Shri Jayvadan Ramniklal Kapadia, Surat V. The Income Tax Officer, Ward-8(2), Surat

ITSSA 408/AHD/2013

• Counselvise Citation: [2016] 122 COUNSELVISE.COM (IT) 1463 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 3 month(s) 1 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 22-01-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 19-11-2015
• Assessment Year: 2001-2002
• Appeal Filed On: 21-10-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: LALA PHILIPS
• Assessee Lawyers: M J SHAH
• Keywords: Business income; Depreciation; Speculation loss; Wrong claim; Difference of opinion
• Section: 69C; 143(3); 153A; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH AHMEDABAD BEFORE S/SHRI RAJPAL YADAV, JM, & MANISH BORAD, AM. IT(SS)A NO.408/AHD/2013 ASST. YEAR: 2001-02 SHRI JAYVADAN RAMNIKLAL KAPADIA, 9/464, STORE SHERI, WADIFALIA, SURAT. VS. INCOME-TAX OFFICER WD-8(2), SURAT APPELLANT RESPONDENT PAN ACHPK 3121D APPELLANT BY SHRI M. J. SHAH, AR RESPONDENT BY MR. LALA PHILIPS, SR.DR DATE OF HEARING: 19/11/2015 DATE OF PRONOUNCEMENT: 22/01/2016 O R D E R PER MANISH BORAD, ACCOUNTANT MEMBER. THIS IS AN APPEAL FILED BY ASSESSEE AGAINST THE OR DER OF CIT(A)-V, SURAT, DATED 3.8.2013 IN APPEAL NO.CAS/V/29/2012-13 FOR ASSESSMENT YEAR 2001-02. PENALTY ORDER U/S 271(1)(C) OF THE IT ACT, 1961 (IN SHORT THE ACT) HAS BEEN PASSED ON 28.05.2012 BY ITO, WD-8 (2), SURAT. FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS APPEAL : - 1. THE ASSESSING OFFICER AND LD. CIT(A) HAS GROSSLY ERRED IN LEVYING PENALTY ON FIDDERENCE ON NOTIONAL INCOME OF RS.1900 ON MUNICIPAL RATABLE VALUE AS PER MUNICIPAL CORPORATION BILL AND ASSESSEE SHOWN IN HIS RETURN OF INCOME. 2. THE AO AND LD. CIT(A) NOT CONSIDERED THE FACT TH AT INCOME OF RS.1900 ADDED AS PER MUNICIPAL RATABLE VALUE WHICH IS NOTIONAL INCOME AND NOT THE EARNED INCOME BY THE ASSESSEE. T HE AO IMPOSE PENALTY ON VIRTUAL INCOME. ITA NO. 408/AHD/2013 ASST. YEAR2001-02 2 3. THE AO AND LD. CIT(A) GROSSLY ERRED FOR LEVYING PENALTY ON SET OFF OF CAR LOSS AGAINST THE REGULAR INCOME. 4. THE AO AND LD. CIT(A) NOT CONSIDERED THAT THE SH ORT TERM CAPITAL LOSS AROSE ON SALE OF CAR AS IT WAS THE ONLY DEPREC IABLE ASSET IN THE BLOCK AND THE SAME HAS BEEN SET OFF AGAINST THE REG ULAR INCOME. THE SAME TREATMENT WAS ALSO GIVEN IN ORIGINAL RETUR N FILED BY THE ASSESSEE. 5. THE AO AS WELL LD. CIT(A) HAS NOT MADE ANY PROPE R JUSTIFICATION FOR IMPOSING PENALTY OR CONSIDERED THE FACT PROPERLY. T HE PENALTY IMPOSED ON BOTH INCOME WERE NOT EARNED BY THE ASSES SEE. ONE IS THE NOTIONAL INCOME WHILE ANOTHER IS THE DIFFERENCE OF OPINION FOR SET OFF OF DIFFERENT TYPES OF LOSSES. 6. THE RELIEF AS CLAIMED BY THE APPELLANT MAY KINDL Y BE ALLOWED IN TOTO. 7. THE APPELLANT RESERVES TO THE RIGHT TO ADD, AMEN D, ALTER OR SUBSTITUTE ANY OTHER GROUNDS UPTO AND AT THE TIME O F HEARING OF THIS APPEAL. 2. SINCE ALL THE GROUNDS ARE INTER RELATED, THEY AR E TAKEN TOGETHER FOR DISPOSAL. BRIEFLY STATED FACTS ARE THAT ASSESSEE IS AN INDIVIDUAL AND A SEARCH PROCEEDINGS U/S 132 OF THE ACT WAS CARRIED O UT AT HIS RESIDENCE AT SURAT ON 22.12.2004. DURING THE COURSE OF SEARCH CERTAIN DOCUMENTS WERE FOUND AND SEIZED. NOTICE U/S 153A OF THE ACT W AS ISSUED ON 7.4.2005 AND SERVED ON ASSESSEE. IN RESPONSE TO THE NOTICE ASSESSEE FURNISHED THE RETURN OF INCOME ON 30.10.2005 SHOWIN G TOTAL INCOME OF RS.86,080/-. ASSESSEE HAS OFFERED RS.98,082/- AS AD DITIONAL INCOME IN THE RETURN FILED IN RESPONSE TO THE NOTICE U/S 153A (A) OF THE ACT. ASSESSMENT U/S 143(3) R.W.S. 153A OF THE ACT WAS FR AMED ON 29.12.2006 AFTER MAKING CERTAIN ADDITIONS AND RETURNED INCOME OF THE ASSESSEE SHOWN AS PER HIS RETURN OF INCOME. INCOME OF THE AS SESSEE WAS ASSESSED AT RS.4,09,430/-. IN THE QUANTUM APPEAL BE FORE CIT(A) APPEAL ITA NO. 408/AHD/2013 ASST. YEAR2001-02 3 OF THE ASSESSEE WAS PARTLY ALLOWED. NO FURTHER APPE AL OF QUANTUM ADDITION CONFIRMED BY CIT(A) WAS PREFERRED BEFORE T HE TRIBUNAL. THEREAFTER ON 26.3.2012 THE ITO, WD-8(2), SURAT PAS SED ORDER U/S 271(1)(C) OF THE ACT LEVYING PENALTY OF RS.1,01,483 /- ON THE ADDITIONS SUSTAINED BY LD. CIT(A). 3. AGGRIEVED, ASSESSEE WENT IN APPEAL BEFORE CIT(A) WHO DISMISSED THE APPEAL OF ASSESSEE BY CONFIRMING THE PENALTY U/ S 271(1)(C) OF THE ACT. LD. AR SUBMITTED THAT PENALTY U/S 271(1)(C) O F THE ACT OF RS.1,01,483/- WAS CONFIRMED BY LD. CIT(A) AND THIS PENALTY OF RS.1,01,483/- WAS CALCULATED ON TOTAL CONCEALED INC OME OF RS.3,23,390/- WHICH INCLUDED CONCEALED INCOME ON ACCOUNT OF INCOM E FROM HOUSE PROPERTY, CLAIM OF LOSS ON SALE OF CAR, LONG TERM C APITAL GAIN AND INCOME FROM OTHER SOURCES. HOWEVER, ASSESSEE IS IN APPEAL AGAINST THE IMPOSITION OF PENALTY U/S 271(1)(C) OF THE ACT ON F OLLOWING CONCEALED INCOME:- 1) INCOME FROM HOUSE PROPERTY RS.1,900/- 2) SHORT TERM CAPITAL LOSS ON SALE OF CAR RS.1,35, 297/- 4. TO ARRIVE AT THE CONCLUSION THAT WHETHER LD. CIT (A) WAS JUSTIFIED IN CONFIRMING PENALTY ON THE ABOVE SAID TWO ADDITIONS, WE WILL TAKE UP EACH ADDITION SEPARATELY. 5. THE LD. AR REITERATED THE SUBMISSIONS MADE BEFOR E LD. FIRST APPELLATE AUTHORITY AND FURTHER RELIED ON THE DECIS ION OF THE TRIBUNAL, DELHI BENCH F IN THE CASE OF RUBBER UDYOG VIKAS ( P) LTD. VS. ACIT IN ITA NO.4435 (DELHI) OF 2009 ASST. YEAR 1994-95. ITA NO. 408/AHD/2013 ASST. YEAR2001-02 4 6. ON THE OTHER HAND THE LD. DR RELIED ON THE ORDER S OF LOWER AUTHORITIES. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. AS REGARDS FIRST CONCEALED INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY AT RS.1,900/-,FROM PERUSAL OF THE RE CORD, WE FIND THAT DURING THE YEAR THE ASSESSEE WAS HAVING TWO HOUSE PROPERTIES OUT OF WHICH ONE WAS SHOWN AS SELF-OCCUPIED AND ON THE OTH ER HOUSE PROPERTY INCOME OF RS.500/- WAS SHOWN IN THE RETURN OF INCOM E BY THE ASSESSEE. HOWEVER, DURING ASSESSMENT PROCEEDINGS INCOME FROM HOUSE PROPERTY OF THIS RENTED HOUSE WAS ESTIMATED BY ASSESSING OFF ICER AT RS.27,500/- THEREBY MAKING AN ADDITION AT RS.27,000/-. HOWEVER, IN APPEAL BEFORE LD. CIT(A) IT WAS HELD THAT THE INCOME OF THIS RENTED H OUSE SHOULD BE TAKEN BY ADOPTING MUNICIPAL VALUATION OF THE PROPERTY WHI CH WAS CALCULATED BY ASSESSING OFFICER AT THE TIME OF GIVING APPEAL EFFE CT AT RS.2,400/- AND BECAUSE OF THIS APPEAL EFFECT THE ORIGINAL ADDITION MADE BY ASSESSING OFFICER AT RS.27,000/- WAS REDUCED TO RS.1,900/-. 8. THE ISSUE BEFORE US IS WHETHER ASSESSEE IS LIABL E TO PAY PENALTY U/S 271(1)(C) OF THE ACT ON THIS CONCEALED INCOME O F RS.1,900/-. SECTION 271(1)(C) REFERS TO IMPOSITION OF PENALTY IF THE AS SESSEE HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURA TE PARTICULARS OF SUCH INCOME. EXAMINING THE FACTS OF THE CASE OF ASSESSEE IN THIS ASPECT WE FIND THAT INCOME FROM HOUSE PROPERTY WAS CERTAINLY DISCLOSED BY THE ASSESSEE IN ITS RETURN OF INCOME ON ESTIMATE BASIS BECAUSE THE HOUSE PROPERTY WAS NOT RENTED DURING THE YEAR AND ASSESSE E HAS DISCLOSED HIS INCOME AT RS.500/-. THE AO FURTHER ESTIMATED THIS I NCOME AT RS.27,500/- AND FINALLY LD. CIT(A) REDUCED THE ADDITION FROM RS .27,500/- TO RS.1,900/- . CERTAINLY THERE WAS NO DELIBERATE CONCEALMENT ON THE PART OF THE ITA NO. 408/AHD/2013 ASST. YEAR2001-02 5 ASSESSEE AND THE ADDITION CONFIRMED IS ONLY ON THE BASIS OF ESTIMATE ARRIVED AT BY TAKING VALUE FROM OTHER SOURCES, WHIC H IN THIS CASE WAS THE MUNICIPAL RATABLE VALUE AND CERTAINLY SUCH TYPE OF ADDITION DO NOT COME UNDER THE CLUTCHES OF SECTION 271(1)(C) OF THE ACT. WE, THEREFORE, DELETE THE PENALTY U/S 271(1)(C) OF THE ACT CALCULATED ON THE SUSTAINED CONCEALED INCOME OF RS.1,900/-. 9. REGARDING SECOND CONCEALMENT ON ACCOUNT OF CLAIM OF SHORT TERM CAPITAL LOSS ON SALE OF CAR RS.1,35,297/-, LD. AR S UBMITTED THAT THERE WAS ONLY ONE CAR IN THE BLOCK NO.III AND THE SAME HAS B EEN SOLD DURING THE FY 2000-01. AFTER DEDUCTION OF SALE VALUE FROM THE BOOK THE SHORT TERM CAPITAL LOSS HAS BEEN AROSE. THERE WAS NO DISPUTE R EGARDING SALE VALUE OF THE CAR AND SHORT TERM CAPITAL LOSS FROM SALE OF CAR WAS SET OFF AGAINST THE REGULAR INCOME IN THE SAME YEAR. LD. AR SUBMITT ED THAT THERE WAS DIFFERENCE OF OPINION WHETHER SHORT TERM CAPITAL LO SS ON SALE OF CAR CAN BE ADJUSTABLE AGAINST OTHER INCOME IN THE SAME YEAR OR NOT, ASSESSING OFFICER WAS OF THE VIEW THAT SHORT TERM CAPITAL LOS S ON SALE OF CAR CANNOT BE ADJUSTABLE WITH OTHER INCOME IN THE SAME ASSESSM ENT YEAR. IT IS MERELY A DIFFERENCE OF OPINION. THERE WAS NO HIDE O F ANY INCOME OR CONCEALED INCOME OR SUPPLY OF INACCURATE PARTICULAR S OR ANY FURTHER CLAIM FROM THE ASSESSEE. ON ACCOUNT OF ONLY DIFFERENCE OF OPINION IT CANNOT BE SAID THAT THE ASSESSEE PROVIDED WRONG DETAILS OR IN ACCURATE PARTICULARS AND PENALTY U/S 271(1)(C) IS APPLICABLE. 10. THE LD. CIT(A) CONFIRMED THE PENALTY BY OBSERVI NG AS UNDER :- 6. I HAVE CONSIDERED THE PENALTY ORDER AS WELL AS THE SUBMISSIONS OF THE APPELLANT THE GROUNDS OF APPEAL- GROUND NO. 1,2 & 3 EFFECTIVELY PERTAINS TO IMPOSITION OF PENALTY OF RS. 1,01,483/- U/S 271(1)( C) OF THE ACT. ON THE PERUSAL OF THE DETAILS IT IS OBSERVED THAT THE APPELLANT HAD CLAIM ED SHORT TERM CAPITAL LOSS OF RS. 3,21,440/- ON THE SALE OF HONDA CITY CAR THE APPELL ANT HAD DEDUCTED SHORT TERM ITA NO. 408/AHD/2013 ASST. YEAR2001-02 6 CAPITAL LOSS FROM THE PROFIT ON THE BUSINESS. THE C IT(A) VIDE ITS ORDER DATED 16.08.2010 IN THE QUANTUM APPEAL HELD THAT THE AO W AS JUSTIFIED IN THE DISALLOWING THE LOSS FROM THE BUSINESS WHEN THE SALE HAS BEEN A DJUSTED AGAINST THE BLOCK OF ASSETS AND THUS CONFIRMED THE ADDITION OF RS. 1,35, 297/-. THE APPELLANT HAS NOT FILED ANY APPEAL AGAINST THE ORDER OF THE CIT(A) AS MENTI ONED IN THE PENALTY ORDER ITSELF. THE APPELLANT'S CONTENTION THAT THERE IS A DIFFEREN CE OF OPINION THAT THE SHORT TERM CAPITAL LOSS ON THE SALE OF CAR CAN BE ADJUSTED AGA INST OTHER INCOME IN THE SAME YEAR OR NOT, IS DEVOID OF FACTS AND MERITS. ITIS SETTLED LAW THAT THE LOSS ON ACCOUNT OF CAPITAL GAINS CANNOT BE ADJUSTED AGAINST ANY OTHER SOURCE O F INCOME AS PER THE PROVISIONS OF SECTION 74 OF THE IT ACT. HENCE THE LAW IS VERY CLE ARAND THERE IS NO QUESTION OF HAVING TWO OPINIONS ON THIS PROVISION. THE APPELLAN T H.JS RELIED ON SEVERAL CASE LAWS IN SUPPORT OF ITS CONTENTION. THE VARIOUS CASE LAW HAS BEEN EXAMINED AND THE FACTS AND CIRCUMSTANCES OF THE CASE ARE DIFFERENT FROM TH E CASE LAWS ON WHICH THE APPELLANT HAS RELIED, HENCE NOT APPLICABLE. 