The ACIT, Circle-8,, Ahmedabad v. ZORA PHARMA LTD.,, Ahmedabad

ITA 1872/AHD/2009 | 1997-1998
Pronouncement Date: 31-03-2011 | Result: Dismissed

Appeal Details

RSA Number 187220514 RSA 2009
Bench Ahmedabad
Appeal Number ITA 1872/AHD/2009
Duration Of Justice 1 year(s) 9 month(s) 26 day(s)
Appellant The ACIT, Circle-8,, Ahmedabad
Respondent ZORA PHARMA LTD.,, Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 31-03-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted C
Tribunal Order Date 31-03-2011
Date Of Final Hearing 29-03-2011
Next Hearing Date 29-03-2011
Assessment Year 1997-1998
Appeal Filed On 04-06-2009
Judgment Text
- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C AHMEDABAD BEFORE S/SHRI D. K. TYAGI JM AND D.C.AGRAWAL AM THE ASSTT. CIT CIRCLE-8 AHMEDABAD. VS. M/S ZARA PHARMA LTD. 604 ANIKET C.G. ROAD AHMEDABAD. (APPELLANT) .. (RESPONDENT) APPELLANT BY :- R. K. TOPIWALA DR RESPONDENT BY:- ARTI SHAH AR O R D E R PER D.C. AGRAWAL ACCOUNTANT MEMBER . THIS IS AN APPEAL FILED BY THE REVENUE RAISING FOL LOWING GROUNDS:- (1) THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DEL ETING THE PENALTY OF RS.10 23 500/- LEVIED U/S 271(1)(C) OF T HE ACT. (2) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A)-XIV. AHMEDABAD OUGHT TO HAVE UPHELD THE ORDE R OF THE AO. 2. THE FACTS OF THE CASE ARE THAT AO LEVIED PENALTY OF RS.10 23 500/- IN RESPECT OF TWO ADDITIONS AS UNDER :- 1. DISALLOWANCE ON ACCOUNT OF LOSS IN TRADING OF SHARE S DEEMED AS SPECULATIVE LOSS U/S 73 OF THE IT ACT OF RS.20 06 5 90/- 2. DISALLOWANCE ON ACCOUNT OF CLAIM OF DEPRECIATION ON LABORATORY EQUIPMENT AND EFFLUENT TREATMENT PLANT WITHDRAWN OF RS.3 73 327/- ITA NO.1872/AHD/2009 ASST. YEAR 1997-98 ITA NO.1872/AHD/2009 ASST. YEAR1997-98 2 IT WAS EXPLAINED TO THE AO THAT CLAIMS OF VARIOUS D EDUCTIONS WERE MADE BONA FIDE BUT WERE FINALLY DISALLOWED. THESE CLAIMS WERE MADE ON THE BASIS OF AUDITED ACCOUNT AND AUDIT REPORT AND OTHER RELEVANT STATEMENTS AND ACCOUNT. THE ASSESSEE ALSO RELIED ON SEVERAL DE CISIONS IN SUPPORT OF HIS CONTENTION THAT MERELY FOR DISALLOWING A CLAIM PENALTY CANNOT BE LEVIED. THESE DECISIONS ARE AS UNDER :- (I) HINDUSTAL STEEL LTD. VS. STATE OF ORISSA (83 ITR 26 ) (SC) (II) K.C. BUILDERS & ANR. VS. ACIT 265 ITR 562 (SC) (III) CIT VS. HOTEL SABAR (P) LTD. 264 ITR 381 (GUJ) (IV) CIT VS. GLOW TECH STEELS (P) LTD. 148 TAXMAN 289 (G UJ) (V) NUCHEM LTD. VS. DCIT 49 ITD 441 (DEL) (VI) CIT VS. HARSHVARDHAN CHEMICALS & MINERALS LTD. 250 ITR 212 (RAJ) (VII) CIT VS. SKYLINE AUTO PRODUCTS P. LTD. 271 ITR 335 ( MP) (VIII) CIT VS. ANAND WATER METER MFG. CO. 117 ITR 866 (P&H) (IX) CIT VS. M.P. NARAYANAN 244 ITR 528 (MAD) (X) CIT VS. S.P. K. STEELS (P) LTD. 270 ITR 156 (MP) (XI) CIT VS. INDEN BISLERS 240 ITR 943 (MAD) (XII) NATIONAL TEXTILES VS. CIT 249 ITR 125 (GUJ) (XIII) CIT VS. UNION ELECTRIC CORPN.281 ITR 266 (GUJ) THE AO WAS HOWEVER NOT SATISFIED AND HE CONSIDERE D THE LEVY OF PENALTY PURELY ON THE LEGAL GROUND. 