LIC NOMURA MUTUAL FUNDA ASSET MANAGEMENT COMPNAY LTD, MUMBAI V. DCIT 1(2), MUMBAI

ITA 8582/MUM/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 100842 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 7 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-08-2015
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 06-08-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 19-12-2011
• Court: TRIBUNAL
• Department Lawyers: RAJN EESH K ARVIND
• Assessee Lawyers: VENHATRAMAN
• Keywords: Capital asset
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI BEFORE SHRI G.S. PANNU , ACCOUNTANT MEMBER AND SHRI SANJAY GARG , JUDICIAL MEMBER ITA NO. 8582 /MUM./ 2011 ( ASSESSMENT YEAR : 200 5 06 ) LIC NOMURA MUTUAL FUND ASSET MANAGEMENT COMPANY LIMITED INDUSTRIAL AS SURANCE BUILDING 4 TH FLOOR, OPP. CHURCHGATE STATION MUMBAI 400 020 PAN AAACJ1166H .. APPELLANT V/S DY . COMMISSIONER OF INCOM E TAX CIRCLE 1 (2) , AAYAKAR BHAVAN 101, M.K. ROAD, MUMBAI 400 020 .... RESPONDENT ASSESSEE BY : SHRI VENHATRAMAN REVENUE BY : SHRI RAJNEESH K. ARVIND DATE OF HEARING 06 .0 8 .2015 DATE OF ORDER 14.08.2015 O R D E R PER SANJAY GARG , JUDICIAL MEMBER TH E PRESENT APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED AGAINST THE IMPUGNED ORDER DATED 3 RD OCTOBER 2011 , PASSED BY THE LEARNED COMMISSIONER (APPEALS) II, MUMBAI , FOR THE ASSESSMENT YEAR 20 05 06 . THE GROUNDS RAISED BY THE ASSESSEE ARE AS FOLLOWS: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE ASSESSEE SUBMITS THAT THE LEARNE D COMMISSIONER (APPEALS) LIC NOMURA MUTUAL FUND ASSET 2 ERRED IN CONFIRMING THE PENALTY OF R S . 50, 00 , 000 LEVIED BY THE ASSESSING OFFICER UNDER SECTION 271(1)( C ) OF THE INCOME TAX ACT, 1961 (THE ACT). 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE ASSESSEE SUBMITS THAT TH E LEARNED COMMISSIONER (APPEALS) ERRED IN HOLDING THAT THE ASSESSEE HAS CONCEALED THE PARTICULARS OF INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME IN SO FAR AS ITS CLAIM OF LONG TERM CAPITAL LOSS ON REDEMPTION OF UNITS OF MUTUAL FUNDS WAS CONCERNED AND CONSEQUENTLY ERRED IN CONFIRMING THE LEVY OF PENALTY OF RS.50, 00 , 000 UNDER SECTION 271(1)( C ) OF THE ACT BY THE LEARNED ASSESSING OFFICER. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE ASSESSEE SUBMITS THAT THE LEARNED COMMISSIONER (A PPEALS) FAILED TO APPRECIATE THAT THE CLAIM OF LONG TERM CAPITAL LOSS ON REDEMPTION OF UNITS OF MUTUAL FUNDS BEING A BONAFIDE CLAIM AND FURTHER THAT ALL FACTS RELATING TO THE CLAIM HAVING BEEN DISCLOSED, NO PENALTY IS IMPOSABLE UNDER THE PROVISIONS OF EXP LANATION 1 TO SECTION 271(1)(C) OF THE ACT AND CONSEQUENTLY ERRED IN CONFIRMING THE LEVY OF PENALTY OF ` 50,00,000. 2. FACTS IN BRIEF : THE ASSESSEE IS AN ASSET MANAGEMENT COMPANY AND MANAGES THE INVESTMENT OF LIC MUTUAL FUNDS. THE INCOME EARNED BY THE COMP ANY IS MAINLY BY WAY OF MANAGEMENT FEES FOR MANAGING THE FUNDS OF LIC MUTUAL FUNDS. THE ASSESSEE HAS INVESTED ` 9 , 45 , 83, 000, ON 28 TH MARCH 2002, AND WAS ALLOTTED UNITS OF LIC MUTUAL BOND FUNDS. THESE UNITS WERE REDEEMED ON 13 TH JULY 2004, AND THE ASSESSEE REALISED ` 11,18,57,516, BY WAY OF CONSIDERATION ON REDEMPTION OF THESE UNITS. THE UNITS WERE HELD FOR A PERIOD OF MORE THAN 12 MONTHS FROM THE DATE THE Y WERE ALLOTTED THE Y WERE LONG TERM CAPITAL ASSET WITHIN THE MEANING OF SECTION 2(42A) OF THE ACT, ELI GIBLE FOR INDEXATION. THE ASSESSEE ALSO INVESTED ` 5,10,28,395, I N UNITS OF LIC NOMURA MUTUAL FUND ASSET 3 LIC MUTUAL FUNDS SHORT TERM PLAN UNITS BETWEEN JULY 2003 AND DECEMBER 20 0 3. THESE UNITS WERE REDEEMED ON 7 TH DECEMBER 2004, AND THE ASSESSEE REALISED ` 5,12,87,467. SINCE THESE UNI TS WERE HELD FOR A PERIOD OF MORE THAN 12 MONTHS FROM THE DATE THEY WERE ALLOTTED, THE Y WERE ALSO LONG TERM CAPITAL ASSET WITHIN THE MEANING OF SECTION 2(42A) OF THE ACT AND, HENCE, ALSO ELIGIBLE FOR INDEXATION. THE ASSESSEE ALSO MADE A LOSS OF ` 37,500, O N REDEMPTION OF BONDS IN KONKAN RAILWAY CORPORATION LTD. SINCE THESE BONDS WERE NOT ELIGIBLE FOR INDEXATION UNDER THIRD PROVISO TO SECTION 48 OF THE ACT, NO INDEXATION WAS CLAIMED BY THE ASSESSEE ON THESE BONDS. THEREFORE, THE ASSESSEE HAS, IN ITS RETURN O F INCOME, SHOWN INDEXATION OF THE SAID LIC MUTUAL BOND FUNDS UNITS AND LIC MUTUAL FUNDS SHORT TERM PLAN UNITS AND AT THE SAME TIME IN THE SAME RETURN OF INCOME HAS CLAIMED A LOSS OF ` 37,500, IN KONKAN RAILWAY BONDS WITHOUT ANY INDEXATION. THE ASSESSEE HAS OFFERED THESE UNITS OF MUTUAL FUNDS FOR INDEXATION BENEFIT AS A BON A FIDE CLAIM IN HIS RETURN OF INCOME SINCE THEY WERE NOT BONDS OR DEBENTURES. THERE IS A SPECIFIC DIFFERENCE BETWEEN UNITS OF MUTUAL FUNDS ON ONE HAND AND BONDS AND DEBENTURE ON THE OTHER. IN SUPPORT OF THIS CONTENTIONS, THE ASSESSEE RELIED ON THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN CIT V/S ENAM SECURITIES PVT. LTD., [2012] 345 ITR 64 (BOM.), WHEREIN THE HON'BLE JURISDICTIONAL HIGH COURT PLACED RELIANCE ON THE DECISION OF T HE HON'BLE APEX COURT IN R.D. GOEL LIC NOMURA MUTUAL FUND ASSET 4 V/S RELIANCE INDUSTRIES LTD., [2003] 113 COMPANY CASES 1 (SC) AS CATEGORICALLY DIFFERENTIATED BETWEEN UNITS AND BONDS AND DEBENTURES. THE QUESTION ANSWERED WAS WHETHER NON CUMULATIVE PREFERENCE SHARES FALL INTO THE CATEGO RY OF BONDS AND DEBENTURES AS ENVISAGED BY THE THIRD PROVISO TO SECTION 48 OF THE ACT. THE JUDICIAL OPINION IN THESE CASES WERE THAT THE NON CUMULATIVE PREFERENCE SHARES COULD NOT BE EQUATED WITH DEBENTURES OR BONDS AND, HENCE, THE ASSESSEE IS ENTITLED TO BENEFIT OF INDEXATION. THE ASSESSING OFFICER, ON THE OTHER HAND, WAS OF THE OPINION THAT THE UNITS OF LIC MUTUAL BOND FUNDS UNITS AND LIC MUTUAL FUNDS SHORT TERM PLAN UNITS WERE IN THE NATURE OF DEBENTURE AND CONSEQUENTLY, HE WAS OF THE OPINION THAT THE PR OVISIONS OF THIRD PROVISO TO SECTION 48 OF THE ACT WHICH DENIED THE BENEFIT OF INDEXATION TO BONDS AND DEBENTURES WERE ATTRACTED. THEREFORE, IN THE ASSESSMENT ORDER UNDER SECTION 143(3) OF THE ACT, WHILE DENYING THE BENEFIT OF INDEXATION TO THE UNITS, THE ASSESSING OFFICER ARRIVED AT A LONG TERM CAPITAL GAIN WITHOUT INDEXATION FOR ` 1,75,71,088, AND CHARGED IT TO TAX WHILE THE LONG TERM CAPITAL LOSS OF ` 37,500 CLAIMED ON THE BONDS BY THE ASSESSEE WAS DISALLOWED. THE ASSESSING OFFICER CAME TO THE CONCLUSION THAT INSTEAD OF LONG TERM CAPITAL GAIN OF ` 1,75,71,088, THE ASSESSEE HAS CLAIMED LONG TERM CAPITAL LOSS OF ` 37,500, AND HENCE, CONCEALED THE PARTICULARS OF INCOME. THE ASSESSING OFFICER, ON THE SAID LIC NOMURA MUTUAL FUND ASSET 5 DISALLOWANCE IMPOSED PENALTY OF ` 50,00,000 ON THE ASS ESSEE UNDER SECTION 271(1)(C) OF THE ACT. 3. THE LEARNED CIT(A) UPHELD THE PENALTY IMPOSED BY THE ASSESSING OFFICER. AGGRIEVED, THE ASSESSEE IS IN FURTHER APPEAL BEFORE THE TRIBUNAL. 4. THE LEARNED COUNSEL FOR THE ASSESSEE, BEFORE US, RELIED ON THE DECISION O F THE HON'BLE SUPREME COURT IN CIT V/S RELIANCE PETROPRODUCTS PVT. LTD., [2010] 322 ITR 158 (SC) WHICH WAS REFERRED TO IN THE CASE OF DIT(IT) V/S ADMINISTRATOR OF ESTATE OF LATE E.F. DINSHAW, [2013] 35 TAXMAN.COM 15 (BOM.). 5. THE LEARNED DEPARTMENTAL REPRES ENTATIVE, ON THE OTHER HAND, RELIED ON THE ORDERS OF THE AUTHORITIES BELOW. 6. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND HAVE PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE PROVISIONS OF SECTION 271(1)(C) OF THE ACT, IMPOSING PENALTY ON THE AS SESSEE CAN BE DONE WHEN THERE IS A CONCEALMENT OF INCOME OR WHEN THERE IS FURNISHING OF INACCURATE PARTICULARS OF INCOME BY THE ASSESSEE IN THE RETURN OF INCOME. ON THE FACTS ON RECORD, IT IS ABSOLUTELY CLEAR THAT THE ASSESSEE HAS FURNISHED ALL DETAILS IN HIS RETURN OF INCOME SHOWN INDEXATION WHEREVER APPLICABLE AND THAT ALSO CLAIMED LOSS ON CERTAIN BONDS. THERE LIC NOMURA MUTUAL FUND ASSET 6 IS NO DOUBT THAT THE ACTION OF THE ASSESSEE HAS ALL THROUGHOUT BEEN BONA FIDE AND ENTIRE DETAILS HAVE BEEN SPECIFICALLY STATED IN THE RETURN OF INC OME. THERE CANNOT BE NO DISPUTE THAT EVERYTHING WOULD DEPEND UPON THE RETURN OF INCOME FILED BECAUSE THAT IS THE ONLY DOCUMENT WHERE THE ASSESSEE CAN FURNISH THE PARTICULARS OF HIS INCOME. THE LIABILITY OF PENALTY ARISES IF SUCH PARTICULARS ARE FOUND TO BE INACCURATE. IT IS AN ADMITTED POSITION IN THE PRESENT CASE THAT NO INFORMATION GIVEN IN THE RETURN OF INCOME WAS FOUND TO BE INCORRECT OR INACCURATE. IT IS NOT AS IF ANY STATEMENT MADE OR ANY DETAILS SUPPLIED WERE FOUND TO BE FACTUALLY INCORRECT. HENCE, P RIMA FACIE, THE ASSESSEE CANNOT BE HELD GUILTY OF FURNISHING INACCURATE PARTICULARS. THERE IS ALSO NO CONCEALMENT OF INCOME IN THIS REGARD. THE ONLY GROUND AS TO WHY THE PENALTY WAS APPLIED AGAINST THE ASSESSEE BECAUSE CERTAIN CLAIM IN HIS RETURN OF INCOME WAS NOT ACCEPTED BY THE REVENUE. THAT IT IS ALSO FACT ON RECORD AS BROUGHT OUT BY THE ASSESSING OFFICER IN HIS ORDER AT PAGE 2 / PARA 3 AND REAFFIRMED IN LEARNED CIT(A)S ORDER AT PAGE 9 / PARA 2.8 THAT THE ASSESSEE COMPANY HAS DISCLOSED FULL DETAILS AND PARTICULARS OF ITS CLAIM OF CARRY FORWARD OF LONG TERM CAPITAL LOSS IN THE RETURN OF INCOME. THE CLAIM OF INDEXATION WAS A BONA FIDE CLAIM AS MADE BY THE ASSESSEE IN RESPECT OF UNITS OF MUTUAL FUNDS. THERE WAS NO INDEXATION CLAIMED BY THE COMPANY IN RESPEC T OF BONDS OF KONKAN RAILWAY CORPORATION LTD. IT IS RIGHTLY HELD BY THE HON'BLE JURISDICTIONAL LIC NOMURA MUTUAL FUND ASSET 7 HIGH COURT IN ADMINISTRATOR OF ESTATE OF LATE E.F. DINSHAW (SUPRA) THAT WHERE ALL DETAILS OF LOSS CLAIMED BY THE ASSESSEE WAS STATED IN THE RETURN OF INCOME BUT WAS REJECTED BY THE REVENUE, IT WOULD NOT AMOUNT TO FURNISHING OF INACCURATE PARTICULARS OR CONCEALMENT OF INCOME ON THE PART OF THE ASSESSEE AND, THEREFORE, PENALTY FOR CONCEALMENT OF INCOME COULD NOT BE LEVIED. SIMILAR FINDING ALSO GIVEN IN THE DECISION OF THE HON'BLE SUPREME COURT IN RELIANCE PETROPRODUCTS PVT. LTD. (SUPRA) WHEREIN IT HAS BEEN HELD THAT MERELY BECAUSE A CLAIM MADE BY THE ASSESSEE IS REJECTED BY THE REVENUE, LEVYING OF PENALTY UNDER SECTION 271(1)(C) IS NOT JUSTIFIED. THEREFORE, ON THE FA CTS OF THE CASE AND RELYING ON THESE JUDICIAL PRONOUNCEMENTS, WE FIND IT FIT AND PROPER TO HOLD THAT THE PENALTY IMPOSED UNDER SECTION 271(1)(C) BY THE ASSESSING OFFICER AND THEREAFTER CONFIRMED BY THE LEARNED CIT(A) WAS NOT JUSTIFIED. CONSEQUENTLY, THE PE NALTY CONFIRMED BY THE LEARNED CIT(A) IS HEREBY CANCELED. 7. IN THE RESULT, ASSESSEES APPEAL STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT O N 14.08.2015 SD/ - G.S. PANNU ACCOUNTANT MEMBER SD/ - SANJAY GARG JUDICIAL MEMBER MUMBAI, DATED : 14/08/2015 LIC NOMURA MUTUAL FUND ASSET 8 COPY OF THE ORDER FORWARDED TO : (1) THE ASSESSEE; (2) THE REVENUE; (3) THE CIT(A); (4) THE CIT, MUMBAI CITY CONCERNED; (5) THE DR, ITAT, MUMBAI; (6) GUARD FILE . TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY (DY./ASSTT. REGISTRAR) ITAT, MUMBAI