6.1.1 THE POSITION OF LAW WITH REGARD TO LEVY OF PE NALTY U/S 271(1)(C) HAS UNDERGONE A SUBSTANTIAL CHANGE AFTER THE INSERTION OF EXPLANA TION (1) TO SECTION 271(1)(C) W.E.F 01.04.1976. EXPLANATION (1) TO SECTION 271(1)(C) RA ISES A PRESUMPTION THAT AS AND WHEN AN AMOUNT IS ADDED OR DISALLOWED IN COMPUTING THE TOTAL INCOME THE SAME SHALL BE DEEMED OR REPRESENT THE INCOME IN RESPECT OF WHI CH PARTICULARS HAVE BEEN CONCEALED. FURTHER W.E.F. 10.09.1986 AMENDMENT HAS BEEN MADE IN EXPLANATION 1-B TO SECTION 271(1)(C). AFTER, THIS AMENDMENT FURTHER ONUS HAS BEEN PLACED ON THE ASSESSEE TO PROVE THAT THE EXPLANATION FURNISHED BY HIM WAS BONAFIDE. THE POSITION NOW IS THAT UNLESS AND UNTIL THE ASSESSEE SUBSTANTI ATES THE EXPLANATION AND PROVES THAT SUCH AN EXPLANATION WAS BONAFIDE THE ADDITION MADE TO HIS INCOME SHALL DEEMED TO REPRESENT THE CONCEALED INCOME. 6.1.2 ON THE ANALYSIS OF THE PROVISIONS OF SECTION 271(1)(C) IT IS OBSERVED THAT THE EXPLANATION 1 TO SECTION 271(1) PROVIDES FOR THE SI TUATION WHERE NO EXPLANATION FOR THE FAILURE IS OFFERED BY THE ASSESSEE OR WHERE THE EXPLANATION THAT HAS BEEN OFFERED IS FOUND TO BE FALSE OR WHERE THE ASSESSEE IS NOT A BLE TO SUBSTANTIATE THE EXPLANATION OFFERED BY HIM. IN ALL THESE CASES, THE AMOUNT ADDE D OR DISALLOWED IN COMPUTING THE TOTAL INCOME OF SUCH PERSON SHALL BE DEEMED TO REPR ESENT THE INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED. AS PER THE P ROVISO TO THIS EXPLANATION, THE ONUS TO ESTABLISH THAT THE EXPLANATION OFFERED WAS BONAFIDE AND FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF HIS INCOME HAVE BEEN DISCLOSED BY HIM WILL BE ON THE PERSON CHARGED FOR CONCEALMENT. 6.1.3 AS PER THE PROVISIONS OF EXPLANATION (1)(B),N OW THE ENTIRE ONUS IS ON THE ASSESSEE TO NOT ONLY OFFER AN EXPLANATION BUT ALSO TO SUBSTANTIATE IT AND TO PROVE THAT THE PRESUMPTION WAS BONAFIDE. AT THE SAME TIME THE PRESUMPTION SO RAISED BY THE EXPLANATION (1) IS REBUTTABLE. THE EFFECT IS THAT U NLESS AND UNTIL THE ASSESSEE REBUTS THE PRESUMPTION, HE WOULD B; LIABLE FOR PENALTY UND ER SECTION 271(1)(C) OF THE ACT. IT IS NOW AN ESTABLISHED LAW THAT THE PRESUMPTION WOUL D NOT STAND REBUTTED MERELY BY FURNISHING ANY GENERAL OR FANTASTIC OR FANCIFUL OR UNREASONABLE EXPLANATION BY ASSESSEE. THE EXPLANATION SHOULD BE BASED ON COGENT AND RELEVANT MATERIAL AND SHOULD BE ACCEPTABLE TO THE AUTHORITIES. IN THIS CO NNECTION REFERENCE MAY BE MADE TO THE DELHI HIGH COURT'S DECISION IN THE CASE OF CIT VS. GURBACHANLAL REPORTED IN 250 ITR 157(DELHI) ITA NO. 408/AHD/2013 ASST. YEAR2001-02 7 6.1.4 THE APEX COURT HAD APPROVED THE INTERPRETATIO N PLACED UPON THE EXPLANATION BY A FULL BENCH OF THE PUNJAB AND HARYANA HIGH COURT IN VISWAKARMA INDUSTRIES VS. GIT (1982) 135 ITR 652. 6.1.5 SIMILAR VIEW HAS BEEN EXPRESSED BY THE KERALA HIGH COURT IN THE CASE OF CIT VS. K.P. MADHUSUDANA REPORTED IN 246 ITR 218. THIS DECISION HAS BEEN AFFIRMED BY THE SUPREME COURT IN 251 ITR 99, AFFIRMING THE AFORESAID DECISION, THE HON'BLE SUPRE ME COURT HAS FURTHER HELD THAT AFTER INSERTION OF EXPL ANATION ITS EARLIER DECISION IN THE CASE OF SIR SHADILAL SUGAR AND GENERAL MILLS LTD. VS. CIT R EPORTED IN 168 ITR 705 (SC) WAS NO LONGER APPLICABLE. THE KERALA HIGH COURT AT PAGE 24 4 HAS OBSERVED AS UNDER: 'THE QUESTION OF ONUS IS OF PRIMARY AND ADDED IMPOR TANCE IN LEGAL ACRIMONY. IN CIT VS. AMVAR AH (1970) 76 ITR 696, THE APEX COURT LAID DOWN THAT , BEFORE A PERSON COULD BE VISITED WITH A PENALTY FOR CONCEALMENT, ETC., THE REVENUE MUST PRO VE THAT THE AMOUNT IN QUESTION WAS THE INCOME OF THE ASSESSEE AND THAT HE HAD CONCEALED IT WITH A MOTIVE. IT WAS FURTHER HELD THAT PENALTY COULD NOT BE IMPOSED MERELY BECAUSE ANY EXP LANATION GIVEN BY THE ASSESSEE IN REGARD TO THE ITEMS IN QUESTION WAS NOT BELIEVED TO BE TRU E. THE POSITION OF LAW ON OR AFTER APRIL 1, 1976, IS THAT WHERE IN RESPECT OF ANY ITEM OF CREDIT. (A) THE ASSESSEE FAILS TO OFFER AN EXPLANATION OR (B) THE ASSESSEE OFFERS AN EXPLANATION WHICH THE TAXING OFFICER CONSIDERS TO BE FALSE, OR (C) THE ASSESSEE OFFERS AN EXPLANATION BUT NO MATERIAL OR E VIDENCE TO SUBSTANTIATE IT, HE SHALL BE DEEMED TO HAVE CONCEALED SUCH INCOME WITHIN THE MEANING OF SECTION 271 (1)(C). WHAT SECTIONS 68, 69,69A, 69B AND 69C DEEM FOR THE PURPOSE OF ASSESSM ENT WAS INJECTED FOR THE PURPOSE OF PENALTY BY OPERATION OF A DEEMING PROVISION. A PROV ISO WAS ADDED TO THE NEW EXPLANATION. IT CONCERNS CASES WHERE THE ASSESSEE OFFERS AN EXPLANA TION WHICH HE IS NOT ABLE TO SUBSTANTIATE. CONSEQUENTIALLY, THE PROVISIONS ARE INTENDED TO SAV E SUCH AMOUNT FROM IMPOSITION OF PENALTY ALTHOUGH THE SAME HAD BEEN ADDED TO THE ASSESSEE'S INCOME IN THE ASSESSMENT. IF THE ASSESSEE'SEXPLANATION IS FOUND TO BE BONAFIDE AND A LL THE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATICN OF HIS TOTS/ INCOME HAVE BEEN DI SCLOSED BY HIM.' 6.1.6 THE VIEWS SIMILAR TO THE ABOVE DECISION OF DE LHI AND KERALA HIGH COURTS WERE EXPRESSED BY THE ALLAHABAD HIGH COURT IN THE CASE O F SUSHIL KUMAR SHARAD KUMAR 232 ITR 588 (ALLD). 6.1.7 SIMILARLY, THE DELHI HIGH COURT IN THE CASE O F CIT VS. SOHAN SINGH 254 ITR 170 HASHELD THAT FOR THE PURPOSE OF PENALTY MATTER HAS TO BE EXAMINED IN THE BACKGROUND OF EXPLANATION TO SECTION 271(L(C). IT HAS ALSO BEEN H ELD THAT EVIDENCE RECORDED DURINCI THE COURSE OF ASSESSMENT PROCEEDINGS, THROUGH NOT CONCL USIVE, ARE NOT TOTALLY IRRELEVANT. THEY COULD BE TAKEN NOTE OF. ACCORDING TO THE HIGH COURT WHAT WAS REQUIRED WAS THAT THE ASSESSES MUST OFFER AN EXPLANATION WHICH, IF FOUND TO BE UNTENABLE OR UNACCEPTABLE, THEN THE PENALTY CAN BE LEVIED UNDER SECTION 271(1) (C)OFTHEITACT. 6.1.8 IN VIEW OF THE ABOVE FACTS, IT IS EVIDENT THA T THE APPELLANT HAD CLAIMED INCORRECT DEDUCTIONS AND THEREFORE THE PROVISIONS OF SECTION 271(1)(C) OF THE ACT ARE APPLICABLE.THE ASSESSING OFFICER HAS RIGHTLY IMPOSE D THE PENALTY U/S 271(1)(C) OF THE ACT FOR FILING INACCURATE PARTICULARS. HENCE, THE PENAL TY ORDER LEVYING A PENALTY OF RS.1,01,483/- IS BEING UPHELD AND GROUND OF APPEAL IS DISMISSED. 11. AFTER CONSIDERING THE RIVAL CONTENTIONS AND FAC TS OF THE CASE, WE FIND THAT A SIMILAR ISSUE HAS BEEN DECIDED BY THE T RIBUNAL DELHI BENCH IN THE CASE OF IN THE CASE OF RUBBER UDYOG VIKAS (P ) LTD. VS. ACIT IN ITA ITA NO. 408/AHD/2013 ASST. YEAR2001-02 8 NO.4435 (DELHI) OF 2009 ASST. YEAR 1994-95 VIDE IS ORDER DATED MARCH 31, 2010 BY OBSERVING AS UNDER: 5. WE HAVE CONSIDERED THE RIVAL CONTENTIONS, CARE FULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND ALSO DELIBERATED UPON THE VARIOUS CASE LAWS CITED BY THE LEARNED AR AND DISCUSSED BY LOWER AUTHORITIES IN TH EIR RESPECTIVE ORDERS. FROM THE RECORD, WE FOUND THAT ASSESSEE HAS CLAIMED SET OFF OF UNABSORBED BUSINESS LOSS AGAINST THE CAPITAL GAINS EARNED DURING THE YEAR. A S A RESULT OF AO'S ACTION FOR DECLINE