MEWAR INTERNATIONAL P. LTD, MUMBAI v. ITO 4(3)(3), MUMBAI

ITA 3484/MUM/2009 | 2002-2003
Pronouncement Date: 15-03-2010 | Result: Allowed

Appeal Details

RSA Number 348419914 RSA 2009
Assessee PAN AABCM5413D
Bench Mumbai
Appeal Number ITA 3484/MUM/2009
Duration Of Justice 9 month(s) 17 day(s)
Appellant MEWAR INTERNATIONAL P. LTD, MUMBAI
Respondent ITO 4(3)(3), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 15-03-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted B
Tribunal Order Date 15-03-2010
Date Of Final Hearing 31-03-2010
Next Hearing Date 31-03-2010
Assessment Year 2002-2003
Appeal Filed On 28-05-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B: MUMBAI BEFORE SHRI N V VASUDEVAN JUDICIAL MEMBER AND SHRI RAJENRA SINGH ACCOUNTANT MEMBER ITA NOS. 3483 AND 3484/MUM/2009 ASSESSMENT YEARS 2001-02 & 2002-03 MEWAR INTERNATIONAL PVT LTD KONEGA HOUSE 25 MAROL CO- OP INDL ESTATE M V ROAD ANDHERI (E) MUMBAI -400 059 PAN AABCM 5413 D VS INCOME TAX OFFICER -4(3)(3) AAYAKR BHAVAN CHURCHGATE MUMBAI 400 020 (APPELLANT) (RESPONDENT) FOR APPELLANT : SHRI VIJAY MEHTA FOR RESPONDENT : S/SHRI S M KESHKAMAT / S S RANA ORDER PER RAJENRA SINGH AM 1. THESE APPEALS BY THE ASSESSEE ARE DIRECTED AGAI NST THE COMMON ORDER DATED 12.3.2009 OF THE CIT (A) FOR ASS ESSMENT YEARS 2001-02 AND 2002-03. THE IDENTICAL DISPUTE RAISED IN BOTH THE APPEALS IS REGARDING LEVY OF PENALTY U/S 271(1)(C). 2. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT THE ASSESSEE FOR THE ASSESSMENT YEARS 2001-02 AND 2002-03 HAD DE CLARED LOSS IN THE RETURNS FILED. THE ASSESSING OFFICER HOWEVER NOTED THAT THE ASSESSEE HAD CLAIMED DEDUCTION OF RS 8 35 763/- AND RS 2 65 655/- RESPECTIVELY FOR THE TWO YEARS AS SEBI TURNOVER CHA RGES. THESE CLAIMS WERE DISALLOWED BY ASSESSING OFFICER U/S 43B OF THE INCOME-TAX ACT. THE ASSESSEE HAD ALSO SHOWED SHARE TRADING LOSS OF RS 12 87 546 AND RS 6 73 563 RESPECTIVELY FOR THE TWO YEARS WHICH HA D BEEN SET-OFF MEWAR INTERNATIONAL PVT LTD ITAS 3483 AND 3484/M/2009 2 AGAINST BROKERAGE INCOME AND OTHER INCOME. ASSESSI NG OFFICER HOWEVER TREATED SHARE TRADING LOSS AS SPECULATION LOSS UNDER THE PROVISIONS OF EXPLANATION TO SECTION 73. THE ASSES SING OFFICER ALSO DISALLOWED EXPENSES OF RS 45 80 000 AND RS 18 45 00 0 RESPECTIVELY FOR THE TWO YEARS ATTRIBUTING THE SAME TO THE SPECU LATION LOSS. IN APPEAL THE CIT (A) UPHELD THE DECISION OF THE ASSE SSING OFFICER WITH ONLY MODIFICATION THAT EXPENSES ATTRIBUTABLE TO THE SPECULATION LOSS WERE REDUCED TO RS 17 10 000 AND 3 89 000 RESPECTIV ELY. THE ASSESSING OFFICER HAD ALSO INITIATED PENALTY PROCEE DINGS FOR CONCEALMENT OF INCOME AND AS PER ASSESSING OFFICER THE ASSESSEE NEITHER ATTEND THE PENALTY PROCEEDINGS NOR FILED AN Y REPLY. THE ASSESSING OFFICER THEREFORE IMPOSED PENALTY U/S 2 71(1)(C) @ 100% OF TAX SOUGHT TO BE EVADED FOR THE TWO YEARS. 3. THE ASSESSEE DISPUTED THE PENALTIES IMPOSED BY THE ASSESSING OFFICER AND SUBMITTED BEFORE CIT (A) THAT THE ASSESSEE HAD CLAIMED DEDUCTION ON ACCOUNT OF SEBI TURNOVER CHARG ES UNDER THE BONA FIDE BELIEF THAT THE SAME WERE COVERED U/S 43B. THE AS SESSEE ALSO SUBMITTED THAT THE ISSUE WHETHER THE SHARE TRA DING LOSS WILL BE DEEMED AS SPECULATION LOSS UNDER THE EXPLANATION TO SECTION 73 WAS ALSO DEBATABLE ISSUE. AS REGARDS THE QUANTIFICATIO N OF EXPENDITURE RELATABLE TO THE SHARE TRADING LOSS THE ASSESSEE S UBMITTED THE SAME WAS A SUBJECT MATTER OF ESTIMATE WHICH HAD BEEN SUB STANTIALLY REDUCED BY THE CIT (A). IT WAS THUS ARGUED THAT THE ASSESS EE HAD NEITHER CONCEALED ANY INCOME NOR FILED ANY INACCURATE PARTI CULARS OF INCOME. IT WAS CASE OF BONA FIDE CLAIM UNDER BONA FIDE BELIEF AND IN SUCH CASES NO PENALTY COULD BE IMPOSED. THE ASSESSEE PLACED R ELIANCE ON SEVERAL JUDGMENTS IN SUPPORT OF THE PLEA. CIT (A) WAS HOW EVER NOT SATISFIED. IT WAS OBSERVED BY HIM THAT SECTION 43B WAS APPLICA BLE IN RESPECT OF ANY SUM PAYABLE BY WAY OF TAX DUTY CESS OR FEES A ND SEBI TURNOVER CHARGE WAS CLEARLY COVERED UNDER THE HEAD FEES AN D THEREFORE SAME MEWAR INTERNATIONAL PVT LTD ITAS 3483 AND 3484/M/2009 3 COULD BE CLAIMED ONLY ON PAYMENT BASIS. SIMILARLY SINCE THE ASSESSEE WAS A COMPANY WHICH WAS TRADING IN SHARES PROVISIO NS TO EXPLANATION TO SECTION 73 WERE CLEARLY APPLICABLE EVEN IF THE S HARE TRADING WAS THE ONLY THE BUSINESS OF THE ASSESSEE AND IN CASE THE S HARE TRADING BUSINESS IS TREATED AS SPECULATION BUSINESS THE EXP ENSES ATTRIBUTABLE TO THE SHARE TRADING BUSINESS HAD TO BE DISALLOWED. THE CLAIM OF THE ASSESSEE THAT THE ENTIRE EXPENDITURE WAS RELATABLE TO THE BROKING BUSINESS WAS NOT ACCEPTABLE. CIT (A) ALSO REFERRED TO THE JUDGMENT OF HONBLE SUPREME COURT IN CASE OF DHARMENDRA TEXTILE PROCESSORS AND OTHERS (306 ITR 277) IN WHICH IT WAS HELD THAT WILL FUL CONCEALMENT WAS NOT AN ESSENTIAL INGREDIENT FOR LEVY OF PENALTY U/S 271(1)(C) WHICH WAS ONLY A CIVIL LIABILITY. CIT (A) WILL ALSO OBSERVE D THAT THE CLAIMS OF THE ASSESSEE COULD NOT BE CONSIDERED AS BONA FIDE . ACCORDINGLY HE CONFIRMED THE ORDER OF THE ASSESSING OFFICER IMPOSI NG PENALTY FOR CONCEALMENT OF INCOME U/S 271(1)(C) AGGRIEVED BY W HICH THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 4. BEFORE US THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES. IT WAS ARGUED THAT WHETHER SEBI TURNOVER CHARGES WI LL BE COVERED U/S 43B OR NOT WAS A DEBATABLE ISSUE WHICH WAS DECIDED IN FAVOUR OF THE REVENUE BY THE TRIBUNAL IN CASE OF SURESHCHAND JAIN (100 ITD 435) ONLY BY ORDER DATED 31.8.2005. SIMILARLY WHETHER THE PROVISIONS OF EXPLANATION TO SECTION 73 WOULD APPLY IN ALL CASES OF COMPANIES WHO WERE DEALING IN SHARES WAS ALSO DEBATABLE ISSUE. H E REFERRED TO THE SMC DECISION OF THE TRIBUNAL DATED 27.9.2004 IN CAS E OF AMAN PORTFOLIO (P) LTD (92 ITD 324) IN WHICH IT WAS HELD THAT EXPL ANATION TO SECTION 73 WAS APPLICABLE ONLY IN CASE OF COMPANIES CONTROL LED BY BUSINESS HOUSES WHO CARRIED SHARE TRANSACTION WITH A VIEW TO MANIPULATE AND REDUCE THE TAXABLE INCOME. THE ASSESSEE-COMPANY DI D NOT BELONG TO A BUSINESS HOUSE AND THEREFORE IN TERMS OF THE SAID REASON PROVISIONS MEWAR INTERNATIONAL PVT LTD ITAS 3483 AND 3484/M/2009 4 OF EXPLANATION TO SECTION 73 WAS NOT APPLICABLE. T HE SAID DECISION OF THE SMC BENCH WAS OVERRULED LATER BY THE SPECIAL BE NCH OF TRIBUNAL IN CASE OF AMP SPINNING AND WEAVING MILLS (P) LTD (100 ITD 142). IT WAS POINTED OUT THAT CASES OF PENALTY HAS TO BE CONSIDE RED ON THE BASIS OF INTERPRETATION OF PROVISIONS AVAILABLE ON THE DATE OF FILING OF RETURN AND IN CASE OF THE ASSESSEE AT THE RELEVANT POINT OF T IME THE ISSUES WERE DEBATABLE. AS REGARDS THE EXPENSES ATTRIBUTABLE TO THE SHARE TRADING BUSINESS IT WAS SUBMITTED THAT THE ASSESSEE HAD RI GHTLY CLAIMED THE SAME AS SHARE TRADING HAD BEEN CONSIDERED AS BUSINE SS INCOME. IT WAS THEREFORE URGED THAT PENALTY LEVIED SHOULD BE DELETED. THE LEARNED DEPARTMENTAL REPRESENTATIVE ON THE OTHER H AND STRONGLY SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW AND P LACED RELIANCE ON THE FINDINGS GIVEN IN THE APPELLATE ORDER. IT WAS ALSO SUBMITTED THAT SINCE 98% OF RETURNS WERE BEING ACCEPTED BY THE DEP ARTMENT SUMMARILY CASES OF WRONG SHOULD BE DEALT WITH AS S TRICTLY. HE ALSO REFERRED TO THE JUDGMENT OF HONBLE SUPREME COURT I N CASE OF DHARMENDRA TEXTILE PROCESSORS AND OTHERS (SUPRA) IN SUPPORT OF LEVY OF PENALTY. 5. WE HAVE PERUSED THE RECORDS AND CONSIDERED THE RIVAL CONTENTIONS CAREFULLY. THE DISPUTE IS REGARDING LE VY OF PENALTY FOR CONCEALMENT OF INCOME IN RELATION TO ADDITIONS MADE ON ACCOUNT OF SEBI TURNOVER CHARGES AND ON ACCOUNT OF TREATMENT O F SHARE TRADING LOSS AS SPECULATION LOSS. THE ASSESSEE HAD CLAIMED DEDUCTION ON ACCOUNT OF SEBI TURNOVER CHARGE CLAIMING THAT THE S AME WAS NOT COVERED BY SECTION 43B. THE ASSESSING OFFICER HOW EVER TREATED THE SAME AS COVERED U/S 43B AND ADDED TO THE TOTAL INCO ME AS THE SAME HAD NOT BEEN PAID BY THE ASSESSEE DURING THE PREVIO US YEAR. THE ADDITION MADE HAS BEEN CONFIRMED BY THE CIT (A) AS WELL AS BY THE TRIBUNAL. THE TREATMENT OF SHARE TRADING LOSS AS S PECULATION LOSS MADE BY THE ASSESSING OFFICER HAS ALSO BEEN CONFIRMED BY THE CIT (A) AND MEWAR INTERNATIONAL PVT LTD ITAS 3483 AND 3484/M/2009 5 THE TRIBUNAL. HOWEVER EXPENSES ATTRIBUTABLE TO TH E SHARE TRADING ACTIVITIES HAVE BEEN REDUCED SUBSTANTIALLY IN APPEA L. THE ASSESSING OFFICER