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Miss Harron Mahmood Adam, 4, Ravindra Mansion, Dinshaw Wachha Road, Churchgate, Mumbai 400 020. Vs. ACIT 12(3),Mumbai.
September, 22nd 2014


                   ./I.T.A. No.1636 /Mum/2013
             (     /     Assessment Year : 2007-2008

Miss Harron Mahmood               /          ACIT ­ 12(3),
Adam,                                        Mumbai.
4, Ravindra Mansion,
Dinshaw Wachha Road,
Mumbai ­ 400 020.
     . / PAN : AABPA0755F
 ( /Appellant)        ..                        (    / Respondent)

     Appellant by                 Shri Kishore Patel
     Respondent by :              Shri Vivek A. Perampurna
          / Date of Hearing                     : 15-09-2014
         /Date of Pronouncement : 19-9-2014

                             / O R D E R
PER R.C. SHARMA, A.M.                    :

      This is an appeal filed by the assessee is directed against the order of
ld. CIT(A) -10, Mumbai dated 14-12-2012 for the A.Y. 2007-08 in the matter
of order passed u/s 271(1)(c) of the Income Tax Act, 1961.

2.    In this appeal, the assessee is aggrieved for the levy of penalty of Rs.
5,05,474/- imposed by the A.O.

3.    The facts in brief are that during the relevant assessment year under
consideration, the assessee had incurred a loss of Rs. 15,01,708/- in
commodity exchange in commodities in MCX & NCDEX. The assessee had
treated the same as business loss and set off against other business income.
                                     2        ITA 1636/M/13

During the course of assessment itself, the assessee offered the same as
speculative loss and did not claim it as set off against the business income.
However, the A.O. levied penalty u/s 271(1)(c) of the Act by observing that the
assessee has furnished inaccurate particulars of her income and concealed
the income. The A.O. also observed that since the case was fixed for scrutiny,
therefore, this income could not escape from tax liability. The ld. CIT(A)
confirmed the action of the A.O. against which the assessee is in further
appeal before us.

3.    We have considered the rival contentions and found from the records
that derivative transactions carried out in a recognized stock exchange were
ultimately settled out otherwise than by the actual delivery or transfer of
scrip. The profit/loss from trading in derivative transactions is considered as
business income and not speculative transaction. NCDEX and MCX are also
exchanges for trading in commodities and the commodities transactions in
NCDEX and MCX are also settled otherwise than by the actual delivery or
transfer of commodity. Accordingly, trading in commodities transactions at
NCDEX and MCX were treated as business activities and loss from
commodities transactions of Rs. 15,01,708/- was set off against other
business income under the same taxable head of income. In the return of
income, the assessee has furnished all details and had not concealed any
particulars   of    income.   However,   inadvertently   THE   ASSESSEE   HAS
considered NCDEX/MCX as a stock exchange within the meaning of section
43(5) of the Act and thereby considered the commodity trade loss as a
business loss against speculation loss. In the course of assessment itself
same was rectified and accepted by the assessee.

4.    The ld. Counsel for the assessee placed reliance on the decision of co-
ordinate Bench of this Tribunal in the case of ACIT vs. Arnav Akshay Mehta,
53 SOT 581 (Mumbai) wherein it was held that assessee's derivative trading
                                    3      ITA 1636/M/13

through MCX stock exchange in the A.Y. 2007-08 is non-speculation
transaction and, therefore, loss incurred is to be treated as normal business
loss. The Bench also observed that transactions carried out through MCX
stock exchange after 1-4-2006 would be eligible for being treated as non-
speculation within the meaning of section 43(5)(d) of the Act. In the instant
case also the assessment year under consideration is A.Y. 2007-08, therefore,
as per the proposition laid down by the co-ordinate Bench of this Tribunal in
the case of Arnav Akshay Mehta (supra) the loss incurred by the assessee
should be treated as normal business loss.     Once such loss is treated as
business loss, mere treatment by the A.O. as speculation loss will not be
justified to levy penalty u/s 271(1)(c) of the Act. Furthermore, the Hon'ble
Delhi High Court in the case of CIT vs. Bhartesh Jain, (2010) 323 ITR 358
held that mere treatment of business loss as speculative loss would not
amount to concealment u/s 271(1)(c) of the Act. It was held that penalty u/s
271(1)(c) was not leviable where the addition was made on account of
treatment of business loss as speculation loss. The Hon'ble Supreme Court
in the case of CIT vs. Reliance Petroproducts (P) Ltd., 322 ITR 158 (SC) also
observed that mere making of the claim, which is not sustainable in law, by
itself will not amount to furnishing inaccurate particulars so as to levy
penalty u/s 271(1)(c) of the Income Tax act, 1961.

5.    In view of the above discussion, we hold that addition made by mere
change of head of income will not attract penalty u/s 271(1)((c) of the Act.
The A.O. is directed to delete the same.
                                            4        ITA 1636/M/13

      6.      In the result, appeal of the assessee is allowed.
             Order pronounced in the open court on 19th September, 2014.


                  Sd/ -                                           sd/-
             (SANJAY GARG)                              (R.C. SHARMA)
           JUDICIAL MEMBER                           ACCOUNTANT MEMBER
                             Dated 19-09-2014

       . ../ RK , Sr. PS

                /Copy of the Order forwarded to :
1.    / The Appellant
2.     / The Respondent.
3.     () / The CIT(A) ­3,, Mumbai
4.      / CIT ­II, Mumbai
5.             ,     ,  / DR, ITAT, Mumbai H Bench

6.     / Guard file.
                                                                           / BY ORDER,

                            //True Copy//
                                                          /  (Dy./Asstt.      Registrar)
                                                              ,  / ITAT, Mumbai
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