OF SUCH SET OFF, PENALTY WAS IMPOSED U/S 271(1)(C). CONTENTION OF THE ASSESSEE WAS THAT CLAIM WAS MADE IN BONA-FIDE WAY FOR SETTING OF CARRY FORWARD BUSINESS LOSS AGAINST THE INCOME ARISING ON SALE OF BUSINESS ASSE TS. ALONG WITH THE RETURN OF INCOME, THE ASSESSEE HAS ALSO SUBMITTED DIRECTOR'S REPORT DULY DISCLOSING THE FACT OF SALE OF BUILDING AND UTILIZATION OF THE AMOUNT FOR THE PURPOSE OF BUSINESS. THUS, WE FOUND THAT ASSESSEE HAS FURNISHED ALL THE PARTICULA RS OF INCOME WHICH IS EVIDENT FROM THE COMPUTATION OF INCOME, DIRECTOR'S REPORT ETC. F ILED ALONG WITH RETURN OF INCOME. IN THE QUANTUM ORDER, THE AO DECLINED ASSESSEE'S CLAIM OF SET OFF. NOWHERE AO HAS ALLEGED THAT ASSESSEE'S CLAIM IS MALA-FIDE. THUS, I T WAS A SIMPLE CASE OF DENIAL OF ASSESSEE'S CLAIM OF SET OFF OF BUSINESS LOSS AGAINS T THE CAPITAL GAIN. IN THIS REGARD, HON'BLE SUPREME COURT IN THE CASE OF RELIANCE PETRO PRODUCTS (P) LTD. (SUPRA) WHILE CONFIRMING THE ORDER OF HON'BLE HIGH COURT DELETING THE PENALTY IMPOSED U/S 271(1)(C) FOR DENIAL OF ASSESSEE'S CLAIM OF DEDUCTI ON OF INTEREST EXPENDITURE, HAS CATEGORICALLY OBSERVED THAT 'BY ANY STRETCH OF IMAG INATION, MAKING AN INCORRECT CLAIM IN LAW CANNOT TANTAMOUNT TO FURNISHING INACCURATE P ARTICULARS'. ACCORDINGLY, IT WAS HELD THAT DECLINE OF 4 ITA-4435/DEL/2009 ASSESSEE'S CLAIM OF INTEREST AGAINST THE LOAN UTILIZED FOR MAKING INVESTMENT IN TAX FREE SEC URITIES, WILL NOT AMOUNT TO FURNISHING OF INACCURATE PARTICULARS SO AS TO ATTRA CT PENALTY U/S 271(1)(C) OF THE ACT. HON'BLE SUPREME COURT IN THIS CASE AFTER CONSIDERIN G THE PROPOSITION OF LAW LAID DOWN IN THE CASE OF DILIP N.SHROFF - 291 ITR 519 (S C) AND UNION OF INDIA V. DHARMENDER TEXTILE PROCESSORS - 306 ITR 277 (SC), H ELD AS UNDER:- 'A MERE MAKING OF THE CLAIM, WHICH IS NOT SUSTAINAB LE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REGARDI NG THE INCOME OF THE ASSESSEE. SUCH CLAIM MADE IN THE RETURN CANNOT AMOU NT TO THE INACCURATE PARTICULARS. MERELY BECAUSE THE ASSESSEE HAD CLAIMED THE EXPENDI TURE, WHICH CLAIM WAS NOT ACCEPTED OR WAS NOT ACCEPTABLE TO THE REVENUE, THAT BY ITSELF WOULD NOT, IN OUR OPINION, ATTRACT THE PENALTY UNDER SECTION 271(1)(C) . IF WE ACCEPT THE CONTENTION OF THE REVENUE THEN IN CASE OF EVERY RET URN WHERE THE CLAIM MADE IS NOT ACCEPTED BY ASSESSING OFFICER FOR ANY REASON , THE ASSESSEE WILL INVITE PENALTY UNDER SECTION 271(1)(C) . THAT IS CLEARLY NOT THE INTENDMENT OF THE LEGISLATURE.' 6. RECENTLY, HON'BLE DELHI HIGH COURT IN THE CASE OF CIT V. ARETIC INVESTMENT PVT. LTD., (2010) 190 TAXMAN 157 OBSERVED THAT WHER E THE LOSS CLAIMED BY THE ASSESSEE ON ACCOUNT OF TRADING IN SHARES WAS NOT AC CEPTED BY THE AO AND WAS TREATED AS A SPECULATION LOSS IN TERMS OF EXPLANATION TO SECTION 73 OF THE ACT, DID NOT AUTOMATICALLY RESULT IN THE INFERENCE OF CONCEALMEN T OF INCOME JUSTIFYING IMPOSITION OF PENALTY U/S 271(1)(C) OF THE ACT. SIMILARLY, IN THE CASE OF CIT V. AURIC INVESTMENT & ITA NO. 408/AHD/2013 ASST. YEAR2001-02 9 SECURITIES LTD. (2009) 310 ITR 121/ 163 TAXMAN 533, IT WAS OBSERVED BY THE HON'BLE DELHI HIGH COURT THAT WHERE ASSESSEE HAS DECLARED H IS INCOME FROM BROKERAGE AND OTHER INCOME AGAINST WHICH IT HAD CLAIMED SHARE TRA DING LOSS, THE AO FOUND THAT LOSS WAS SPECULATIVE IN NATURE AND COULD NOT BE ADJUSTED AGAINST ASSESSEE'S NORMAL INCOME, ACCORDINGLY THE AO HELD THAT ASSESSEE HAS F URNISHED INACCURATE PARTICULARS OF INCOME TO THE EXTENT OF MAKING A WRONG CLAIM OF SHA RE TRADING LOSS AGAINST THE NORMAL INCOME AND IMPOSED PENALTY U/S 271(1)(C) OF THE ACT. THE HON'BLE HIGH COURT HELD THAT MERE TREATMENT OF BUSINESS LOSS AS A SPEC ULATION LOSS BY THE AO DID NOT AUTOMATICALLY WARRANT INFERENCE OF CONCEALMENT OF I NCOME, ACCORDINGLY PENALTY WAS NOT LEVIABLE. 7. RECENTLY, HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF SHAHABAD COOP. SUGAR MILLS LIMITED (SUPRA) OBSERVED THAT WHERE THE ASSESSEE IS FOUND TO HAVE MADE WRONG CLAIM U/S 80P AND WRONG CLAIM OF DEPRECIATION ON GUEST HOUSE, MAKING A WRONG CLAIM IS NOT AT PAR WITH CONCEALMENT OR GIVIN G OF INACCURATE INFORMATION, IT WILL NOT CALL FOR LEVY OF PENALTY U/S 271(1)(C). AC CORDINGLY, ORDER OF THE ITAT CHANDIGARH BENCH DELETING PENALTY IMPOSED U/S 271(1 )(C) WAS UPHELD BY THE HON'BLE COURT. 8. HON'BLE MADHYA PRADESH HIGH COURT IN THE CASE O F CIT VS. S.P.K. STEELS PVT. LTD. - 270 ITR 156 UPHELD THE ORDER OF THE TRIBUNAL DELETING THE PENALTY U/S 271(1)(C) BY OBSERVING THAT ASSESSEE BEING ENGAGED IN THE BUS INESS OF COMMISSION AGENCY, EXPLANATION TO SECTION 73 WAS APPLICABLE AND THUS, LOSS ON ACCOUNT OF TRADIN G IN SHARES WAS DISALLOWED, IT WAS HELD THAT FOR SUCH DI SALLOWANCE PENALTY U/S 271(1)(C) IS NOT LEVIABLE AS THE ASSESSEE HAS FILED PRELIMINARY DETAILS ALONG WITH THE RETURN. 9. HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE O F CIT V. SIDDHARTHA ENTERPRISES - 322 ITR 80 OBSERVED THAT WHERE THE AS SESSEE'S CLAIM FOR SET OFF ON ACCOUNT OF CAPITAL GAINS AGAINST PROFIT OF BUSINESS WAS DISALLOWED BY THE AO AND AO IMPOSED PENALTY FOR FURNISHING INACCURATE PARTICULA RS OF INCOME, THE CIT(A) DELETED THE SAME AND TRIBUNAL UPHELD THE ORDER OF THE CIT(A ) BY OBSERVING THAT ENTIRE FACTS HAVE BEEN DISCLOSED BY THE ASSESSEE IN THE DOCUMENT S FILED ALONG WITH THE RETURN AND THE MISTAKE HAS BEEN COMMITTED BY THE COUNSEL OF TH E ASSESSEE FOR SUCH WRONG CLAIM. THERE WAS NO SCOPE FOR CONCEALING ANY INCOME OR FUR NISHING OF INACCURATE PARTICULARS OF INCOME. WHILE COUNTERING THE DEPARTMENT'S CONTEN TION THAT EVEN IF CLAIM FOR SET OFF OF CAPITAL LOSS AGAINST PROFIT OF BUSINESS WAS BY T HE NEGLIGENCE OR BY MISTAKE, THE FACT REMAINS THAT THE PARTICULARS OF INCOME FURNISHED WE RE NOT CORRECT AND WILLFUL CONCEALMENT NOT BEING AN ESSENTIAL REQUIREMENT FOR LEVY OF PENALTY U/S 271(1)(C) OF THE IT ACT , AS HELD BY THE HON'BLE SUPREME COURT IN THE CASE OF DHARMENDRA TEXTILE PROCESSORS (SUPRA), THE PENALTY COULD NOT BE DELETE D, THE HON'BLE HIGH COURT OBSERVED AS UNDER:- 'WE ARE UNABLE TO ACCEPT THE SUBMISSION. THE JUDGME NT OF THE HON'BLE SUPREME COURT IN DHARMENDRA TEXTILE PROCESSORS [200 8] 306 ITR 277 CANNOT BE READ AS LAYING DOWN THAT IN EVERY CASE WHERE PAR TICULARS OF INCOME ARE INACCURATE, PENALTY MUST FOLLOW. WHAT HAS BEEN LAID DOWN IS THAT QUALITATIVE DIFFERENCE BETWEEN CRIMINAL LIABILITY UNDER SECTION 276C AND PENALTY UNDER SECTION 271(1)(C) HAD TO BE KEPT IN MIND AND APPROACH ADOPTED TO THE ITA NO. 408/AHD/2013 ASST. YEAR2001-02 10 TRIAL OF A CRIMINAL CASE NEED NOT BE ADOPTED WHILE CONSIDERING THE LEVY OF PENALTY. EVEN SO, THE CONCEPT OF PENALTY HAS NOT UN DERGONE CHANGE BY VIRTUE OF THE SAID JUDGMENT. PENALTY IS IMPOSED ONLY WHEN THE RE IS SOME ELEMENT OF DELIBERATE DEFAULT AND NOT A MERE MISTAKE. THIS BEI NG THE POSITION, THE FINDING HAVING BEEN RECORDED ON FACTS THAT THE FURNISHING O F INACCURATE PARTICULARS WAS SIMPLY A MISTAKE AND NOT A DELIBERATE ATTEMPT TO EV ADE TAX, THE VIEW TAKEN BY THE TRIBUNAL CANNOT BE HELD TO BE PERVERSE.' 