SHREE TRADING CORPORATION, MUMBAI v. ACIT CIR 12(3), MUMBAI

ITA 2871/MUM/2010 | 1992-1993
Pronouncement Date: 21-09-2011 | Result: Dismissed

Appeal Details

RSA Number 287119914 RSA 2010
Assessee PAN AAMFS2550F
Bench Mumbai
Appeal Number ITA 2871/MUM/2010
Duration Of Justice 1 year(s) 5 month(s) 8 day(s)
Appellant SHREE TRADING CORPORATION, MUMBAI
Respondent ACIT CIR 12(3), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 21-09-2011
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted J
Tribunal Order Date 21-09-2011
Date Of Final Hearing 23-08-2011
Next Hearing Date 23-08-2011
Assessment Year 1992-1993
Appeal Filed On 12-04-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH J MUMBAIJ BEFORE SHRI D. MANMOHAN VICE PRESIDENT AND SHRI P.M. JAGTAP ACCOUNTANT MEMBER I.T.A. NO. 2871/MUM/2010. ASSESSMENT YEAR : 1992-93. M/S SHREE TRADING CORPORATION ASSTT. COMMISSIONER OF C/O N. VARMA & ASSOCIATES VS. INCOME TAX 56 B WING MITTAL TOWER CIRCLE-12(3) MUMBAI. 210 NARIMAN POINT MUMBAI 400 021. PAN AAMFS 2550F APPELLANT. RESPONDENT. APPELLANT BY : SHRI K. GOPAL. RESPONDENT BY : SHRI P.K.B. MENON. DATE OF HEARING : 23-08-2011 DATE OF PRONOUNCEMENT : O R D E R. PER P.M. JAGTAP A.M. : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF LEARNED CIT(APPEALS)-23 MUMBAI DATED 11-01-2010 WHEREBY HE SUSTAINED THE PENALTY IMPOSED BY THE AO U/S 271(1)(C) TO THE EXTENT IT WA S IN RESPECT OF ADDITION OF RS.22 48 125/- MADE TO THE TOTAL INCOME OF THE ASSE SSEE ON ACCOUNT OF DISALLOWANCE OF ITS CLAIM FOR BUSINESS LOSS ON ASSIGNMENT OF DEP OSIT. 2. THE ASSESSEE IN THE PRESENT CASE IS A PARTNERSHI P FIRM WHICH IS ENGAGED IN THE BUSINESS OF TRADING IN CHEMICALS. THE RETURN OF INC OME FOR THE YEAR UNDER CONSIDERATION WAS FILED BY IT ON 24-12-1992 DECLARI NG TOTAL INCOME OF 2 ITA NO. 2871/MUM/2010 ASSESSMENT YEAR : 1992-93. RS.10 13 060/-. IN THE PROFIT & LOSS ACCOUNT FILED ALONG WITH THE SAID RETURN A SUM OF RS.22 48 125/- WAS DEBITED BY THE ASSESSEE ON AC COUNT OF LOSS ON ASSIGNMENT OF DEPOSITS. FROM THE PERUSAL OF DETAILS FURNISHED BY THE ASSESSEE IN RESPECT OF ITS CLAIM FOR THE SAID LOSS THE AO FOUND THAT THE ASSE SSEE HAD INVESTED TOTAL AMOUNT OF RS.27 25 000/- AS INTEREST BEARING FIXED DEPOSIT S WITH TWO PUBLIC LIMITED COMPANIES VIZ. M/S TESTEEL LTD. AHMEDABAD AND M/ S ORIENTAL CABLE LTD. KOTA IN THE YEAR 1985. SUBSEQUENTLY THESE COMPANIES BEC AME SICK AND WERE REFERRED TO BIFR. THE ASSESSEE NEITHER RECEIVED REFUND OF THESE FIXED DEPOSITS NOR ANY INTEREST THEREON. IT THEREFORE TRANSFERRED THE SAID FIXED DEPOSITS BY WAY OF ASSIGNMENT TO ONE COMPANY VIZ. M/S FIELMEDIA COMMUNICATIONS & S YSTEMS P. LTD. BOMBAY FOR TOTAL CONSIDERATION OF RS.4 76 875/- AND THE DI FFERENCE AMOUNT OF RS.22 48 125/- WAS CLAIMED BY IT AS LOSS ON ACCOUNT OF ASSIGNMENT OF DEPOSITS IN COMPUTING ITS BUSINESS INCOME. WHILE JUSTIFYING THI S CLAIM IT WAS SUBMITTED ON BEHALF OF THE ASSESSEE BEFORE THE AO DURING THE COU RSE OF ASSESSMENT PROCEEDINGS THAT THE TWO COMPANIES VIZ. M/S TESTEEL LTD. AH MEDABAD AND M/S ORIENTAL CABLE LTD. KOTA WERE A PART OF SOMAIYA GROUP CONC ERNS WITH WHOM THE ASSESSEE FIRM HAD MAJOR BUSINESS DEALINGS. IT WAS SUBMITTED THAT THE ASSESSEE FIRM WAS REPRESENTING SOMAIYA ORGANO CHEMICALS LTD. AND SOMA IYA ORGANICS (I) LTD. FOR MARKETING THEIR PRODUCTS ALL OVER INDIA AND THE SAI D BUSINESS CONSTITUTED ALMOST 60% OF ITS TURNOVER. IT WAS SUBMITTED THAT THE SAID SUPPLIERS WERE EXTENDING LONG TERM CREDIT FACILITY TO THE FIRM IN VIEW OF THE DEP OSITS KEPT WITH M/S TESTEELS LTD. AND M/S ORIENTAL POWER CABLES LTD. IT WAS CONTENDED THAT THE INVESTMENT IN THE SAID DEPOSITS THUS WAS MADE KEEPING IN VIEW THE BUS INESS RELATIONS WITH OTHER GROUP COMPANIES AND THE SAME WERE PART OF THE BUSIN ESS TRANSACTIONS OF THE ASSESSEE. IT WAS CONTENDED THAT THE LOSS INCURRED B Y THE ASSESSEE ON ASSIGNMENT OF 3 ITA NO. 2871/MUM/2010 ASSESSMENT YEAR : 1992-93. THE SAID DEPOSITS THUS WAS A LOSS INCURRED IN THE N ORMAL COURSE OF ITS BUSINESS AND THE SAME WAS RIGHTLY CLAIMED AS A DEDUCTION IN COMP UTING ITS BUSINESS INCOME. 3. THE STAND TAKEN BY THE ASSESSEE ON THIS ISSUE WA S NOT FOUND ACCEPTABLE BY THE AO. ACCORDING TO HIM THE FIXED DEPOSITS IN QUE STION WERE CAPITAL ASSETS WITHIN THE MEANING GIVEN IN SECTION 2(14) AND THE LOSS SU FFERED BY THE ASSESSEE ON ASSIGNMENT OF THE SAID DEPOSITS WAS A CAPITAL LOSS IRRESPECTIVE OF WHETHER THE SAME WERE CONNECTED WITH THE BUSINESS OF THE ASSESSEE OR NOT. HE HELD THAT THE LOSS INCURRED BY THE ASSESSEE ON TRANSFER OF THE SAID DE POSITS BY ASSIGNMENT THUS WAS A CAPITAL LOSS AND NOT A BUSINESS LOSS AS CLAIMED BY THE ASSESSEE. HE THEREFORE DISALLOWED THE CLAIM OF THE ASSESSEE FOR DEDUCTION ON ACCOUNT OF SUCH LOSS IN COMPUTING ITS BUSINESS INCOME. ON APPEAL THE LEARN ED CIT(APPEALS) CONFIRMED THE SAID DISALLOWANCE AND WHEN THE MATTER REACHED T O THE TRIBUNAL ON FURTHER APPEAL ITS CLAIM FOR THE LOSS ON ASSIGNMENT OF DEP OSITS WAS SOUGHT TO BE JUSTIFIED BY THE ASSESSEE BY CONTENDING THAT SUPPLIER COMPANI ES BELONGING TO THE SAID GROUP HAD EXTENDED LONG TERM CREDIT FACILITIES TO IT IN V IEW OF THE SAID DEPOSITS KEPT WITH THE OTHER GROUP CONCERNS. THE TRIBUNAL FELT THAT TH ESE ASPECTS ARE REQUIRED TO BE CONSIDERED BY THE LEARNED CIT(APPEALS) AND ACCORDIN GLY THE MATTER WAS SET ASIDE BY THE TRIBUNAL TO THE LEARNED CIT(APPEALS) FOR SUC H CONSIDERATION. DURING THE COURSE OF SET ASIDE APPELLATE PROCEEDINGS THE ASSE SSEE COULD NOT PRODUCE ANY EVIDENCE TO SUPPORT AND SUBSTANTIATE ITS CLAIM THAT AS A RESULT OF DEPOSITS KEPT WITH OTHER GROUP COMPANIES THE SUPPLIER COMPANIES BELON GING TO THE SAME GROUP HAD GIVEN EXTENDED CREDIT FACILITIES TO IT DESPITE SPEC IFIC AND SUFFICIENT OPPORTUNITY AFFORDED BY THE LEARNED CIT(APPEALS). THE LEARNED C IT(APPEALS) THEREFORE CONFIRMED THE DISALLOWANCE MADE BY THE AO ON ACCOUN T OF ASSESSEES CLAIM FOR DEDUCTION ON ACCOUNT OF LOSS ON ASSIGNMENT OF DEPOS ITS IN COMPUTING ITS BUSINESS INCOME. 4 ITA NO. 2871/MUM/2010 ASSESSMENT YEAR : 1992-93. 4. CONSEQUENT TO THE CONFIRMATION OF ADDITION MADE ON ACCOUNT OF DISALLOWANCE OF ASSESSEES CLAIM FOR BUSINESS LOSS ON ASSIGNMENT OF DEPOSITS BY THE LEARNED CIT(APPEALS) IN THE QUANTUM PROCEEDINGS A NOTICE W AS ISSUED BY THE AO REQUIRING THE ASSESSEE TO SHOW CAUSE AS TO WHY PENALTY U/S 27 1(1)(C) SHOULD NOT BE IMPOSED IN RESPECT OF THE SAID ADDITION. THE EXPLANATION OF FERED BY THE ASSESSEE IN RESPONSE TO THE SAID NOTICE WAS NOT FOUND ACCEPTABLE BY THE AO. ACCORDING TO HIM THERE WAS A FAILURE ON THE PART OF THE ASSESSEE TO SUBSTA NTIATE THE EXPLANATION OFFERED BY IT WITH REGARD TO THE CLAIM FOR LOSS OF RS.22 48 125/- . HE ALSO HELD THAT THE ASSESSEE EVEN COULD NOT ESTABLISH THAT ITS CLAIM FOR THE SAI D LOSS WAS MADE BONAFIDE. ACCORDINGLY HE HELD THAT EXPLANATION 1 TO SECTION 2 71(1)(C) WAS CLEARLY ATTRACTED IN THE CASE OF THE ASSESSEE AND IMPOSED A PENALTY U/S 271(1)(C) TO THE EXTENT OF 100% OF THE TAX SOUGHT TO BE EVADED BY THE ASSESSEE IN R ESPECT OF ADDITION MADE TO ITS TOTAL INCOME BY WAY OF DISALLOWANCE OF THE CLAIM OF LOSS AMOUNTING TO RS.22 48 125/- HOLDING THAT THE ASSESSEE HAD FURNIS HED INACCURATE PARTICULARS OF ITS INCOME TO THAT EXTENT. 5. THE PENALTY IMPOSED BY THE AO U/S 271(1)(C) WAS CHALLENGED BY THE ASSESSEE IN AN APPEAL FILED BEFORE THE LEARNED CIT( APPEALS). MEANWHILE THE APPEAL FILED BY THE ASSESSEE IN THE QUANTUM PROCEEDINGS CH ALLENGING THE DISALLOWANCE MADE BY THE AO AND CONFIRMED BY THE LEARNED CIT(APP EALS) ON ACCOUNT OF ITS CLAIM FOR LOSS ON ASSIGNMENT OF DEPOSITS CAME TO BE DISMISSED BY THE TRIBUNAL ON THIS ISSUE VIDE ITS ORDER DATED 12-08-2009. THE LEA RNED CIT(APPEALS) TOOK NOTE OF THE FINDINGS RECORDED BY THE TRIBUNAL IN ITS ORDER ON THIS ISSUE WHICH WERE AS UNDER : 7.1 SHRI VIJAY MEHTA TRIED TO FILE AN AFFIDAVIT FR OM ONE SHRI MANISH WHO IS SAID TO BE AN EMPLOYEE WORKING ON SOMAIYA GROUP OF COMPANIES TO DEMONSTRATE THE FACT THAT ALL THESE COMPANIES WERE PART OF SOMAIYA GROUP AND THAT SOMAIYA GROUP INSISTED THAT THE DEALER SHO ULD PLACE FIXED DEPOSITS 5 ITA NO. 2871/MUM/2010 ASSESSMENT YEAR : 1992-93. IN THESE TWO COMPANIES. THIS AFFIDAVIT IS SUBMITTED FOR THE FIRST TIME AND THAT TOO NOT FROM AN AUTHORIZED PERSON. NEITHER THE MANA GING DIRECTOR NOR AN AUTHORIZED DIRECTOR HAS GIVEN THESE SUBMISSIONS. TH US NO EVIDENTIARY VALUE CAN BE GIVEN TO SUCH AFFIDAVITS. EVEN OTHER WISE IT APPEARS TO BE A SELF SERVING DOCUMENT. THUS THIS ADDITIONAL EVIDENCE TR IED TO BE FILED BY WAY OF AN AFFIDAVIT IS NOT ADMITTED. NO REASON WHATSOEVER IS GIVEN BEFORE US AS TO WHY THIS EVIDENCE COULD NOT BE FILED BEFORE THE LOW ER AUTHORITIES. IN VIEW OF THE ABOVE DISCUSSION NO COGNIZANCE IS TAKEN OF THIS EVIDENCE. 7.2 COMING TO THE FACTS OF THE CASE THE ASSESSEE HA S IN THE YEAR 1985 MADE CERTAIN FIXED DEPOSITS IN CERTAIN COMPANIES. THE CA SE OF THE ASSESSEE IS THAT THESE FIXED DEPOSITS WERE MADE AT THE INSTANCE OF S OMAIYA GROUP OF COMPANIES WITH WHICH IT HAD SUBSTANTIAL BUSINESS DE ALINGS. NO EVIDENCE WHATSOEVER TO DEMONSTRATE THE SAME IS PLACED BEFORE THE REVENUE AUTHORITIES EVEN IN THE SECOND ROUND OF ASSESSMENT PROCEEDINGS. EVEN A LETTER DATED 08.12.1995 WHICH IS ADMITTEDLY NOT BEFORE THE A.O. THE CHIEF ACCOUNTANT OF SOMAIYA ORGANICS AND CHEMICALS LTD. STATES THAT THE FIXED DEPOSITS WERE PLACED BY THE ASSESSEE AT THEIR REQUEST FOR CONTINU ED BUSINESS RELATIONSHIP AND THAT THEY HAVE AGREED TO EXTENT CREDIT FOR THE SUPPLIERS OF CHEMICALS. THE FIRST APPELLATE AUTHORITY COMMENTS THAT NO DETAILS HAVE BEEN GIVEN REGARDING CREDIT FACILITIES AVAILED BY THE ASSESSEE. THE ASSE SSEE IS NOT ABLE TO PRODUCE ANY EVIDENCE. SHRI VIJAY MEHTA HAS NO DOUBT TRIED T O CONVINCE US THAT CIRCUMSTANTIAL EVIDENCE SHOWS THAT THE DEPOSITS WER E MADE AT THE INSTANCE OF A MAJOR SUPPLIED. BUT THE FACT REMAINS THAT NONE OF THE CONTENTIONS OF THE ASSESSEE AND SPECIFICALLY THE CONTENTION THAT IT HA S OBTAINED LONG TERM CREDIT FACILITIES FROM SOMAIYA GROUP IN VIEW OF THESE DEPO SITS REMAINS UNPROVED. SHRI VIJAY MEHTA PLEADS THAT LAPSE OF TIME HAS TO B E CONSIDERED AND THE INABILITY OF THE ASSESSEE TO PRODUCE THE NECESSARY EVIDENCE SHOULD NOT GO AGAINST HIM. WE ARE UNABLE TO PERSUADE OURSELVES TO ACCEPT THIS LINE OF ARGUMENT. IN FACT THE ASSESSING OFFICER IN THE ASS ESSMENT ORDER HAS CLEARLY STATED THAT THE ASSESSEE HAD NOT DEMONSTRATED THAT THE DEPOSITS WERE INCIDENTAL TO THE BUSINESS. HE ALSO OBSERVED THAT T HE LOSS WAS HAVING NO CONNECTION AT ALL WITH THE BUSINESS OF THE ASSESSEE AS KEEPING MONEY S FIXED DEPOSIT WAS PURELY INVESTMENT IN NATURE SO AS TO EA RN INTEREST THEREFROM. IN ABSENCE OF EVIDENCE WE ARE UNABLE TO AGREE WITH TH E CONTENTIONS OF SHRI VIJAY MEHTA THAT TOO AFTER THE TRIBUNAL HAS GIVEN A SECOND OPPORTUNITY TO PRODUCE EVIDENCE. 6 ITA NO. 2871/MUM/2010 ASSESSMENT YEAR : 1992-93. 7.3 COMING TO THE DECISION OF THE HONBLE BOMBAY HI GH COURT IN THE CASE OF GWALIOR RAYON SILK MANUFACTURING (WEAVING) CO. L TD. (SUPRA) THE HONBLE COURT HAS NOTED THE FACTUAL FINDINGS OF THE TRIBUNAL THAT THE GOVERNMENT SECURITIES WERE PURCHASED AT THE INSTANC E OF GOVERNMENT OFFICIALS. IN THIS CASE WE ARE UNABLE TO COME TO S UCH A CONCLUSION DUE TO LACK OF EVIDENCE. THUS THE PROPOSITIONS APPROVED BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF GWALIOR RAYON SILK MANUFA CTURING (WEAVING) CO. LTD. (SUPRA) DOES NOT COME TO THE RESCUE OF THE ASS ESSEE. 7.4 AS THESE FIXED DEPOSITS ARE NOT TRADE DEPOSITS NOR IN ANY WAY CONNECTED WITH THE TRADING ACTIVITY OF BUSINESS OF THE ASSESSEE THE LOSS INCURRED THEREIN IS IN THE CAPITAL FILED AND HENCE CANNOT BE ALLOWED. 6. KEEPING IN VIEW THE ABOVE FINDING RECORDED BY TH E TRIBUNAL IN THE QUANTUM PROCEEDINGS THE LEARNED CIT(APPEALS) HELD THAT THE AO WAS RIGHT IN HOLDING THAT THE CLAIM OF LOSS OF RS.22 48 125/- AS DEDUCTION IN COMPUTING THE BUSINESS INCOME UNDER THE HEAD LOSS ON ASSIGNMENT OF DEPOSIT WAS MADE BY THE ASSESSEE WITH AN INTENTION TO REDUCE ITS TAXABLE BUSINESS INCOME AND THEREBY TO AVOID PAYMENT OF TAX. HE HELD THAT THERE WAS FAILURE ON THE PART OF THE ASSESSEE TO ESTABLISH THAT THE RELEVANT DEPOSITS WERE INCIDENTAL TO ITS BUSINESS. HE HELD THAT THE ASSESSEE THUS HAD FAILED TO SUBSTANTIATE ITS EXPLANATION OFFERED IN R EGARD TO ITS CLAIM FOR THE SAID LOSS AND IT WAS A FIT CASE TO IMPOSE PENALTY U/S 271(1)( C) IN RESPECT OF THE ADDITION MADE BY WAY OF DISALLOWANCE OF THE SAID LOSS AS PER EXPL ANATION 1 TO SECTION 271(1)(C). ACCORDINGLY THE PENALTY IMPOSED BY THE AO U/S 271(1 )(C) TO THAT EXTENT WAS CONFIRMED BY THE LEARNED CIT(APPEALS). 7. THE LEARNED COUNSEL FOR THE ASSESSEE AT THE OUT SET INVITED OUR ATTENTION TO THE PROFIT & LOSS ACCOUNT OF THE ASSESSEE FOR THE Y EAR UNDER CONSIDERATION TO SHOW THAT LOSS ON ASSIGNMENT OF DEPOSITS WAS SEPARATELY DEBITED IN THE SAID PROFIT & LOSS ACCOUNT AS TRADING LOSS. HE SUBMITTED THAT ALTHOUGH THE DEDUCTION CLAIMED BY THE ASSESSEE ON ACCOUNT OF THE SAID LOSS IN COMPUTING T HE BUSINESS INCOME HAS BEEN DISALLOWED BY THE AO TREATING THE SAID LOSS AS A CA PITAL LOSS AND THE TRIBUNAL HAS 7 ITA NO. 2871/MUM/2010 ASSESSMENT YEAR : 1992-93. FINALLY UPHELD THE ACTION OF THE AO IN THE QUANTUM PROCEEDINGS THE FACT REMAINS THAT THE DEDUCTION ON ACCOUNT OF THE SAID LOSS WAS CLEARLY AND SEPARATELY CLAIMED BY THE ASSESSEE. HE CONTENDED THAT THE SAID CLAIM T HUS WAS MADE BONAFIDE BY THE ASSESSEE AND THE SAME HAS NOT BEEN FOUND TO BE BOGU S OR FALSE EITHER IN THE QUANTUM PROCEEDINGS OR EVEN IN THE PENALTY PROCEEDI NGS. REFERRING TO THE RELEVANT PORTION OF THE PENALTY ORDER HE SUBMITTED THAT THE PENALTY U/S 271(1)(C) WAS IMPOSED BY THE AO MAINLY ON THE GROUND THAT THE EXP LANATION OFFERED BY THE ASSESSEE IN REGARD TO ITS CLAIM FOR LOSS WAS NOT SU BSTANTIATED. HE CONTENDED THAT THERE IS HOWEVER NOTHING TO SHOW THAT THE CLAIM O F THE ASSESSEE FOR LOSS WAS NOT BONAFIDE. HE SUBMITTED THAT THE ASSESSEE COULD NOT SUPPORT AND SUBSTANTIATE ITS CLAIM BY BRINGING THE RELEVANT EVIDENCE DUE TO PASS AGE OF TIME AND THIS COULD NOT BE TREATED AS FAILURE OF THE ASSESSEE TO SUBSTANTI ATE ITS EXPLANATION SO AS TO INVOKE EXPLANATION 1 TO SECTION 271(1)(C). RELYING ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF RELIANCE PETRO PRODUCTS P. LTD . 322 ITR 158 HE CONTENDED THAT MAKING AN INCORRECT CLAIM WILL NOT TANTAMOUNT TO FURNISHING OF INACCURATE PARTICULARS OF ITS INCOME BY THE ASSESSEE SO AS TO ATTRACT THE PENAL PROVISIONS OF SECTION 271(1)(C). 8. THE LEARNED DR ON THE OTHER HAND STRONGLY SUPP ORTED THE IMPUGNED ORDER OF THE LEARNED CIT(APPEALS) CONFIRMING THE PENALTY IMPOSED BY THE AO U/S 271(1)(C) READ WITH EXPLANATION 1 THERETO. HE SUBMI TTED THAT THE CLAIM OF THE ASSESSEE FOR DEDUCTION ON ACCOUNT OF LOSS ON ASSIGN MENT OF DEBTS WAS FOUND TO BE UNSUSTAINABLE EVEN BY THE TRIBUNAL IN QUANTUM PROCE EDINGS BY RECORDING SPECIFIC ADVERSE OBSERVATIONS. HE INVITED OUR ATTENTION TO T HE SAID OBSERVATIONS OF THE TRIBUNAL EXTRACTED BY THE LEARNED CIT(APPEALS) IN H IS IMPUGNED ORDER AND SUBMITTED THAT THESE OBSERVATIONS WERE SUFFICIENT T O SHOW THAT THE EXPLANATION OFFERED BY THE ASSESSEE IN REGARD TO ITS CLAIM FOR DEDUCTION ON ACCOUNT OF LOSS 8 ITA NO. 2871/MUM/2010 ASSESSMENT YEAR : 1992-93. COULD NOT BE SUBSTANTIATED DESPITE SUFFICIENT OPPOR TUNITY AFFORDED DURING THE COURSE OF QUANTUM PROCEEDINGS. HE CONTENDED THAT SI NCE THE ASSESSEE COULD NOT IMPROVE ITS CASE DURING THE COURSE OF PENALTY PROCE EDINGS BY BRINGING ANY RELEVANT EVIDENCE ON RECORD TO SUPPORT AND SUBSTANTIATE ITS EXPLANATION THE LEARNED CIT(APPEALS) WAS FULLY JUSTIFIED IN RELYING ON THE FINDINGS OF THE TRIBUNAL IN THE QUANTUM PROCEEDINGS WHICH CLEARLY DEMONSTRATED THAT THE CASE OF THE ASSESSEE WAS SQUARELY COVERED BY EXPLANATION 1 TO SECTION 271(1) (C). 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND ALS O PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS OBSERVED THAT THE LOSS ON ASSIGNMENT OF DEPOSITS WAS CLAIMED BY THE ASSESSEE AS DEDUCTION IN COMPUTING I TS BUSINESS INCOME. SINCE THE SAID DEPOSITS WERE IN THE NATURE OF CAPITAL ASSETS AS DEFINED IN SECTION 2(14) THE AO HELD THAT THE LOSS ON ASSIGNMENT OF THE SAID DEP OSIT WAS A CAPITAL LOSS AND THE DEDUCTION CLAIMED BY THE ASSESSEE WAS DISALLOWED B Y THE AO. ALTHOUGH THE ASSESSEE MADE AN ATTEMPT TO JUSTIFY ITS CLAIM FOR T HE SAID LOSS BEING BUSINESS LOSS BY EXPLAINING THAT THE INVESTMENT IN DEPOSIT WAS MADE KEEPING IN VIEW ITS BUSINESS INTEREST AND THE LOSS SUFFERED ON ASSIGNMENT OF THE SAID DEPOSIT WAS A BUSINESS LOSS NOTHING HAS BEEN BROUGHT ON RECORD BY IT EITHER DUR ING THE COURSE OF QUANTUM PROCEEDINGS OR EVEN DURING THE COURSE OF PENALTY PR OCEEDINGS TO SUPPORT AND SUBSTANTIATE THE SAID EXPLANATION INSPITE OF SPECI FIC AND SUFFICIENT OPPORTUNITY AFFORDED TO IT. AT THE TIME OF HEARING BEFORE US T HE LEARNED COUNSEL FOR THE ASSESSEE HAS CONTENDED THAT THIS FAILURE OF THE ASSESSEE WAS DUE TO PASSAGE OF TIME. IT IS HOWEVER OBSERVED THAT AN OPPORTUNITY WAS SOUGHT BY THE ASSESSEE BEFORE THE TRIBUNAL DURING THE COURSE OF QUANTUM PROCEEDINGS S PECIFICALLY TO PRODUCE THE EVIDENCE TO SUPPORT AND SUBSTANTIATE ITS EXPLANATIO N IN REGARD TO THE CLAIM OF LOSS AND ACCORDINGLY SUCH OPPORTUNITY WAS INDEED AFFORDE D BY THE TRIBUNAL BY SETTING ASIDE THE MATTER TO THE LEARNED CIT(APPEALS). STILL THE ASSESSEE FAILED TO SUPPORT 9 ITA NO. 2871/MUM/2010 ASSESSMENT YEAR : 1992-93. AND SUBSTANTIATE ITS CLAIM OF WHICH ADVERSE NOTE WA S TAKEN BY THE TRIBUNAL IN ITS ORDER PASSED IN THE SECOND ROUND OF QUANTUM PROCEED INGS. THE OBSERVATIONS RECORDED BY THE TRIBUNAL IN THIS CONTEXT AS EXTRAC TED BY THE LEARNED CIT(APPEALS) IN HIS IMPUGNED ORDER HAVE BEEN REPRODUCED BY US IN THE FOREGOING PORTION OF THIS ORDER AND AS RIGHTLY SUBMITTED BY THE LEARNED DR T HE SAME ARE SUFFICIENT TO SHOW THAT THERE WAS COMPLETE FAILURE OF THE ASSESSEE TO SUBSTANTIATE ITS EXPLANATION IN REGARD TO ITS CLAIM OF BUSINESS LOSS BY SHOWING THA T THE RELEVANT DEPOSITS HAD ANY CONNECTION WHATSOEVER WITH ITS BUSINESS OF TRADING IN CHEMICALS. IN THE ABSENCE OF SUCH EVIDENCE TO SUPPORT AND SUBSTANTIATE ITS EXPL ANATION AS REGARDS THE CLAIM FOR BUSINESS LOSS IT CANNOT BE SAID THAT THERE WAS ANY BASIS WHATSOEVER TO CLAIM DEDUCTION ON ACCOUNT OF LOSS IN QUESTION IN COMPUTI NG ITS BUSINESS INCOME BY THE ASSESSEE AND THE SAID CLAIM IN OUR OPINION THEREF ORE CANNOT BE REGARDED AS A BONAFIDE CLAIM MADE BY THE ASSESSEE. 10. AT THE TIME OF HEARING BEFORE US THE LEARNED C OUNSEL FOR THE ASSESSEE HAS RELIED ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF RELIANCE PETRO PRODUCTS P. LTD. (SUPRA) IN SUPPORT OF THE ASSESSE ES CASE. IT IS OBSERVED THAT THE SAID DECISION OF THE HONBLE SUPREME COURT WAS RELI ED UPON ON BEHALF OF THE ASSESSEE BEFORE THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. ZOOM COMMUNICATION P. LTD. REPORTED IN 327 ITR 510 WHERE IN THE ISSUE INVOLVED WAS RELATING TO THE PENALTY IMPOSED U/S 271(1)(C) READ WITH EXPLANATION 1 THERETO IN RESPECT OF DISALLOWANCE OF ASSESSEES CLAIM FOR DED UCTION ON ACCOUNT OF EQUIPMENT WRITTEN OFF. THE HONBLE DELHI HIGH COU RT HOWEVER FOUND THE CASE OF RELIANCE PETRO PRODUCTS P. LTD. (SUPRA) DECIDED BY THE HONBLE SUPREME COURT TO BE DISTINGUISHABLE ON FACTS BY OBSERVING THAT T HE ASSESSEE IN THAT CASE HAD CLAIMED INTEREST U/S 36(1)(III) OF THE ACT WHICH WA S PAID ON THE LOAN WHICH THE ASSESSEE HAD UTILIZED FOR PURCHASING SOME IPL SHARE S BY WAY OF ITS BUSINESS POLICY. 10 ITA NO. 2871/MUM/2010 ASSESSMENT YEAR : 1992-93. THE ASSESSEE HOWEVER DID NOT EARN ANY INCOME BY WAY OF DIVIDEND FROM THOSE SHARES. IT WAS SUBMITTED BEFORE THE HONBLE SUPREME COURT THAT THE ASSESSEE COMPANY WAS AN INVESTMENT COMPANY AND THAT IN ITS O WN CASE FOR THE ASSESSMENT YEAR 2000-01 THE LEARNED CIT(APPEALS) HAD DELETED THE DISALLOWANCE OF INTEREST MADE BY THE AO AND TRIBUNAL HAD ALSO CONFIRMED THE STAND OF THE LEARNED CIT(APPEALS) FOR THAT YEAR. IT WAS ON THE BASIS OF THIS THAT THE EXPENDITURE ON ACCOUNT OF INTEREST WAS CLAIMED BY THE ASSESSEE. TH E TRIBUNAL HAD HOWEVER RESTORED THE ISSUE BACK TO THE AO. IN THE APPEAL AR ISING OUT OF THE PENALTY PROCEEDINGS THE TRIBUNAL IN THE CIRCUMSTANCES WA S OF THE VIEW THAT THE CONFIRMATION OF DISALLOWANCE BY THE TRIBUNAL DID NO T MEAN THAT THE ASSESSEE HAD CONCEALED THE INCOME OR HAD FURNISHED INACCURATE PA RTICULARS THEREOF. NOTICING THAT THE ASSESSEE HAD GIVEN AN EXPLANATION VIDE ITS LETT ER DATED 22 ND MARCH 2006 GIVING REASONS FOR CLAIMING THE INTEREST AS A DEDUCTION T HE TRIBUNAL WAS OF THE VIEW THAT THE ONUS SHIFTED ON THE REVENUE TO PROVE THAT EXPLA NATION OFFERED BY THE ASSESSEE WAS FALSE. THE TRIBUNAL FELT THAT THE BONAFIDES OF THE EXPLANATION WERE CLEARLY PROVED FROM THE FACT THAT THE HIGH COURT ADMITTED T HE APPEAL OF THE ASSESSEE ABOUT THE DISALLOWANCE OF THE INTEREST. THE TRIBUNAL HELD THAT IF THERE COULD BE TWO VIEWS ABOUT THE CLAIM OF THE ASSESSEE THE EXPLANATION OF FERED BY IT CANNOT BE SAID TO BE FALSE. THE PENALTY WAS ACCORDINGLY DELETED BY THE T RIBUNAL. THE ORDER OF THE TRIBUNAL WAS MAINTAINED BY THE HIGH COURT AND THE D ECISION OF THE HIGH COURT WAS UPHELD BY THE SUPREME COURT HOLDING THAT MAKING AN INCORRECT CLAIM IN LAW CANNOT TANTAMOUNT TO FURNISHING OF INACCURATE PARTICULARS. AFTER ANALYZING THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF RELIANCE PETRO PRODUCTS P. LTD. (SUPRA) IN THE LIGHT OF FACTS AND CIRCUMSTANCES INVOLVED IN TH AT CASE THE HONBLE DELHI HIGH COURT HELD IN THE CASE OF ZOOME COMMUNICATION P. LT . (SUPRA) THAT THE PROPOSITION OF LAW WHICH EMERGES FROM THE SAID CASE WHEN CONSID ERED IN THE BACK DROP OF THE 11 ITA NO. 2871/MUM/2010 ASSESSMENT YEAR : 1992-93. FACTS OF THE CASE BEFORE THE COURT IS THAT SO LONG AS THE ASSESSEE HAS NOT CONCEALED ANY MATERIAL FACT OR THE FACTUAL INFORMATION GIVEN BY HIM HAS NOT BEEN FOUND TO BE INCORRECT HE WILL NOT BE LIABLE TO IMPOSITION OF P ENALTY U/S 271(1)(C) OF THE ACT EVEN IF THE CLAIM MADE BY HIM IS UNSUSTAINABLE IN L AW PROVIDED THAT HE EITHER SUBSTANTIATES THE EXPLANATION OFFERED BY HIM OR THE EXPLANATION EVEN IF NOT SUBSTANTIATED IS FOUND TO BE BONAFIDE. IT WAS HELD THAT IF THE EXPLANATION IS NEITHER SUBSTANTIATED NOR SHOWN TO BE BONAFIDE EXPLANATION 1 TO SECTION 271(1)(C) WOULD COME INTO PLAY AND THE ASSESSEE WILL BE LIABLE TO T HE PRESCRIBED PENALTY. 11. AS ALREADY DISCUSSED THE EXPLANATION OFFERED B Y THE ASSESSEE IN THE PRESENT CASE IN RESPECT OF ITS CLAIM FOR DEDUCTION ON ACCO UNT OF LOSS ON ASSIGNMENT OF DEPOSITS IN COMPUTING THE BUSINESS INCOME WAS NEITH ER SUBSTANTIATED BY THE ASSESSEE NOR THERE WAS ANY THING BROUGHT ON RECORD TO SHOW THAT THE SAME WAS BONAFIDE. THE RATIO OF THE DECISION OF HONBLE DELH I HIGH COURT IN THE CASE OF ZOOM COMMUNICATION P. LTD. IN OUR OPINION THUS IS SQUARELY APPLICABLE TO THE FACTS OF THE ASSESSEES CASE AND RESPECTFULLY FOLLO WING THE SAME WE HOLD THAT THE ASSESSEE IS LIABLE TO PENALTY U/S 271(1)(C) READ WI TH EXPLANATION 1 THERETO. THE PENALTY IMPOSED BY THE AO AND CONFIRMED BY THE LEAR NED CIT(APPEALS) IS THEREFORE UPHELD AND THIS APPEAL OF THE ASSESSEE I S DISMISSED. 12. IN THE RESULT THE APPEAL OF THE ASSESSEE IS DI SMISSED. ORDER PRONOUNCED ON THIS 21ST DAY OF SEPT. 2011. SD/- SD/- (D. MANMOHAN) (P.M. J AGTAP) VICE PRESIDENT. ACCOUNTANT MEMBER MUMBAI DATED: 21ST SEPT. 2011. 12 ITA NO. 2871/MUM/2010 ASSESSMENT YEAR : 1992-93. COPY TO : 1. APPELLANT 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. DR J-BENCH. (TRUE COPY ) BY ORDER ASSTT. REGISTRAR ITAT MUMBAI BENCH ES MUMBAI . WAKODE