PANTHER INDUSTRIAL PRODUCTS LTD., Mumbai v. I.T.O. - 2(2)(4), Mumbai

ITA 1080/MUM/2018 | 2001-2002
Pronouncement Date: 08-03-2021 | Result: Dismissed

Appeal Details

RSA Number 108019914 RSA 2018
Assessee PAN AAACB2058G
Bench Mumbai
Appeal Number ITA 1080/MUM/2018
Duration Of Justice 3 year(s) 14 day(s)
Appellant PANTHER INDUSTRIAL PRODUCTS LTD., Mumbai
Respondent I.T.O. - 2(2)(4), Mumbai
Appeal Type Income Tax Appeal
Pronouncement Date 08-03-2021
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted C
Tribunal Order Date 08-03-2021
Last Hearing Date 11-03-2019
First Hearing Date 19-10-2020
Assessment Year 2001-2002
Appeal Filed On 23-02-2018
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH MUMBAI BEFORE SHRI S. RIFA UR RAHMAN ACCOUNTANT MEMBER AND SHRI PAVAN KUMAR GADALE JUDICIAL MEMBER IT A NO. 1080 & 1081 /MUM./2018 ( ASSESSMENT YEAR : 20 01 02 ) PANTHER INDUSTRIAL PRODUCTS LTD. RADHA BHAVAN 1 ST FLOOR 121 NAGINDAS MASTER ROAD FORT MUMBAI 400 023 PAN AAACB2058G . ASSESSEE V/S INCOME TAX OFFICER WARD 2 ( 2 )( 4 ) MUMBAI . RESPONDENT ASSESSEE BY : SHRI RAJIV KHANDELWAL REVENUE BY : MS. SHREEKALA PARDESHI DATE OF HEARING 2 7 .0 1 .202 1 DATE OF ORDER 8.03.2021 O R D E R PER S. RIFAUR RAHMAN A.M. THE ASSESSEES APPEAL BEING ITA NO.1081/MUM./2018 IS A QUANTUM APPEAL AGAINST ORDER DATED 28 TH DECEMBER 2017 PASSED BY THE LEARNED COMMISSIONER (APPEALS) 5 MUMBAI AND THE APPEAL BEING ITA NO.1080/MUM./2018 IS AGAINST THE ORDER DATED 29 TH DECEMBER 2017 PASSED BY THE LEARNED COMMISSIONER (APPEALS) 5 MUMBAI CONFIRMING PENALTY IMPOSED UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT 1961 (FOR SHORT 'THE ACT' ) BY THE A SSESSING OFFICER FOR THE ASSESSMENT YEAR 2001 02. 2 PANTHER INDUSTRIAL PRODUCTS LTD. WE FIRST TAKE UP THE APPEAL BEING ITA NO.1081/MUM./2018. 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE RELATE TO DISALLOWANCE OF LOSS OF ` 3 12 90 00 0 ARISING OUT OF THE IMPUGNED TRANSACTIONS IN SHARES OF LANDMARK LEISURE LTD. TO BE SHAM INSOMUCH SO THAT THE SAME IS NON GENUINE. 3. BRIEF FACTS OF THE CASE ARE THE ASSESSEE FILED ITS RETURN OF INCOME ON 11 TH JULY 2002 DECLARING LOSS OF ` 36 46 004. THE RETURN OF INCOME WAS PROCESSED UNDER SECTION 143(1) OF T HE INCOME TAX ACT 1961 (FOR SHORT 'THE ACT' ) AND THE SAME WAS SELECTED FOR SCRUTINY AND THE STATUTORY NOTICES UNDER SECTION 143(2) AND 142(1) OF THE ACT WERE ISSUED AND SERVED ON THE ASSESSEE. IN RESPONSE THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSE SSEE ATTENDED AND FILED THE RELEVANT INFORMATION AS CALLED FOR BY THE ASSESSING OFFICER. DURING THE ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS DECLARED GROSS TOTAL INCOME (LOSS) AT ` 36 46 004 . 4. THE ASSESSING OFFICER SOUG HT EXPLANATION ON THE APPLICABILITY OF THE EXPLANATION TO SECTION 73 OF THE ACT TO THE LOSS FROM SHARES AND SECURITIES INCURRED BY THE ASSESSEE. IN RESPONSE THE ASSESSEE FILED THE FOLLOWING SUBMISSIONS: AT THE OUTSET IT WOULD BE WORTH THE WHILE TO REF ER TO THE COMPOSITION OF INCOME OF OUR ABOVENAMED CLIENTS. 3 PANTHER INDUSTRIAL PRODUCTS LTD. BUSINESS INCOME LOSS ` ` IN SHARE TRADING (3 07 40 000) OTHER BUSINESS 2 67 48 996 (39 91 004) CAPITAL GAINS 3 45 000 GROSS TOTAL INCOME:::::::: 36 46 004 FROM THE AB OVE YOU WOULD APPRECIATE THAT THE GROSS TOTAL INCOME BEING NEGATIVE AND CAPITAL GAINS BEING A POSITIVE FIGURE THE MATTER FALLS IN THE EXCEPTED CATEGORY. CONSEQUENTLY THE EXPLANATION CANNOT BE PRESSED INTO ACTION ON THE FACTS OF THE CASE. IN CONNECTION WITH YOUR ANOTHER QUERY WE SUBMIT THAT THE SHARE TRADING ACTIVITY IN WHICH THE LOSS HAS ARISEN IS BACKED BY DELIVERY THE DETAILS OF WHICH HAS BEEN GIVEN TO YOU DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND HENCE PER SE NOT SPECULATIVE IN NATURE WITH IN THE MEANING OF SEC 43(5) OF THE ACT. ACCORDINGLY FOR COMPUTING THE GROSS TOTAL INCOME THE LOSS FROM SHARE TRADING ACTIVITY HAS TO BE CONSIDERED. THE PROPOSITION THAT LOSS SHOULD BE IGNORED TO DETERMINE THE APPLICABILITY OF THE EXPLANATION IS FALLACIOU S IN AS MUCH AS YOU ARE INTENDING TO APPLY THE PROVISIONS OF THE EXPLANATION IN ORDER TO DETERMINE WHETHER THE EXPLANATION IS APPLICABLE. INDEED IN ORDER TO DETERMINE THE APPLICABILITY OF THE EXPLANATION ONE CANNOT FIRST START BY APPLYING THE EXPLANATION . THE FIRST STEP IS TO COMPUTE THE GROSS TOTAL INCOME COMPLETELY IGNORING THE EXPLANATION TO SEC.73. THEN EXAMINE THE COMPOSITION OF THE GROSS TOTAL INCOME. IF THE GROSS TOTAL INCOME SO COMPUTED COMPRISE MAINLY OF INCOME UNDER THE HEADS OTHER THAN BUSINESS THEN THE QUESTION OF APPLICABILITY OF THE EXPLANATION DOES NOT ARISE. RELIANCE IS PLACED ON THE FOLLOWING DECISIONS OF TRIBUNALS UPHOLDING THE AFORESAID VIEW: RAJAN ENTERPRISES 41 ITD 469 (BOM.) M. GULAB SINGH & SONS 43 ITD 208 (CHD) BLOOM TRADING CO . P. LTD. ITA NO.6229/BOM./91 FURTHER SECTION 73 COMES INTO PLAY ONLY AFTER INCOME HAS BEEN COMPUTED UNDER VARIOUS HEADS OF INCOME AS DEFINED IN SECTION 14 OF THE ACT. THE PROVISIONS OF SET OFF OR CARRY FORWARD AND SET OFF CONTAINED IN CHAPTER VI THAT IS SECTION 70 TO SECTION 79 ARE APPLICABLE TO THE HEADS OF INCOME. ACCORDINGLY LOSS ARISING ON SHARE TRADING HAS TO BE CONSIDERED IN COMPUTING THE GROSS TOTAL INCOME. RELIANCE IS PLACED ON THE RATIO OF THE SUPREME COURT IN THE FOLLOWING CASES CIT V KAN TILAL NATHUCHAND SAMI 63 ITR 318 (SC) 4 PANTHER INDUSTRIAL PRODUCTS LTD. CIT V JAGANNATH MAHADEO PRASAD 71 ITR 296 (SC) IN VIEW OF THE ABOVE EXPLANATION TO SEC. 73 IS NOT APPLICABLE TO THE FACTS OF THE CASE OF OUR ABOVE NAMED CLIENTS. 5. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSE E THE ASSESSING OFFICER REJECTED THE CONTENTION OF THE ASSESSEE BY OBSERVING AS UNDER: 2.3: THE INCOME SIDE OF THE P&L A/C OF THE ASSESSEE COMPANY SHOWS INCOME FROM SHARES AND SECURITIES AT ` 3 07 40 000. HOWEVER THIS INCOME IS NEGATIVE INCOME. IT IS BY NOW WELL SETTLED THAT THE WORDS INCOME OR PROFITS AND GAINS SHOULD BE UNDERSTOOD AS INCLUDING LOSSES ALSO SO THAT IN ONE SENSE PROFITS AND GAINS REPRESENT POSITIVE INCOME WHEREAS LOSSES REPRESENT NEGATIVE INCOME. IN OTHER WORDS LOSS IS NEGATIVE PROFIT. BOTH POSITIVE AND NEGATIVE PROFITS ARE OF REVENUE CHARACTER. BOTH MUST ENTER INTO COMPUTATION WHEREVER IT BECOMES MATERIAL IN THE SAME MODE OF THE TAXABLE INCOME OF THE ASSESSEE. REFERENCE IN THIS CONTEXT MAY BE MADE TO THE DECISION OF THE SUPREME COURT IN CIT V. HARPRASAD AND CO. P. LTD. [1975] 99 ITR 118. THE SUPREME COURT IN THE CASE OF CIT V. J . H. GOTLA [1985] 156 ITR 323 IN CONSTRUING THE WORD 'INCOME' IN SECTION 16(3) OF THE INDIAN INCOME - TAX ACT 1922 HELD THAT THE WORD 'INCOM E WOULD INCLUDE LOSS. THE EXPLANATION TO SECTION 73 IS PRODUCED BELOW: ' EXPLANATION : - WHERE ANY PART OF THE BUSINESS OF A COMPANY (OTHER THAN A COMPANY WHOSE GROSS TOTAL INCOME CONSISTS MAINLY OF INCOME WHICH IS CHARGEABLE UNDER THE HEADS 'INTEREST ON SE CURITIES' 'INCOME FROM HOUSE PROPER' 'CAPITAL GAINS' AND 'INCOME FROM OTHER SOURCES' OR A COMPANY THE PRINCIPAL BUSINESS OF WHICH IS THE BUSINESS OF BANKING OR THE GRANTING OF LOANS AND ADVANCES) CONSISTS IN THE PURCHASE AND SALE OF SHARES OF OTHER COMPA NIES SUCH COMPANY SHALL FOR THE PURPOSES OF THIS SECTION BE DEEMED TO BE CARRYING ON A SPECULATION BUSINESS TO THE EXTENT TO WHICH THE BUSINESS CONSISTS OF THE PURCHASE AND SALE OF SUCH SHARES.' THE OPERATIVE WORD IN THE EXPLANATION IS MAINLY'. THE LEG ISLATURE HAS DELIBERATELY USED THE WORD 'MAINLY' WHILE ENACTING THE EXPLANATION IS SO FAR AS HE SAME IS NOT USED THE MEANING OF THE EXPLANATION WOULD TOTALLY CHANGE. 5 PANTHER INDUSTRIAL PRODUCTS LTD. THE LOSS IN SHARES DEALING AMOUNTS TO RS.3 07 40 000/ - NEEDS TO BE TREATED AS NEGATIVE PROFIT THEN THE INCOME FROM OTHER BUSINESS OF RS.2 67 48 996/ - IS LESS. THEREFORE THE MAIN INCOME OF THE ASSESSEE CONSISTS OF SHARE TRADING. 2.4: I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE ASSESSEE COMPANY THROUGH ITS A.R AND IN VIEW OF THE REAS ONING GIVEN IN THE FOREGOING PARAS THE TOSS OF RS.3 07 40 000/ - IS TREATED AS SPECULATION LOSS TO BE SET OFF ONLY AGAINST SPECULATION INCOME. FURTHER RELIANCE CAN BE PLACED ON THE DECISION OF THE CALCUTTA HIGH COURT IN HE CASE OF CIT V. PARK VIEW PROPER TIES P. LTD 261 ITR AT PAGE 493. 6. AGGRIEVED WITH THE ABOVE ORDER THE ASSESSEE PREFERRED APPEAL BEFORE THE LEARNED COMMISSIONER (APPEALS) AND THE TRIBUNAL. SUBSEQUENTLY THE TRIBUNAL RESTORED THE ISSUE BACK TO THE LEARNED COMMISSIONER (APPEALS) FOR DECID ING THE ISSUE RAISED BY THE ASSESSEE IN THE ORIGINAL APPEAL BEFORE THE LEARNED COMMISSIONER (APPEALS) AFRESH AFTER GIVING SUFFICIENT OPPORTUNITIES TO THE ASSESSEE AND AFTER TAKING INTO CONSIDERATION OF THE DETAILS AND DOCUMENTS ON RECORD. ACCORDINGLY THE LEARNED COMMISSIONER (APPEALS) 5 MUMBAI ADJUDICATED THE ISSUES AFTER GIVING OPPORTUNITY TO THE ASSESSEE. BEFORE THE LEARNED COMMISSIONER (APPEALS) THE ASSESSEE FILED SIMILAR SUBMISSIONS WHAT WAS MADE BEFORE THE ASSESSING OFFICER AND IN RESPONSE TO THE F URTHER QUERIES RAISED BY THE LEARNED COMMISSIONER (APPEALS) THE ASSESSEE FILED FURTHER SUBMISSIONS DATED 15 TH MARCH 2004. FOR THE SAKE OF CLARITY IT IS REPRODUCED BELOW: SUBMISSIONS DATED 15.3.2003: (A) IN THIS CONNECTION AT THE OUTSET WE WOULD LIKE TO POINT OUT TO YOU THAT YOU HAVE NOT GIVEN ANY REASONS FOR TREATING THE 6 PANTHER INDUSTRIAL PRODUCTS LTD. IMPUGNED TRANSACTIONS AS BOGUS. IN ANY VIEW OF THE MATTER WE SUBMIT THAT THE TRANSACTIONS OF PURCHASE AND SALE OF SHARES OF LANDMARK ARE NOT BOGUS AS THEY HAVE BEEN EXECUTED BY OUR ABOVE NAMED CLIENTS IN THE COURSE OF BUSINESS AND ALL INGREDIENTS REQUIRED FOR A VALID CONTRACT ARE PRESENT IN THE SAID TRANSACTION. THERE IS A PURCHASE (DEBIT NOTE OF CLASSIC CREDIT LTD.) DELIVERY OF SHARES RECEIVED (DISTINCTIVE NUMBERS WITH DELIVERY LETT ER FILED) AND PAYMENT FOR THE PURCHASE. SIMILARLY THERE IS A SALE (DEBIT NOTE OF PANTHER INDUSTRIAL PRODUCTS LTD. ) DELIVERY OF THE SAME SHARES GIVEN AND PAYMENT RECEIVE. WE HAVE FILED LETTER DATED 17.12.2003 GIVING ALL THE RELEVANT SUPPORTING OF THE TRAN SACTIONS. THE MARKET QUOTATION OF LANDMARK ON THE DATE OF PURCHASE AND SALE ARE RS. 152.40 AND RS. 48.10 RESPECTIVELY WHICH ARE THE RATES AT WHICH TRANSACTIONS HAVE BEEN EXECUTED AND HENCE ARE ON THE BASIS OF REAL TIME RATES. ONLY BECAUSE THE SELLER COMP ANY AND BUYER COMPANY ARE ASSOCIATE COMPANIES OF OUR ABOVE NAMED CLIENTS A DOUBT ON THE GENUINITY OF THE TRANSACTIONS CANNOT BE RAISED. IN VIEW OF THE ABOVE WE WOULD LIKE TO IMPRESS UPON YOU THAT THE TRANSACTIONS ARE GENUINE AND HAVE BEEN CARRIED OUT IN THE COURSE OF BUSINESS. 'B) THE TRANSACTIONS ARE NOT SPECULATIVE AS OUR ABOVE NAMED CLIENTS HAVE RECEIVED DELIVERY (REFER POINT NO. 3 OF OUR LETTER DATED 12.11.2003) ON PURCHASE AND HAVE GIVEN DELIVERY ON SALE. AS SUCH THE CONDITIONS OF SECTION 43(5) OF C ONTRACT BEING SETTLED OTHERWISE THAN BY DELIVERY NOT BEING SATISFIED THE TRANSACTIONS ARE NOT SPECULATIVE. (C) EXPLANATION TO SECTION 73 IS NOT APPLICABLE AND IN THIS CONNECTION WE WOULD RELY ON THE VARIOUS DECISIONS GIVEN TO YOU DURING THE COURSE OF PRO CEEDINGS. SUBMISSION DATED 17.12.2003: - IN THIS CONNECTION AS REQUIRED BY YOU WE FURNISH THE FOLLOWING: - (A) MEMORANDUM AND ARTICLES OF ASSOCIATION OF THE COMPANY (B)(I) THE SHARE OF LANDMARK LEISURE HAVE BEEN PURCHASED ON 25.06.2000 FROM CLASSIC CREDIT LT D REFER THEIR DEBIT NOTE NO. CCL/2606/2000 - 01 DATED 26.6.2000. (II) THE PAYMENT HAS BEEN EFFECTED BY PANTHER FINCAP & MANAGEMENT SERVICES LTD. ON BEHALF OF OUR CLIENTS ON 26.6.2000. (C) (I) THE SHARES OF LANDMARK LEISURE HAVE BEEN SOLD ON 28 12.2000 TO PA NTHER FINCAP & MANAGEMENT SERVICES LTD. REFER OUR DEBIT NOTE NO. PJPL/28 12/2000 - 01 DATED 28.12.2000. (II) THE PAYMENT HAS BEEN EFFECTED BY PRIAT HER FINCAP & MANAGEMENT SERVICES LTD. TO OUR CLIENTS ON 4. 12.2000 (PS. 75 LACS) - AND 21.12.2000 (PS. 100 LAC S) PAGE 5 FIND ENCLOSED PHOTO COPY OF BANK STATEMENT EVIDENCING CLEARANCE OF AFORESAID CHEQUE. THERE IS NO BROKER INVOLVE TO EFFECT THE AFORESAID TRANSACTIONS IN (B) AND (C) ABOVE. (D) THE SELLER COMPANY AND BUYER COMPANY ARE ASSOCIATES OF THE ASSESSEE COM PANY. SUBMISSION DATED 30.3.2004: - 7 PANTHER INDUSTRIAL PRODUCTS LTD. FURTHER WITH REFERENCE TO YOUR MENTION IN THE AFORESAID LETTER OF THE TRANSFER DEEDS EVIDENCING THE PURCHASE NOT HAVING BEEN PRODUCED WE WOULD LIKE TO IMPRESS UPON YOU THAT THE SHARES UNDER REFERENCE HAVING BEEN SOLD BY OUR CLIENTS TO CLASSIC CREDIT LTD(CCL) OUR CLIENTS HAVE GIVEN THE DELIVERY OF THE SHARES WITH THE TRANSFER DEEDS BEING MARKET DELIVERY AND VALID FOR 1 YEAR AND HENCE NOT IN POSSESSION. CCL IN TURN PLEDGED THE SHARES WITH VIDYUT INVESTMENTS LTD. AND TH E SHARES AFTER DEMAT ARE AS OF TODAY STILL LYING IN THEIR DEMAT ACCOUNT. AS SUCH THE TRANSFER DEEDS WOULD HAVE BEEN USED BY THE TRANSFEREE VIDYUT IN THIS CASE TO GET THE SHARES TRANSFERRED IN THEIR NAME AND AFTER TRANSFER BEING EFFECTED THE DEEDS ARE RETAINED BY THE COMPANY WHOSE SHARES ARE UNDER TRANSFER NAMELY LANDMARK LEISURE. AS SUCH OUR CLIENTS WOULD NOT BE IN A POSITION TO FURNISH THE TRANSFER DEED FOR VERIFICATION AND / OR RECORDS. FURTHER IN CONNECTION WITH THE SALE OF SHARES BY OUR ABOVE NAM ED CLIENTS TO PANTHER FINCAP & MANAGEMENT SERVICES LTCL(PFMS) YOU HAVE OBSERVED THAT THE CONSIDERATION HAS BEEN RECEIVED BY OUR CLIENTS IN ADVANCE. WE CONFIRM THAT THE AMOUNTS HAVE BEEN RECEIVED IN ADVANCE AND ARE IN PROXIMITY TO THE DATE OF SALE THESE A RE PAYMENTS IN ADVANCE BY THE BUYER THAT IS PFMS; FURTHER AS REQUIRED BY YOU PLEASE FIND ENCLOSED THE FOLLOWING: - (I) LEDGER ACCOUNT OF PFMS AND CCL IN THE BOOKS OF OUR CLIENTS AND OUR CLIENTS' ACCOUNT IN THEIR RESPECTIVE BOOKS OF ACCOUNT. (II) EVIDENCE OF MARKE T PRICE OF SHARES OF LANDMARK LEISURE ON THE DATE OF PURCHASE AND SALE HAVE BEEN ENCLOSED IN OUR LETTER DATED 15.3.2O04. 7. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE THE LEARNED COMMISSIONER (APPEALS) OBSERVED THAT THE ISSUE BEFORE HIM IS WHETHER THE LOSS OF ` 3 12 90 000 INCURRED ON TRADING IN 3 00 000 SHARES OF LANDMARK LEISURE LTD. WERE GENUINE OR NOT IS SO THE SAME SHOULD BE CLASSIFIED AS BUSINESS LOSS OR SPECULATION LOSS WITHIN THE MEANING OF EXPLANATION TO SECTION 73 OF THE ACT. HE OBSERVE D THAT THE ASSESSEE HAD PURCHASED 3 00 000 SHARES OF LANDMARK LEISURE LTD. @ ` 152. 40 PER SHARE FROM CLASSIC CREDIT LTD. FOR AN AMOUNT OF ` 4 57 20 000 ON 25 TH JUNE 2020 AND HE OBSERVED THAT THE ASSESSEE CLAIMS TO HAVE SOLD THE SAME ON 28 TH DECEMBER 2000 A T ` 48=10 PER SHARE TO PFMS LTD. 8 PANTHER INDUSTRIAL PRODUCTS LTD. FOR A TOTAL AMOUNT OF ` 1 44 30 000 AND SHOWED LOSS OF ` 3 12 90 000 AND CLAIMED THE SAME AS BUSINESS LOSS. THE LEARNED COMMISSIONER (APPEALS) OBSERVED THE BASIC FACTS IN HIS ORDER RELATING TO THE TRANSFER OF SHARES. FOR T HE SAKE OF CLARITY IT IS REPRODUCED BELOW: IN ORDER TO APPRECIATE THE TRUE NATURE OF TRANSACTION SOME MORE INFORMATION ABOUT PURCHASE AND SALE OF SHARES WAS OBTAINED FROM THE ASSESSEE. IT IS SEEN THAT THE LOSS OF RS 3 07 40 000/ - WAS ARRIVED AT AS UNDE R: - SR. NAME OF SCRIP PURCHASE SALES PROFIT QUANTITY AMOUNT QUANTITY AMOUNT 1. LANDMARKI LEISURE LTD. 3 00 000 4 57 20 000 3 00 000 1 44 30 000 (3 12 90 000) 2. WALCHAND CRICKET NEXT COM. 2 75 000 6 38 000 2 75 000 6 43 50 000 TOTAL 5 75 000 10 9 5 20 000 5 75 000 7 57 80 000 THUS LOSS OF RS. 312 90 000/ - WAS INCURRED BY THE ASSESSEE ON PURCHASE AND SALE OF THREE LACK SHARES OF LANDMARK LEISURE(LL) PURCHASED AT A COST OF RS. 4 57 20 000/ - AND SOLD TO SISTER CONCERN PANTHER FINVEST MANAGEMENT SE RVICES(PFMS) AT RS.1 44 30 000/ - . THE ASSESSEE IS A KETAN PAREKH GROUP COMPANY. THE BACKGROUND OF THE TRANSACTION IS THAT M/S CLASSIC CREDIT LTD(CCL) ANOTHER KETAN PARIKH GROUP COMPANY PURCHASED 14 50 000 SHARES OF LANDMARK LEISURE ON 27 01.2000 FOR RS.7 2 7 90 000/ - (AT RS. 50.20 PER SHARE) FROM PRATIK INVESTMENT PUNE. 6.1 ADMITTEDLY THESE SHARES WERE NOT TRANSFERRED IN THE NAME OF M/S CCL. SUBSEQUENTLY M/S CCL IS STATED TO HAVE SOLD THREE LACS SHARES TO THE ASSESSEE COMPANY ON 26.6.2000 VIDE DEBIT NOTE NO. CCL/2606/2000 01 DATED 26.6.2000 AT A COST OF RS. 4 57 20 000/ - I.E. RS. 152.40 PER SHARE THIS TRANSACTION WAS DONE OUTSIDE THE STOCK EXCHANGE. NO PAYMENT WAS MADE BY THE ASSESSEE COMPANY TO M/S CCL FOR PURCHASES OF SHARES. IT WAS STATED THAT THE ASS ES SEE WAS HAVING A RUNNING ACCOUNT WITH M/S CCL AND THE AMOUNT OF RS. 4 57 20 000/ - TOWARDS PURCHASE OF SHARES WAS CREDITED TO .CL'S ACCOUNT IN ASSESSEE'S BOOKS. ON THE SAME DAY THE ACCOUNT WAS DEBITED WITH EQUIVALENT AMOUNT OF RS 4 57 20 000/ - WITH THE NA RRATION PFMS PD TO CCL FOR PIPL. ON 28.12.2000 THE ASSESSEE 9 PANTHER INDUSTRIAL PRODUCTS LTD. COMPANY IS STATED TO HAVE SOLD THESE SHARES TO ANOTHER GROUP COMPANY M/S PFMS AT A PRICE OF RS. 1 44 30 000/ - I.E. RS. 48.10 PER SHARE VIDE DEBIT NOTE NO. PIPL/2812/2000 - 01 DATED 28.12.2000. THUS IN THE PROCESS THE ASSESSEE COMPANY IS STATED TO HAVE SUFFERED A LOSS OF RS. 3 12 90 000/ - . AS REGARDS THE PAYMENT BY M/S PFMS TO THE ASSESSEE IT WAS STATED THAT M/S PFMS PAID TO THE ASSESSEE ON 4.12.2000 (RS75 LACS) AND 21.12.2000 (RS 100 LACS) (INTERESTI NGLY BOTH THESE DATES ARE PRIOR TO ALLEGED SALE OF SHARES BY THE ASSESSEE TO M/S PFMS. ALSO THOUGH THE SALE CONSIDERATION WAS RS.1 44 30 000/ - THE ASSESSEE COMPANY CLAIMS TO HAVE RECEIVED 175 00 000). 8. THE LEARNED COMMISSIONER (APPEALS) OBSERVED IN HI S ORDER THAT THE CRUX OF THE MATTER IS WHETHER THE ASSESSEE HAS REALLY PURCHASED 3 00 000 SHARES OF LANDMARK LEISURE LTD. FOR ` 4 57 20 000 ON 26 TH JUNE 2000 TOOK DELIVERY OF THE SHARES AND SHARES WERE TRANSFERRED IN THE NAME OF THE ASSESSEE AND ANY REAL P AYMENT BY MOVEMENT OF ACTUAL FUND BY WAY OF CHEQUE WAS MADE OR NOT. WHETHER THE ASSESSEE SOLD 3 00 000 SHARES OF LANDMARK LEISURE LTD. TO PFMS LTD. AND GIVEN DELIVERY OF SHARES. IN THIS REGARD HE ANALYSED THE LEDGER OF CLASSIC CREDIT LTD. IN WHICH THE PF MS LTD. MADE THE PAYMENT TO CLASSIC CREDIT LTD. ALONG WITH OTHER BUSINESS TRANSACTIONS AND HE NOTICED THAT THERE WAS NO SPECIFIC PAYMENT WAS MADE FOR THIS TRANSACTION AND OBSERVED THAT PFMS LTD HAS MADE CERTAIN TRANSACTION WITH CLASSIC CREDIT LTD. DURING T HIS YEAR. FURTHER HE OBSERVED THAT THE SAME SHARES WERE CLAIMED TO HAVE DELIVERED TO PFMS LTD. BY THE ASSESSEE VIDE LETTER DATED 30 TH DECEMBER 2000 FOR ` 1 44 30 000. HE FURTHER OBSERVED THAT ALL THE THREE COMPANIES I.E. THE ASSESSEE CLASSIC CREDIT LTD. AND PFMS LTD. WERE MANAGED AND CONTROLLED BY ONE GROUP I.E. KETAN PAREKH. 10 PANTHER INDUSTRIAL PRODUCTS LTD. 9. IN SUBSTANCE THE LEARNED COMMISSIONER (APPEALS) OBSERVED THAT IT APPEARS TO HIM THAT THE ASSESSEE GONE ABOUT MAKING BOOK ENTRIES BY RESORTING TO PURCHASE AND SALE OF SHARES IN DE CEMBER 2000 AFTER HAVING REALIZED THE EARNING OF INTEREST AND BROKAGE AND INTEREST THEN TO OFF SET THE SAME AND A PLAN WAS DEVISED TO PASS BOOK ENTRIES AND CREAT E A PAPER TRAIL TO SHOW THAT PURCHASE AND SALE OF SHARES WERE EFFECTED AND PAYMENTS WERE MADE AND RECEIVED BY BOOK ENTRIES. THEREFORE THERE WERE NO COPIES OF TRANSFER DEEDS AVAILABLE WITH THE ASSESSEE AND NO CHEQUE PAYMENT WAS EITHER MADE FOR THE PURCHASE OF SHARES FROM CLASSIC CREDIT LTD. NO PAYMENTS RECEIVED FOR THE SALE OF SHARES FROM PFMS LTD. ACCORDINGLY THE LEARNED COMMISSIONER (APPEALS) TREATED THE PURCHASE AND SALE OF 3 00 000 SHARES OF LANDMARK LEISURE LTD. AS SHAM TRANSACTION AND BOGUS SHARE TRANSACTION AND ACCORDINGLY HE CAME TO THE CONCLUSION THAT IT SHOULD BE DISALLOWED AND REJECTED. 10. FURT HER HE ANALYSED THE CLAIM OF LOSS AS SPECULATION LOSS BY THE ASSESSING OFFICER AND AFFIRMED BY THE LEARNED COMMISSIONER (APPEALS) II MUMBAI AS AN ALTERNATIVE ISSUE. ACCORDINGLY HE ANALYZED THE ISSUE AND CAME TO THE FOLLOWING CONCLUSION: PRIMA FACIE IT WOULD APPEAR THAT NONE OF THE TWO LIMBS OF EXPLANATION TO SUB SECTION 73(4) OF THE IT ACT 1961 WHICH EXCLUDE THE APPLICABILITY OF THE EXPLANATION TO COMPANIES DO NOT APPLY TO THE FACTS OF THE CASE4 AND HENCE PRIMA FACIE PROVISIONS OF EXPLANATIO N TO SUB SECTION 73(4) OF THE IT ACT 1961 ARE 11 PANTHER INDUSTRIAL PRODUCTS LTD. APPLICABLE TO THE ASSESSEES CASE. EVEN THOUGH IT HAS BEEN HELD THAT THE LOSS OF ` 3 12 90 000/ IS A BOGUS LOSS AND NOT ALLOWABLE AS PER FACTS OF THE CASE AND IN LAW IT IS REITERATED HERE THAT THE LOSS OF ` 3 12 90 000/ WERE HELD TO BE GENUINE AND ALLOWABLE IT WILL STILL BE SPECULATION LOSS WITHIN THE MEANING OF EXPLANATION TO SUB SECTION 73(4) OF THE IT ACT 1961 AND HENCE IT WILL NOT BE ALLOWABLE AS SET OFF AGAINST BUSINESS INCOME AND/OR ANY OTHER S OURCE OF INCOME EXCEPT SPECULATION GAIN WITHIN THE MEANING OF IT ACT 1961. IT IS THEREFORE HELD THAT NOTWITHSTANDING THE DECISION TO TREAT THE LOSS OF ` 3 12 90 000/ AS BOGUS LOSS AND ITS REJECTION OF IT IN EARLIER PARAGRAPHS IT IS HELD THAT THE AO WAS FULLY JUSTIFIED IN TREATING THE LOSS OF ` 3 12 90 000/ AS SPECULATION LOSS WITHIN THE MEANING OF EXPLANATION TO SUB SECTION 73(4) OF THE IT ACT 1961. IN NUTSHELL ASSESSEES APPEAL IS REJECTED IN FACTS OF THE CASE AND IN LAW . THE ASSESSEE BEING A GGRIEVED BY THE AFORESAID ORDER OF THE LEARNED COMMISSIONER (APPEALS) IS IN FURTHER APPEAL BEFORE THE TRIBUNAL. 11. BEFORE US THE LEANED COUNSEL FOR THE ASSESSEE SUBMITTED WITH REGARD TO GROUND NO 1 THAT THE CIT(A) IN THE FIRST INNINGS BY ORDER DATED 25.03. 2004 HAS HELD THAT THE LOSS OF RS 3 12 90 000 IS A NON - GENUINE LOSS A ND FURTHER HELD IT TO BE A SPECULATION LOSS AS PER THE PROVISIONS OF EXPLANATION TO SECTION 73 OF THE ACT. THEN T HE HONOURABLE TRIBUNAL BY ORDER DATED 9TH NOVEMBER 2005 SET ASIDE THE OR DER AND RESTORED THE SAME TO THE CIT(A) FOR FRESH ADJUDICATION ( PAGE NOS 61 TO 66 OF THE PAPER BOOK ) . 11.1 HE BROUGHT TO OUR NOTICE THE LOSS INCURRED BY THE ASSESSEE AND THE DETAILS ARE: 12 PANTHER INDUSTRIAL PRODUCTS LTD. PARTICULARS QUANTITY AMOUNT (RS) SA L ES 3 00 000 4 57 20 000 PURCH ASE 3 00 000 1.44 30 000 LOSS (3 12 90 000) 11.2 HE SUBMITTED THAT T HE SHARES OF LANDMARK LEISURE HAVE BEEN PURCHASED ON 26 TH JUN E 2000 FROM CLASSIC CREDIT LTD AND BROUGHT TO OUR NOTICE THE DEBIT NOTE NO CCL/2606/2000 - 01 DATED 26.06.2000 ( PAGE NO 22 O F THE PAPER BOOK ) . THE PAYMENT HAS BEEN EFFECTED BY PANTHER FINCAP & MANAGEMENT SERVICES LTD ON BEHALF OF THE ASSESSEE S ON 26 TH JUNE 2000 ( PAGE NO 23 OF THE PAPER BOOK ) . FURTHER HE SUBMITTED THAT T HE SHARES OF LANDMARK LEISURE HAVE BEEN SOLD ON 28 TH DECEM BER 2000 TO PANTHER F INCAP & MANAGEMENT SERVICES LTD HE BROUGHT TO OUR NOTICE ASSESSEE - COMPANY'S DEBIT NOTE NO PIPIJ28 12/2000 - 01 DATED 28.12.2000 (PAGE NO 34 OF THE PAPER BOOK). 11.3 HE SUBMITTED THAT T HE PAYMENT HAS BEEN EFFECTED BY PANTHER FINCAP & M ANAGEMENT SERVICES LTD TO THE ASSESSEE - COMPANY ON 4 TH DECEMBER 2000 (RS 75 LACS) AND 21' DECEMBER 2000 (RS 100 LACS) . HE BROUGHT TO OUR NOTICE P AGE NOS 35 AND 36 OF THE PAPER BOOK AND SUBMITTED T HERE WA S NO BROKER INVOLVED TO EFFECT BOTH THE AFORESAID TR ANSACTIONS AND T HE SELLER - COMPANY (CLASSIC CREDIT) AND THE BUYER - COMPANY (PANTHER FINCAP) ARE ASSOCIATES OF THE ASSESSEE - COMPANY . 13 PANTHER INDUSTRIAL PRODUCTS LTD. 11.4 HE FURTHER SUBMITTED THAT T HE TRANSACTIONS OF PURCHASE AND SALE OF SHARES OF LANDMARK LEISURE ARE NOT BOGUS AS THEY HAVE BEEN EXECUTED BY THE ASSESSEE IN THE COURSE OF CARRYING ON BUSINESS AND ALL INGREDIENTS REQUIRED FOR A VALID CONTRACT ARE PRESENT IN THE SAID TRANSACTION. THERE IS A PURCHASE CONTRACT (DEBIT NOTE OF CLASSIC CREDIT LTD) DELIVERY OF SHARES RECEIVED OF THE SHARES PURCHASED (DISTINCTIVE NUMBERS WITH DELIVERY LETTER FILED) AND PAYMENT FOR THE PURCHASE OF SHARES. SIMILARLY THERE IS A SALE CONTRACT (DEBIT NOTE OF THE ASSESSEE - COMPANY) DELIVERY OF THE SAME SHARES GIVEN AND PAYMENT RECEIVED. FURTHER THE MARKET QUOTATION OF LANDMARK LEISURE ON THE DATE OF PURCHASE AND SALE ARE RS 152.40 ( PAGE NO 42 OF THE PAPER BOOK) AND RS 48.10 ( PAGE NO 43 OF THE PAPER BOOK) RESPECTIVELY WHICH ARE THE RATES AT WHICH TRANSACTIONS HAVE BEEN EXECUTED AND HENCE ARE ON THE BASIS OF REAL TIME RATES. ONLY BECAUSE THE SELLER - COMPANY AND BUYER - COMPANY ARE ASSOCIATES OF THE ASSESSEE - COMPANY A DOUBT ON THE GENUINENESS OF THE TRANSACTIONS CANNOT BE RAISED. 11.5 LD AR SUBMIT TED THAT THE H ONOURABLE TRIBUNAL IN THE CASE OF PANTHER FINCAP FOR THE YEAR UNDER REFERENCE BY ORDER DATED 1 7 . 4. 2 013 HAS HELD THAT THE TRANSACTIONS OF SALE AND PURCHASE CARRIED OUT BY PANTHER FINCAP ARE GENUINE AND NOT BOGUS HE BROUGHT TO OUR NOTICE COPY OF THE DECISION AND RELEVANT PARA 93 OF THE ORDER. 14 PANTHER INDUSTRIAL PRODUCTS LTD. HE SUBMITTE D THAT A S SUCH IT IS CLEAR THE SALE OF SHARES BY THE ASSESSEE - COMPANY TO PANTHER FINCAP HAS BEEN HELD TO B E GENUINE. 11.6 FINALLY HE SUBMITTED THAT THE AFORESAID TRANSACTIONS ARE GENUINE AND HAVE BEEN CARRIED OUT IN THE NORMAL COURSE OF BUSINESS OF THE A SSESSEE - COMPANY AT PREVAILING MARKET RATES. 12. WITH REGARD TO GROUND NO 2 TREATING THE AFORESAID TRANSACTIONS AS SPECULATIVE UNDER SECTION 43(5) OF THE ACT HE SUBMITTED THAT THE AFORESAID TRANSACTIONS CANNOT BE SAID TO BE SPECULATIVE UNDER SECTION 43(5) IN ASMUCH AS THE ASSESSEE S HAVE RECEIVED DELIV ERY ON PURCHASE OF SHARES FOR THAT PURPOSE HE BROUGHT TO OUR NOTICE PAGE NOS 22 AND 24 TO 32 OF THE PAPER BOOK . HE SUBMITTED THAT THE ASSESSEE HAVE GIVEN DELIVER Y ON SALE OF SUCH SHARES ( PAGE NOS 34 AND 37 OF THE PAPER BOOK) . FURTHER HE SUBMIT TED THAT THE CONDITIONS OF SECTION 43(5) OF CONTRACT BEING SETTLED OTHERWISE THAN BY DELIVERY ARE NOT SATISFIED AND HENCE IT CANNOT BE SAID THAT THE TRANSACTIONS REFERRED ABOVE ARE SPECULATIVE. 13. WITH REGARD TO GROUND NO 3 N OT ALLOWING SET - OFF OF THE LOSS OF RS 3 07 40 000 BY INVOKING EXPLANATION TO SECTION 73 HE BROUGHT TO OUR NOTICE EXPLANATION TO SECTION 73 AS IT STOOD PRIOR TO THE AMENDMENT W.E.F . 1.4.2015 WHICH IS REPRODUCED BELOW: WH ERE ANY PART OF THE BUSINESS OF A COMPANY (OTH ER THAN A 15 PANTHER INDUSTRIAL PRODUCTS LTD. COMPANY WHOSE GROSS TOTAL INCOME CONSISTS MAINLY OF INCOME WHICH IS CHARGEABLE UNDER THE HEADS 'INTEREST ON SECURITIES' 'INCOME FROM HOUSE PROPERLY' 'CAPITAL GAINS' AND 'INCOME FROM OTHER SOURCES' OR A COMPANY THE PRINCIPAL BUSINE SS OF WHICH IS THE BUSINESS OF BANKING OR THE GRANTING OF LOANS AND ADVANCES) CONSISTS IN THE PURCHASE AND SALE OF SHARES OF OTHER COMPANIES SUCH COMPANY SHALL FOR THE PURPOSES OF THIS SECTION BE DEEMED TO BE CARRYING ON A SPECULATION BUSINESS TO THE EX TENT T O WHICH THE BUSINESS CONSISTS O F THE PURCHASE AND SALE OF SUCH SHARES . 13.1 FURTHER BE BROUGHT TO OUR NOTICE PAGE NO 21 OF THE PAPER BOOK TO HIGHLIGHT THE LOSS INCURRED BY THE ASSESSEE AND HE BROUGHT TO OUR NOTICE THE COMPOSITION OF THE CURRENT ASS ETS AT PAGE NO 6 OF THE PAPER BOOK WHICH IS REPRODUCED BELOW: PARTICULARS 31 ST MARCH 2000 31 ST MARCH 2001 INVESTMENTS ` 8 48 000 ` 2 72 56 000 STOCK IN TRADE (SHARES) ` 3 46 538 TOTAL: ` 11 94 538 ` 2 72 56 000 LOANS AND ADVANCES ` 3 70 42 439 ` 7 74 56 000 13.2 F ROM THE ABOVE TABLE IT IS EVIDENT THAT THE PRINCIPAL BUSINESS OF THE ASSESSEE COMPANY IS OF GRANTING OF LOANS AND ADVANCES AND SUBMITTED THAT AN EXCEPTION CARVED OUT IN EXPLANATION TO SECTION 73. AS SUCH IT IS SUBMITTED THAT THE PR OVISIONS OF EXPLANATION TO SECTION 73 CANNOT BE PRESSED INTO SERVICE IN THE CASE OF THE ASSESSEE - COMPANY. IN VIEW OF THE ABOVE THE COUNSEL OF THE ASSESSEE SUBMIT TED THAT THE SET - OFF OF RS 3 07 40 000 OUGHT TO BE ALLOWED. 14. ON THE OTHER HAND THE LEARNED DE PARTMENTAL REPRESENTATIVE RELIED HEAVILY ON THE FINDINGS OF THE LEARNED COMMISSIONER (APPEALS) 16 PANTHER INDUSTRIAL PRODUCTS LTD. AND SUBMITTED THAT ALL THESE TRANSACTIONS WERE CARRIED OUT WITHIN THE GROUP CONCERN AND THIS GROUP CONCERN BELONGS TO M/S KETAN PAREKH GROUP AND HE SUBMITTED THA T NO DOUBT THE TRANSACTIONS CARRIED ON BY THE GROUP CONCERN ARE ON THE RATE S AS PER MARKET DRIVEN RATES AS ON 27 TH JULY 2000 26 TH JUNE 2000 AND 28 TH DECEMBER 2000. HE SUBMITTED THAT ALL THESE TRANSACTIONS SHOWS THAT THE ASSESSEE DEALT ON BEHALF OF ITS SIS TER CONCERN I.E. PANTHER FINCAP AND MANAGEMENT SERVICES. IN THIS REGARD HE SUBMITTED THAT THE PAYMENT FOR THE SHARES PURCHASED BY THE ASSESSEE WAS ACTUALLY PAID BY PFMS LTD. AND THE SAME SHARES WERE SOLD TO PFMS AS IT IS ONLY LOSS WAS BOOKED IN THE BOO KS OF THE ASSESSEE. THEREFORE IT IS NOT A GENUINE TRANSACTION. FOR THAT PURPOSE HE BROUGHT TO OUR NOTICE PAGE 11 OF THE LEARNED COMMISSIONER (APPEALS)S ORDER. THE ASSESSEE HAS NOT SUBMITTED ANY NEW MATERIAL BEFORE THE LEARNED COMMISSIONER (APPEALS). 15. IN THE REJOINDER THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED THAT THE ASSESSEE HAS BORROWED FUNDS FROM SISTER CONCERN TO SETTLE THE PAYMENT TO CCL MERELY BECAUSE THE ASSESSEE HAS SOLD THE SHARES TO PFMS. THE LEARNED COMMISSIONER (APPEALS) DOUBTS THE TRA NSACTIONS IF THE SAME WAS SOLD TO ANY OTHER CONCERN NO ONE WOULD HAVE RAISED ANY DOUBT ON THESE TRANSACTIONS. IT IS FACT THAT IN THE YEAR 2001 THE SHARE MARKET CRASHED DRASTICALLY. IN ORDER TO MANAGE FUND REQUIREMENT IT WAS SOLD TO SISTER CONCERN BY CCL. FOR THE SIMILAR 17 PANTHER INDUSTRIAL PRODUCTS LTD. PURPOSE THE ASSESSEE HAS SOLD THE SAME TO PFMS TO TIED OVER ITS FINANCIAL REQUIREMENT. THEREFORE IT IS A GENUINE TRANSACTION. 16. CONSIDERED THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. WE NOTICE THAT THE ASSESSEE HAS PURCHASED 3 00 000 SHARES OF LANDMARK LEISURE LTD. FROM CLASSIC CREDIT LTD. ON 26 TH JUNE 2000 AT THE COST OF RS. 4 57 20 000 BY TAKING PHYSICAL DELIVERY OF SHARES . HOWEVER THIS AMOUNT WAS SETTLED BY PFMS WHICH IS A SISTER CONCERN OF THE ASSESSEE WHICH IS EVIDENT FROM THE LEDGER COPY OF CCL (REFER ORDER OF CIT(A)). ON 28 TH DECEMBER 2000 THE ASSESSEE HAS SOLD THE SAME SHARES TO PFMS. THE ASSESSEE HAS HANDED OVER THE DELIVERY OF SHARES TO PFMS. THE ASSESSEE HAS ACCEPTED DELIVERY OF SHARES FROM CCL AFTER SETTLEMENT O F FUND BY PFMS. THE ASSESSEE HAS FILED A COPY OF THE LETTER IN SUPPORT OF THE RECEIPT OF PHYSICAL DELIVERY AND SIMILARLY THE ASSESSEE HAS HANDED OVER THE PHYSICAL COPIES OF SHARES TO PFM S AT THE TIME OF SALE THE PROOF IS ALSO PLACED ON RECORD AT PAGE 34 T O 37 OF THE PAPER BOOK. 17. WITH THIS BACKGROUND WE NOTICE D THAT THE LEARNED CO MMISSIONER (APPEALS) OBSERVED IN HIS ORDER THAT THE ASSESSEE HAS PURCHASED SHARES FROM ITS SISTER CONCERN CCL AND THE SAME WAS SETTLED BY PFMS ON BEHALF OF THE ASSESSEE. FURTHER HE OBSERVED THAT CCL HAS RAISED A DEBIT NOTE TO THE ASSESSEE . FOR REACHING HIS CONCLUSION H E ANALYZED THE LEDGER COPY OF THE ASSESSEE IN THE BOOKS OF CCL IN WHICH IT IS 18 PANTHER INDUSTRIAL PRODUCTS LTD. NARRATED THAT PFMS PAID TO CCL RS. 4 57 20 000. SINCE THE PAYMENT WAS SETTLED BY PFM S AND HE OBSERVED THAT THERE IS A DEBIT ENTRY FOR THE PAYMENT OF RS. 2 01 63 250 TOWARDS PAYMENT BY PFMS TO CCL AND TWO CHEQUES OF RS. 50 LAKH AND RS. 25 LAKH FROM CCL TO THE ASSESSEE AND THERE IS A PAYMENT OF RS. 1 CRORE BY THE ASSESSEE TO CCL AND OBSERV ED THAT THERE WE RE CERTAIN OTHER TRANSACTIONS BETWEEN THE ASSESSEE AND CCL. WITH THE ABOVE OBSERVATION THE LEARNED COMMISSIONER (APPEALS) CAME TO THE CONCLUSION THAT THERE WAS NO ACTUAL MOVEMENT OF FUNDS FROM THE ASSESSEE OR ITS ASSOCIATE PFMS TO CCL EITH ER ON 26 TH JUNE 2000 OR SUBSEQUENTLY. SINCE THESE TRANSACTIONS WERE CARRIED OUT WITHIN THE SISTER CONCERN HE FORMED AN OPINION THAT THE WHOLE TRANSACTION WAS BOGUS. THE LEDGER COPY ON WHICH THE LEARNED COMMISSIONER (APPEALS) FORMED AN OPINION FOR THE SAKE OF CLARITY IT IS REPRODUCED BELOW: SL.NO. DOCUMENT NO. TRANSACTION DATE NARRATION DEBIT AMOUNT CREDIT AMOUNT BALANCE AMOUNT ACCOUNT : PANTHER IND. PROD. LIMITED PIPL/2606 26/06/2000 PFMS PD TO CCL FOR PIPL 45720000.00 45720000.00 PIPL/26/06 26/ 06/2000 BILL AMOUNT 45720000 PIPL/2710 27/10/2000 PFMS PD TO CCL FOR PIFL 20163250.00 20163250.00 PIPL/03/00 27/10/2000 BILL AMOUNT 67 6 7750 13395500.00 PIPL/04/00 27/10/2000 BILL AMOUNT 13395500 000003 540912 04/11/2000 ON A/C. 5000000 5000 000 000003 540916 09/11/2000 ON A/C. 2500000 7500000 .00 19 PANTHER INDUSTRIAL PRODUCTS LTD. 000003 1408 13/11/2000 ON A/C CMO NC.062071 100000000.00 925000000.00 CCL/03/01 30/03/2000 BILL AMOUNT 63800000 28700000.00 PIPL/3103 31/03/2001 SAME A/C 28700000 T O T A L S : 16268325 0.00 165883230.00 18. AFTER CAREFUL CONSIDERATION OF THE ABOVE LEDGER WE OBSERVE THAT ON 26 TH JUNE 2000 PFMS HAS MADE A PAYMENT TO CCL OF RS. 4 57 20 000 (THE NARRATION CLEARLY INDI CATES THAT PD TO CCL FOR PFMS ) WHICH MEANS PFMS PAID THE ABOVE AMOUNT O N BEHALF OF ASSESSEE AND FURTHER FOLLOWING THAT PAYMENT BILL AMOUNT F OR TRANSFER OF SHARES WERE RECORDED. SUBSEQUENTLY ON 27 TH OCTOBER 2000 THERE WAS ANOTHER PAYMENT WAS MADE BY THE PFMS TO CCL ON BEHALF OF THE ASSESSEE TO THE EXTENT OF RS. 201 63 250. THE PURPOSE OF THIS PAYMENT IT IS NOT KNOWN. THE ASSESSEE HAS CARRIED ON WITH THE OTHER TRANSACTION WITH CCL WHICH IS NOT RELEVANT FOR OUR DISCUSSION. WE OBSERVE THAT THE LEARNED COMMISSIONER (APPEALS) HAS NOT NOTICED THE FIRST PAYMENT OF RS. 4 57 20 000 INSTEAD HE OBSERVED ONLY RS. 2 01 63 250 AND FORMED AN OPINION THAT THERE IS NO SETTLEMENT FOR THE PURCHASE OF SHARES BY THE ASSESSEE OR PFMS . IN OUR CONSIDERED VIEW THE ASSESSEE HAS PURCHASED THE SHARES FROM CCL ON 26 TH JUNE 2000 BY TAKING PHYSICAL DEL IVERY OF SHARES THE PROOF OF WHICH IS ALREADY SUBMITTED IN THE PAPER BOOK AND THE ASSESSEE HAS SETTLED THE ABOVE PURCHASE CONSIDERATION BY TAKING LOAN FROM PFMS THE LEDGER COPY OF 20 PANTHER INDUSTRIAL PRODUCTS LTD. CCL CLEARLY INDICATES THAT THE PFMS HAS SETTLED THE AMOUNT ON BEHALF OF TH E ASSESSEE. THE PURCHASE CONSIDERATION WAS DETERMINED ON THE BASIS OF MARKET PRICE PREVAILING ON THE DATE OF PURCHASE I.E. RS. 152.04 PER SHARE. THE LEARNED COMMISSIONER (APPEALS) OBJECTED TO THE ABOVE MODE OF SETTLEMENT/ TRANSACTION JUST BECAUSE THE ASSES SEE HAS TAKEN A LOAN FROM ITS SISTER CONCERN TO SETTLE OTHER SISTER CONCERN. SINCE THE DELIVERY OF SHARES WERE TAKEN PLACE IN THE NAME OF THE ASSESSEE ON THE DATE OF TRANSFER AND THERE WAS NO INVOLVEMENT OF ANY AGENT IN ORDER TO COMPLETE THE TRANSACTION T HE PHYSICAL DELIVERY OF SHARES WERE CARRIED OUT AND THE PROOF OF WHICH IS PROPERLY SUBMITTED IN THE PAPER BOOK. IT IS NORMAL IN CASE OF CLOSELY HELD COMPANIES LIKE THIS TO BORROW FUNDS FROM THE SISTER CONCERN IN ORDER TO COMPLETE THE TRANSACTION OR INTERNA L SETTLEMENTS . IT IS IMPORTANT TO NOTE THAT ALL THE SETTLEMENT OF SHARES WERE CARRIED OUT ONLY THRU BANKING CHANNEL. WE DO NOT UNDERSTAND THE FINDINGS OF LEARNED COMMISSIONER (APPEALS) THAT IT IS ONLY BOOK ENTRIES HOW THEY CAN CREATE BOOK ENTRIES WHEN THE SETTLEMENTS WERE CARRIED OUT BY BANK TRANSFERS. THERE IS NO IMPROPER WAY OF SETTLEMENT AND IT IS ONE OF THE LEGAL WAYS OF COMPLETING THE CONTRACT. WITH REGARD TO SALE OF SHARES TO PFMS THE ASSESSEE HAS SUBMITTED CLEARLY PROPER PAYMENT CHALLAN TO SUPPORT THAT THE ASSESSEE HAS ACTUALLY RECEIVED RS. 1.75 CRORE FROM PFMS BEFORE HANDING OVER OF THE PHYSICAL SHARES TO THEM AT THE MARKET PRICE PREVAILING ON THE DATE OF SALE I.E. RS. 48.10 PER SHARE. SINCE THERE IS A LOSS INCURRED BY THE 21 PANTHER INDUSTRIAL PRODUCTS LTD. ASSESSEE IN THESE TRANSA CTIONS THE LEARNED COMMISSIONER (APPEALS) DOUBTS THE WHOLE TRANSACTION MERELY BECAUSE THERE IS A LOSS . O THERWISE I N CASE THE TRANSACTION WAS CARRIED OUT WITH ANY THIRD PARTY THE DOUBT WOULD NOT HAVE ARISE N . IN OUR CONSIDERED VIEW MERELY BECAUSE THE ASSE SSEE HAS TAKEN ADVANCES FROM ITS SISTER CONCERN TO SETTLE PURCHASE CONSIDERATION IT DOES NOT MAKE THE TRANSACTION A BOGUS TRANSACTION. 19. COMING TO THE NEXT ARG UMENT WHETHER THESE TRANSACTIONS WILL FALL UNDER SPECULATIVE TRANSACTION OR NOT. WE NOTICE FROM THE RECORD THAT THE ASSESSEE HAS TAKEN DELIVERY OF SHARES ON THE DATE OF PURCHASE AND SIMILARLY THE ASSESSEE HAS MADE THE PHYSICAL DELIVERY OF SHARES TO PFMS. THEREFORE AS PER THE DEFINITION OF SPECULATION TRANSACTION WHICH MEANS A TRANSACTION IN WHICH A CONTRACT FOR THE PURCHASE OR SALE OF ANY COMMODITY INCLUDING STOCKS AND SHARES IS PERIODICALLY OR ULTIMATELY SETTLED OTHERWISE THAN BY ACTUAL DELIVERY OR TRANSFER OF THE COMMODITY OR SCRIPS. FROM THE ABOVE DEFINITION IT IS CLEAR THAT THE TRANSACTION CAN B E CONSIDERED AS SPECULATIVE ONLY WHEN THE TRANSACTION IS SETTLED OTHERWISE THAN BY ACTUAL DELIVERY. IN THE GIVEN CASE BOTH PURCHASE AND SALE TRANSACTIONS WERE CARRIED OUT WITH ACTUAL DELIVERY OF SHARES ON THE SPECIFIC DATES AND AT THE SPECIFIC RATE PREVAIL ING ON THE DATE OF TRANSFER. THEREFORE THIS TRANSACTION CAN NEVER BE CLASSIFIED AS SPECULATION TRANSACTION. 22 PANTHER INDUSTRIAL PRODUCTS LTD. 20. COMING TO THE NEXT ISSUE WHETHER THE BUSINESS OF THE ASSESSEE FALLS UNDER THE CATEGORY SPECIFIED IN EXPLANATION 2 TO SECTION 73 OF THE ACT. AS PE R EXPLANATION PREVAILING AT THAT POINT OF TIME ARE GIVEN BELOW: WH ERE ANY PART OF THE BUSINESS OF A COMPANY (OTH ER THAN A COMPANY WHOSE GROSS TOTAL INCOME CONSISTS MAINLY OF INCOME WHICH IS CHARGEABLE UNDER THE HEADS 'INTEREST ON SECURITIES' 'INCOME FR OM HOUSE PROPERLY' 'CAPITAL GAINS' AND 'INCOME FROM OTHER SOURCES' OR A COMPANY THE PRINCIPAL BUSINESS OF WHICH IS THE BUSINESS OF BANKING OR THE GRANTING OF LOANS AND ADVANCES) CONSISTS IN THE PURCHASE AND SALE OF SHARES OF OTHER COMPANIES SUCH COMPANY SHALL FOR THE PURPOSES OF THIS SECTION BE DEEMED TO BE CARRYING ON A SPECULATION BUSINESS TO THE EXTENT TO WHICH THE BUSINESS CONSISTS O F THE PURCHASE AND SALE OF SUCH SHARES . 21. FROM THE ABOVE EXPLANATION IT IS CLEAR THAT THE COMPANIES WHICH FALLS UNDE R EXCLUSION WHICH ARE THE COMPA NY MAINLY CONSIST OF INCOME WHICH IS CHARGEABLE UNDER THE HEAD INTEREST ON SECURITIES INCOME FROM HOUSE PROPERTY CAPITAL GAIN AND INCOME FROM OTHER SOURCES ARE COMPANIES THE PRINCIPAL BUSINESS OF WHICH IS THE BUSINESS OF BA NKING OR GRANTING OF LOANS AND ADVANCES. IT IS BROUGHT TO OUR NOTICE BY THE LEARNED AUTHORIZED REPRESENTATIVE THAT THE MAJORITY OF THE BUSINESS OF THE ASSESSEE IS LENDING OF LOANS AND ADVANCES IT IS EVIDENT FROM THE BALANCE SHEET. I N THE YEAR 31 ST MARCH 2 000 THE LOANS AND ADVANCES STOOD AT RS. 3 70 42 439 WHEREAS AT THE SIMILAR PERIOD AS ON 31 ST MARCH 2001 THE LOANS AND ADVANCES STOOD AT RS. 7 74 20 916. THEREFORE 75% OF THE TOTAL ASSETS CONSIST OF LOANS AND ADVANCES. 23 PANTHER INDUSTRIAL PRODUCTS LTD. THEREFORE IT CLEARLY FALLS UNDER C ATEGORY OF THE PRINCIPAL BUSINESS OF GRANTING OF LOANS AND ADVANCES UNDER EXCLUSION CATEGORY IN THE EXPALANATION - 2 TO SECTION 73 . THEREFORE EXPLANATION 2 TO SECTION 73 OF THE ACT WILL ATTRACT TO THE FACTS OF THE PRESENT CASE. ACCORDINGLY THE GROUNDS RAIS ED BY THE ASSESSEE ARE ALLOWED. 22. IN THE RESULT APPEAL FILED BY THE ASSESSEE IS ALLOWED. WE NO W TAKE THE APPEAL BEING ITA NO.10 8 1/MUM./2018. 23. THE SOLE DISPUTE IN THIS APPEAL IS WHETHER OR NOT THE LEARNED COMMISSIONER (APPEALS) WAS JUSTIFIED IN CONFIRMING THE PENALTY OF ` 1 21 58 829 IMPOSED UNDER SECTION 271(1)(C) OF THE ACT BY THE ASSESSING OFFICER. 24. THE AFORESAID PENALTY UNDER SECTION 271(1)(C) OF THE ACT IMPOSED BY THE ASSESSING OFFICER AND CONFIRMED BY THE LEARNED COMMISSIONER (APPEALS) WAS ON THE B ASIS OF QUANTUM ADDITION MADE BY THE AUTHORITIES BELOW. SINCE DURING THE SECOND APPELLATE PROCEEDINGS WE HAVE DELETED THE QUANTUM ADDITION MADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE LEARNED COMMISSIONER (APPEALS) FOR THE DETAILED REASONS STATED FRO M PARA 14 TO 18 AS AFORESAID CONSEQUENTLY THE PENALTY IMPOSED UNDER SECTION 271(1)(C) OF THE ACT BECOMES INFRUCTUOUS AND THE PENALTY ORDER IS LIABLE TO BE QUASHED. ACCORDINGLY 24 PANTHER INDUSTRIAL PRODUCTS LTD. WE SET ASIDE THE IMPUGNED ORDER PASSED BY THE LEARNED COMMISSIONER (APPEALS) AND ALLOW THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE. 25. IN THE RESULT APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 8.3.2021 SD/ - PAVAN KUMAR GADALE JUDICIAL MEMBER SD/ - S. RIFAUR RAHMAN ACCOUNTANT MEMBER MUMBAI DATED: 8.3.2021 COPY OF THE ORDER FORWARDED TO : (1) THE ASSESSEE; (2) THE REVENUE; (3) THE CIT(A); (4) THE CIT MUMBAI CITY CONCERNED; (5) THE DR ITAT MUMBAI; (6) GUARD FILE . TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY ASSISTANT REGISTRAR ITAT MUMBAI