10. IN VIEW OF THE ABOVE JUDICIAL PRONOUNCEMENTS, WE CAN REASONABLY CONCLUDE THAT ASSESSEE HAS DISCLOSED ALL THE PARTICULARS ALO NG WITH THE RETURN OF INCOME, THEREFORE IT WAS NOT A FIT CASE FOR LEVY OF PENALTY MERELY BY DECLINING ASSESSEE'S CLAIM FOR SET OFF OF BUSINESS LOSS AGAINST OTHER HEADS OF INCOME. 12 THE ISSUE IN APPEAL IS IN REGARD TO IMPOSITION O F PENALTY U/S 271(1)(C) OF THE ACT ON INCOME CONCEALED BY WAY OF TAKING WRONG CLAIM OF SHORT-TERM CAPITAL LOSS ON SALE OF CAR AGAINST B USINESS INCOME. FROM GOING THROUGH THE FACTS AND JUDICIAL PRONOUNCEMENT WE FIND THAT ASSESSEE WAS POSSESSING ONLY ONE CAR AND THE SAME W AS SOLD DURING THE FINANCIAL YEAR 2000-01. THERE WAS NO OTHER ASSE T IN THE BLOCK OF ASSET RELATING TO MOTOR CAR AND, THEREFORE, AFTER D EDUCTION OF SALE VALUE FROM THE PURCHASE VALUE THERE AROSE A SHORT TERM CA PITAL LOSS. THERE IS NO DISPUTE ON THE PART OF THE REVENUE ON THE VALUE OF PURCHASED CAR AND SALE VALUE OF CAR. ASSESSEE HAS CLAIMED THE SHORT T ERM CAPITAL LOSS AT RS.3,21,440/- AGAINST THE BUSINESS INCOME. CERTAINL Y ALL THE FACTS RELATING TO THESE TRANSACTIONS OF PURCHASE AND SALE OF CAR WERE DULY DISCLOSED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE A ND THE ADDITION MADE BY THE ASSESSING OFFICER WAS ON ACCOUNT OF MERELY WRONG CLAIM MADE BY THE ASSESSEE. PENALTY U/S 271(1)(C) OF THE ACT I S IMPOSABLE WHERE THE ASSESSEE HAS CONCEALED PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. HONBLE SUPR EME COURT IN THE CASE OF CIT VS. RELIANCE PETROPRODUCTS (P) LTD. (20 10) 322 ITR 158 HAS ITA NO. 408/AHD/2013 ASST. YEAR2001-02 11 HELD THAT MERE MAKING A CLAIM WHICH IS NOT SUSTAIN ABLE IN LAW IN ITSELF WILL NOT AMOUNT TO FURNISHING OF INACCURATE PARTICU LARS REGARDING INCOME OF THE ASSESSEE. THE FACTS OF THE CASE OF ASSESSEE ARE QUITE SIMILAR TO THE FACTS TAKE UP BY THE HONBLE SUPREME COURT IN T HE CASE OF CIT VS. RELIANCE PETROPRODUCTS (P) LTD. (SUPRA) AS THE ASSE SSEE MADE A WRONG CLAIM OF SHORT TERM CAPITAL LOSS AGAINST THE BUSINE SS INCOME. ASSESSEE HAD MADE ONLY A CLAIM WHICH WAS FOUND TO BE LEGALLY NOT ACCEPTABLE. HOWEVER, ASSESSEE HAS TRULY DISCLOSED ALL MATERIAL FACTS. THEREFORE, AS THERE ARE NO SUPPRESSION OF FACTS, WE ARE OF THE VI EW THAT IN THE LIGHT OF VARIOUS JUDGMENTS OF HONBLE SUPREME COURT AND HON BLE HIGH COURT AS DISCUSSED ABOVE AND IN VIEW OF OUR DISCUSSION LEVY OF PENALTY U/S 271(1)(C) OF THE ACT ON WRONG CLAIM BY THE ASSESSE E WAS NOT JUSTIFIED AND, THEREFORE, WE DELETE THE SAME. THE GROUNDS OF ASSESSEE ARE ALLOWED. 13. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 22 JANUARY, 2016 SD/- SD/- (RAJPAL YADAV) JUDICIAL MEMBER (MANISH BORAD) ACCOUNTANT MEMBER DATED 22 /01/2016 MAHATA/- ITA NO. 408/AHD/2013 ASST. YEAR2001-02 12 COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, AHMEDABAD 1. DATE OF DICTATION: 20/01/2016 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: 21/01/2016 OTHER MEMBER: 3. DATE ON WHICH APPROVED DRAFT COMES TO THE SR. P. S./P.S.: 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: __________ 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S./P.S.: 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK: 22/1/16 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK: 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER: 9. DATE OF DESPATCH OF THE ORDER: