, ""
IN THE INCOME TAX APPELLATE TRIBUNAL" E" BENCH, MUMBAI
BEFORE S/SHRI VIJAY PAL RAO (JM) AND D. KARUNAKAR RAO, (AM)
, . ,
./I.T.A.No.7194/Mum/2013
( / Assessment Year :2004-05)
M/s E-Cap Partners, / The Dy.Commissioner of Income
Edelweiss House, Tax, Central Circle-15(1),
Vs.
Off CST Road, Mumbai
Kalina,
Santacruz (E),
Mumbai-400098
( /Appellant) .. ( / Respondent)
. / . /PAN/GIR No. :AABEF3734E
/ Appellant by Shri Vijay Mehta
/ Respondent by Shri Neil Philip
/ Date of Hearing
: 7.5.2015
/Date of Pronouncement : 22.6.2015
/ O R D E R
PER VIJAY PAL RAO (JM)
This appeal by the assessee is directed against the order dated 2.9.2013
arising from the penalty order passed under section 271(1)(c) of the Income
Tax Act, 1961 (the Act).
2. In this case the penalty has been levied under section 271(1)(c) against
the disallowance of claim of loss of Rs.22,04,485/- being held as speculative loss
by the AO. The disallowance made by the AO was upheld by the ld.CIT(A) but
the Tribunal has reversed the orders of the authorities below and allowed the
claim of the assessee. On further appeal by the revenue before the High Court,
the order of this Tribunal was reversed and the order of the AO and ld. CIT(A)
have been upheld. The AO levied the penalty in respect of disallowance of loss
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of Rs.22,04,485/- by treating the same as speculative loss as per the provisions
of section 73 r.w.s.43(5) of the Act. The assessee challenged the action of the
AO before the ld. CIT(A) against the levy of penalty under section 271(1)( c )
but without success.
3. Before us, the ld.AR of the assessee has submitted that this is a debatable
issue and the claim of the assessee is bonafide. The AO has disallowed the claim
of the loss by treating the same as speculative loss and therefore the
disallowance made by the AO is based on change of opinion. The claim of the
assessee is a possible view and this Tribunal in the quantum appeal decided the
issue in favour of the assessee, therefore, the claim of loss by treating the
same as speculative loss does not amount to concealment of income or
furnishing in accurate particulars of income, when the assessee has furnished the
relevant record and details in respect of transactions from which the assessee
has incurred the loss in question. He has relied upon the order of coordinate
Bench of this Tribunal in the case of Radhe Krishna Fiscal Pvt Ltd V/s DCIT in
ITA No.6256/Mum/2011 (AY-2005-06) dated 14.12.2012 and submitted on
identical facts, the Tribunal has deleted the penalty levied in respect of
disallowance of loss arising from the trading in shares and derivatives.
4. On the other hand, the ld.DR has relied upon the orders of authorities
below and submitted that in the quantum appeal, the issue has been decided by
the Hon''ble Jurisdictional High Court against the assessee and therefore the
penalty is justified.
5. We have considered the rival submissions as well as considered the
relevant record available before us. In the case in hand, the assessee has
incurred loss in the business of trading in shares and derivatives and claimed
the same against the other income. The AO disallowed the claim of loss by
treating the same as speculative loss as per the explanation to provisions of
section 73 of the Act read with section 43(5) of the Act. There is no dispute
that the losses arose from the activities of share trading and derivatives was
explained by the assessee and disclosed before the AO. However, the assessee
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claimed the said loss as business loss. Thus, it is clear that as far as the
transaction of trading in shares and derivatives giving rise to the loss in question
is concerned, there is no dispute between the parties and therefore the assessee
has not represented any wrong fact regarding trading activities resulted in loss
in question. The basis for treating the loss as speculative loss by the AO is by
applying the deeming provision of section 73 of the Act and therefore, it was a
case of interpretation of provisions of law. When the assessee has not
suppressed any fact or nature of transaction and source of loss then the claim of
the assessee cannot be said to be an absolute, bogus or incorrect claim. Even
otherwise, the issue of treating the loss as speculation under explanation to
section 73 of the Act is a subject matter of interpretation of law and therefore,
there was a scope of possible two views on this point. The Tribunal in the
quantum appeal decided the issue in favour of the assessee which support the
view of the assessee being a possible view and therefore, the claim of the
assessee was bonafide claim. In a similar situation, the coordinate Bench of the
Tribunal in the case of Radhe Krishna Fiscal Pvt Ltd(supra) has held as under:
"7. At the outset, the Ld.AR has pointed out that the assessee's case is
covered in its favour by the decision of the ITAT in the case of Radhe
Krishna Fiscal Pvt. Ltd. Vs. DCIT in ITA No. 6256/Mum/2011, the order in
which the present AM is also a party and the relevant findings of the ITAT
in the said case is extracted hereunder: "We have considered the rival
submissions and also perused the relevant material on record. Although
the issue relating toe assessee's claim for loss on account of trading in
derivatives being a normal business loss or speculation loss has been
decided by the Hon'ble Bombay High Court in the case of Shri Bharat R.
Ruia (HUF) (supra) against the assessee on April 18, 2011, there were
decisions rendered by the Tribunal prior thereto accepting the stand of the
assessee that loss on account of derivative trading was not a speculation
loss but was allowable as a business loss. Keeping in view the said
decisions of the Tribunal cited by the learned counsel for the assessee, we
agree with his contention that the view taken by the assessee while
claiming the loss on account of derivative trading as a normal business
loss was a possible view and the claim so made by adopting a possible
view was bona fide. Moreover, the SLP filed by the assessee against the
decision of Hon'ble Bombay High Court in the case of Shri Bharat R. Ruia
(HUF) (supra) has already been admitted by the Hon'ble Supreme Court
vide its order dated 05.09.2011 which shows that the issue relating to
assessee's claim for loss on account of derivative trading being a normal
business loss involve a substantial question of law and as held by the
coordinate Bench of this Tribunal in the case of Nayan Builders &
Developers Pvt. Ltd. (supra), no penalty u/s 271(1)(c) can be imposed in
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respect of disallowance on the issue which involves a substantial question
of law. It is also observed that in the case of Hongkong & Sjhanghai
Banking Corpn. Ltd. (supra) cited by the learned counsel for the assessee,
the penalty imposed u/s 271(1)(c) in respect of disallowance made on
account of assessee's claim for loss resulting from ready forward
transaction treating the same as speculative loss was cancelled by the
Tribunal holding that the assessee in making such claim was not guilty of
concealment as envisaged in section 271(1)(c) justifying imposition of
penalty.
8. In our opinion, the various judicial pronouncements cited by the
learned counsel for the assessee which are discussed above are clearly
applicable to the facts of the present case and keeping in view the ratio
laid down therein, we are of the view that the claim made by the assessee
on account of loss in derivative trading was a bona fide claim based on a
possible view and all the material facts relevant to the said claim having
been fully and truly furnished by the assessee, it is not a fit case to
impose penalty u/s 271(1)(c). We, therefore, cancel the penalty imposed
by the AO and confirmed by the learned CIT(Appeals) and allow this
appeal of the assessee."
5. In view of the facts and circumstances of the case as well as the decision
of the co-ordinate Bench of the Tribunal, we are of the opinion that mere
disallowance of the claim of loss by treating the same as speculative loss would
not amount to concealment of income or furnishing inaccurate particulars of
income leading to levy of penalty u/s 271(1)( c ) of the Act. Mere disallowance
of claim as it is not allowable under the provisions of Act would not ipso facto
lead to a conclusion that the assessee has furnished inaccurate particulars of
income when the primary facts of the claim are disclosed and furnished by the
assessee. Accordingly, we delete the penalty levied by the AO u/s 271(1)( c ) of
the Act.,
6. In the result, the appeal of the assessee is allowed.
The above order was pronounced in the open court on 22nd June, 2015.
22 June, 2015
nd
Sd sd
(. /D. KARUNAKAR RAO) ( /VIJAY PAL RAO)
/ ACCOUNTANT MEMBER / JUDICIAL MEMBER
Mumbai: 22nd June, 2015.
. ../ SRL , Sr. PS
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/Copy of the Order forwarded to :
1. / The Appellant
2. / The Respondent.
3. () / The CIT(A)- concerned
4. / CIT concerned
5. , , /
DR, ITAT, Mumbai concerned
6. / Guard file.
/ BY ORDER,
True copy
(Asstt. Registrar)
, /ITAT, Mumbai
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