DCIT, CC-XVI, KOLKATA, Kolkata V. Shree Ram Electrocast Pvt. Ltd., Kolkata

ITSSA 31/KOL/2014

• Counselvise Citation: [2017] 122 COUNSELVISE.COM (IT) 3087 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 10 month(s) 26 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 03-02-2017
• Appeal Filed By: Department
• Bench Allotted: B
• Next Hearing Date: 15-11-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 07-03-2014
• Court: TRIBUNAL
• Assessee Lawyers: K K CHHAPARIA F
• Keywords: Business income; Search and seizure; Speculation loss
• Section: 153A; 132

Judgement Text

I.T.(S.S.)A . NO. 31/KOL./2014 ASSESSMENT YEAR: 2007-2008 & C.O. NO. 29/KOL/2014 (ARISING OUT OF I.T.(S.S.)A NO. 31/KOL/2014) ASSESSMENT YEAR: 2007-2008 PAGE 1 OF 7 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA B BENCH, KOLKATA BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI S.S. VISWANETHRA RAVI, JUDICIAL MEMBER I.T.(S.S.)A. NO. 31/KOL/ 2014 ASSESSMENT YEAR: 2007-2008 DEPUTY COMMISSIONER OF INCOME TAX,................. ..................APPELLANT CENTRAL CIRCLE-XVI, KOLKATA, AAYAKAR BHAWAN POORVA, 110, SHANTIPALLY, 4 TH FLOOR, KOLKATA-700 107 -VS.- SHREE RAM ELECTROCAST PRIVATE LIMITED,............. ................RESPONDENT 8, CAMAC STREET, SHANTINIKETAN BUILDING, 9 TH FLOOR, ROOM NO. 16, KOLKATA-700 017 [PAN : AAICS 3476 P] & C.O. NO. 29/KOL/2014 (IN I.T.(S.S.)A. NO. 31/KOL/ 2014) ASSESSMENT YEAR: 2007-2008 SHREE RAM ELECTROCAST PRIVATE LIMITED,............. ....................CROSS OBJECTOR 8, CAMAC STREET, SHANTINIKETAN BUILDING, 9 TH FLOOR, ROOM NO. 16, KOLKATA-700 017 [PAN : AAICS 3476 P] -VS.- DEPUTY COMMISSIONER OF INCOME TAX,................. ........................RESPONDENT CENTRAL CIRCLE-XVI, KOLKATA, AAYAKAR BHAWAN POORVA, 110, SHANTIPALLY, 4 TH FLOOR, KOLKATA-700 107 APPEARANCES BY: SHRI ANAND KUMAR KEDIA, CIT, D.R., FOR THE DEPARTMENT SHRI K.K. CHHAPARIA, F.C.A., FOR THE ASSESSEE DATE OF CONCLUDING THE HEARING : JANUARY 05, 2017 DATE OF PRONOUNCING THE ORDER : FEBRUARY 03, 2017 I.T.(S.S.)A . NO. 31/KOL./2014 ASSESSMENT YEAR: 2007-2008 & C.O. NO. 29/KOL/2014 (ARISING OUT OF I.T.(S.S.)A NO. 31/KOL/2014) ASSESSMENT YEAR: 2007-2008 PAGE 2 OF 7 O R D E R THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS), CENTRAL-II, K OLKATA DATED 20.12.2013 AND THE SAME IS BEING DISPOSED OF ALONG WITH THE CROSS OBJECTION FILED BY THE ASSESSEE BEING C.O. NO. 29/K OL/2014. 