ITO 2(1)(1), MUMBAI v. DINDAYAL COMMODITGIES P. LTD, MUMBAI

ITA 1978/MUM/2010 | 2006-2007
Pronouncement Date: 25-02-2011 | Result: Dismissed

Appeal Details

RSA Number 197819914 RSA 2010
Assessee PAN AAACB2008E
Bench Mumbai
Appeal Number ITA 1978/MUM/2010
Duration Of Justice 11 month(s) 15 day(s)
Appellant ITO 2(1)(1), MUMBAI
Respondent DINDAYAL COMMODITGIES P. LTD, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 25-02-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted D
Tribunal Order Date 25-02-2011
Assessment Year 2006-2007
Appeal Filed On 11-03-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH: MUMBAI BEFORE SHRI R. S. SYAL ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR JUDICIAL MEMBER ITA NO.1978/MUM/2010 (ASSESSMENT YEAR: 2006-07) ITO-2(1)(1) AAYAKAR BHAVAN ROOM NO.575 5 TH FLOOR MUMBAI -400 020 REVENUE VS M/S. DINDAYAL COMMODITIES P. LTD. 601 VITHALDAS CHAMBERS B.S. MARG FORT MUMBAI -400 0 23 PAN: AAACB 2008 E ASSESSEE ASSESSEE BY: SHRI JAIDEV REVENUE BY: SHRI JITENDRA YADAV O R D E R IN THIS APPEAL THE REVENUE HAS CHALLENGED THE IMPUG NED ORDER OF THE LD. CIT (A)-IV MUMBAI DATED 02.12.2009 FOR THE A.Y. 200 6-07. 2. THE SHORT CONTROVERSY BEFORE US IS WHETHER THE P ENALTY IMPOSED BY THE SEBI FOR THE VIOLATION OF MARGINS WHETHER AMOUN TS TO PENAL IN NATURE AND LEVIED FOR SERIOUS INFRACTION OF LAW. ITA 1978/M/2010 M/S. DINDAYAL COMMODITIES P. LTD. 2 3. THE ASSESSEE-COMPANY IS IN THE TRADING AND BRO KING OF THE COMMODITY. IT WAS NOTICED BY THE A.O. THAT AS PER THE AUDIT REPORT THE PENALTY OF ` ` 7 05 399/- WAS LEVIED. THE A.O. WAS OF THE OPINIO N THAT THE SAID PENALTY WAS FOR THE INFRACTION OF THE LAW AND WAS NOT ALLOWABLE EXPENDITURE U/S.37(1) OF THE ACT. THE A.O. THEREF ORE DISALLOWED THE AMOUNT OF THE PENALTY OF ` ` 7 05 399/- AND MADE THE ADDITION TO THE INCOME OF THE ASSESSEE. THE ASSESSEE CARRIED THE M ATTER BEFORE THE LD. CIT (A). BEFORE THE LD. CIT (A) IT WAS CONTENDED T HAT THE ASSESSEE IS A MEMBER OF THE COMMODITY EXCHANGE CALLED MCX AND DOE S THE TRANSACTION IN COMMODITIES IN THE SAID EXCHANGE. THERE ARE RULES OF THE EXCHANGE FRAMED FOR THE SETTLEMENT PROCEDURE FOR TH E VARIOUS COMMODITIES LIKE CHANA URAD SILVER ETC. IF A ME MBER DOES NOT SQUARE UP THE COMMODITY ON THE SETTLEMENT DATE THEN HE IS LIABLE FOR THE PENALTY AND AS PER THE EXCHANGE RULES. THE LD. CIT (A) HAS ACCEPTED PLEA OF THE ASSESSEE THAT THE PENALTY LEVIED BY THE MCX IS ANALOGOUS TO THE PENALTY LEVIED BY THE SEBI ON THE SHARE BROKER AND IT IS FOR THE VIOLATION OF THE MARGIN NOT FOR ANY SERIOUS CONTRAVENTION OF THE LAW. THE LD. CIT (A) HELD THAT THE SAID PENALTY IS COMPENSATORY IN N ATURE AND ALLOWED THE CLAIM OF THE ASSESSEE. NOW THE REVENUE IS IN APPE AL BEFORE US. 4. WE HAVE HEARD THE PARTIES. THE LD. COUNSEL SUBM ITTED THAT THE PENALTY LEVIED BY THE EXCHANGE IS ANALOGOUS TO THE PENALTY LEVIED BY THE SEBI FOR VIOLATION OF THE MARGIN AND OTHER PROCEDUR ES. HE RELIED ON THE DECISION OF HONBLE P&H HIGH COURT IN THE CASE OF C IT VS. HERO CYCLES LIMITED LUDHIANA IN ITA NO.655 OF 2008 DATED 9.12. 2008 AS WELL AS THE DECISION OF THE ITAT MUMBAI IN THE CASE OF KAIRA CA N CO. LTD. VS. DCTI 2 ITR (TRIB) 20 (MUM). WE HAVE ALSO HEARD THE LD. D. R. THERE IS NO MUCH MORE DISCUSSION IN THE ASSESSMENT ORDER ON THIS ISS UE. THE LD. CIT (A) HAS PUT SOME LIGHT ON THE NATURE OF THE PENALTY. T HE LD. CIT (A) HAS ALSO CONSIDERED THE PENALTY LEVIED UNDER THE SEBI REGULA TIONS UPON A SHARE ITA 1978/M/2010 M/S. DINDAYAL COMMODITIES P. LTD. 3 BROKER. NOWHERE IT IS CONTROVERTED THAT THE PENALT Y LEVIED BY THE COMMODITY EXCHANGE FOR NON SETTLEMENT OF TRANSACT IONS ON THE SETTLEMENT DATE CAN BE SAID TO BE FOR ANY SERIOUS V IOLATION. IN OUR OPINION IT IS A COMPENSATORY IN NATURE AS HELD BY THE LD. CIT (A). MOREOVER WE FIND THAT THE NATURE OF THE PENALTY LE VIED BY THE COMMODITY EXCHANGE IS ANALOGOUS TO THE PENALTY LEVIED BY THE SEBI. WE THEREFORE HOLD THAT THE PENALTY LEVIED BY THE SEBI AS PER THE FACTS ON RECORD ADMITTEDLY COMPENSATORY NOT FOR ANY SERIOUS INFRACT ION OF LAW. WE ACCORDINGLY CONFIRM THE ORDER OF THE LD. CIT (A) O N THIS ISSUE. 5. IN THE RESULT REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 25TH FEBRUARY 2011. SD/- SD/- (R. S. SYAL ) ACCOUNTANT MEMBER ( R.S. PADVEKAR ) JUDICIAL MEMBER MUMBAI DATE: 25TH FEBRUARY 2011 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) 4 MUMBAI. 4) THE CIT-2 MUMBAI. 5) THE D.R. D BENCH MUMBAI. BY ORDER / / TRUE COPY / / ASSTT. REGISTRAR I.T.A.T. MUMBAI *CHAVAN ITA 1978/M/2010 M/S. DINDAYAL COMMODITIES P. LTD. 4 SR.N. EPISODE OF AN ORDER DATE INITIALS CONCERNED 1 DRAFT DICTATED ON 14.02.2011 SR.PS 2 DRAFT PLACED BEFORE AUTHOR 21.02.2011 SR.PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6 KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7 FILE SENT TO THE BENCH CLERK SR.PS/PS 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER