ACIT-4(1), 6th FloorRoom No.640, Aaykar Bhavan,M K Marg, Mumbai-20. Vs. M/s. Claridges Investments and Finance P. Ltd. 107, Doctor centre, 135, August Kranti Maidan, Kemps Corner,Mumbai -400038
May, 08th 2015
INCOME TAX APPELLATE TRIBUNAL,MUMBAI -C BENCH
Before S/Sh. I P Bansal,Judicial Member & Rajendra,Accountant Member
/.ITA No.410/Mum/2011, /Assessment Year-2003-04
ACIT-4(1), 6th Floor M/s. Claridges Investments and
Room No.640, Finance P. Ltd. 107, Doctor centre,
Aaykar Bhavan,M K Marg, 135, August Kranti Maidan,
Mumbai-20. Kemps Corner,Mumbai -400038
( /Appellant) ( / Respondent)
/ Revenue by : Shri Premanand J.
/Assessee by:Shri Pankaj R. Toprani &
Ms. Krupa P. Toprani
/ Date of Hearing : 07 - 05 -2015
/ Date of Pronouncement : 07 -05-2015
, 1961 254(1)
Order u/s.254(1)of the Inco me-tax Act,1961(Act)
PER RAJENDRA, AM-
Challenging the order dt.20.10.2010 of the CIT(A)-9,Mumbai,Assessing officer (AO) has raised
following Grounds of Appeal:
"On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in cancelling
the penalty of rs.7,45,180/- levied u/s.271(1)(c) of the I.T. Act holding that furnishing its return of
income the assessee has neither concealed its income nor furnished inappropriate particulars of
income and mere treatment of business loss as peculation loss by A.O. do not automatically
warrant the inference of concealment of income without appreciating the decision of the Hon'ble
Supreme Court in the case of Dharmendra Textile Processors reported in 306 ITR 277 wherein it is
held that the element of mensrea is not essential for levy of penalty.
2. On the facts and in the circumstances of the case, the impugned order of the Ld. CIT(A) is
contrary to laws to be set aside and that of the Assessing officer be restored."
Assessee-company,engaged in the business of share broking, filed it return of income on 01.12.
2003,declaring loss of Rs.1.28 crores.Later on it filed a revised return on 31.03.2005,declaring
loss of Rs.1.17 crores. The AO completed the assessment on 28.02.2006, under section 143(3) of
the Act,assessing the total loss at Rs.50.33 lakhs.
2.Effective ground of appeal is about deletion of penalty, amounting to Rs.7.45 lakhs.During the
assessment proceedings,the AO made addition on account of share trading loss deemed to be
speculation loss(20.27 lakhs), SEBI fees(56.12 lakhs),brokerage income(1.16 lacs)non-payment
of service tax(Rs.2,000) and additional dividend income (Rs.46078).Aggrieved by the order of
the AO,the assessee preferred an appeal before the First Appellate Authority(FAA) who
confirmed the additions in respect of share trading loss and expenses attributable to such losses.
He also confirmed the addition on account of SEBI fees,but directed the AO to allow the same in
the year of actual expenditure.Besides,the FAA deleted the addition in respect of brokerage
income and directed the AO to verify the other expenses. The assessee challenged the order of
the FAA before the Tribunal. Vide its order,dated10.09.2009,the Tribunal restored back the
matter to the file of the AO for fresh adjudication.
In the meanwhile,the AO issued a show cause notice u/s.271(1)(c) of the Act to the assessee
asking it to explain as to why penalty should not be levied for filing in accurate particulars and
concealing the particulars of income. After considering submission of the assessee the AO levied
penalty of Rs.7,45,180/- vide his order dated 31st March 2009.
