Income Tax Officer-9(2)(3) Room No. 225, 2nd Floor Aayakar Bhavan, M.K. Road Mumbai 400020 Vs. M/s. Midas Powertech P. Ltd. 309, Pioneer Industrial Estate Subhash Road, Jogeshwari (E) Mumbai 400060
March, 03rd 2015
IN THE INCOME TAX APPELLATE TRIBUNAL
"B" Bench, Mumbai
Before Shri D. Manmohan, Vice President
and Shri Chandra Poojari, Accountant Member
ITA No. 2110/Mum/2012
(Assessment Year: 2004-05)
Income Tax Officer-9(2)(3) M/s. Midas Powertech P. Ltd.
Room No. 225, 2nd Floor 309, Pioneer Industrial Estate
Aayakar Bhavan, M.K. Road Subhash Road, Jogeshwari (E)
Mumbai 400020 Mumbai 400060
PAN - AAACC1922C
Appellant by: Shri Vivek Batra
Respondent by: None
Date of Hearing: 02.03.2015
Date of Pronouncement: 02.03.2015
Per D. Manmohan, V.P.
This appeal by the Revenue is directed against the order passed by
CIT(A)-20, Mumbai and it pertains to A.Y. 2004-05.
2. The only ground urged by the Revenue reads as under: -
"Whether on the facts and in the circumstances of the case and in law,
the Ld. CIT(A) was correct in deleting the penalty of Rs.11,03,087/-
levied u/s. 271(1)(c) of the I.T. Act, 1961, without appreciating the fact
that the Hon'ble ITAT has confirmed the disallowance of loss u/s. 94(7)
of the Act and when provisions of section 94(7) are clear on the point of
reckoning of limitation and expiry of limitation."
3. None appeared on behalf of the assessee. We have heard the learned
D.R. and proceed to dispose of the appeal.
4. Facts necessary for disposal of the appeal are stated in brief.
Assessee-company is engaged in trading of goods and commodities on ready
or forward basis and also acted as commission agent, broker, exporter and
importer apart from investing in shares, stocks, debentures, etc. For the
year under consideration assessee-company declared total income of
`31,590/- accompanied with Audit Report in Form No. 3CA/3CD and other
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M/s. Midas Powertech P. Ltd.
relevant details. Though the return was processed under section 143(1) of
the Act it was later taken up for scrutiny wherein it was noticed that the
assessee-company entered into transaction of purchase and sale of
Sundaram Bond Saver (Mutual Fund); assessee purchased units on
26.12.2003 for `79,50,000/-, received dividend of `30,74,808/- on the same
date, claimed exemption under section 10(35) of the Act and thereafter sold
the units on 26.03.2004 for `45,04,799/- which resulted in a loss of
`34,45,201/- on the transaction of purchase and sale of shares and the said
loss was set off against the profit of other securities/shares. According to the
AO, purchase of shares, claiming dividend as exempt and sale of shares
within three months after the record date is clearly in violation provisions of
section 94(7) of the Income Tax Act and therefore the loss to the extent of
dividend of `30,74,808/- was ignored under section 94(7) of the act and
added to the total income of the assessee. Further the balance of
`3,70,393/- was also not allowed to be set off against other business income
following the decision of the Hon'ble Punjab & Haryana High Court in the
case of Vaneet Jain vs. CIT 205 CTR 92. Consequent thereto the AO initiated
penalty proceedings and levied penalty of `11,03,087/-.
5. It may be noticed that the assessee preferred an appeal against the
quantum of loss and the CIT(A) set aside the entire addition of `34,45,201/-.
On a further appeal the ITAT `B' Bench, Mumbai, vide ITA No.
183/Mum/2008 allowed the departmental appeal partly thereby sustaining
the disallowance to the tune of `30,74,808/-. Assessee preferred an appeal
before the Hon'ble Bombay High Court against the order of the ITAT.