3. THE LD. CIT(A) HOWEVER CANCELLED THE PENALTY O N THE GROUND THAT ASSESSEE HAD MADE FULL DISCLOSURE AND FURNISHED ALL THE NECESSARY DETAILS IN RESPECT OF VARIOUS CLAIMS WHILE FILING THE RETUR N OF INCOME. THE LOSS IN TRADING OF SHARES WAS CLAIMED ON THE GROUND THAT TH IS LOSS HAD ARISEN DUE TO FALL IN MARKET VALUE OF THE SHARES HELD AS STOCK -IN-TRADE. SCOPE OF SECTION 73 WOULD BE LIMITED TO LOSS ARISING ON ACTU AL SALE OF SHARES. THUS IT WAS A CASE OF DIFFERENCE OF OPINION AND NOT A CA SE OF FURNISHING OF INACCURATE PARTICULARS OF INCOME OR CONCEALING ANY PARTICULARS OF INCOME. ITA NO.1872/AHD/2009 ASST. YEAR1997-98 3 4. WE HAVE HEARD THE PARTIES AND CAREFULLY PERUSED THE MATERIAL ON RECORD. IN OUR VIEW THE STAND OF THE REVENUE IS MIS CONCEIVED. LD. AR SUBMITTED THAT NONE OF THE AUTHORITIES BELOW POINTE D OUT THAT THERE WAS A CASE OF ANY FURNISHING INACCURATE PARTICULARS OF IN COME OR CONCEALING ANY PARTICULARS OF INCOME NOR A CASE IS MADE OUT UNDER EXPLANATION-1 TO SECTION 271(1)(C). THUS FOR MERELY MAKING A CLAIM W HICH WAS NOT SUSTAINED IN APPEAL AND THERE WAS NO FINDING OF ANY FURNISHING OF INACCURATE PARTICULARS OR CONCEALMENT OF PARTICULAR S PENALTY CANNOT BE SUSTAINED. IT IS SUBMITTED BY LD. AR THAT THE ISSUE IS NOW COVERED BY THE DECISION OF HON. SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCTS 322 ITR 158 (SC). 5. IF WE CONSIDER THE TWO ADDITIONS INDEPENDENTLY THE DETAILS ARE AS UNDER :- (1) ADDITION ON ACCOUNT OF TRADING OF SHARES ASSESS EE HAD CLAIMED LOSS ON SALE OF SHARES AT RS.20 09 950/-. THIS FIGURE CO MPRISED OF FOLLOWING ITEMS :- (I) DIFFERENCE IN VALUATION IN SHARES OF CLOSING ST OCK RS.18 93 300/- (II) LOSS ON SALE OF SHARES RECEIVED ON AMALGAMATIO N RS.72 048/- (III) LOSS ON SALE OF SHARES PURCHASED AND SOLD BY ZORA PHARMA DURING THE YEAR RS.41 242/- ------------- -------- RS.20 06 590/- ============= THE AO INVOKED THE EXPLANATION TO SECTION 73 ACCORD ING TO WHICH THE COMPANY SHALL BE DEEMED TO BE CARRYING ON SPECULATI ON BUSINESS TO THE EXTENT TO WHICH BUSINESS CONSISTED OF SALE AND PURC HASE OF SHARES. IT WAS CLAIMED THAT THIS LOSS BELONGED TO PATANKAR LEASE F INANCE LTD. WHICH WAS AMALGAMATING COMPANY. IT WAS ARGUED