3.The assessee preferred an appeal before the FAA and contended that the disallowance made by
the AO had converted the business loss into speculative loss following the provision of
explanation to section 73 of the Act, that the addition were made on account of application of
deeming provisions and not on account of any concealment of any particular of income, that
assessee had not suppressed any income or claimed any wrong expenditure, that at the time of
filing of return the assessee had mentioned about the dealing with shares of other company, that
the AO had found about the loss from the profit and loss account filed by the assessee. The
assessee relied upon the judgment of the Hon'ble Supreme Court delivered in the case of
Reliance Petro Products Ltd.(322ITR158).It was further argued that there was no change in
amount of total income which was a loss,that merely a change of treatment of loss did not
tantamount to concealment of income/filing of inaccurate particulars.Assessee relied upon cases
of Auric Investments and Securities Ltd.(310ITR121)and Bhartesh Jain(323ITR58)in its support.
The FAA considered the submission of the assessee and the penalty order of the AO. He held
that in the matter under appeal share trading loss were treated speculative losses, that only head
of income has changed, that entire facts were on record, disallowance of proportionate expenses
could not be basis for levying penalty u/s.271(1)(c) of the Act. Referring to the decision of
Aurich Investment and Securities Ltd. (supra)The FAA deleted the penalty levied by the AO.
4.Before us,Departmental Representative(DR)relied upon the order of the AO.Authorised
Representative(AR)supported the order of the FAA and argued that the assessee had not
concealed its particulars of income, that the AO was not justified levy in penalty just because
particular item of income was assessed under different head of income. He relied upon the case
Auric Investments and Securities Ltd. (supra).
5.We have heard the rival submission and perused the material on record. We find the AO had
levied penalty u/s. 271(1)(c) as speculative loss was assessed under the head business loss. We
are of opinion that mere change of head of income should not result in automatic levy of
concealment penalty.The detail about the speculative loss was available on the record. Therefore,
it cannot be held that assessee had filed inaccurate peculiars of income or had concealed the
particulars of income.Even if a unsubstantiated claim is made in the return of income, it cannot
be held that the assessee is liable for levy of penalty u/s.271(1)(c). Difference of opinion between
the AO and the assessee about head of income under which particular item is to be assessed was
and would remain a bone of contention between the AO and the assessee. But such differences
should not and cannot result invoking the penal provision of chapter XXI of the Act. We would
like to refer to the judgment of the Hon'ble Delhi High Court Auric Investments and Securities
Ltd. (supra) relied upon by the FAA in that matter the claim of business loss was disallowed and
it was held that loss was to be assessed under the head speculative loss. The AO levied penalty
u/s.271(1)(c) for concealment of particulars of income. When the matter traveled to the Hon'ble
High Court, it decided the issue as under:
"During the assessment proceedings for the assessment year 2001-02 , the Assessing Officer
found that the loss claimed by the assessee was speculative in nature to be adjusted against
speculative income only and as the income was assessed at a loss, the loss shown by the assessee
could not be adjusted. Therefore, the Assessing Officer initiated penalty proceedings under
section 271(1)(c) of the Income-tax Act, 1961, and imposed penalty. The penalty was cancelled by
the Commissioner of Income-tax (Appeals) and this was upheld by the Tribunal. .... there was
nothing on record to show that in furnishing its return of income, the assessee had either
concealed its income or had furnished any inaccurate particulars of income. The mere treatment
of the business loss as speculation loss by the Assessing Officer did not automatically warrant the
inference of concealment of income. The cancellation of penalty was valid."
Respectfully following the above, we decide the effective ground of appeal against the AO.
In the result, appeal filed the AO stands dismissed.
Order pronounced in the open court on 7th,May,2015.
( /I P Bansal) ( / RAJENDRA)
/ JUDICIAL MEMBER / ACCOUNTANT MEMBER
/Mumbai, /Date: 07.05.2015
/Copy of the Order forwarded to :
1.Appellant / 2. Respondent /
3.The concerned CIT(A)/ , 4.The concerned CIT /
5.DR "C" Bench, ITAT, Mumbai / , ,.. .
/ BY ORDER,
/ Dy./Asst. Registrar
, /ITAT, Mumbai.