2. IN ITS APPEAL, THE REVENUE HAS CHALLENGED THE AC TION OF THE LD. CIT(APPEALS) IN CANCELLING THE PENALTY OF RS.45,23, 466/- IMPOSED BY THE ASSESSING OFFICER UNDER SECTION 271(1)(C) OF THE IN COME TAX ACT, 1961. 3. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY, W HICH DURING THE YEAR UNDER CONSIDERATION DERIVED INCOME FROM LEASIN G OF LAND, PLANT & MACHINERY AND PREMISES. THE RETURN OF INCOME FOR TH E YEAR UNDER CONSIDERATION WAS FILED BY IT ON 24.10.2007 DECLARI NG TOTAL INCOME OF RS.50,02,709/-. A SEARCH AND SEIZURE ACTION UNDER S ECTION 132 WAS CONDUCTED IN THE CASE OF THE ASESSEE AND PURSUANT T O THE SAME, A NOTICE UNDER SECTION 153A WAS ISSUED BY THE ASSESSING OFFI CER ON 26.04.2010. IN RESPONSE TO THE SAID NOTICE, THE RETURN OF INCOME F OR THE YEAR UNDER CONSIDERATION WAS FILED BY THE ASSESSEE ON 24.05.20 10 DECLARING THE SAME TOTAL INCOME OF RS.50,02,709/- AS DECLARED IN THE O RIGINAL RETURN. DURING THE COURSE OF ASSESSMENT PROCEEDINGS UNDER SECTION 153A/143(3), THE CLAIM OF THE ASSESSEE FOR SET OFF OF SHARE TRADING LOSS OF RS.1,34,38,700/- AGAINST OTHER INCOME WAS EXAMINED BY THE ASSESSING OFFICER AND THE SAME WAS DISALLOWED ON THE GROUND THAT THE LOSS SHOWN BY THE ASSESSEE WAS NOT A GENUINE LOSS AND THE SAME EVEN OTHERWISE WAS DEEM ED SPECULATION LOSS AS PER EXPLANATION TO SECTION 73 OF THE INCOME TAX ACT. 4. ON APPEAL, THE LD. CIT(APPEALS) REGARDED THE SHA RE TRADING LOSS SHOWN BY THE ASSESSEE AS A GENUINE LOSS. HE, HOWEVE R, UPHELD THE ORDER OF I.T.(S.S.)A . NO. 31/KOL./2014 ASSESSMENT YEAR: 2007-2008 & C.O. NO. 29/KOL/2014 (ARISING OUT OF I.T.(S.S.)A NO. 31/KOL/2014) ASSESSMENT YEAR: 2007-2008 PAGE 3 OF 7 THE ASSESSING OFFICER IN TREATING THE SAID LOSS AS SPECULATION LOSS AS PER EXPLANATION TO SECTION 73 AND CONSEQUENTLY NOT ENTI TLED FOR SET OFF AGAINST OTHER INCOME. THEREAFTER NOTICE UNDER SECTI ON 271(1)(C) WAS ISSUED BY THE ASSESSING OFFICER TO THE ASSESSEE AND SINCE THE EXPLANATION OFFERED BY THE ASSESSEE IN RESPONSE TO THE SAID NOT ICE WAS NOT FOUND ACCEPTABLE BY HIM, THE ASSESSING OFFICER IMPOSED PE NALTY OF RS.45,23,466/- UNDER SECTION 271(1)(C) BEING 100% O F THE TAX SOUGHT TO BE EVADED BY THE ASSESSEE BY WRONGLY CLAIMING THE S ET OFF OF SHARE TRADING LOSS TO THAT EXTENT, WHICH WAS TREATED AS SPECULATI VE IN NATURE. 5. THE PENALTY IMPOSED BY THE ASSESSING OFFICER UND ER SECTION 271(1)(C) WAS CHALLENGED BY THE ASSESSEE IN THE APP EAL FILED BEFORE THE LD. CIT(APPEALS) AND AFTER CONSIDERING THE SUBMISSI ONS MADE BY THE ASSESSEE AS WELL AS THE MATERIAL AVAILABLE ON RECOR D, THE LD. CIT(APPEALS) CANCELLED THE PENALTY IMPOSED BY THE ASSESSING OFFI CER UNDER SECTION 271(1)(C) FOR THE FOLLOWING REASONS GIVEN IN PARAGR APH NO. 6 OF HIS IMPUGNED ORDER:- 6. I HAVE CONSIDERED THE SUBMISSION OF THE APPELL ANT AND PERUSED THE ASSESSMENT ORDER AS WELL AS THE PENALTY ORDER. I HAVE ALSO GONE THROUGH THE APPEAL ORDER AGAINST THE QUANTUM APPEAL AND THE JUDICIAL DECISIONS RELIED UP ON BY THE APPELLANT. THE FACTS OF THE CASE WHICH RESULTED INT O TREATING THE SHARE TRADING LOSS AS DEEMED SPECULATION LOSS W ITHIN THE MEANING OF EXPLANATION BELOW SECTION 73 OR THE TREA TMENT OF SHARE TRADING LOSS AS BOGUS LOSS BY THE AO AND THE REASONS FOR IMPOSITION OF PENALTY U/S 271(1)(C) OF THE ACT; HAV E ALREADY BEEN DISCUSSED AS ABOVE. DURING THE COURSE OF ASSES SMENT PROCEEDINGS IT WAS OBSERVED BY THE AA THAT THE ASSE SSEE COMPANY HAD INCURRED LOSS OF RS.L,34,38,700/- IN SH ARE TRADING ACTIVITY. HE INVOKED PROVISIONS OF EXPLANAT ION BELOW SECTION 73 OF THE ACT AND TREATED THE SAID LOSS AS DEEMED SPECULATION LOSS. HOWEVER, SIMULTANEOUSLY HE ALSO H ELD THAT THE SHARE TRANSACTIONS WERE NOT GENUINE FOR THE REA SON THAT THE APPELLANT COMPANY HAD PURCHASED THE SHARES IN O FF MARKET TRANSACTIONS FROM THREE COMPANIES AND ON INQ UIRY THOSE COMPANIES WERE NOT AVAILABLE ON THE ADDRESSES PROVIDED ON THE SALE BILLS. AS MENTIONED ABOVE, AGG RIEVED BY I.T.(S.S.)A . NO. 31/KOL./2014 ASSESSMENT YEAR: 2007-2008 & C.O. NO. 29/KOL/2014 (ARISING OUT OF I.T.(S.S.)A NO. 31/KOL/2014) ASSESSMENT YEAR: 2007-2008 PAGE 4 OF 7 THE ACTION OF THE AS THE APPELLANT COMPANY FILED AN APPEAL BEFORE THE CIT(A). IN HIS ORDER, THE CIT(A) CONFIRM ED THE ACTION OF THE AO TREATING THE SHARE TRADING LOSS AS DEEMED SPECULATION LOSS. HOWEVER, THE VIEW REGARDING INGEN UITY OF SHARE TRADING LOSS WAS NOT UPHELD FOR THE REASON TH AT ALL THE COMPANIES FROM WHOM SHARES WERE PURCHASED BY THE APPELLANT COMPANY WERE ASSESSED TO TAX AND FILING T HEIR RETURN OF INCOME. THEIR PAN WERE MENTIONED ON THE S ALE BILLS ISSUED BY THEM AND THAT SUBSEQUENTLY THE SHARES PUR CHASED FROM THOSE THREE COMPANIES WERE SOLD BY THE APPELLA NT COMPANY THROUGH NATIONAL STOCK EXCHANGE THROUGH REGISTERED SHARE BROKER. IT IS OBSERVED THAT THE AO HAS IMPOSED THE PENALTY U/S 271(1)(C) OF THE ACT FOR TH E REASON THAT THE APPELLANT COMPANY HAD FILED INACCURATE PAR TICULARS OF INCOME AS IT HAS CLAIMED DEDUCTION ON ACCOUNT OF SHARE TRADING LOSS WHICH WAS ALLEGED TO BE BOGUS AND ALSO OTHERWISE NOT ALLOWABLE AS NON-SPECULATIVE LOSS WIT HIN THE MEANING OF EXPLANATION BELOW SECTION 73 OF THE ACT. ON CAREFUL CONSIDERATION OF THE FACTS, I AM OF THE OPI NION THAT THE SHARE TRADING LOSS INCURRED BY THE APPELLANT CO MPANY CANNOT BE TREATED AS BOGUS LOSS BECAUSE IF THE APPE LLANT COMPANY WOULD HAVE NOT MADE PURCHASE OF SHARES, THE SAME COULD HAVE NOT BEEN SOLD THROUGH STOCK EXCHANGE THR OUGH THE REGISTERED BROKER. THE AO HAS NOT DOUBTED THE SALE OF SHARES AND THE COPIES OF SALE BILLS/CONTACT NOTES WERE SUB MITTED BEFORE HIM. THE QUESTION REMAINED THAT AS TO WHETHE R TREATMENT OF SHARE TRADING LOSS AS DEEMED SPECULATI ON LOSS AS PER THE EXPLANATION BELOW SECTION 73 IS TANTAMOUNT TO FURNISHING OF INACCURATE PARTICULARS OF INCOME. ON CAREFUL CONSIDERATION OF THE FACTS, I AM OF THE OPINION THA T IT CANNOT BE SAID THAT THE APPELLANT COMPANY HAD FILED INACCU RATE PARTICULARS OF INCOME. IN THE RETURN OF INCOME FILE D BY THE APPELLANT, THE SHARE TRADING LOSS WAS CLAIMED AS NON-SPECULATIVE BUSINESS LOSS AND SET OFF AGAINST O THER BUSINESS INCOME. HOWEVER, THE AO TREATED THE SAID L OSS AS SPECULATIVE BUSINESS LOSS AND NOT ALLOWED THE SET O FF OF THE SAME AGAINST OTHER BUSINESS INCOME. THUS, THE AO CH ANGED THE SUB-HEAD OF THE LOSS FROM NON- SPECULATIVE TO S PECULATIVE LOSS. HOWEVER, THE FACTS REMAINS THAT THE APPELLANT HAD INCURRED LOSS IN SHARE TRANSACTIONS WAS REFLECTED I N THE P&L A/C AND IN THE COURSE OF ASSESSMENT PROCEEDINGS THE APPELLANT SUBMITTED THE DETAILS WITH REFERENCE TO A FORESAID LOSS. I.T.(S.S.)A . NO. 31/KOL./2014 ASSESSMENT YEAR: 2007-2008 & C.O. NO. 29/KOL/2014 (ARISING OUT OF I.T.(S.S.)A NO. 31/KOL/2014) ASSESSMENT YEAR: 2007-2008 PAGE 5 OF 7 IN SUPPORT OF HIS DECISION TO CANCEL THE PENALTY IM POSED BY THE ASSESSING OFFICER UNDER SECTION 271(1)(C), THE LD. CIT(APPEAL S), INTER ALIA, RELIED ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CA SE OF CIT VS.- RELIANCE PETRO PRODUCTS PVT. LIMITED [322 ITR 158]; HONBLE MADHYA PRADESH HIGH COURT IN THE CASE OF CIT VS.- SPK STE ELS PVT. LIMITED [270 ITR 156]; AND HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS.- BHARTESH JAIN [323 ITR 358]. AGGRIEVED BY THE ORDER OF THE L D. CIT(APPEALS), THE REVENUE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUN AL. 6. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. AS SUBMITTED BY THE LD. COUNSEL FOR THE ASSESSEE, THE TRIBUNAL VIDE ITS ORDER DATED 02. 03.2016 PASSED IN ITA NOS. 657 & 750/KOL/2012 HAS ALREADY ACCEPTED THE GE NUINENESS OF SHARE TRADING LOSS SHOWN BY THE ASSESESE BY UPHOLDING THE FINDING RECORDED BY THE LD. CIT(APPEALS) THAT THE SAME CANNOT BE REGARD ED AS A BOGUS LOSS. BY THE SAID ORDER, THE TRIBUNAL, HOWEVER, HAS UPHELD T HE ORDER OF THE LD. CIT(APPEALS) PASSED IN THE QUANTUM PROCEEDINGS WHER EBY HE CONFIRMED THE ACTION OF THE ASSESSING OFFICER IN TREATING THE SAID SHARE TRADING LOSS AS DEEMED SPECULATION LOSS AS PER EXPLANATION TO SE CTION 73 OF THE ACT AND CONSEQUENTLY NOT ENTITLED FOR SET OFF AGAINST O THER INCOME OF NON- SPECULATIVE NATURE AND THE QUESTION THAT REQUIRES O UR CONSIDERATION AND DECISION IS WHETHER THE DISALLOWANCE OF ASSESSEES CLAIM FOR SET OFF OF SHARE TRADING LOSS AGAINST OTHER INCOME BY TREATING THE SAME AS SPECULATION LOSS AS PER EXPLANATION TO SECTION 73 O F THE ACT WILL ATTRACT THE PENALTY UNDER SECTION 271(1)(C). IN THIS REGARD , WE FIND THAT THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY TH E VARIOUS JUDICIAL PRONOUNCEMENTS CITED BY THE LD. COUNSEL FOR THE ASS ESSEE INCLUDING THOSE WHICH HAVE BEEN RELIED UPON BY THE LD. CIT(APPEALS) IN HIS IMPUGNED ORDER WHILE CANCELLING THE PENALTY IMPOSED BY THE A SSESSING OFFICER UNDER SECTION 271(1)(C). IN ONE OF SUCH CASES, NAME LY CIT VS.- SPK STEELS PVT. LIMITED [270 ITR 156 (M.P.)], IT WAS HELD BY T HE HONBLE MADHYA I.T.(S.S.)A . NO. 31/KOL./2014 ASSESSMENT YEAR: 2007-2008 & C.O. NO. 29/KOL/2014 (ARISING OUT OF I.T.(S.S.)A NO. 31/KOL/2014) ASSESSMENT YEAR: 2007-2008 PAGE 6 OF 7 PRADESH HIGH COURT THAT PENALTY UNDER SECTION 271(1 )(C) WAS NOT EXIGIBLE IN RESPECT OF DISALLOWANCE OF ASSESSEES CLAIM FOR SET OFF OF SHARE TRADING LOSS BY TREATING THE SAME AS SPECULATIVE IN NATURE AS PER EXPLANATION TO SECTION 73 ON THE BASIS OF PRELIMINARY DETAILS FURN ISHED BY THE ASSESSEE ALONGWITH THE RETURN OF INCOME AS THE ASSESSEE COUL D NOT BE SAID TO HAVE FILED INACCURATE PARTICULARS OR CONCEALED PARTICULA RS OF HIS INCOME, WHICH WAS CHARGEABLE TO TAX. 7. IN THE CASE OF CIT VS.- AURIC INVESTMENT & SECU RITIES LIMITED [310 ITR 121 (DELHI)] BEFORE THE HONBLE DELHI HIGH COUR T, THE CLAIM OF THE ASSESSEE FOR SET OFF OF SHARE TRADING LOSS AGAINST OTHER INCOME OF NON- SPECULATIVE NATURE WAS DISALLOWED BY THE ASSESSING OFFICER BY TREATING THE SAME AS THE LOSS OF SPECULATIVE NATURE BY INVOK ING THE EXPLANATION TO SECTION 73. THE ASSESSING OFFICER ALSO IMPOSED PENA LTY UNDER SECTION 271(1)(C) ON THE GROUND THAT THE ASSESSEE HAD FURNI SHED INACCURATE PARTICULARS OF INCOME TO THE EXTENT OF MAKING A WRO NG CLAIM FOR SET OFF OF SHARE TRADING LOSS AGAINST NORMAL INCOME. HONBLE D ELHI HIGH COURT, HOWEVER, HELD THAT THE PENALTY IMPOSED BY THE ASSES SING OFFICER UNDER SECTION 271(1)(C) WAS NOT SUSTAINABLE AS MERE TREAT MENT OF BUSINESS LOSS AS SPECULATION LOSS BY THE ASSESSING OFFICER DID NO T AUTOMATICALLY WARRANT INFERENCE OF CONCEALMENT OF INCOME AND THERE WAS NO THING ON RECORD TO SHOW THAT IN FURNISHING ITS RETURN OF INCOME, THE A SSESSEE HAD EITHER CONCEALED ITS INCOME OR HAD FURNISHED ANY INACCURAT E PARTICULARS OF INCOME. SIMILARLY IN THE CASE OF CIT VS.- BHARTESH JAIN [323 ITR 358 (DELHI)], THE HONBLE DELHI HIGH COURT HELD THAT ME RE TREATMENT OF BUSINESS LOSS AS SPECULATION LOSS WOULD NOT JUSTIFY LEVY OF PENALTY UNDER SECTION 271(1)(C). KEEPING IN VIEW THE RATIO OF THE SE JUDICIAL PRONOUNCEMENTS, WHICH IS SQUARELY APPLICABLE IN THE PRESENT CASE, WE FIND NO INFIRMITY IN THE IMPUGNED ORDER OF THE LD. CIT(APPEALS) CANCELLING THE PENALTY IMPOSED BY THE ASSESSING OFFICER UNDER SECTION 271(1)(C) AND UPHOLDING THE SAME, WE DISMISS THIS APPEAL FILED BY THE REVENUE. I.T.(S.S.)A . NO. 31/KOL./2014 ASSESSMENT YEAR: 2007-2008 & C.O. NO. 29/KOL/2014 (ARISING OUT OF I.T.(S.S.)A NO. 31/KOL/2014) ASSESSMENT YEAR: 2007-2008 PAGE 7 OF 7 8. AS A RESULT OF OUR DECISION RENDERED WHILE DISPO SING OF THE APPEAL OF THE REVENUE, WHEREBY THE IMPUGNED ORDER OF THE L D. CIT(APPEALS) CANCELLING THE PENALTY IMPOSED BY THE ASSESSING OFF ICER UNDER SECTION 271(1)(C) IS UPHELD, THE ISSUE RAISED BY THE ASSESS EE IN ITS CROSS OBJECTION HAS BECOME ACADEMIC OR INFRUCTUOUS. WE, T HEREFORE, DISMISS THE CROSS OBJECTION OF THE ASSESSEE. 9. IN THE RESULT, THE APPEAL OF THE REVENUE AS WELL AS THE CROSS OBJECTION FILED BY THE ASSESSEE BOTH ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON FEBRUARY 03, 2017. SD/- SD/- (S.S. VISWANETHRA RAVI) (P.M. JAGTAP) JUDICIAL MEMBER ACCOUNTANT ME MBER KOLKATA, THE 3 RD DAY OF FEBRUARY, 2017 COPIES TO : (1) DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-XVI, KOLKATA, AAYAKAR BHAWAN POORVA, 110, SHANTIPALLY, 4 TH FLOOR, KOLKATA-700 107 (2) SHREE RAM ELECTROCAST PRIVATE LIMITED, 8, CAMAC STREET, SHANTINIKETAN BUILDING, 9 TH FLOOR, ROOM NO. 16, KOLKATA-700 017 (3) COMMISSIONER OF INCOME-TAX (APPEALS), CENTRAL- II, KOLKATA (4) COMMISSIONER OF INCOME TAX, KOLKATA (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.