HAS IMPOSED PENALTY FOR CONCEALMENT OF INCO ME IN RELATION TO THE ADDITIONS MADE ON THE ABOVE ACCOUNTS. THE CASE OF THE DEPARTMENT IS THAT IN VIEW OF JUDGMENT OF HONBLE S UPREME COURT IN CASE OF DHARMENDRA TEXTILE PROCESSORS AND OTHERS (S UPRA) PENALTY U/S 271(1)(C) IS A CIVIL LIABILITY AND WILLFUL CONCEALM ENT IS NOT REQUIRED TO BE PROVED BY THE REVENUE AND THEREFORE PENALTY HAS T O BE IMPOSED IN RESPECT OF ADDITIONS MADE IN THE ASSESSMENT TO THE TOTAL INCOME. THE CASE OF THE ASSESSEE IS THAT IT HAD MADE A BONA FIDE CLAIM BASED ON A PARTICULAR INTERPRETATION OF THE PROVISIONS AND TH EREFORE IN SUCH CASES NO PENALTY COULD BE IMPOSED. 6. WE HAVE CAREFULLY CONSIDERED VARIOUS ASPECT OF THE MATTER. NO DOUBT IT IS TRUE AS HELD BY THE HONBLE SUPREME COURT IN CASE OF DHARMENDRA TEXTILE PROCESSORS AND OTHERS (SUPRA) TH AT PENALTY U/S 271(1)(C) IS A CIVIL LIABILITY AND WILLFUL CONCEALM ENT IS NOT REQUIRED TO BE PROVED BY THE REVENUE BUT EACH AND EVERY ADDITION MADE IN THE ASSESSMENT CANNOT AUTOMATICALLY LEAD TO CONCEALMENT OF PENALTY. A CASE FOR CONCEALMENT OF PENALTY HAS TO BE EVALUATED IN TERMS OF THE EXPLANATION I TO SECTION 271(1)(C) AS PER WHICH THE RE WILL BE A CASE FOR CONCEALMENT IN CASE THE ASSESSEE IS NEITHER ABLE TO SUBSTANTIATE THE EXPLANATION IN RELATION TO ANY ADDITION NOR THE ASS ESSEE IS ABLE TO PROVE THAT THE EXPLANATION WAS BONA FIDE AND ALL MATERIAL FACTS RELATING TO THE SAME HAD BEEN GIVEN. THEREFORE THE ISSUE B ASICALLY IS TO DETERMINE WHETHER THE EXPLANATION OF THE ASSESSEE O N THE FACTS OF THE CASE CAN BE CONSIDERED AS BONA FIDE . SECTION 43B REFERS TO TAX DUTIES CESS OR FEES AND WHETHER SEBI TURNOVER CHARGE CAN B E CONSIDERED AS A DEBATABLE ISSUE. THIS IS CLEAR FROM THE FACT THAT THE ISSUE WHETHER THE SEBI TURNOVER CHARGES CAN BE TAKEN AS COVERED U/S 4 3B HAD REACHED THE STAGE OF TRIBUNAL AND THE TRIBUNAL VIDE ORDER D ATED 31.8.2005 IN MEWAR INTERNATIONAL PVT LTD ITAS 3483 AND 3484/M/2009 6 CASE OF SURESHCHAND JAIN (SUPRA) HAD DECIDED THE I SSUE IN FAVOUR OF THE REVENUE. THIS MEANS AT THE POINT OF TIME OF F ILING OF RETURN OF INCOME FOR THE RELEVANT YEARS THESE ISSUES WERE DE FINITELY SUBJECT MATTER OF INTERPRETATION AND IT WAS POSSIBLE TO TAK E A VIEW THAT IT WAS NOT COVERED U/S 43B. SIMILARLY IN RELATION TO SHA RE TRADING LOSS BY COMPANIES IT WAS POSSIBLE TO TAKE A VIEW THAT THE SAME WOULD BE APPLICABLE TO COMPANIES CONTROLLED BY BUSINESS HOUS ES WHO UNDERTAKE SHARE TRANSACTIONS WITH A VIEW TO MANIPULATE AND RE DUCE TAXABLE INCOME. THIS VIEW IS SUPPORTED BY THE DECISION OF SMC BENCH OF TRIBUNAL IN CASE OF AMAN PORTFOLIO (SUPRA) WHICH W AS DELIVERED ON 27.9.2004 I.E. MUCH AFTER THE RETURNS WERE FILED BY THE ASSESSEE. THIS MEANS THAT AT THE POINT OF TIME OF FILING OF RETURN S OF INCOME THIS WAS ONE OF THE POSSIBLE VIEWS AND IN CASE THE ASSESSEE HAD ADOPTED THIS INTERPRETATION IN MAKING THE CLAIM IT COULD NOT BE SAID THAT THE CLAIM OF THE ASSESSEE IS NOT BONA FIDE . THEREFORE IN OUR VIEW THE EXPLANATION OF THE ASSESSEE THAT IT HAD MADE A BONA FIDE CLAIM HAS TO BE ACCEPTED. AS REGARDS THE FILING OF NECESSARY DE TAILS THERE IS NO DISPUTE THAT THE RELEVANT DETAILS HAD BEEN FILED BY THE ASSESSEE IN THE RETURN OF INCOME AS ON THE BASIS OF THESE DETAILS O NLY THE ASSESSMENT HAD BEEN REOPENED BY THE ASSESSING OFFICER U/S 197 OF THE ACT AS RIGHTLY POINTED OUT BY LEARNED AUTHORIZED REPRESENT ATIVE. FURTHER THE ASSESSMENT ORDER ITSELF REFERS TO RELEVANT DETAILS AS HAVING BEEN FILED BY THE ASSESSEE. THEREFORE IN OUR VIEW THE CASE O F THE ASSESSEE IS NOT COVERED BY EXPLANATION I TO SECTION 271(1)(C) A ND PENALTY IN SUCH CASES CANNOT BE IMPOSED. LEARNED DEPARTMENTAL REPR ESENTATIVE HAS ARGUED THAT PENALTY HAS TO BE IMPOSED IN CASE OF WR ONG CLAIM AND HAS PLACED RELIANCE ON A JUDGMENT OF HONBLE HIGH COURT OF KERALA IN CASE OF KUTTUKARAN MACHINE TOOLS (313 ITR 413). THE SAI D CASE IN OUR VIEW IS DISTINGUISHABLE AS IN THAT CASE INVESTMENT ALLOW ANCE AND DEPRECIATION HAD BEEN CLAIMED IN RESPECT OF MACHINE RY WHICH WAS NOT PURCHASED INSTALLED OR COMMISSIONED. IT WAS THER EFORE A CASE OF MEWAR INTERNATIONAL PVT LTD ITAS 3483 AND 3484/M/2009 7 BOGUS CLAIM. THE CASE OF THE ASSESSEE IS DIFFERENT . THE CLAIM OF THE ASSESSEE IS NOT BOGUS. THE CLAIM HAS BEEN MADE ADO PTING A PARTICULAR INTERPRETATION OF PROVISIONS OF LAW WHICH HAS BEEN DISALLOWED BY THE ASSESSING OFFICER. IT WAS A BONA FIDE CLAIM AS HEL D BY US EARLIER. 6. IN VIEW OF THE FOREGOING DISCUSSION WE ARE UNA BLE TO SUSTAIN THE ORDERS OF THE CIT (A) CONFIRMING THE PE NALTIES FOR CONCEALMENT OF INCOME. THE ORDERS ARE ACCORDINGLY SET ASIDE AND PENALTIES LEVIED ARE DELETED. 7. IN THE RESULT BOTH THE APPEALS FILED BY THE AS SESSEE ARE ALLOWED. ORDER PRONOUNCED ON 15TH DAY OF MARCH 2010. SD/- SD/- (N V VASUDEVAN) (RAJENRA SINGH) JUDICIAL MEMBER A CCOUNTANT MEMBER MUMBAI DATE: 15TH MARCH 2010 COPY TO 1. THE APPELLANT. 2. THE RESPONDENT 4. CIT(A)-XIV MUMBAI. 5. CIT -14 MUMBAI. 6. D R B BENCH MUMBAI. 7. GUARD FILE. BY ORDER / / TRUE COPY / / ASST. REGISTRAR ITAT MUMBAI BENCHES MUMBAI *CHAVAN/- MEWAR INTERNATIONAL PVT LTD ITAS 3483 AND 3484/M/2009 8 SNO DATE INITIALS 1 DRAFT DICTATED ON 11-03-2010 SR.P.S 2. DRAFT PLACED BEFORE AUTHOR 12-03-2010 SR.P.S 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER V.P. 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER A.M 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.P.S 6. KEPT FOR PRONOUNCEMENT ON SR.P.S 7. FILE SENT TO THE BENCH CLERK SR.P.S 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER