ADIT (IT) 2(2), MUMBAI v. VARIABLE INSURANCE PRODUCTS FUND III BALANCED PORTFOLIO ( VIPAG), MUMBAI

ITA 1126/MUM/2010 | 2006-2007
Pronouncement Date: 09-03-2011 | Result: Dismissed

Appeal Details

RSA Number 112619914 RSA 2010
Assessee PAN AAATV7272M
Bench Mumbai
Appeal Number ITA 1126/MUM/2010
Duration Of Justice 1 year(s) 28 day(s)
Appellant ADIT (IT) 2(2), MUMBAI
Respondent VARIABLE INSURANCE PRODUCTS FUND III BALANCED PORTFOLIO ( VIPAG), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 09-03-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted F
Tribunal Order Date 09-03-2011
Assessment Year 2006-2007
Appeal Filed On 11-02-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES F MUMBAI BEFORE SHRI D.K. AGARWAL (J.M.) AND SHRI J. SUDHAKA R REDDY (A.M.) ITA NO. 1126/MUM /2010 ASSESSMENT YEAR : 2006-07 ADIT (IT) - 2(2) ROOM NO. 116 IST FLOOR SCINDIA HOUSE BALLARD ESTATE N.M. ROAD MUMBAI 400 038. VS. M/S VARIABLE INSURANCE PRODUCTS FUND III BALANCED PORTFOLIO (VIPAG) C/O S.R. BATLIBOI & CO. 18 TH FLOOR EXPRESS TOWER NARIMAN POINT MUMBAI. PAN : AAATV 7272 M (APPELLANT) (RESPONDENT) ITA NO. 1127/MUM /2010 ASSESSMENT YEAR : 2006-07 ADIT (IT) - 2(2) ROOM NO. 116 IST FLOOR SCINDIA HOUSE BALLARD ESTATE N.M. ROAD MUMBAI 400 038. VS. M/S VARIABLE INSURANCE PRODUCTS FUND II CONTRAFUND PORTFOLIO (VIPCP) C/O S.R. BATLIBOI & CO. 18 TH FLOOR EXPRESS TOWER NARIMAN POINT MUMBAI. PAN : AAATV 6632M (APPELLANT) (RESPONDENT) ITA NO. 1128/MUM /2010 ASSESSMENT YEAR : 2006-07 ADIT (IT) - 2(2) ROOM NO. 116 IST FLOOR SCINDIA HOUSE BALLARD ESTATE N.M. ROAD MUMBAI 400 038. VS. M/S VARIABLE INSURANCE PRODUCTS FUND V ASSET MANAGER GROWTH PORTFOLIO (VIPAG) C/O S.R. BATLIBOI & CO. 18 TH FLOOR EXPRESS TOWER NARIMAN POINT MUMBAI. PAN : AAATV 5951 F (APPELLANT) (RESPONDENT) ITA NO.1126 TO 1130/MUM/2010 L 2 ITA NO. 1129/MUM /2010 ASSESSMENT YEAR : 2006-07 ADIT (IT) - 2(2) ROOM NO. 116 IST FLOOR SCINDIA HOUSE BALLARD ESTATE N.M. ROAD MUMBAI 400 038. VS. M/S VARIABLE INSURANCE PRODUCTS FUND VI VIP INTERNATIONAL CAPITAL APPRECIATION PORTFOLIO (VICAP) C/O S.R. BATLIBOI & CO. 18 TH FLOOR EXPRESS TOWER NARIMAN POINT MUMBAI. PAN : AAATV 6808 M (APPELLANT) (RESPONDENT) ITA NO. 1130/MUM /2010 ASSESSMENT YEAR : 2006-07 ADIT (IT) - 2(2) ROOM NO. 116 IST FLOOR SCINDIA HOUSE BALLARD ESTATE N.M. ROAD MUMBAI 400 038. VS. M/S VARIABLE INSURANCE PRODUCTS FUND IV FINANCIAL SERVICES PORTFOLIO (VIPBP) C/O S.R. BATLIBOI & CO. 18 TH FLOOR EXPRESS TOWER NARIMAN POINT MUMBAI. PAN : AAATV 6636 R (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI K.R. DAS RESPONDENT BY : SHRI M.P. LOHIA O R D E R PER D.K. AGARWAL J.M. ALL THESE APPEALS PERTAINING TO FIVE ASSESSEES PRE FERRED BY THE REVENUE ARE DIRECTED AGAINST SEPARATE ORDERS ALL DA TED 9.12.2009 PASSED BY THE LD. CIT (A) FOR THE A.YS 2006-07. SINCE THE FACTS ARE IDENTICAL AND THE ISSUE INVOLVED IS COMMON ALL THESE APPEALS WER E HEARD TOGETHER AND ARE DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE O F CONVENIENCE. ITA NO.1126 TO 1130/MUM/2010 L 3 2. BRIEFLY STATED FACTS OF THE CASE EXTRACTED FROM ITA NO. 1126/MUM/2010 FOR A.Y. 2006-07 IN THE CASE OF M/S V ARIABLE INSURANCE PRODUCTS FUND III BALANCED PORTFOLIO (VIPBP) ARE TH AT M/S FIDELITY MANAGEMENT & RESEARCH COMPANY A/C. VARIABLE INSURAN CE PRODUCTS FUND III : BALANCED (VIPBP) (THE ASSESSEE) IS A FUN D REGISTERED AS A FOREIGN INSTITUTIONAL INVESTOR (FII) WITH SECURITIE S AND EXCHANGE BOARD OF INDIA (SEBI). AS PER THE APPROVAL GRANTED BY THE S EBI THE M/S FIDELITY MANAGEMENT & RESEARCH COMPANY AND ITS SUB-ACCOUNTS (THE ASSESSEE WAS ONE OF THE SUB-ACCOUNTS) WERE ALLOWED TO INVEST IN THE INDIAN SECURITIES SUBJECT TO THE GUIDELINES/DIRECTIONS/INS TRUCTIONS ISSUED BY SEBI OR RESERVE BANK OF INDIA OR THE GOVERNMENT OF INDIA FROM TIME TO TIME. THE ASSESSEE FILED ITS RETURN SHOWING NIL I NCOME CLAIMING THAT ITS INCOME IS IN THE NATURE OF BUSINESS INCOME WHILE IN THE REVISED RETURN IT CLAIMED THAT ITS INCOME IS OF THE NATURE OF CAP ITAL GAINS. THE A.O. OBSERVED THAT IF THE INCOME IS CHARACTERIZED AS CA PITAL GAINS UNDER ARTICLE 13 OF THE INDO-USA DTAA INDIA HAS A RIGHT TO TAX THE SAME IF THE INCOME ARISES IN INDIA. HOWEVER IF THE INCOME IS CHARACTERIZED AS BUSINESS INCOME ITS TAXABILITY IN INDIA WILL DEP END ON WHETHER THE ASSESSEE HAS A PE IN INDIA OR NOT. ACCORDINGLY IT NEEDS TO BE FIRST ASCERTAINED WHAT IS THE CHARACTER OF THE INCOME EAR NED BY THE ASSESSEE IN INDIA THAT IS WHETHER IT IS BUSINESS INCOME OR CAPITAL GAINS. THE A.O. AFTER CONSIDERING BOTH THE RETURNS GUIDELINES ISSU ED BY THE GOVT. OF INDIA FOR FOREIGN INSTITUTIONAL INVESTORS PROVISIO NS OF LAW AND RELEVANT MATERIAL AVAILABLE ON RECORD INCLUDING THE DECISION S HELD THAT VIEWED IN THE CONTEXT OF LEGAL PERSPECTIVE AS WELL AS FACTUAL MATRIX AS SET OUT ABOVE IT IS AMPLY CLEAR THAT SURPLUS ARISING FROM PURCHAS E AND SALE OF SECURITIES IN INDIA BY THE FIIS IS LIABLE TO BE ASSESSED AS CA PITAL GAINS UNDER SECTION 115AD(1)(B). HE FURTHER OBSERVED THAT THE ASSESSEE HAS FILED REVISED RETURN BY OFFERING TO TAX THE INCOME EARNED FROM SA LE OF SECURITIES IN INDIA UNDER THE HEAD CAPITAL GAINS. HOWEVER IT IS EVIDENT THAT IN THE ITA NO.1126 TO 1130/MUM/2010 L 4 ORIGINAL RETURN THE ASSESSEE HAS TAKEN A STAND THA T THE INCOME EARNED ON SALE OF SECURITIES IN INDIA IS BUSINESS INCOME. IT IS EVIDENT THAT ASSESSEE TOOK A CHANCE BY FILING THE RETURN OF INCO ME DECLARING EARLIER THAT IS INCOME WAS BUSINESS INCOME AND LATER CHANG ING THE STAND AND TAKING A VIEW THAT ITS INCOME WAS CHARGEABLE UNDER THE HEAD CAPITAL GAINS. THUS IT IS SEEN THAT ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF ITS INCOME IN THE ORIGINAL RETURN HENCE HE INITI ATED PENALTY PROCEEDINGS U/S 271(1)(C) OF THE I.T. ACT 1961 AND ACCORDINGLY COMPLETED THE ASSESSMENT ASSESSING THE INCOME AS SHORT TERM CAPIT AL GAIN AT ` 2401601/- VIDE ORDER DATED 29.12.2008 PASSED U/S 14 3(3) OF THE INCOME TAX ACT 1961 (THE ACT). 3. SINCE IN THE ASSESSMENT THE A.O. INITIATED PENAL TY PROCEEDINGS U/S 271(1)(C) A SHOW CAUSE NOTICE WAS ISSUED TO THE AS SESSEE. THE A.O. AFTER CONSIDERING THE ASSESSEES EXPLANATION INTER ALIA S TATING THAT IT HAD NOT CONCEALED ANY PARTICULARS OF ITS INCOME OR FURNISHE D IN-ACCURATE PARTICULARS OF ITS INCOME HELD THAT THE ASSESSEE HA S CONCEALED ITS PARTICULARS OF INCOME IN NOT INCLUDING RS. AS SHOR T TERM CAPITAL GAINS IN ITS TAXABLE INCOME AND ACCORDINGLY HE IMPOSED PE NALTY OF ` 2 69 460/- VIDE ORDER DATED 30.6.2009 PASSED U/S 271(1)(C) OF THE ACT. 4. ON APPEAL BEFORE THE LD. CIT(A) IT WAS INTER AL IA CONTENDED THAT THE ASSESSEE FILED ITS ORIGINAL RETURN OF INCOME ON 28.7.2006 OFFERING TO TAX THE INCOME FROM TRANSACTIONS IN INDIAN SECURITI ES UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION. THE ABOVE STAND WAS TAKEN BY THE ASSESSEE BASED ON THE RULING BY THE AUTHORIT Y FOR ADVANCE RULINGS (AAR) IN ONE OF ITS SISTER FUNDS CASE NAMELY FIDEL ITY ADVISOR SERIES VIII REPORTED IN [2004] 271 ITR 0001 (AAR) AND IN THE CA SE OF XYZ/ABC EQUITY FUND [2001] 250 ITR 0194 (AAR). THE ASSESSEE SUBSEQUENTLY FILED ITA NO.1126 TO 1130/MUM/2010 L 5 A REVISED RETURN OF INCOME ON 26.2.2007 PRIOR TO TH E ISSUE OF NOTICE U/S 143(2) REPORTING ITS INCOME FROM SUCH TRANSACTIONS UNDER THE HEAD CAPITAL GAINS. THE REVISION WAS BASED ON THE ADVA NCE RULING PRONOUNCED BY THE AAR IN THE APPELLANTS SISTER FUNDS CASE FI DELITY NORTHSTAR FUND AND OTHERS REPORTED IN [2007] 288 ITR 641 (AAR). TH E RETURN OF INCOME WAS SELECTED FOR SCRUTINY ASSESSMENT AND THE ASSESS MENT WAS COMPLETED TREATING THE INCOME OF THE ASSESSEE AS INCOME FROM CAPITAL GAINS. RELYING ON THE DECISIONS IN KANBAY SOFTWARE INDIA PRIVATE L IMITED V. DCIT. PUNE (31 SOT 153) THE ASSTT. CIT V. VIP INDUSTRIES LTD. (MUMBAI ITAT) AND GEM GRANITES VS. DCIT 120 TTJ 992 (MAD.) IT WAS SU BMITTED THAT THE PROVISIONS OF SECTION 271(1)(C) BEING OF A PENAL NA TURE WHICH REQUIRE THAT SOME AMOUNT OF CULPABLE NEGLIGENCE OR WILLFUL OMISS ION ON THE PART OF THE ASSESSEE MUST BE ESTABLISHED BEFORE PENALTY IS IMPO SED AND EXISTENCE OF MENS REA IS ESSENTIAL FOR IMPOSITION OF PENALTY. IF THE DEFAULT FLOWS FROM A BONAFIDE BELIEF THAT IT WAS NOT THE RESULT OF A DEL IBERATE ACT OF DEFIANCE OF THE LAW NO PENALTY IS LEVIABLE. RELIANCE WAS ALSO PLACED IN MUMBAI ITAT IN CASE OF ONE OF THE APPELLANTS SISTER FUNDS IE. VARIABLE INSURANCE PRODUCTS FUND: OVERSEAS PORTFOLIO VS. ADIT (INTERNA TIONAL TAXATION) 2(2) (2009-TIOL-491-MUM) WHEREIN PENALTY HAD BEEN IMPOS ED UNDER SIMILAR CIRCUMSTANCES. THE TRIBUNAL HELD THAT SINCE THE ISS UE WAS DEBATABLE IN NATURE THE EXPLANATION FURNISHED BY THE ASSESSEE C ANNOT BE CONSIDERED AS FALSE. THUS THE LEVY OF PENALTY U/S 271(1)(C) O N THE CLAIM MADE BY THE UNDER BONA FIDE BELIEF WAS HELD TO BE NOT SUSTAINA BLE. 5. THE LD. CIT(A) AFTER CONSIDERING THE ASSESSEES SUBMISSIONS OBSERVED THAT THE APPELLANT HAD FILED ITS REVISED R ETURN TREATING THE INCOME FROM SALE OF PORTFOLIO INVESTMENTS IN INDIA AS CAPITAL GAINS BASED ON THE RULING OF AAR IN ITS SISTER FUNDS CASE. THE ORIGINAL RETURN OF INCOME AND REVISED RETURN OF INCOME WERE FILED WITH IN THE DUE DATE ITA NO.1126 TO 1130/MUM/2010 L 6 SPECIFIED U/S 139(1) AND 139(5) OF THE ACT RESPECTI VELY AND ACCORDINGLY THE REVISED RETURN WOULD BE CONSIDERED TO HAVE REPL ACED THE ORIGINAL RETURN. MOREOVER THE REVISED RETURN OF INCOME WAS ACCOMPANIED BY A LETTER DETAILING THE TECHNICAL AND FACTUAL REASONS FOR THE CHANGE IN THE BASIS OF CHARACTERIZATION OF INCOME. FURTHER THE A SSESSMENT WAS COMPLETED ACCEPTING THE POSITION ADOPTED BY THE APP ELLANT IN THE REVISED RETURN OF INCOME AND ACCORDINGLY THERE CANNOT BE AN Y BASIS FOR LEVYING THE PENALTY U/S 271(1)(C) OF THE ACT FOR CONCEALME NT OF ANY INCOME. THE A.O. HAS APPARENTLY REPLICATED THE ORDER OF THE SIS TER CONCERN OF THE APPELLANT FOR THE PREVIOUS ASSESSMENT YEAR IGNORING THE FACT OF THE PRESENT CASE. FURTHER THE APPELLANT HAD MADE FULL DISCLOSURE OF THE FACTS AT ALL TIMES AND THEREFORE THE CONTENTION OF THE A. O THAT THE APPELLANT HAD CONCEALED INCOME AND FURNISHED INACCURATE PARTI CULARS (WITH A GUILTY MIND) TO AVOID IMPOSITION OF TAX AND APPELLANT HAD INTERPRETED THE LAW TO SUIT ITS OWN FREE WILL WITHOUT COMPLYING WITH THE R EQUIREMENTS OF THE LAW IS NOT ACCEPTABLE HELD THAT SINCE THE PRIMARY COND ITIONS FOR LEVY OF PENALTY U/S 271(1)(C) ARE NOT SATISFIED PENALTY CA NNOT BE LEVIED UNDER THE SAID SECTION AND ACCORDINGLY HE DELETED THE PENALTY LEVIED BY THE A.O. 6. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A) THE REVENUE IS IN APPEAL BEFORE US TAKING FOLLOWING GROUNDS OF APPEAL :- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LD. CIT (APPEALS) ERRED IN DELETING THE PE NALTY U/S 271(1)(C) OF THE INCOME TAX ACT 1961. 2. THE APPELLANT PRAYS THAT THE ORDER OF THE LD. CI T(A) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 7. AT THE TIME OF HEARING THE LD. D.R. SUBMITS THA T FOR THE REASONS DISCUSSED IN THE PENALTY ORDER THE LD. CIT(A) WAS NOT JUSTIFIED IN DELETING ITA NO.1126 TO 1130/MUM/2010 L 7 THE PENALTY IMPOSED BY THE A.O. HE THEREFORE SUBM ITS THAT THE PENALTY IMPOSED BY THE A.O. BE SUSTAINED. 8. ON THE OTHER HAND THE LD. COUNSEL FOR THE ASSES SEE WHILE REITERATING THE SAME SUBMISSIONS AS SUBMITTED BEFOR E THE A.O. AND LD. CIT(A) PLACED ON RECORD THE FOLLOWING FACTUAL MATRI X:- APPEAL NO. 1126/M/10 AY 2006-07 NAME OF FUND VARIABLE INSURANCE PRODUCT FUND III: BALANCED PORTFOLIO ORIGINAL RETURN AS BUSINESS INCOME RELYING UPON RUL INGS OF THE AAR IN THE CASE OF FIDELITY ADVISOR SERIES V III [2004] 271 ITR 1 AND XYZ/ABC EQUITY FUND [2001] 250 ITR 194 - DATE OF FILING - AMOUNT (IN RS) 28 JULY 2006 NIL REVISED RETURN AS CAPITAL GAINS RELYING UPON RULING S OF THE AAR IN THE CASE OF FIDELITY NORTHSTAR FUND AND OTHERS [2007] 288 ITR 641 (AAR) - DATE OF FILING - AMOUNT (IN RS) - 26 FEBRUARY 2007 2 401 601 DATE OF NOTICE UNDER SECTION 143(3) OF THE ACT 13 JULY 2007 (REFER PAGE NUMBER 31 OF PAPER BOOK) ASSESSED BY THE AO AS CAPITAL GAINS - DATE OF ORDER - AMOUNT (IN RS) 30 DECEMBER 2008 2 401 601 [AS PER ASSESSMENT ORDER 29.12.2008] IN THE LIGHT OF THE ABOVE HE SUBMITS THAT SINCE TH E REVISED RETURN WAS FILED VOLUNTARILY ON 26 TH FEB. 2007 AND THE NOTICE U/S 143(2) WAS ISSUED MUCH AFTER I.E. ON 13 JULY 2007 AND BEFORE THE DETE CTION OF ANY CONCEALMENT THEREFORE THE LD. CIT(A) WAS FULLY JU STIFIED IN DELETING THE ITA NO.1126 TO 1130/MUM/2010 L 8 PENALTY IMPOSED BY THE A.O. RELIANCE WAS ALSO PLAC ED ON THE FOLLOWING DECISIONS:- SR NO. PARTICULARS PAGE NOS. OF PAPER BOOK 1 COPY OF THE RULING OF AUTHORITY FOR ADVANCE RULINGS IN THE CASE OF FIDELITY ADVISOR SERIES VIII IN RE 271 ITR 1 1-15 2 COPY OF THE RULING OF AUTHORITY FOR ADVANCE RULINGS IN THE CASE OF XYZ/ABC EQUITY FUND IN RE 250 ITR 194. 16 - 39 3 COPY OF DECISION IN CHEAP CYCLE STORES V CIT 281 ITR 166 (ALL) 40 - 43 4 COPY OF DECISION IN CIT V. GURBAX LAL AND COMPANY 256 ITR 133 (P&H) 44 - 45 5 COPY OF DECISION IN CIT V. S.S. KARUPPASAMY AND SONS 254 ITR 591 (MAD.) 46 6 COPY OF DECISION IN CIT V J.V. APPADURAI CHETTIAR CO 221 ITR 849 (MAD.) 47 - 54 7 COPY OF DECISION IN CIT VS. SURESH CHANDRA MITTAL 251 ITR 9 (SC) 55 - 56 8 COPY OF DECISION IN DHAMPUR SUGAR MILLS LTD. V CIT 90 ITR 236 (ALL) 57 - 59 9 COPY OF DECISION IN CIT V. RELIANCE PETROPRODUCTS PVT. LTD. 322 ITR 158 (SC) 60 - 69 9. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECO RD. WE FIND THAT THERE ITA NO.1126 TO 1130/MUM/2010 L 9 IS NO DISPUTE THAT THE ORIGINAL RETURN WAS FILED ON 28 TH JULY 2006 SHOWING BUSINESS INCOME AT NIL RELYING UPON RULINGS OF T HE AAR IN THE CASE OF FIDELITY ADVISOR SERIES VIII [2004] 271 ITR 1 AND X YZ/ABC EQUITY FUND [2001] 250 ITR 194. WE FURTHER FIND THAT IT I S ALSO NOT IN DISPUTE THAT THE ASSESSEE HAS FILED REVISED RETURN VOLUNTAR ILY ON 26.2.2007 SHOWING INCOME AS CAPITAL GAINS ` 2 401 601/- RELYING UPON THE LATTER RULING OF THE AAR IN THE CASE OF FIDELITY NORTHSTAR FUND AND OTHERS [2007] 288 ITR 641 (AAR). WE FURTHER FIND THAT THE A.O. ON THE BASIS OF REVISED RETURN FILED BY THE ASSESSEE ON 26.2.07 HAS ISSUED NOTICE U/S 143(2) ON 13.7.07. THUS IT IS CLEAR THAT THE SAID N OTICE ISSUED BY THE A.O. U/S 143(2) OF THE ACT WAS NOT BASED ON THE ORIGINAL RETURN FILED BY THE ASSESSEE BUT THE SAME WAS ISSUED IN PURSUANCE TO TH E REVISED RETURN FILED BY THE ASSESSEE ON 26.2. 07. WE FURTHER FIND THAT THE ASSESSMENT WAS ALSO COMPLETED ON THE BASIS OF THE SAID REVISED RETURN ACCEPTING THE SAME INCOME AS DISCLOSED BY THE ASSESSEE IN THE REV ISED RETURN AMOUNTING TO ` 2 401 601/- AS INCOME FROM SHORT TERM CAPITAL GAIN S. ACCORDING TO THE A.O. THERE IS CONCEALMENT AS THE ASSESSEE IN THE ORIGINAL RETURN HAS NOT INCLUDED THE INCOME FROM SH ORT TERM CAPITAL GAINS. HOWEVER THE LD. CIT(A) HELD THAT THE REVIS ED RETURN FILED BY THE ASSESSEE SHOWING CAPITAL GAIN WAS BASED ON RULINGS OF AAR IN THE CASE OF SISTER FUNDS CASE NAMELY FIDELITY NORTHSTAR FUND A ND OTHERS (SUPRA) AND THE APPELLANT HAS MADE FULL DISCLOSURE OF THE FACTS THEREFORE THERE IS NO CONCEALMENT. 