AJAY M. MAHAJAN, MUMBAI v. ITO 26(1)(3), MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A MUMBAI BEFORE SHRI R V EASWAR SENIOR VICE PRESIDENT AND SHRI J SUDHAKAR REDDY ACCOUNTANT MEMBER I T A NO: 2048/MUM/2009 (ASSESSMENT YEAR: 2004-05) AJAY M MAHAJAN MUMBAI APPELLANT (PAN: AADPM2907K) VS INCOME TAX OFFICER 26(1)(3) MUMBAI RESPONDENT APPELLANT BY: SHRI R J ZAVERI RESPONDENT BY: SHRI MANVENDRA GOYAL O R D E R R V EASWAR SENIOR VICE PRESIDENT: THIS IS AN APPEAL FILED BY THE ASSESSEE CHALLENGIN G THE LEVY OF PENALTY OF RS.1 21 000/- IMPOSED UNDER SECTION 271( 1)(C) OF THE INCOME TAX ACT 1961 FOR THE ASSESSMENT YEAR 2004- 05. 2. THE ASSESSEE IS AN INDIVIDUAL AND IS A SALARIED EXECUTIVE OF THE BANK OF AMERICA. WHILE COMPLETING THE ASSESSMENT U NDER SECTION 143(3) OF THE ACT THE ASSESSING OFFICER CALLED FOR THE DETAILS OF THE SHORT TERM AND LONG TERM CAPITAL LOSS DECLARED BY T HE ASSESSEE. FROM THE DETAILS HE NOTICED THAT THE ASSESSEE HAD CLAIM ED INTEREST EXPENDITURE OF RS.4 07 174/- AS COST OF THE SHARES AND HAS PROCEEDED TO COMPUTE THE CAPITAL GAINS ON THAT BASIS. HE TOO K THE VIEW THAT INTEREST EXPENSE ON AMOUNTS BORROWED FOR PURCHASE O F SHARES DOES NOT FORM PART OF THE COST OF THE ASSET AND ACCORDIN GLY DISALLOWED THE SAME IN THE COMPUTATION OF THE CAPITAL GAINS. HE A LSO INITIATED PENALTY PROCEEDINGS AGAINST THE ASSESSEE FOR CONCEALMENT OF INCOME. THE 2 ASSESSEE EXPLAINED THAT THE INTEREST PAID ON THE PU RCHASE OF SHARES WAS CLAIMED AS DEDUCTION BECAUSE IT WAS DIRECTLY RE LATED TO THE EARNING OF THE INCOME AND THAT IN ANY CASE THERE WA S NO CONCEALMENT AS THE CLAIM WAS MADE IN AN OPEN MANNER WHICH HOWE VER DID NOT FIND ACCEPTANCE. THE ASSESSING OFFICER NOT BEING SATISF IED WITH THE REPLY IMPOSED THE IMPUGNED PENALTY. THE SAME HAVING BEEN CONFIRMED BY THE CIT(A) THE ASSESSEE IS IN FURTHER APPEAL BEFOR E THE TRIBUNAL. 3. WE HAVE HEARD THE RIVAL SUBMISSIONS. IN OUR OPI NION THERE IS NO CASE MADE OUT FOR IMPOSING PENALTY FOR CONCEALMENT OF INCOME OR FURNISHING INACCURATE PARTICULARS THEREOF. IN THE STATEMENT OF INCOME A COPY OF WHICH HAS BEEN COMPILED IN THE PAPER BOOK THE ASSESSEE CLAIMED DEDUCTION ON ACCOUNT OF THE INTEREST OF RS. 4 07 174/- PAID ON PURCHASE OF SHARES AND THE DEDUCTION WAS CLAIMED WH ILE ADJUSTING THE SHORT TERM CAPITAL LOSS ON THE SALE OF SHARES AGAIN ST THE SHORT TERM CAPITAL GAIN ON SALE OF STOCK OPTION. PAGE 2 OF TH E STATEMENT OF THE INCOME SETS OUT THE WORKING OF THE NET SHORT TERM C APITAL LOSS OF RS.4 03 359/- AFTER CLAIMING DEDUCTION FOR THE INT EREST. WE ARE UNABLE TO THEREFORE SHARE THE OPINION OF THE ASSESSING OFF ICER EXPRESSED IN THE PENALTY ORDER THAT THE CLAIM WAS MADE IN SUCH A WAY THAT IT COULD NOT HAVE BEEN DETECTED BUT FOR THE SCRUTINY. IT IS A MATTER OF THE ASSESSEE HAVING MADE THE CLAIM IN AN OPEN AND BONA FIDE MANNER AND FURNISHING THE RELEVANT DETAILS WHEN CALLED UPON TO DO SO BY THE ASSESSING OFFICER. THE MERE FACT THAT THE ASSESSIN G OFFICER WAS UNABLE TO ACCEPT THE ASSESSEES CLAIM DOES NOT MEAN THAT THE ASSESSEE WAS GUILTY OF CONCEALMENT OF INCOME. WE A LSO FIND THAT THE 3 ASSESSEE HAS FILED A STATEMENT OF THE OD ACCOUNT IN HDFC BANK SHOWING DEBITS FOR INTEREST AGGREGATING TO RS.4 07 173/- FOR AMOUNTS BORROWED FOR INVESTMENT IN SHARES. THE MONTHLY STA TEMENTS OF THE HDFC BANK HAVE ALSO BEEN FURNISHED BEFORE THE ASSES SING OFFICER. IT THUS APPEARS TO US TO BE A CASE WHERE THE ASSESSEE HAVING FURNISHED ALL THE DETAILS ABOUT THE CLAIM WAS DENIED THE SAME BY THE ASSESSING OFFICER. THIS DOES NOT MEAN THAT THE ASSESSEE HAS CONCEALED HIS INCOME. REFERENCE IN THIS CONNECTION CAN BE MADE T O THE FOLLOWING JUDGMENTS: - (1) ADDITIONAL CIT VS. DELHI CLOTH & GENERAL MILLS CO. LTD. (1984) 157 ITR 822 (DEL) (2) CIT VS. LATE G D NAIDU (1987) 165 ITR 63 (MAD) (3) BURMAH SHELL OIL STORAGE & DISTRIBUTING COMPANY OF INDIA LTD. (1987) 163 ITR 496 (CAL) IN THE ABOVE CASES IT HAS BEEN HELD THAT WHEN ALL T HE DETAILS RELATING TO A CLAIM WERE FURNISHED BY THE ASSESSEE MERELY BECA USE THE ASSESSING OFFICER TOOK A DIFFERENT VIEW OF THE CLAI M DOES NOT LEAD TO THE CONCLUSION THAT THE ASSESSEE HAS CONCEALED HIS INCO ME OR FURNISHED INACCURATE PARTICULARS THEREOF. APPLYING THESE JUD GMENTS WE CANCEL THE PENALTY AND ALLOW THE APPEAL FILED BY THE ASSES SEE WITH NO ORDER AS TO COSTS. ORDER PRONOUNCED ON 20 TH APRIL 2010. SD/- SD/- (J SUDHAKAR REDDY) (R V EASWAR) ACCOUNTANT MEMBER SENIOR VICE PRESI DENT MUMBAI DATED 20 TH APRIL 2010 SALDANHA 4 COPY TO: 1. AJAY M MAHAJAN RASHMI ZAVERI & CO. CHARTERED ACCOUNTANTS ARHAM GROUND FLOOR PLOT 266 SION (EAST) MUMBAI 400 022 2. ITO 26(1)(3) 3. CIT-26 4. CIT(A)-XXVII 5. DR A BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR ITAT MUMBAI