THAT THE AMALGA MATING COMPANY ITA NO.1872/AHD/2009 ASST. YEAR1997-98 4 WAS A FINANCIAL COMPANY OR INVESTMENT COMPANY AND THEREFORE THE CASE OF THE ASSESSEE WOULD FALL IN ONE OF THE EXCEPTIONS PROVIDED IN EXPLANATION TO SECTION 73 BUT AS ASSESSEE WAS UNABL E TO PROVE ITS CLAIM OF FALLING IN ONE OF THE EXCEPTIONS THE ADDITION WAS M ADE. THE ALTERNATIVE ARGUMENT OF THE ASSESSEE COMPANY THAT LOSS HAS ARIS EN DUE TO FALL IN MARKET VALUE AS SHARES ARE KEPT AS STOCK-IN-TRADE A ND EXPLANATION TO SECTION 73 WOULD ONLY BE APPLICABLE TO ACTUAL SALES OF SHARES WAS ALSO NOT ACCEPTED BY THE AO AS ACCORDING TO HIM SECTION 73 R ELATED TO LOSS IN SHARE TRADING WHICH WOULD INCLUDE VALUATION OF CLOSING ST OCK ALSO. THIS VIEW OF THE AO WAS FINALLY UPHELD BY THE TRIBUNAL. IT HELD THAT PROFIT AND LOSS FROM PURCHASE AND SALE OF SHARES WILL HAVE TO BE CO MPUTED SEPARATELY AND WHILE COMPUTING THE PROFIT AND LOSS ON THE PURCHASE AND SALE OF SHARES OPENING STOCK AND CLOSING STOCK OF THE SHARES HAS T O BE ACCOUNTED FOR AND THEY HAVE TO BE VALUED IN ACCORDANCE WITH THE METHO D OF ACCOUNTING REGULARLY FOLLOWED BY THE ASSESSEE. SINCE THE SHARE S WERE NOT HELD AS INVESTMENT AND THE SHARES HAVE BEEN VALUED AT MARKE T VALUE OR COST WHICHEVER IS LOW AND IN THAT CASE THEY WERE VALUED AT COST AS IT WAS HIGHER THAN MARKET VALUE THAN CLEARLY EXPLANATION T O SECTION 73 OF THE ACT WOULD BE APPLICABLE AND THE VALUATION OF CLOSING ST OCK WOULD BE COVERED UNDER IT. IN RESPECT OF OTHER ITEM REGARDING DISALL OWANCE OF CLAIM FOR DEPRECIATION THE TRIBUNAL OBSERVED THAT DEPRECIATI ON WAS CLAIMED AT 100% OF EFFLUENT TREATMENT PLANT ON RS.12 13 394/- BUT THEY INCLUDED LABORATORY EQUIPMENT ON WHICH 25% DEPRECIATION WAS ONLY TO BE ALLOWED AND ACCORDINGLY CLAIM OF DEPRECIATION WAS REDUCED B Y RS.3 73 327/-. 6. THUS IN BOTH THE CASES ASSESSEE HAD TAKEN A VIEW WHICH WAS NOT ILLOGICAL ON COMMERCIAL PRINCIPLES. SINCE MAJOR LOS S IN SHARES WAS ON ACCOUNT OF VALUATION IN STOCK ASSESSEE CONSIDERED I T THAT VALUATION IN STOCK IS OUTSIDE THE PURVIEW OF EXPLANATION OF SECTION 73 THOUGH LEGALLY HE WAS ITA NO.1872/AHD/2009 ASST. YEAR1997-98 5 INCORRECT. SIMILARLY LABORATORY EQUIPMENT IN EFFLU ENT TREATMENT PLANT WERE CONSIDERED AS PART OF SUCH PLANT AND 100% DEPR ECIATION THEREON WAS CLAIMED THOUGH SUCH CLAIM WAS DISALLOWED. THUS THER E WAS ONLY A DIFFERENCE OF OPINION THE OPINION OF THE ASSESSEE BEING NOT FOUND SUSTAINABLE IN LAW. HOWEVER THERE IS NO CASE OF HO LDING THAT EXPLANATION OF ASSESSEE WAS NOT BONA FIDE OR ASSESSEE HAS WITHH ELD ANY MATERIAL FACT FROM THE A.O. SECTION 271(1)(C) READS AS UNDER :- 271(1) IF THE [ASSESSING] OFFICER OR THE [COMMISSIO NER (APPEALS) [OR THE COMMISSIONER] IN THE COURSE OF ANY PROCEEDINGS UNDE R THIS ACT IS SATISFIED THAT ANY PERSON- (A) (B) .. (C) HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME: OR MAKES IT CLEAR THAT IMPOSITION OF PENALTY UNDER SEC TION 271(1)9C) AO HAS TO SATISFY HIMSELF :- (1) THAT ASSESSEE HAS CONCEALED HIS INCOME; OR (2) FURNISHED INACCURATE PARTICULARS OF HIS INCOME; OR (3) HIS CASE FALLS IN ONE OR MORE OF THE EXPLANATION AP PENDED TO SECTION 271(1)(C). HONBLE SUPREME COURT HAS IN THE CASE OF RELIANCE PETROPRODUCTS ( SUPRA ) OBSERVED THAT FURNISHING OF INACCURATE PARTICULA RS MUST MEAN THE DETAILS SUPPLIED IN THE RETURN WHICH ARE NOT ACCUR ATE NOT EXACT OR CORRECT NOT ACCORDING TO TRUTH OR ARE ERRONEOUS. THEIR LORDSHIPS NOTED THAT IN THIS CASE THERE IS NO FINDING THAT ANY DE TAILS SUPPLIED BY THE ASSESSEE IN ITS RETURN WERE FOUND TO BE INCORRECT O R ERRONEOUS OR FALSE AND SUCH NOT BEING THE CASE THERE WOULD BE NO QUE STION OF INVITING THE PENALTY UNDER SECTION 271(L)(C) OF THE ACT. IT WAS THEN NOTED BY THEIR LORDSHIPS THAT A MERE MAKING OF THE CLAIM WHICH I S NOT SUSTAINABLE IN ITA NO.1872/AHD/2009 ASST. YEAR1997-98 6 LAW BY ITSELF WILL NOT AMOUNT TO FURNISHING INACC URATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE AND THAT SUC H CLAIM MADE IN THE RETURN CANNOT AMOUNT TO THE INACCURATE PARTICULARS . FURTHER AS OBSERVED BY US THE CLAIM MADE BY THE AS SESSEE IS NOT DEVOID OF RATIONAL BASIS EVEN THOUGH DISALLOWANCE HAS BEEN UPHELD BY THE TRIBUNAL BUT AS HAS BEEN HELD BY HONBLE SURPEME CO URT IN THE CASE OF RELIANCE PETROPRODUCTS (SUPRA) FOR MERELY MAKING A CLAIM WHICH IS NOT SUSTAINABLE IN LAW WILL BY ITSELF NOT AMOUNT TO FU RNISHING INACCURATE PARTICULARS. THAT PRECISELY IS THE CASE BEFORE US. 7. IN VIEW OF ABOVE WE HOLD THAT LD. CIT(A) WAS JU STIFIED IN CANCELING THE PENALTY. AS A RESULT THE APPEAL FILE D BY THE REVENUE IS DISMISSED. 8. IN THE RESULT THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER WAS PRONOUNCED IN OPEN COURT ON 31.3.11 SD/- SD/- (D. K. TYAGI) (D.C. AGRAWAL) JUDICIAL MEMBER ACCOUNTANT MEMB ER AHMEDABAD DATED : 31.3.11. MAHATA/- ITA NO.1872/AHD/2009 ASST. YEAR1997-98 7 COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR ITAT AHMEDABAD 6. GUARD FILE. BY ORDER DEPUTY / ASSTT.REGISTRAR ITAT AHMEDABAD 1.DATE OF DICTATION 29/3/2011 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING 30/3/ 2011 MEMBER.OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT.. 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..