10. WITH REGARD TO THE FILING OF REVISED RETURN WE FIND THAT SUB-SECTION (5) OF SECTION 139 PERMITS AN ASSESSEE TO FILE A RE VISED RETURN AT ANY TIME BEFORE THE EXPIRY OF ONE YEAR FROM THE END OF THE R ELEVANT ASSESSMENT YEAR OR BEFORE THE COMPLETION OF ASSESSMENT WHICHE VER IS EARLIER IF HE DISCOVERS ANY OMISSION OR WRONG STATEMENT IN THE RE TURN FILED BY HIM. IN ITA NO.1126 TO 1130/MUM/2010 L 10 OTHER WORDS IF AN ASSESSEE HAVING FURNISHED A RET URN OF HIS OWN ACCORD OR IN RESPONSE TO A SPECIAL NOTICE SERVED ON HIM D ISCOVERS ANY OMISSION OR WRONG STATEMENT THEREIN HE MAY FURNISH A REVISE D RETURN AT ANY TIME BEFORE THE ASSESSMENT IS MADE. THE INCOME TAX ACT CONTEMPLATES THE FILING BY THE ASSESSEE OF A CORRECT AND COMPLETE RE TURN. THE LAW GIVES HIM A RIGHT TO SUBSTITUTE AND BRING ON RECORD A COR RECT AND COMPLETE RETURN IF HE DISCOVERS ANY OMISSION OR WRONG STATEM ENT IN THE RETURN ORIGINALLY FILED BY HIM. THE RIGHT TO FILE A REVISE D RETURN GRANTED TO AN ASSESSEE UNDER SUB-SECTION (5) IS A RIGHT GIVEN BY THE SUB-SECTION ITSELF. 11. SINCE IN THE CASE BEFORE US THE ORIGINAL RETUR N WAS FILED BY THE ASSESSEE SHOWING BUSINESS INCOME AT NIL UNDER THE BONAFIDE BELIEF RELYING UPON RULINGS OF THE AAR IN THE CASE OF FIDE LITY ADVISOR SERIES VIII [2004] 271 ITR 1 AND XYZ/ABC EQUITY FUND [2001] 250 ITR 194 (AAR) AND THE REVISED RETURN WAS FILED VOLUNTARILY WITHOU T ANY DETECTION BY THE REVENUE SHOWING THE INCOME OF ` 2401601/- ON 26.2.07 RELYING UPON THE LATTER RULINGS OF THE AAR IN THE CASE OF FIDELITY N ORTHSTAR FUND AND OTHERS [2007] 288 ITR 641 (AAR) AND KEEPING IN VIEW THAT THE ASSESSEE HAS FURNISHED ALL THE DETAILS WHICH WERE NOT FOUND TO BE FALSE OR INACCURATE WE ARE OF THE VIEW THAT MERELY BECAUSE IN THE ORIGINAL RETURN THE ASSESSEE HAS MADE CERTAIN CLAIM BASED UPON THE RULING OF AAR WHICH THE ASSESSEE HAS SUBSEQUENTLY REVISED VOLUNTARILY A S PER LATTER RULING OF THE AAR DOES NOT MEAN THAT THERE IS A CONCEALMENT O F INCOME ON THE PART OF THE ASSESSEE. 12. IN A RECENT JUDGMENT OF THE HONBLE APEX COURT IN CIT VS. RELIANCE PETROPRODUCTS PVT. LTD. (2010) 322 ITR 158(SC) THEI R LORDSHIPS AFTER CONSIDERING VARIOUS DECISIONS INCLUDING DILIP N. SH ROFF VS. JCIT (2007) 291 ITR 519(SC) AND UNION OF INDIA VS. DHARAMENDRA TEXTILE PROCESSORS ITA NO.1126 TO 1130/MUM/2010 L 11 (2008) 306 ITR 277(SC) HAVE OBSERVED AND HELD (PAGE 158 HEAD NOTES) AS UNDER: A GLANCE AT THE PROVISIONS OF SECTION 271(1)(C) OF THE INCOME- TAX ACT 1961 SUGGESTS THAT IN ORDER TO BE COVERED BY IT THERE HAS TO BE CONCEALMENT OF THE PARTICULARS OF THE INCOME OF THE ASSESSEE. SECONDL Y THE ASSESSEE MUST HAVE FURNISHED INACCURATE PARTICULARS OF HIS INCOME. THE MEANING OF THE WORD PARTICULARS USED IN SECTION 271(1)(C) WOULD EMBRA CE THE DETAILS OF THE CLAIM MADE. WHERE NO INFORMATION GIVEN IN THE RETURN IS FOUND TO BE INCORRECT OR INACCURATE THE ASSESSEE CANNOT BE HELD GUILTY OF FURNISHING INACCURATE PARTICULARS IN ORDER TO EXPOS E THE ASSESSEE TO PENALTY UNLESS THE CASE IS STRICTL Y COVERED BY THE PROVISION THE PENALTY PROVISION CANNOT BE INVOKED. BY NO STRETCH OF IMAGINATION CA N MAKING AN INCORRECT CLAIM TANTAMOUNT TO FURNISHING INACCURATE PARTICULARS. THERE CAN BE NO DISPUTE THA T EVERYTHING WOULD DEPEND UPON THE RETURN FILED BY TH E ASSESSEE BECAUSE THAT IS THE ONLY DOCUMENT WHERE THE ASSESSEE CAN FURNISH THE PARTICULARS OF HIS INCOME. WHEN SUCH PARTICULARS ARE FOUND TO BE INACCURATE THE LIABILITY WOULD ARISE. TO ATTRACT PENALTY THE DETAILS SUPPLIED IN THE RETURN MUST NO T BE ACCURATE NOT EXACT OR CORRECT NOT ACCORDING TO THE TRUTH OR ERRONEOUS. WHERE THERE IS NO FINDING THAT ANY DETAILS SUPPLIE D BY THE ASSESSEE IN ITS RETURN ARE FOUND TO BE INCOR RECT OR ERRONEOUS OR FALSE THERE IS NO QUESTION OF INVIT ING THE PENALTY UNDER SECTION 271(1)(C). A MERE MAKING OF A CLAIM WHICH IS NOT SUSTAINABLE IN LAW BY ITS ELF WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULAR S REGARDING THE INCOME OF THE ASSESSEE. SUCH A CLAIM MADE IN THE RETURN CANNOT AMOUNT TO FURNISHING INACCURATE PARTICULARS 13. RESPECTFULLY FOLLOWING THE RATIO OF THE ABOVE D ECISION WE OBSERVE THAT THE SITUATION IN THE PRESENT CASE IS STILL BET TER AS NO FAULT HAS BEEN FOUND WITH THE PARTICULARS/EXPLANATION SUBMITTED BY THE ASSESSEE IN ITS RETURN AND KEEPING IN VIEW THAT IT IS NOT THE CASE OF THE REVENUE THAT THE ITA NO.1126 TO 1130/MUM/2010 L 12 REVISED RETURN WAS FILED BY THE ASSESSEE AFTER CONC EALMENT WAS DETECTED IN THE COURSE OF ASSESSMENT PROCEEDING OR THE REVIS ED RETURN WAS NOT A VOLUNTARY RETURN OR VALID RETURN OR THE EXPLANATION GIVEN BY THE ASSESSEE WAS NOT BONAFIDE WE ARE OF THE VIEW THAT A MERE MA KING OF A CLAIM WHICH IS NOT SUSTAINABLE IN LAW BY ITSELF WILL NO T AMOUNT TO FURNISHING INACCURATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. SUCH A CLAIM MADE IN THE RETURN CANNOT AMOUNT TO CONCEALME NT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF SUCH INCOME WHICH MAY ATTRACT LEVY OF PENALTY U/S 271(1)(C) OF THE ACT. ACCORDIN GLY WE ARE INCLINED TO UPHOLD THE FINDINGS OF THE LD. CIT(A) IN DELETING T HE PENALTY IMPOSED BY THE A.O. THE GROUNDS TAKEN BY THE REVENUE ARE THER EFORE REJECTED. ITA NO. 1127/MUM/2010 FOR A.Y. 2006-07 ITA NO. 1128/MUM/2010 FOR A.Y. 2006-07 ITA NO. 1129/MUM/2010 FOR A.Y. 2006-07 ITA NO. 1130/MUM/2010 FOR A.Y. 2006-07 14. THE COMMON GROUNDS TAKEN BY THE REVENUE IN THE ABOVE APPEALS READ UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LD. CIT (APPEALS) ERRED IN DELETING THE PE NALTY U/S 271(1)(C) OF THE INCOME TAX ACT 1961. 2. THE APPELLANT PRAYS THAT THE ORDER OF THE LD. CI T(A) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 15. AT THE TIME OF HEARING BOTH THE PARTIES HAVE A GREED THAT THE FACTS OF THE ABOVE CASES ARE SIMILAR TO THE FACTS OF THE CASE OF M/S VARIABLE INSURANCE PRODUCTS FUND III BALANCED PORTFOLIO (VIP AG) THEREFORE THE SAME PLEA MAY BE CONSIDERED WHILE DECIDING THE ABOV E APPEALS. THE LD. COUNSEL FOR THE ASSESSEE IN SUPPORT OF HIS SUBMISSI ONS HAS ALSO FILED CHART SHOWING FACTUAL MATRIX WHICH IS REPRODUCED AS UNDER:- ITA NO.1126 TO 1130/MUM/2010 L 13 APPEAL NO. 1127/M/10 AY 2006-07 1128/M/10 AY 2006-07 1129/M/10 AY 2006-07 1130/M/10 AY 2006-07 NAME OF FUND VARIABLE INSURANCE PRODUCT FUND II:CONTRA FUND PORTFOLIO VARIABLE INSURANCE PRODUCT FUND II:ASSET MANAGER GROWTH PORTFOLIO VARIABLE INSURANCE PRODUCT FUND IV:CAPITAL APPRECIATION PORTFOLIO VARIABLE INSURANCE PRODUCT FUND IV:FINANCIAL SERVICE PORTFOLIO ORIGINAL RETURN AS BUSINESS INCOME RELYING UPON RULINGS OF THE AAR IN THE CASE OF FIDELITY ADVISOR SERIES VIII [2004] 271 ITR 1 AND XYZ/ABC EQUITY FUND [2001] 250 ITR 194 - DATE OF FILING - AMOUNT (IN RS) 28 TH JULY 2006 NIL 28 TH JULY 2006 NIL 28 TH JULY2006 NIL 28 TH JULY 2006 NIL REVISED RETURN AS CAPITAL GAINS RELYING UPON RULINGS OF THE AAR IN THE CASE OF FIDELITY NORTHSTAR FUND AND OTHERS [2007] 288 ITR 641 (AAR) - DATE OF FILING AMOUNT (IN RS) 27 FEB.2007 [ 21 FEB. 2007 AS PER A.O.] 34 042 244 28 FEB.2007 [ 23 FEB 2007 AS PER AO.] 3 896 964 27 FEB.2007 [ 2 MAR 2007 AS PER A.O.] 4.509 005 {4 509 005(-) B/F LOSS 88 862= 44 20 140 AS PER RETURN} 27 FEB.2007 3 693 164 DATE OF NOTICE UNDER SECTION 143(3) OF THE ACT 24 JUL 2007 (REFER PAGE NUMBER 32 OF PAPER BOOK. 22 JUN 2007 (REFER PAGE NUMBER 33 OF PAPER BOOK. 27 OCT. 2007 [24 OCT. 2007 AS PER A.O.] (REFER PAGE NUMBER 41 OF PAPER BOOK. 16 JUL. 2007 (REFER PAGE NUMBER 40 OF PAPER BOOK. ASSESSED BY THE AO AS CAPITAL GAINS - DATE OF ORDER - AMOUNT (IN RS) 30 DEC. 2008 [29 DEC. 2008 AS PER A.O.] 34 042 244 30 DEC. 2008 [29 DEC.2008 AS PER A.O.] 3 896 964 30 DEC. 2008 [29 DEC. 08 AS PER A.O.] 4 509 005 30 DEC. 2008 [29 DEC. 2008 AS PER A.O.] 3 693 164 ITA NO.1126 TO 1130/MUM/2010 L 14 16. AFTER CAREFULLY HEARING THE RIVAL SUBMISSIONS A ND PERUSING THE RELEVANT MATERIAL AVAILABLE ON RECORD AND KEEPING I N VIEW OF OUR FINDINGS RECORDED IN PARAGRAPH NO. 9-13 OF THIS ORDER WE AR E OF THE VIEW THAT THE A.O. WAS NOT JUSTIFIED IN IMPOSING THE PENALTY IN A BOVE CASES. ACCORDINGLY WE ARE INCLINED TO UPHOLD THE FINDINGS OF LD. CIT(A) IN DELETING THE SAME. THE COMMON GROUNDS TAKEN BY THE REVENUE IN ALL THESE APPEALS ARE THEREFORE REJECTED. 17. IN THE RESULT REVENUES APPEALS STAND DISMISSE D. ORDER PRONOUNCED ON THIS 9 TH OF MARCH 2011. SD/- (J. SUDHAKAR REDDY) ACCOUNTANT MEMBER SD/- (D.K. AGARWAL) JUDICIAL MEMBER MUMBAI DATED 9 TH MARCH 2011. RK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS)- II MUMBA I 4. DIT (INTERNATIONAL TAXATION) MUMBAI 5. DEPARTMENTAL REPRESENTATIVE BENCH F MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR ITAT MUMBAI ITA NO.1126 TO 1130/MUM/2010 L 15 1 DRAFT DICTATED ON 2 .3.11 SR PS 2 DRAFT PLACED BEFORE AUTHOR ON 3 .3.11 SR PS 3 DRAFT PROPOSED & PLACE BEFORE THE 2 ND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY 2 ND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR PS SR.PS 6 KEPT FOR PRONOUNCEMENT ON SR PS 7 FILE SENT TO THE BENCH CLERK SR PS 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE ON WHIC H FILE GOES TO THE AR 10 DATE OF DESPATCH SR PS