Shri Kalpeshbhai Jayantibhai Patel, Anand v. The Income tax Officer,Ward-2,, Anand

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH AHMEDABAD (BEFORE S/SHRI BHAVNESH SAINI JM AND D. C. AGRAWAL AM ) ITA NO.1747/AHD/2008 A. Y.: 2002-03 SHRI KALPESHBHAI JAYANTIBHAI PATEL TWO GATE AT: NAVIL DIST. ANAND VS THE INCOME TAX OFFICER WARD -2 ANAND PA NO. ADOPP 9346 H (APPELLANT) (RESPONDENT) APPELLANT BY SHRI A. L. THAKKAR AR DEPARTMENT BY SHRI DARSI SUMAN RATNAM DR O R D E R PER BHAVNESH SAINI: THE APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LEARNED CIT(A)-IV BARODA DATED 31 ST MARCH 2008 FOR ASSESSMENT YEAR 2002-03 CHALLENGI NG LEVY OF PENALTY U/S 271 (1) ( C ) OF THE IT ACT. 2. THE FACTS OF THE CASE ARE THAT ASSESSMENT WAS CO MPLETED ON 25-10-2004 ON A TOTAL INCOME OF RS.5 00 120/-. THE AO INITIATED PENALTY PROCEEDINGS FOR FURNISHING INACCURATE PARTI CULARS OF INCOME FOR MAKING FALSE CLAIM OF LOSS ON SHARE TRADING AMOUNTI NG TO RS.2 65 902/-. THE ASSESSEE CLAIMED THE ABOVE AMOUN T ON ACCOUNT OF LOSS ON TRADING OF SHARES. FROM THE COPIES OF BI LLS SUBMITTED BY THE ASSESSEE IT WAS FOUND THAT THERE WAS NO ACTUAL DEL IVERY OF SHARES ON ACCOUNT OF WHICH LOSS WAS CLAIMED. ON FURTHER ENQUI RY FROM THE SUB- ITA NO.1747/AHD/2008 SHRI KALPESHBHAI JAYANTIBHAI PATEL VS ITO W-2 ANA ND 2 BROKERS OF THE SHARES FROM WHOM THE ASSESSEE HAD PU RCHASED THE SHARES IT WAS FOUND THAT THE ASSESSEE HAS SHOWN MU CH MORE PURCHASE OF SHARES THAN THE NUMBER OF SHARES PURCHA SED BY THE SUB- DEALER M/S. CAPITAL MARKET SERVICES FROM ITS MAIN B ROKER I.E. M/S. MARKET CREATORS LTD. SINCE NO PLAUSIBLE EXPLANATIO N WAS RECEIVED FROM THE ASSESSEE IT WAS CONCLUDED THAT THE TRANSA CTION IN SHARES ENTERED INTO BY THE ASSESSEE WAS NOT GENUINE. SINCE NO ACTUAL DELIVERY WAS TAKEN PLACE THE LOSS IF ANY AT THE B EST COULD BE TREATED AS SPECULATION LOSS AND THEREFORE WAS NOT ELIGIBL E FOR SET OFF AGAINST OTHER INCOME. THE AO THEREFORE HELD THAT THE ASSE SSEE HAD DELIBERATELY FURNISHED INACCURATE PARTICULARS OF IN COME TO REDUCE THE TAX LIABILITY. PENALTY WAS ACCORDINGLY IMPOSED VIDE SEPARATE ORDER. IT WAS SUBMITTED BEFORE THE LEARNED CIT(A) THAT ALL TH E TRANSACTIONS OF SALE OF SHARES WERE NOT SPECULATIVE IN NATURE. THE TRANSACTION WAS CONSIDERED AS SPECULATIVE BY THE LEARNED CIT(A) BEC AUSE THE ASSESSEES CASE WAS NOT CONSIDERED BY APPLYING RULE 46A OF THE IT RULES. IT WAS FURTHER SUBMITTED THAT THERE WAS NO INTENTION TO CONCEAL THE INCOME AND THE ASSESSEE WAS UNDER BONA FIDE BEL IEF THAT LOSS INCURRED ON SALE OF SHARES IS AN ELIGIBLE DEDUCTION . THE LEARNED CIT(A) NOTED THAT THE ASSESSEES REPRESENTATIVE HAS FILED DETAILS OF SALES AND PURCHASES OF SHARES. APART FROM TWO SHARE S RESTS HAVE BEEN SOLD WITHIN 5 6 DAYS OF THE PURCHASE. NO DET AIL HAS BEEN FILED THAT THE SHARES HAVE ACTUALLY CHANGED HANDS AND DEL IVERY OF THE SAME HAS TAKEN PLACE. THE LEARNED CIT(A) THEREFORE NOTED THAT THE TRANSACTION IS SPECULATIVE IN NATURE AND THAT THE A SSESSEE WAS AWARE OF THE SAME AND ACCORDINGLY DISMISSED THE PENALTY A PPEAL. ITA NO.1747/AHD/2008 SHRI KALPESHBHAI JAYANTIBHAI PATEL VS ITO W-2 ANA ND 3 3. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSION MADE BEFORE THE AUTHORITIES BELOW AND SU BMITTED THAT THE ASSESSEE CLAIMED LOSS ON SHARE TRADING WHICH WAS CO NSIDERED AS SPECULATIVE TRANSACTION. THE ASSESSEE DISCLOSED ALL THE PARTICULARS BEFORE THE AO AT THE PENALTY STAGE AS WELL AS BEFOR E THE LEARNED CIT(A) ON QUANTUM. THEREFORE IT IS NOT A CASE OF C ONCEALMENT OF INCOME OR FILING OF INACCURATE PARTICULARS OF INCOM E. HE HAS SUBMITTED THAT COMPLETE COPIES OF THE BILLS WERE PRODUCED WHI CH HAVE NOT BEEN CONSIDERED PROPERLY. HE HAS RELIED UPON THE ORDER O F ITAT(SB) AHMEDABAD BENCH IN THE CASE OF GUJARAT CREDIT CORPO RATION LTD. VS ACIT 113 ITD 133 IN WHICH IT WAS HELD AS UNDER: PENALTY UNDER S. 271 (1) ( C ) EXPLN. CONCEALME NT CLAIM OF SPECULATIVE LOSS AS BUSINESS LOSS IT BEI NG NOT THE CASE OF REVENUE THAT ASSESSEE HAD FAILED TO OFFER AN EXPLANATION OR THAT ITS EXPLANATION WAS FO UND FALSE PART A OF EXPLN. 1 WAS NOT ATTRACTED CH ARGE AGAINST ASSESSEE FOR INITIATING PENALTY PROCEEDINGS BEING THAT IT CLAIMED AS BUSINESS LOSS WHAT WAS IN FACT CAPITAL LOSS AND THE EXPLANATION OF ASSESSEE T HAT IT WAS BUSINESS LOSS HAVING BEEN ACCEPTED BY THE CIT(A) THOUGH CIT(A) AGAIN DISALLOWED THE SAME BY HOLDING IT AS SPECULATION LOSS IT COULD NOT BE SAI D THAT ASSESSEE HAS FAILED TO SUBSTANTIATE ITS EXPLANATION OR FAILED TO PROVE THE EXPLANATION TO B E BONA FIDE ASSESSEE HAVING DISCLOSED ALL MATERIAL FACTS AT THE THRESHOLD IN THE RETURN OF INCOME ITSE LF PART B OF EXPLN. 1 EXONERATED THE ASSESSEE FROM LIABILITY OF PENALTY UNDER S. 271 (1) ( C ) A MER E REJECTION OF ASSESSEES CLAIM FOR LOSS THAT TOO ON A DIFFERENT GROUND BY THE APPELLATE AUTHORITY CANNOT BE EQUATED WITH CONCEALMENT FURTHER THE LOSS CLAIME D BY THE ASSESSEE WAS NOT ABSOLUTELY WRONG AS IT WAS IN EITHER CASE ALLOWABLE OR CARRIED FORWARD TO BE SET ITA NO.1747/AHD/2008 SHRI KALPESHBHAI JAYANTIBHAI PATEL VS ITO W-2 ANA ND 4 OFF EITHER AS CAPITAL LOSS OR AS SPECULATIVE LOSS AGAINST CAPITAL GAINS OR INCOME FROM SPECULATIVE BUSINESS PENALTY UNDER S. 271 (1) ( C ) WAS THEREFORE NOT LEVIABLE. HE HAS ALSO RELIED UPON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS RELIANCE PETROPRODUCTS PVT. LTD. 32 ITR 158 IN WHICH IT WAS HELD AS UNDER: A GLANCE AT THE PROVISIONS OF SECTION 271(1) (C) OF THE INCOME-TAX ACT 1961 SUGGEST THAT IN ORDER TO BE COVERED BY IT THERE HAS TO BE CONCEALMENT OF PARTICULARS OF THE INCOME OF THE ASSESSEE. SECONDLY THE ASSESSEE MUST HAVE FURNISHED INACCURATE PARTICULARS OF HIS INCOME. THE MEANING OF THE WORD PARTICULARS USED IN SECTION 271(1) (C) WOULD EMBRACE THE DETAILS OF THE CLAIM MADE. WHERE NO INFORMATION GIVEN IN THE RETURN IS FOUND TO BE INCORRECT OR INACCURATE THE ASSESSEE CANNOT BE HEL D GUILTY OF FURNISHING INACCURATE PARTICULARS. IN ORD ER TO EXPOSE THE ASSESSEE TO PENALTY UNLESS THE CASE IS STRICTLY COVERED BY THE PROVISION THE PENALTY PROVISION CANNOT BE INVOKED. BY NO STRETCH OF IMAGINATION CAN MAKING AN INCORRECT CLAIM TANTAMOUNT TO FURNISHING INACCURATE PARTICULARS. THERE CAN BE NO DISPUTE THAT EVERYTHING WOULD DEPEND UPON THE RETURN FILED BY THE 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 T HE LIABILITY WOULD ARISE. TO ATTRACT PENALTY THE DETA ILS SUPPLIED IN THE RETURN MUST NOT BE ACCURATE NOT EX ACT OR CORRECT NOT ACCORDING TO THE TRUTH OR ERRONEOUS . WHERE THERE IS NO FINDING THAT ANY DETAILS SUPPLIED BY THE ASSESSEE IN ITS RETURN ARE FOUND TO BE INCORREC T OR ERRONEOUS OR FALSE THERE IS NO QUESTION OF INVITING THE PENALTY UNDER SECTION 271(1) ( C ). A MERE MAKING O F A CLAIM WHICH IS NOT SUSTAINABLE IN LAW BY ITSELF W ILL ITA NO.1747/AHD/2008 SHRI KALPESHBHAI JAYANTIBHAI PATEL VS ITO W-2 ANA ND 5 NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. SUCH A CLAIM MADE IN THE RETURN CANNOT AMOUNT TO FURNISHING INACCURATE PARTICULARS. DECISION OF THE GUJARAT HIG H COURT AFFIRMED. 4. ON THE OTHER HAND THE LEARNED DR RELIED UPON T HE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT THE ASSESS EE HAS NOT ADDUCED ANY EVIDENCE IN SUPPORT OF THE CLAIM OF BUS INESS LOSS. THEREFORE THE TRANSACTION CARRIED OUT WITHOUT ACTU AL DELIVERY WAS RIGHTLY NOT CONSIDERED AS TRADING LOSS. THEREFORE PENALTY HAS BEEN RIGHTLY IMPOSED IN THE MATTER. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND MA TERIAL AVAILABLE ON RECORD. THE ASSESSEE FILED DETAILS BEF ORE THE AO AT THE PENALTY STAGE ON ACCOUNT OF THE LOSS ON TRADING. CO PIES OF THE BILLS WERE FURNISHED. BUT THE AO NOTED THAT OTHER DETAILS WERE NOT FURNISHED. THE AO ON ENQUIRY CAME TO KNOW THAT NO A CTUAL DELIVERY OF THE SHARES HAS BEEN TAKEN PLACE. THEREFORE TRADING LOSS WAS CONSIDERED AS SPECULATIVE LOSS. THE AO ACCORDINGLY DID NOT ALLOW SET OFF OF THE SAME AGAINST THE BUSINESS INCOME. IT IS THEREFORE NOT A CASE OF THE REVENUE THAT THE ASSESSEE HAS FAILED TO OFFER ANY EXPLANATION OR THAT ITS EXPLANATION WAS FOUND FALSE . THE ASSESSEE FURNISHED THE DETAILS BEFORE THE AO IN SUPPORT OF T HE CLAIM. MERELY BECAUSE THE CLAIM WAS NOT SUBSTANTIATED THROUGH EVI DENCE AS REQUIRED BY THE AO WOULD NOT MAKE OUT A CASE OF CON CEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF I NCOME. THE SIMILAR ISSUE WAS CONSIDERED BY ITAT SPECIAL BENCH IN THE C ASE OF GUJARAT CREDIT CORPORATION (SUPRA) WHICH SUPPORT THE CASE O F THE ASSESSEE. ITA NO.1747/AHD/2008 SHRI KALPESHBHAI JAYANTIBHAI PATEL VS ITO W-2 ANA ND 6 ITAT CHENNAI BENCH IN THE CASE OF SOUTHERN GAS FITT INGS (P) LTD. VS DCIT 80 ITD 202 HELD IN PARA 20 AS UNDER: 20. AT THE COST OF REPETITION WE MAY MENTION HERE THAT FROM ALL THE FACTS AND CIRCUMSTANCES OF THE CA SE IT SEEMS THAT IT IS A CASE OF DIFFERENCE OF OPINION AS THE CLAIM FOR DEPRECIATION ETC. WAS MADE BY THE ASSESSEE ON THE BASIS OF TRIAL PRODUCTION WHICH WAS SUPPORTED BY RECORD BUT THE STAND OF THE DEPARTMEN T WAS THAT SINCE NO COMMERCIAL PRODUCTION WAS THERE THE ASSESSEE IS NOT ENTITLED FOR SUCH CLAIM. ALL TH E FACTS OF THE CASE WERE BEFORE THE ASSESSING OFFICER AND AS SUCH IT CANNOT BE SAID TO BE A CASE OF FILI NG INACCURATE PARTICULARS OR MAKING ANY CONCEALMENT BEFORE THE ASSESSING OFFICER. EVEN IF THE ASSESSEE WOULD CLAIM THIS DEPRECATION ETC. ON MERITS AND REJECTED BY THE ASSESSING OFFICER STILL LAW IS CLE AR THAT EVEN IF THE EXPLANATION OF THE ASSESSEE IS REJECTED NO CASE FOR IMPOSITION OF PENALTY WOULD B E MADE OUT. 6. CONSIDERING THE FACTS OF THE CASE IN THE LIGHT O F THE ABOVE DECISIONS WE DO NOT FIND IT TO BE A FIT CASE FOR L EVY OF PENALTY. THE ORDERS OF THE AUTHORITIES BELOW ARE SET ASIDE. PENA LTY IS CANCELLED. THE APPEAL OF THE ASSESSEE IS ALLOWED. 7. AS A RESULT THE APPEAL OF THE ASSESSEE IS ALLOW ED. ORDER PRONOUNCED ON 18-02-2011 SD/- SD/- (D. C. AGRAWAL) ACCOUNTANT MEMBER (BHAVNESH SAINI) JUDICIAL MEMBER DATE : 18 - 02-2011 LAKSHMIKANT/- ITA NO.1747/AHD/2008 SHRI KALPESHBHAI JAYANTIBHAI PATEL VS ITO W-2 ANA ND 7 COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR ITAT AHMEDABAD 6. GUARD FILE BY ORDER D Y. REGISTRAR ITAT AHMEDABAD