M?s. Anoop Jain (HUF), New Delhi v. DCIT, New Delhi

ITA 2584/DEL/2010 | 2006-2007
Pronouncement Date: 03-02-2012 | Result: Partly Allowed

Appeal Details

RSA Number 258420114 RSA 2010
Assessee PAN AAAHA6321A
Bench Delhi
Appeal Number ITA 2584/DEL/2010
Duration Of Justice 1 year(s) 8 month(s) 3 day(s)
Appellant M?s. Anoop Jain (HUF), New Delhi
Respondent DCIT, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 03-02-2012
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted A
Tribunal Order Date 03-02-2012
Date Of Final Hearing 23-01-2012
Next Hearing Date 23-01-2012
Assessment Year 2006-2007
Appeal Filed On 31-05-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : A : NEW DELHI BEFORE SHRI I.P. BANSAL JUDICIAL MEMBER AND SHRI K.G. BANSAL ACCOUNTANT MEMBER ITA NO.2584/DEL/2010 ASSESSMENT YEAR : 2006-07 ANOOP JAIN (HUF) 11 BABAR LANE BENGALI MARKET NEW DELHI. PAN : AAAHA6321A VS. DCIT CIRCLE 31 (1) NEW DELHI. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI AMOL SINHA ADVOCATE REVENUE BY : MRS. ANUSHA KHURANA SR.DR ORDER PER I.P. BANSAL JUDICIAL MEMBER THIS IS AN APPEAL FILED BY THE ASSESSEE. IT IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT (A) DATED 28 TH APRIL 2010 FOR ASSESSMENT YEAR 2006-07. THE GROUNDS OF APPEAL READ AS UNDER:- 1. THAT THE LD. CIT (A) ERRED IN CONFIRMING THE LEVY O F PENALTY U/S 271(1)(C) OF THE INCOME TAX ACT 196 AS LEVIED BY THE DCIT CIRCLE 31 (1) NEW DELHI VIDE HIS ORDER DATED 19.06. 2009. 2. THE APPELLANT CRAVES LEAVE TO ALTER AND AMEND ITS GR OUNDS OF APPEAL IF NECESSARY. 2. THE RETURN OF INCOME WAS FILED BY THE ASSESSEE AT ` 18 66 02 760/- CLAIMING THEREIN THE INCOME TO BE TA XED AT NORMAL RATE OF ` 30 18 100/- AND ` 18 35 84 660/- AT SPECIAL RAT E. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAD CLAIMED INTEREST P AID TO BANK ITA NO.2584/DEL/2010 2 OUT OF HIS INCOME CHARGED TO NORMAL TAX AMOUNTING TO ` 25 86 752/- AND ALSO A SUM OF ` 1 50 326/- ON ACCOUNT OF SECURITY TRANSACTION TAX (STT) PAID IN RESPECT OF ITS NORMAL INCOME. THE ASSESSIN G OFFICER SOUGHT EXPLANATION FROM THE ASSESSEE AND VIDE LETTER DAT ED 24 TH NOVEMBER 2008 IT WAS SUBMITTED THAT THE INTEREST IS PA ID BY THE ASSESSEE TO HDFC BANK ON SECURED LOANS WHICH WAS NOT A TER M LOAN BUT MAXIMUM LIMIT WAS FIXED APPROXIMATELY AT ` 6 CRO RES WHICH WAS USED TIME TO TIME TOWARDS MARGIN MONEY PAID TO BROKER S FOR INTRA DAY TRADING AS WELL AS TRADING IN DERIVATES. THE ASSESSEE WA S REQUIRED TO PRODUCE DOCUMENTARY EVIDENCE SHOWING THAT WHETHER TH E PAYMENT OF MARGIN MONEY TO THE BROKERS WAS FOR SPECULATIVE TRADIN G ACTIVITIES. THE ASSESSEE DID NOT PRODUCE DOCUMENTARY EVIDENCE. THE REFORE THE ASSESSING OFFICER HELD THAT THE INTEREST CLAIMED TO BE P AID BY THE ASSESSEE TO THE BANK ON MARGIN MONEY IS NOT UTILIZED FO R SPECULATIVE TRADING AND IT WAS UTILIZED IN CONNECTION WITH SHORT- TERM CAPITAL GAIN ON PURCHASE AND SALE OF SHARES AND SECURITY. THEREFORE TH E ASSESSING OFFICER ADDED THE AMOUNT OF ` 25 86 752/- BEING IN TEREST PAID TO HDFC BANK TO THE SPECULATIVE INCOME OF THE ASSESSEE AND REDUC ED THE SAME FROM SHORT-TERM CAPITAL GAIN LIABLE FOR SPECIAL RATE OF TAXATION. 3. THE SECOND ASPECT RELATES TO ADDITION OF ` 64 16 70 7/- CLAIMED TO BE STT PAID OUT OF INCOME EARNED BY THE ASSESSEE AS SHORT -TERM CAPITAL GAIN AND STT OF ` 1 50 326/- CLAIMED OUT OF SPECULATIVE INCOME. THUS THE TOTAL STT CLAIMED OUT OF BOTH THE INCOME W AS ` 65 67 033/-. THE ASSESSING OFFICER HELD THAT STT IS NOT AN ALLOWABLE DEDUCTION HENCE THE SAME WAS DISALLOWABLE. IN ACCORDANCE WITH THE STATUTORY PROVISIONS BROUGHT W.E.F. 1.4.2005 UNDER CHAPTER-VII OF THE FINANCE (NO.2) ACT 2004 WHICH PROVIDES THAT NO DEDUCTION SHA LL BE ALLOWED IN COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD CAP ITAL GAINS IN RESPECT OF ANY SUM PAID ON ACCOUNT OF STT AND THUS R ELYING UPON THAT PROVISION THE ASSESSING OFFICER ADDED THIS AMOUNT TO THE TAXABLE ITA NO.2584/DEL/2010 3 INCOME OF THE ASSESSEE AND THE RESULTANT INCOME OF THE A SSESSEE HAS BEEN ASSESSED BEING ` 56 04 850/- CHARGEABLE AT GENERAL RATES AND ` 18 74 14 620/- AT SPECIAL RATE. ON BOTH THESE ITEMS P ROCEEDINGS U/S 271(1)(C) WERE INITIATED AND ACCORDINGLY THE ASSESSEE WAS SERVED WITH THE SHOW CAUSE NOTICE TO EXPLAIN THE SAME. THE SU BMISSIONS MADE BEFORE THE ASSESSING OFFICER DURING THE COURSE OF A SSESSMENT PROCEEDINGS WERE REITERATED IN THE PENALTY PROCEEDIN GS. IT WAS SUBMITTED THAT THE STT WAS CLAIMED ON THE ASSUMPTION TH AT IT IS IN THE NATURE OF COST OF IMPROVEMENT OF CAPITAL ASSET AND THE SAME WAS NOT ACCEPTED BECAUSE OF THE AMENDMENT IN THE ACT. SIMIL ARLY IT WAS SUBMITTED THAT THE INTEREST PAID TO BANK WAS FOR THE M ARGIN MONEY TO BE PAID TO BROKERS FOR TRADING IN SPECULATIVE ACTIVIT Y. THE ASSESSING OFFICER ON CAREFUL CONSIDERATION OF THESE SUBMISSIONS OF THE ASSESSEE OBSERVED THAT THE ASSESSEE HAS NOT BEEN ABLE TO SUBMIT ANY DOCUMENTARY EVIDENCE TO SUBSTANTIATE HIS CLAIM REGARDI NG INCURRING OF INTEREST EXPENDITURE ONLY FOR SPECULATIVE ACTIVITIES. THEREFORE HE HELD THAT THE ASSESSEE HAS CONCEALED HIS INCOME TO THAT EXTENT . HE OBSERVED THAT IN THIS MANNER THE ASSESSEE HAS MADE AN ATTE MPT TO SAVE TAX OF ABOUT 20% OF THE SUM OF ` 25 86 752/- AS I F THE SAID AMOUNT IF WOULD BE REDUCED FROM SHORT-TERM CAPITAL GAIN THEN THE ASSESSEE HAS TO PAY MORE TAX ON SPECULATIVE INCOME. IN R ESPECT OF CLAIM OF THE ASSESSEE REGARDING STT HE OBSERVED THAT AS THE SAID AMOUNT IS NOT ALLOWABLE AS PER THE STATUTORY PROVISION THE PLEA OF THE ASSESSEE THAT ITS CLAIM DOES NOT INVOLVE MENSREA IS NOT ACCEPTABLE. THE ASSESSEE HAS NOT BROUGHT ON RECORD ANY EXPLANATION A ND EVIDENCE TO PROVE THAT IT WAS A BONA FIDE ERROR AND REFERRING TO THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF UOI VS. DHARMEND RA TEXTILE PROCESSORS 219 CTR 617 WHERE IT HAS BEEN HELD THAT MENSREA IS NOT AN ESSENTIAL INGREDIENT FOR LEVY OF PENALTY LD. ASSESSING O FFICER HAS IMPOSED CONCEALMENT PENALTY OF ` 13 00 482/- BEING 1 00% OF THE TAX SOUGHT TO BE EVADED. ITA NO.2584/DEL/2010 4 4. THE SUBMISSIONS MADE BEFORE THE ASSESSING OFFICER WERE REITERATED BEFORE THE CIT (A) AND LEARNED CIT (A) HAS UPHELD THE LEVY OF PENALTY. THE ASSESSEE IS AGGRIEVED HENCE IN APPEAL . 5. AFTER NARRATING THE FACTS THE SUBMISSIONS MADE BEFOR E THE ASSESSING OFFICER AND LD. CIT (A) WERE REITERATED BEFOR E US BY THE LEARNED AR. 6. ON THE OTHER HAND RELYING UPON THE ORDER OF ASSESSI NG OFFICER AND CIT (A) IT WAS PLEADED BY THE LEARNED DR THAT T HE PENALTY HAS RIGHTLY BEEN SUSTAINED AND THE ORDER OF THE CIT (A) SH OULD BE UPHELD. 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS IN THE LIGHT OF THE MATERIAL PLACED BEFORE US. SO FAR AS IT RELATES T O LEVY OF PENALTY ON THE COMPONENT OF CLAIM OF INTEREST OUT OF SPECULATIVE INCOME WE ARE OF THE OPINION THAT THE SAID AMOUNT HAS BEEN ADDED TO TH E INCOME OF THE ASSESSEE SIMPLY FOR THE REASON THAT THE ASSESSEE COULD NOT SUBSTANTIATE ITS EXPLANATION TO PROVE THAT THE ENTIRE BORROWINGS ON WHICH THE INTEREST HAS BEEN PAID BY HIM TO THE BANK W ERE UTILIZED ONLY FOR THE PURPOSE OF SPECULATIVE INCOME. IT WAS THE CASE OF THE ASSESSEE THAT THE BORROWED FUND WAS UTILIZED FOR THE PURPOSE O F EARNING SPECULATIVE INCOME THEREFORE THE CLAIM IS MADE. IT IS NOT THE CASE OF THE ASSESSING OFFICER THAT THE BORROWED AMOUNT ON WHICH THE INTEREST HAS BEEN PAID BY THE ASSESSEE WAS NOT UTILIZED BY HIM FOR THE PURPOSE OF EARNING INCOME EITHER FROM SPECULATIVE ACTIVITY O R FROM SHORT-TERM CAPITAL GAIN. IT IS THEREFORE THE ASSESSING OFFICER H AS REDUCED THE SAID AMOUNT FROM SHORT-TERM CAPITAL GAIN AFTER ADDING IT BACK TO THE SPECULATIVE INCOME SHOWN BY THE ASSESSEE. THAT DOES NOT M EAN THAT THE BORROWED AMOUNT ON WHICH THE INTEREST IS PAID WAS ENTIRELY USED BY THE ASSESSEE FOR EARNING SHORT-TERM CAPITAL GAIN. T HE AMOUNT HAS BEEN FOUND TO BE ALLOWABLE AND IT WAS A MATTER OF D ETERMINATION ONLY ITA NO.2584/DEL/2010 5 THAT WHAT AMOUNT SHOULD BE ALLOWED OUT OF SPECULATIVE ACTIVITY OR WHAT AMOUNT SHOULD BE ALLOWED OUT OF SHORT-TERM CAPITAL GA IN. IT IS ALSO NOT THE CASE OF THE ASSESSING OFFICER THAT THE AMOUNT HAS INC ORRECTLY BEEN CLAIMED AND IS NOT PAID BY THE ASSESSEE TO THE BANK FOR THE PURPOSE OF EARNING INCOME EITHER AS SPECULATIVE INCOME OR AS SHORT -TERM CAPITAL GAIN. THEREFORE WE ARE OF THE OPINION THAT ON THA T COMPONENT LEVY OF CONCEALMENT PENALTY IS NOT JUSTIFIED. THEREFORE TO THAT EXTENT WE DIRECT THE ASSESSING OFFICER TO DELETE THE PENALTY ON T HAT COMPONENT. 8. NOW COMING TO ANOTHER ISSUE OF LEVIABILITY OR OTH ERWISE OF CONCEALMENT PENALTY ON THE CLAIM OF STT THE RELEVA NT PROVISION ACCORDING TO WHICH SUCH CLAIM CANNOT BE MADE IS IN SE CTION 48 WHICH DESCRIBE THE MODE OF COMPUTATION OF CAPITAL GAIN. F IFTH PROVISO TO SECTION 48 WHICH REGULATE THE ISSUE READ AS UNDER:- PROVIDED ALSO THAT NO DEDUCTION SHALL BE ALLOWED IN C OMPUTING THE INCOME CHARGEABLE UNDER THE HEAD CAPITAL GAINS I N RESPECT OF ANY SUM PAID ON ACCOUNT OF SECURITIES TRANSACTION TAX UNDER CHAPTER VII OF THE FINANCE (NO.2) ACT 2004. 9. THE AFOREMENTIONED PROVISO WAS INSERTED BY THE FINA NCE (NO.2) ACT 2004 W.E.F. 1.4.2005. THE CASE OF THE ASSESSEE IS F OR FINANCIAL YEAR 2005-06 AND ASSESSMENT YEAR 2006-07. THE SAID PROV ISO WAS APPLICABLE W.E.F. ASSESSMENT YEAR 2005-06. IT CANNOT B E SAID THAT THE PROVISION WAS A NEW PROVISION AND THE ASSESSEE WAS NOT AWAR E OF THAT PROVISION. THE EXPLANATION OF THE ASSESSEE WAS THAT IT SH OULD BE CONSIDERED AS COST OF IMPROVEMENT. WHEN THERE IS EXPRE SS PROVISION RELATING TO MODE OF COMPUTATION OF CAPITAL GAIN TH EN THE AMOUNT OF SECURITY TRANSACTION TAX WILL BE GOVERNED BY THE EXPR ESS PROVISION OF THE STATUTE. THE CLAIM MADE BY THE ASSESSEE WAS EXPRESSLY DISALLOWABLE AND NO MATERIAL WHATSOEVER HAS BEEN BROUG HT ON RECORD BY THE ASSESSEE TO SUPPORT THE PROPOSITION THAT THE SAID C LAIM WAS ITA NO.2584/DEL/2010 6 MADE ON ACCOUNT OF BONA FIDE ERROR. THIS POSITION HA S ALSO BEEN BROUGHT OUT BY LD. ASSESSING OFFICER IN THE PENALTY ORD ER THAT NO EVIDENCE HAS BEEN BROUGHT ON RECORD BY THE ASSESSEE TO SH OW THAT THE CLAIM OF STT WAS ONLY ON ACCOUNT OF BONA FIDE ERROR. THE POSITION AS MENTIONED IN THE ORDER OF THE ASSESSING OFFICER AND CIT (A) HAS REMAINED SAME BEFORE US. THE ASSESSEE HAS NOT PRODUCED AN Y EVIDENCE TO SHOW THAT THE SAID CLAIM WAS ON ACCOUNT OF BONA FIDE ERROR. THE CLAIM IS AGAINST THE EXPRESS PROVISIONS OF THE STATUTE . THEREFORE WE ARE OF THE OPINION THAT LEARNED CIT (A) HAS RIGHT LY UPHELD THE CONCEALMENT PENALTY ON THAT COMPONENT. WE DECLINE TO INTERFERE. 10. IN THE RESULT THE APPEAL IS PARTLY ALLOWED IN TH E MANNER AFORESAID. THE ORDER PRONOUNCED IN THE OPEN COURT ON 03.02.20 12. SD/- SD/- [K.G. BANSAL] [I.P. BANSAL] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED 03.02.2012. DK COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ITAT TRUE COPY BY ORDER DEPUTY REGISTRAR ITAT DELHI BENCHES