCT , 2016 . . . ./ SRL , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - CONCERNED 4. / CIT C ONCERNED ITA NO 7548/ M/ 201 4 6 5. 6. , , / DR, ITAT, MUMBAI CONCERNED / GUARD FILE. / BY ORDER, T RUE COPY (ASSTT. REGISTRAR) , /ITAT, MUMBAI