6. In the appeal filed by the assessee against levy of penalty, it was
contended before the CIT(A) that the assessee purchased the units of
Sundaram Mutual Fund on 26th December 2003 and received dividend on
26.12.2003. These units were sold on 26th March, 2004 resulting in short
term capital loss. As per provisions of section 94(7) two conditions need to be
applied simultaneously. First, these units were purchased within a period of
three months prior to the record date and second, the units were sold within
a period of three months after such record date. It is the case of the assessee
that when it purchased the units on 26th December, 2003 the first condition
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M/s. Midas Powertech P. Ltd.
was not satisfied since the record date is 25th December, 2003. Further, when
the units were sold on 26th March, 2004 then the units can be said to have
been sold after the period of three months from the record date in as much as
the three months period expires on 25th March, 2004 itself.
7. It was also contended that it was not a case of concealment of income
or furnishing of inaccurate particulars of income as two different views were
possible on this matter; two judgements of the High Courts were in favour of
the assessee as regards the definition of the term `month'. Thus the issue is
legal and debatable in nature in which event penalty is not leviable. Reliance
was also placed upon the decision of the ITAT Mumbai Benches in the case
of Hindalco India Ltd. 41 SOT 254 wherein it was held that no penalty can
be levied when disallowances were made under section 94(7) when the
assessee disclosed full facts and details which were not proved to be
incorrect. Reliance was also placed upon the decisions of the Hon'ble
Calcutta High Court and Hon'ble Madras High Court wherein it was held
that `month' expires on a date before the corresponding date of next month
in which event, in the instant case, one of the conditions of section 94(7) is
8. Having regard to the circumstances of the case the learned CIT(A)
cancelled the penalty by observing as under: -
"5. I have perused the assessment order, penalty and written
submissions of the appellant. The whole case revolves around the
definition of "month". The decision of the CIT(A) is in appellant's favour
as the decision of the Hon'ble Madras High Court in the case of CIT vs.
Kadrai Mills Ltd. (106 ITR 846) and that of Hon'ble Gujarat High court
in the case of CIT vs. S.L.M. Maneklal Industries Ltd. (274 ITR 485) are
also in appellant's favour whereas the Hon'ble ITAT has not agreed
with this definition. The issue, therefore, is legal, debatable where two
bonafide opinions are possible.
5.1. More importantly there is direct decision of Hon'ble ITAT
Mumbai in the case of Hindalco India Ltd cited supra where it has been
held penalty cannot be levied for disallowance made u/s. 94(7) if the
appellant had furnished full details and particulars of income while
filing return of income and under bonafide belief regarding allowability
of said claim. In the present case, except for different interpretation of
the term `month' there is nothing to suggest that any particulars were
concealed by the appellant. In these circumstances, the decision of
Jurisdictional ITAT that no penalty is leviable on a disallowance made
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M/s. Midas Powertech P. Ltd.
u/s. 84(7) has a binding force. Thus taking into all the facts and
circumstances of the explanation offered by the appellant is held to be
bonafide and penalty levied is cancelled."
9. Aggrieved, Revenue is in appeal before us. At the time of hearing the
learned D.R. could not place any material on record or any case law on this
issue to prove that the view taken by the learned CIT(A) is not in accordance
with law. He mainly relied upon the order passed by the AO and submitted
that the ITAT confirmed the loss under section 94(7) of the Act and hence
penalty is leviable. When specifically pointed out that he has to read the
conclusions and findings of the learned CIT(A) and rebut the findings, the
learned D.R. could not place any material to contradict the findings. In fact
it appears that he has not even looked into the decision of the ITAT, Mumbai
in the case of Hindalco India Ltd. or the decisions of the Calcutta/Madras
High Courts referred to by the learned CIT(A). In view of the poor
preparation of the learned Sr. D.R. and in the absence of any material to
contradict the findings of the learned CIT(A), we are of the view that the
order passed by the learned CIT(A) deserves to be confirmed.
10. In the result, the appeal filed by the Revenue is dismissed.
Order pronounced in the open court on 2nd March, 2015.
(Chandra Poojari) (D. Manmohan)
Accountant Member Vice President
Mumbai, Dated: 2nd March, 2015
1. The Appellant
2. The Respondent
3. The CIT(A) 20, Mumbai
4. The CIT 9, Mumbai City
5. The DR, "B" Bench, ITAT, Mumbai
ITAT, Mumbai Benches, Mumbai