IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH: `SMC' NEW DELHI
BEFORE SMT DIVA SINGH, JUDICIAL MEMBER
I.T.A .No.-1039/Del/2014
(ASSESSMENT YEAR-2006-07)
Yashmina Investments Pvt. Ltd., vs ITO,
573, Main road, Chirag, Delhi, Ward-18(4),
New Delhi-110017. New Delhi
PAN-AAACY0208R
(APPELLANT) (RESPONDENT)
Appellant by None
Respondent by Sh.Gagan Sood, Sr.DR
Date of Hearing 01.07.2015
Date of Pronouncement 24.07.2015
ORDER
By the present appeal the assessee assails the correctness of the order
dated 16.12.2013 of CIT(A)-XXI, New Delhi pertaining to 2006-07 assessment
year on the ground that the penalty imposed by the AO u/s 271(1)(c) has
wrongly been upheld.
2. No one was present on behalf of the assessee at the time of hearing.
However considering the material available on record, it was considered
appropriate to proceed with the present appeal ex-parte qua the assessee
appellant on merit after hearing the Ld. Sr. DR.
3. The relevant facts of the case are that the assessee company declared a
loss of Rs.16,53,079/- by filing its return on 29.11.2006. For ready-reference,
we extract the relevant facts from the penalty order itself:-
"The assessee company filed its return of income on 29.11.2006
declaring loss of Rs.16,53,079. Thereafter re-assessment proceedings
were initiated when it was observed that the assessee had debited a
capital loss of Rs.22,87,596 on sale of investment to its P&L account.
Since it was a capital loss therefore it should have been disallowed.
2. In its reply the assessee contested that explanation u/s 73(1) is
not applicable in its case as after excluding the share loss the main
source of income is house property, it has been further submitted that
however if you are not satisfied with the justification filed by the
assessee company then the assessee company is ready to surrender
I.T.A .No.-1039/Del/2014
loss on shares for Rs.22,87,595 to be treated as speculation loss. After
considering the reply of the assessee, it was found that the justification
given was not tenable.
The main source of assessee's income was not house property
but sale & purchase of shares due to which it incurred a loss.
Thus provisions of explanation to Sec 73 are squarely applicable in the
case. Further the loss to the assessee is because of sale of long term
investments which implies that it is a long term loss. Chapter VI of
Income Tax Act, 1961 states that Long Term Capital Loss can be set off
only against a long term capital gain and not against income from any
other had of income. Thus the long term capital loss of Rs.22,87,596
was not be allowed as deduction. Thus penalty proceedings u/s
271(1)(c) were initiated for furnishing inaccurate particulars of income."
(emphasis provided)
3.1. In view of the above facts, notice for levy of penalty was issued. Despite
this fact, no one was present on behalf of the assessee. Subsequently another
attempt was made. Considering the fact that the same also remained un-
complied with penalty u/s 271(1)(c) was imposed amounting to Rs.6,86,280/-
holding that the assessee had furnished inaccurate particulars of income.
4. In appeal before the First Appellate Authority, the CIT(A) took cognizance
of the fact that the addition made by way of a disallowance was not challenged
in appeal by the assessee. Thus it was considered on facts where the assessee
who was involved in construction business and was not a trader or broker of
shares as such the LTCG loss could be set off only against LTCG income for
which purpose there is a specific provision u/s 71(3). The issue being free of
debate it was concluded that the assessee has deliberately set up the LTCG loss
against other income. The claim that it was inadvertent mistake was not
accepted. The Ld. Sr. DR relies upon the impugned order and the penalty order.
5. Having heard these submissions and perused the material available on
record. I am of the view that simply because the addition made was not
challenged by the assessee and was accepted by the assessee by itself does not
lead to the conclusion that the claim of the assessee was not bonafide. It is
further seen that although in the penalty proceedings the assessee was not
represented. In the finding arrived at in the penalty order highlighted above and
in the finding arrived at in para 3.3 as subsequently extracted it would show
that there is inherent departmental confusion on the issue as to what was the
primary source of income of the assessee as the Ld.CIT(A) considered the
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I.T.A .No.-1039/Del/2014
assessee primarily in construction business and not trader. For ready-
reference, the relevant extract is reproduced from the impugned order:-
3.3. "I have considered the order of the AO and the submissions of
the assessee and I do not find any merit in the submission of the
assessee. It is a matter of fact that the assessee is involved in
construction business and the assessee is not a trader or broker of
shares............................................"
5.1. Before the CIT(A) reliance was placed upon the judgement of the Apex
Court in the case of CIT vs Reliance Petro Products Ltd. 322 ITR 158 (SC).
Accordingly considering the peculiar facts and circumstances of the case and
the principle laid down by the Apex Court in the afore-said judgement when
considered in the context of the facts of the present case, it can not be said to be
a case of filing of any inaccurate particulars of income. It is a case of an
inadvertent mistake as per the claim of the assessee before the CIT(A) and
simply because the addition was not challenged in the quantum proceedings, it
does not negatively impact the bonafide of the assessee in the peculiar facts of
the present case. Accordingly, considering the principle laid down by the Apex
Court in the case of Reliance Petro Products Ltd. (cited supra), the impugned
order is set aside and the penalty is directed to be quashed.
6. In the result, the appeal of the assessee is allowed.
The order is pronounced in the open court on 24th of July, 2015.
Sd/-
(DIVA SINGH)
JUDICIAL MEMBER
Dated: 24/07/2015
*Amit Kumar*
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT
ASSISTANT REGISTRAR
ITAT NEW DELHI
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