PRAMODA S. PILLAI, MUMBAI V. DCIT 22(2), MUMBAI

ITA 7863/MUM/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8305 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-11-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2007-2008
• Appeal Filed On: 21-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A B KOLI
• Assessee Lawyers: SATENDRA PANDEY
• Keywords: Salary income; Opportunity of being heard; Principle of natural justice; Transactions in derivatives; Source of fund; Additional evidence; Wrong claim; Futures and options

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH C, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTAT MEMBER AND SHRI VIVEK VARMA, JUDICIAL MEMBER I.T.A. NO.7863/M/2011 ASSESSMENT YEAR:2007-2008 MRS. PRAMODA S PILLAI, B-8, KAILAS C.H.S. BHATWADI, GHATKOPAR, MUMBAI-400 084 PAN:AEJPP1996B VS. THE DCIT, WARD - 22(2), AAYKAR BHAVAN, MUMBAI 400 020. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI K. GOPAL & SATENDRA PANDEY RESPONDENT BY : SHRI A.B. KOLI, SR. DR DATE OF HEARING: 31.10.2012 DATE OF ORDER :7.11.2012 O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE ASSESSEE ON 21.11.2011 IS DIRECTED AGAINST THE ORDER OF CIT (A)-33, MUMBAI DATED 29.08.2011 FOR THE ASSESSM ENT YEAR 2007-2008 AND THE APPEAL RELATES TO THE LEVY PENALTY U/S 271(1)(C) OF THE ACT. 2. THE FACTS NECESSARY FOR THE DISPOSAL OF THE ISSU E RELATING TO THE PENALTY U/S 271(1)(C) OF THE ACT ARE THAT THE ASSESSEE IS A PRO FESSOR AT GURU NANAK COLLEGE OF ARTS AT G.T.B. NAGAR, MUMBAI AND EARNS SALARY INCOME OF RS. 3,92,306/-. IN THE RETURN, IT WAS CLAIMED THAT THE ASSESSEE EARNED LOSS OF RS. 29 ,99,245/- OUT OF THE TRANSACTIONS RELATING TO FEATURES AND OPTIONS (F&O) AND CLAIMED A SET OFF OF THE INCOME AGAINST THE SAID LOSS. DURING THE SCRUTINY PROCEEDINGS, ASSESS EE DID NOT APPEAR BEFORE THE AO AND HER COUSIN ON BEHALF OF THE ASSESSEE FILED A LETTER DATED 24.11.2009 STATING THAT THE CHARTERED ACCOUNTANT, WHO LOOKS AFTER THE FINANCIAL MATTERS OF THE ASSESSEE, EXPIRED AND THE ASSESSEE WOULD APPEAR BEFORE THE AO AFTER A MONTHS PERIOD. ASSESSEE FURNISHED CERTAIN PAPERS SUCH AS LEDGER ACCOUNT, ST T CERTIFICATE, SALARY CERTIFICATE, COPIES OF BANK PASS BOOK ETC IN SUPPORT OF THE CLAI MS IN THE RETURN. CONSIDERING THE 2 MRS. PRAMODA S PILLAI TIME BAR IN NATURE OF THE ASSESSMENT, AO COMPLETED THE ASSESSMENT AND DISALLOWED THE CLAIM OF LOSS AS WELL AS SET OFF OF THE SAME AGAINS T THE SALARY INCOME. 3. DURING THE FIRST APPELLATE PROCEEDINGS, ASSESSEE FURNISHED LEDGER ACCOUNT COPY FOR THE PERIOD FROM 1.4.2006 TO 31.3.2007 AND STATE D THAT THE TRANSACTION RELATING TO THE FUTURES AND OPTIONS WAS THE MAIN CAUSE OF EARNI NG LOSS AND HOWEVER, CLAIM OF SET OFF OF THE LOSS AGAINST THE SALARY INCOME IS AN INA DVERTENT MISTAKE. ASSESSEE ALSO MENTIONED THAT DUE TO SEVERE ILLNESS OF HER FATHER- IN-LAW, THE ASSESSEE COULD NOT FURNISH THE FULL DETAILS AT THE TIME OF SCRUTINY PROCEEDING S AND SHE ALSO REITERATED THE FACT ABOUT THE DEMISE OF HER CA, SHRI SHASHANK RANADE AND SUBM ITTED THE DEATH CERTIFICATE OF SHRI SHASHANK RANADE. SHE SUBMITTED FOR GRANT OF CARRY FORWARD BENEFIT OF THE SAID LOSS ONLY TO SET OFF AGAINST THE PROFITS IN THE LATER YE ARS. CONSIDERING THE DEFECTS APPEARING ON THE AUDIT REPORT AND HER FAILURE TO PRODUCE THE BOOKS OF ACCOUNT, CIT (A) REJECTED THE ADDITIONAL EVIDENCE AND DISMISSED THE APPEAL OF THE ASSESSEE AND DENIED THE CLAIM OF LOSS. THE MATTER TRAVELLED TO THE HONBLE ITAT ON THE QUANTUM PROCEEDINGS AND ON THE MERITS OF THE ADDITIONS, IT WAS CONTENDED BEFOR E THE TRIBUNAL THAT THE CIT (A) DID NOT GRANT SUFFICIENT OPPORTUNITY AND REJECTED THE A DDITIONAL EVIDENCES AND THE SAME IS ERRONEOUS. SHE CONTENDED THAT THE TRANSACTIONS REL ATING TO F&O WERE INDEED EXECUTED BY HER AND SHE WAS NOT A NAME LENDER AS ALLEGED BY THE REVENUE. 4. ON THE OTHER HAND, LD DR TOOK A STAND THAT THE A SSESSEE FAILED TO COOPERATE WITH THE PROCEEDINGS AND REITERATED THAT ASSESSEE WAS A NAME LENDER AND ARGUED STATING THAT THE ADDITIONAL EVIDENCE WAS RIGHTLY REJECTED B Y THE CIT (A). 5. ON HEARING THE PARTIES, THE TRIBUNAL (SMC) HAS D ISMISSED THE APPEAL OF THE ASSESSEE FOR THE REASONS GIVEN IN PARA 8 OF ITS ORD ER DATED 30.5.2012 WHICH READS AS UNDER: I HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS A ND PERUSED THE RECORD. IT IS A FACT THAT THE ASSESSEE DID NOT FURNISH ANY INFORMAT ION BEFORE THE ASSESSING OFFICER WITH REGARD TO F&O. THERE IS NOTHING ON RECORD TO SUGGEST THAT THE ASSESSEE HAD PREVIOUS EXPERIENCE IN F&O TRANSACTIONS OR SHE HAD SUFFICIENT FUNDS TO INDULGE IN 3 MRS. PRAMODA S PILLAI SUCH TRADE. ADMITTEDLY DIFFERENTIAL AMOUNT WAS PAI D FROM SOME OTHER ACCOUNTS AND EVEN AUDIT REPORT IS NOT DATED. HAVING REGARD TO OVERALL CIRCUMSTANCES, I AM OF THE VIEW THAT THE ASSESSEE HAS NOT MADE OUT A PR IMA FACIE CASE EVEN FOR ADMISSION OF ADDITIONAL EVIDENCE. IN OTHER WORDS, TAX AUTHORITIES WERE JUSTIFIED IN HOLDING THAT SHE WAS MERELY A NAME LENDER. IF RECORD INDICATES THAT SHE HAD BORROWED THE MONEY TO REPAY THE LOSS SUFFERED BY HE R, IT MIGHT BE A GOOD CASE FOR NON-LEVY OF PENALTY BUT IN THE QUANTUM PROCEEDINGS INITIAL ONUS IS UPON THE ASSESSEE TO PROVE THAT SHE WAS ENGAGED IN THE F&O TRANSACTIONS. WITH THESE OBSERVATIONS, APPEAL OF THE ASSESSEE IS DISMISSED. 6. IN THE BACKGROUND OF ABOVE DEVELOPMENTS, SHRI K. GOPAL / SATENDRA PANDE, LD COUNSELS FOR THE ASSESSEE BROUGHT OUR ATTENTION TO THE ADDITIONAL EVIDENCE FURNISHED BEFORE US VIDE LETTER DATED 23.10.2012 AND MENTIONE D THAT THIS BEING THE PENALTY PROCEEDINGS WHICH ARE DISTINCTLY DIFFERENT FROM THA T OF THE QUANTUM PROCEEDINGS AND ALSO CONSIDERING THE DIRECTION OF THE TRIBUNAL IN P ARA 8 OF ITS ORDER, THE SAID EVIDENCE MAY BE ADMITTED FOR ANALYZING WHETHER THE ASSESSEE BORROWED THE MONEY ON REPAYMENT BASIS AND TRULY SUFFERED LOSSES. LD COUN SEL READ OUT IF RECORD INDICATES THAT SHE HAD BORROWED THE MONEY TO REPAY THE LOSS S UFFERED BY HER, IT MIGHT BE A GOOD CASE FOR NON-LEVY OF PENALTY FROM PARA 8 EXTRACTED ABOVE. AS PER SRI GOPAL, TH E TRIBUNAL HAS INTENDED FOR EXAMINATION OF THE RECORD S FOR THE PURPOSE OF PENALTY PROCEEDINGS. THE ASSESSEE IS GIVEN A CHANCE BY THE TRIBUNAL TO PROVE THAT ASSESSEE IS NOT A NAME LENDER. LD COUNSEL PRAYED SERIOUSLY BEFO RE US FOR GRANT OF A CHANCE BEFORE THE AO AND IN THAT CASE, THE ASSESSEE SHALL DEMONST RATE THAT SHE IS NOT A NAME LENDER FOR THE PURPOSE OF NON LEVY OF PENALTY AND PRAYED F OR ADMISSION OF THE ADDITIONAL EVIDENCES FOR PENAL PROCEEDINGS ONLY, WHICH ARE THE DIFFERENT PROCEEDINGS. LD COUNSEL PLEADED FOR THE ADMISSION OF THE ADDITIONAL EVIDENC E AND SET ASIDE THE ISSUE TO THE FILES OF AO FOR APPRECIATION OF THE FACTS REGARDING THE S OURCE OF FUNDS FOR THE ASSESSEE TO DO THE BUSINESS RELATING TO F&O. HE OFFERED TO DEMONS TRATE BEFORE THE REVENUE AUTHORITIES THAT THE SOURCE OF FUNDS FOR DOING THE F&O BUSINESS WAS MERELY FROM LOANS WHICH HAVE BEEN REPAID AND SHE WAS NOT A NAME LENDE R AS HELD BY THE TRIBUNAL IN THE QUANTUM PROCEEDINGS. 4 MRS. PRAMODA S PILLAI 7. ON THE OTHER HAND, LD DR VEHEMENTLY ARGUED STATI NG THAT ASSESSEE MADE A WRONG CLAIM IN THE RETURN OF INCOME WHICH AMOUNTS T O FURNISHING OF INACCURATE PARTICULARS AND, THEREFORE, THE ORDER OF LD CIT (A) MUST BE CONFIRMED WITHOUT ANY AMENDMENTS. ROUTINELY, LD DR OPPOSED THE ADMISSION OF THE ADDITIONAL EVIDENCE. 8. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE ORDE RS OF THE REVENUE AUTHORITIES AND THE PAPERS FILED BEFORE US. WITHOUT GOING INTO THE MERITS OF THE LEVY OF PENALTY, WE HAVE TO DECIDE THE PRELIMINARY ISSUE RELATING TO TH E ADMISSION OF ADDITIONAL EVIDENCE IN THE PENALTY PROCEEDINGS. IT IS A FACT THAT THE SAI D ADDITIONAL EVIDENCES WERE THE SAME AS THAT OF THE ONES FURNISHED BY THE ASSESSEE AT TH E TIME OF QUANTUM PROCEEDINGS BEFORE THE SMC. THE RULE 29 OF THE INCOME TAX RULE S, 1963 PROVIDES FOR THE CONDITIONS FOR ADMISSION OF THE ADDITIONAL EVIDENCE . RELEVANT CONDITION RELATES TO THE REQUIREMENT OF THE SAID ADDITIONAL EVIDENCE NECESSA RY FOR ADJUDICATION OF THE GROUNDS. THEREFORE, WE HAVE TO DECIDE WHETHER THERE EXISTS A NY SUCH A REQUIREMENT FOR DECIDING THE IMPUGNED PENALTY PROCEEDINGS IN A JUDICIOUS MAN NER AND IF NON ADMISSION OF THE ADDITIONAL EVIDENCES MAY RENDER THE ADJUDICATION UN FAIR AND NOT IN THE INTEREST OF ADMINISTRATION OF JUSTICE. 9. IT IS A SETTLED PROPOSITION THAT THE PENALTY PRO CEEDINGS ARE DIFFERENT FROM THAT OF THE QUANTUM APPEALS PROCEEDINGS. THEREFORE, CONSIDE RING THE NATURE OF THE PENALTY PROCEEDINGS AND THE CONSEQUENCES OF PROSECUTION THE REOF, WE HAVE EXAMINED THE ISSUE OF ADMISSION OF THE IMPUGNED ADDITIONAL EVIDENCES A ND THEIR NECESSITY. IN THIS REGARD, WE HAVE PERUSED THE ORDER OF THE TRIBUNAL AND FIND THAT THERE IS AN INDICATION THAT THE ASSESSEE WAS NOT GIVEN FULL OPPORTUNITY TO SHOW THE RECORDS WHICH INDICATES THAT SHE BORROWED THE MONEY TO REPAY THE LOSSES SUFFERED BY HER. IN THAT CASE, IT MIGHT BE A GOOD REASON FOR NOT LEVY OF PENALTY, NOTWITHSTANDIN G THE FACT THE QUANTUM ADDITIONS ARE ALREADY SUSTAINED BY THE TRIBUNAL. THAT SHOWS THAT THE RECORDS ARE REQUIRED TO BE ADMITTED. IN OUR OPINION, SUCH ADMISSION OF THE ADD ITIONAL EVIDENCE WOULD FACILITATE THE REVENUE TO EXAMINE THE CLAIMS OF THE ASSESSEE FOR L IMITED PURPOSE OF DECIDING THE 5 MRS. PRAMODA S PILLAI PENALTY PROCEEDINGS. DESPITE THE NON-COOPERATIVE A TTITUDE TO THE ASSESSEE IN THE PAST, LD COUNSEL MADE A SUBMISSION AT BAR THAT THE ASSESS EE SHALL COOPERATE WITH THE AO IN THE SET ASIDE PROCEEDINGS AS PER THE REQUIREMENT OF LAW. WE HAVE ALSO CONSIDERED THE FACT THAT THESE ARE THE PENALTY PROCEEDINGS WHICH A RE DISTINCTLY DIFFERENT FROM APPEAL PROCEEDINGS ON QUANTUM OR ON MERITS. CONSIDERING T HE OVERALL MATRIX OF THE FACTS, WE ARE OF THE OPINION THAT THE DOCUMENTS SHOULD BE ADM ITTED AND THEY SHOULD BE REMANDED TO THE FILES OF THE AO IN THE INTEREST OF NATURAL JUSTICE FOR DECIDING THE ISSUE OF LEVY OF PENALTY AFRESH AFTER AFFORDING A REASONA BLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. IN THE SET ASIDE PROCEEDINGS, AO SHALL EX AMINE IF THE ASSESSEE HAS HER OWN SOURCES OF FUNDS OR AT EAST, SHE HAS THE ABILITY TO OUTSOURCE THE FUNDS OR RAISE LOANS FROM THE OTHERS AS CLAIMED BEFORE US. AO SHALL GARN ER AND ADJUDICATE FOR PURPOSES OF PENALTY PROCEEDINGS, IF SHE IS MERELY A NAME LENDER AS ALREADY HELD BY THE TRIBUNAL. ACCORDINGLY, ALL THE GROUNDS RAISED BY THE ASSESSEE ARE SET ASIDE FOR STATISTICAL PURPOSES. 10. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 7 TH DAY OF NOVEMBER, 2012. SD/- SD/- (VIVEK VARMA) (D. KARU NAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE : 7 .11. 2012 AT :MUMBAI OKK COPY TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (A), CONCERNED. 4. THE CIT CONCERNED. 5. THE DR C, BENCH, ITAT, MUMBAI. 6. GUARD FILE. 6 MRS. PRAMODA S PILLAI // TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI.