STEECON PLASTOPACK P. LTD, MUMBAI v. ITO WD 8(3)(2),

ITA 4366/MUM/2008 | 2001-2002
Pronouncement Date: 21-05-2010 | Result: Allowed

Appeal Details

RSA Number 436619914 RSA 2008
Assessee PAN AABCS3557L
Bench Mumbai
Appeal Number ITA 4366/MUM/2008
Duration Of Justice 1 year(s) 10 month(s) 28 day(s)
Appellant STEECON PLASTOPACK P. LTD, MUMBAI
Respondent ITO WD 8(3)(2),
Appeal Type Income Tax Appeal
Pronouncement Date 21-05-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted J
Tribunal Order Date 21-05-2010
Date Of Final Hearing 10-05-2010
Next Hearing Date 10-05-2010
Assessment Year 2001-2002
Appeal Filed On 23-06-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL J BENCH: MUMBAI BEFORE SHRI D K AGARWAL JUDICIAL MEMBER AND SHRI B RAMAKOTAIAH ACCOUNTANT MEMBER ITA NO 4366/MUM/2008 (ASSESSMENT YEAR: 2001-02) STEECON PLASTOPACK PVT LTD 9 ASHISH APARTMENT SHREENIWAS BAGARKA MARG J B NAGAR ANDHERI (E) MUMBAI -400 059 PAN : AABCS 3557 L VS ITO WARD 8(3)(2) MUMBAI APPELLANT RESPONDENT APPELLANT BY: SHRI N M PORWAL RESPONDENT BY: SHRI S M KESHKAMAT ORDER PER B RAMAKOTAIAH AM THIS IS AN ASSESSEES APPEAL AGAINST THE PENALTY O RDER LEVIED U/S 271(1)(C) OF RS 11 79 573/- CONFIRMED BY THE CIT (A) XXIX MUMBAI DATED 7.4.2008. 2. BRIEFLY STATED THE ASSESSEE HAD FILED ITS RETUR N OF INCOME WITH BUSINESS LOSS OF RS 28 83 177/-. FROM THE COMPUTATION OF INCOME TH E ASSESSEE HAS DECLARED THE FOLLOWING SOURCES OF INCOME:- (I) PROFIT ON WOVEN SACKS TRADING RS 69 74 1/- (II) LOSS ON SHARE TRADING (ACTUAL DELIVERY BASIS) RS 7 54 817/- (III) SHARE SPECULATION LOSS RS 20 43 150/- 3. THE AO AT THE TIME OF ASSESSMENT PROCEEDINGS ISS UED SHOW CAUSE NOTICE FOR CLAIMING SETTING OFF SPECULATION LOSS AGAINST THE O THER INCOME / LOSS. THE ASSESSEE VIDE ITS WRITTEN SUBMISSION DATED 21.08.2003 SUBMIT TED BEFORE AO AS WELL AS BEFORE CIT (A) AS FOLLOWS: A) THE INTENTION OF SHARE TRADING WAS TO BORROW FU NDS AVAILABLE FROM BANK AT LOWER RATE OF INTEREST AND INVEST IN SHARE TRADING TO EARN LARGER RATE OF INTEREST. HOWEVER DUE TO VARIOUS REGULATI ONS OF STOCK EXCHANGE IT IS NOT REFLECTED AS INTEREST INCOME / LOSS. ITA 4366/M/2008 STEECON PLASTOPACK PVT L TD 2 (B) THE EXPLANATION ITS ULTRA-VIRES OF CONSTITUTION OF INDIA AS IT INTENDS TO TREAT TRADING IN COMMODITY DIFFERENTLY WITH ANOT HER COMMODITY. THE AO AFTER INVOKING PROVISIONS OF SECTION 73 AND EXPLANATION TO SECTION 73 HELD THAT THE SET OFF SPECULATION LOSS AGAINST BUSINESS INCOME OR ADDING THE SAME TO BUSINESS LOSS WAS CONTRARY TO THE PROVISIONS OF LAW . HE ALSO INITIATED PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT. DURING THE CO URSE OF PENALTY PROCEEDINGS THE ASSESSEE DID NOT OFFER ANY EXPLANATION TO AO AND IT WAS HELD BY AO THAT THE ASSESSEE HAS NO EXPLANATION TO OFFER FOR THE FILING INACCURA TE PARTICULARS IN THE FORM OF DELIBERATELY CLAIMING SET OFF OF LOSSES CONTRARY TO LAW. ACCORDINGLY HE LEVIED PENALTY OF AN AMOUNT OF RS 29 82 485/-.THE ASSESSEE HAS OBJ ECTED TO LEVY OF PENALTY ON VARIOUS GROUNDS. AFTER ELABORATELY DISCUSSING THE ISSUE LEGALLY THE CIT (A) WAS OF THE OPINION THAT ASSESSEE COULD NOT JUSTIFY WHY HE CLAIMED SET OFF OF LOSSES EARNED IN SPECULATION BUSINESS AND ACCORDINGLY HE CONFIRMED T HE LEVY OF PENALTY. 4. THE COUNSEL SUBMITTED THAT THE ASSESSEE WAS UNDE R BONAFIDE OPINION THAT THE LOSSES IN SHARE TRADING ACTIVITY ARE BUSINESS INCOM E BUT NOT SPECULATIVE INCOME AS ASSESSEES MAIN ACTIVITY IS NOT SHARE TRADING BUT B USINESS OF SALE OF WOVEN SACKS. IT WAS HIS SUBMISSION THAT ALL THE DETAILS WERE FURNIS HED AND THE ASSESSING OFFICER HAS NOT DISPUTED EITHER ABOUT THE QUANTUM OF LOSS OR TH E NATURE OF LOSS. THE DISPUTE IS ONLY WITH REFERENCE TO THE LOSS CLAIMED WHICH THE ASSESSING OFFICER TREATED IT AS SPECULATIVE LOSS INVOKING THE EXPLANATION TO SECTIO N 73. IT WAS HIS SUBMISSION THAT ASSESSING OFFICER ALSO BIFURCATED THE EXPENDITURE A ND QUANTIFIED THE ACTUAL LOSS OF RS 27 97 967/- TO RS 29 82 485/- AND THIS LOSS IS THE ACTUAL LOSS INCURRED BY THE ASSESSEE COMPANY IN ITS BUSINESS. IT WAS HIS SUBMI SSION THAT LOSS RETURNED WAS CONVERTED TOTAL INCOME OF RS 1 16 000/- BUT ASSESS EE HAS NEITHER CONCEALED ANY INCOMES NOR FURNISHED ANY INACCURATE CLAIMS. THE M ERE TREATMENT OF BUSINESS LOSS AS SPECULATION LOSS BY THE ASSESSING OFFICE DID NOT AUTOMATICALLY WARRANT THE INCIDENT OF CONCEALMENT OF INCOME AND RELIED ON THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS AURIC INVESTMENT AND SECURITI ES LTD 310 ITR 121. 5. THE LEARNED DEPARTMENTAL REPRESENTATIVE IN REP LY HOWEVER REITERATED THE ARGUMENTS CONSIDERED BY THE CIT (A) IN HIS DETAILED ORDER AND REFERRED TO THE BENCH ITA 4366/M/2008 STEECON PLASTOPACK PVT L TD 3 DECISIONS IN THE QUANTUM AND FURTHER THE FACT THAT ITAT ALSO HAS CONFIRMED THE DISALLOWANCE OF SPECULATIVE LOSS INVOKING THE EXPLA NATION TO SECTION 73 AND ACCORDINGLY ASSESSEE MADE A WRONG CLAIM AND MADE AN INACCURATE PARTICULARS WHICH ATTRACTED THE PROVISIONS OF SECTION 271(1)(C). 6. WE HAVE CONSIDERED THE ISSUE AND ARGUMENTS OF TH E DR AND THE COUNSEL. AS SEEN FROM THE FACTS THE ASSESSEE HAS INCURRED LOSS IN SHARE TRADING ACTIVITY AND ASSESSEE HIMSELF HAS QUANTIFIED THE SAME IN TWO CAT EGORIES AS LOSS OF SHARE TRADING IN ACTUAL DELIVERY BASIS AND LOSS ON SPECULATION. ONCE THEY ARE CATEGORISED AS SUCHIN THE COMPUTATION OF INCOME AND THESE WERE ALSO ACCEP TED BY THE ASSESSING OFFICER AS NOTED IN PAGE 1 OF THE ASSESSMENT ORDER:- AS PER THE AUDITED PROFIT & LOSS ACCOUNT THE ASSE SSEE HAS INCURRED LOSS OF RS 7 54 813/- FROM DELIVERY BASED SHARES TRADING AND L OSS OF RS 20 43 150/- FROM DIFFERENCE BASED SHARE TRADING. THE LOSS DOES NOT INCLUDE THE OTHER DIRECT AND INDIRECT EXPENSES INCURRED FOR THE SHARE TRADING AC TIVITIES. THE ASSESSEE HAS ALSO EARNED DIVIDEND INCOME OF RS 14 250/- WHICH IS INCIDENTAL TO THE CARRYING ON OF SHARE TRADING ACTIVITIES. THE ASSESSEE HAS S ET OFF THE AFORESAID LOSS FROM SHARE TRADING ACTIVITIES AGAINST THE PROFIT FROM OT HER ACTIVITIES. THESE ACTION ON THE PART OF THE ASSESSEE IS LEGALLY INCORRECT. 7. AS CAN BE SEEN FROM THE ABOVE THE ACTION ON THE PART OF THE ASSESSEE WAS HELD TO BE LEGALLY INCORRECT. IF AN ASSESSEE MAKES AN INCORRECT CLAIM AND ASSESSING OFFICER TAKES A DIFFERENT OPINION ON THE CLAIMS AS SUCH WE ARE OF THE OPINION THAT THIS CANNOT LEAD TO PENALTY U/S 271(1)(C). SIMILAR FACTS EXISTED IN THE CASE OF CIT VS AURIC INVESTMENT AND SECURITIES LTD 310 ITR 121 WHE REIN THE HONBLE DELHI HIGH COURT HAS CONSIDERED AND HELD AS UNDER:- SO IT IS CLEAR FROM THE RECORD THAT ALL THE REQUI SITE INFORMATION AS REQUIRED BY THE ASSESSING OFFICER WAS FURNISHED BY THE ASSESSE E. THERE IS NOTHING ON RECORD TO SHOW THAT IN FURNISHING ITS RETURN OF INC OME THE ASSESSEE HAS EITHER CONCEALED ITS INCOME OR HAS FURNISHED ANY INACCURAT E PARTICULARS OF INCOME. THE MERE TREATMENT OF THE BUSINESS LOSS AS SPECULAT ION LOSS BY THE ASSESSING OFFICER DOES NOT AUTOMATICALLY WARRANT INFERENCE OF CONCEALMENT OF INCOME. THE ASSESSEE DID NOT CONCEAL ANY PARTICULARS OF INC OME AS HE FILED FULL DETAILS OF THE SALE OF SHARES. IN ANY CASE IT CANNOT BE S AID THAT THE ASSESSEE HAS CONCEALED ANY PARTICULARS SO FAR AS ITS COMPUTATION OF INCOME IS CONCERNED AND AS THE SUCH PROVISIONS OF SECTION 271(1)(C) OF THE ACT ARE NOT ATTRACTED IN THIS CASE AND WE DO NOT FIND ANY INFIRMITY IN THE REASON ING GIVEN BY THE TRIBUNAL. ITA 4366/M/2008 STEECON PLASTOPACK PVT L TD 4 8. EVEN THOUGH ULTIMATELY THE DELHI HIGH COURT HA S DISMISSED THE REVENUE APPEAL AS IT OBSERVED THAT THE ASSESSEE HAS FILED A LOSS RETURN AND ASSESSED ON THE THEN EXISTING HONBLE SUPREME COURT JUDGMENT IN THE CASE OF VIRTUAL SOFT SYSTEMS LTD 289 ITR 83 WHICH WAS SUBSEQUENTLY REVERSED BY THE SUPREME COURT THE FACT IS THAT IT WAS ONLY A TREATMENT GIVEN BY THE ASSESSING OFFICER TO THE BUSINESS LOSS AS A SPECULATION LOSS WHICH IN OUR OPINION DOES NOT A TTRACT ANY LEVY OF PENALTY. RECENTLY THE HONBLE SUPREME COURT ALSO EXPRESSED THE SAME OPINION IN THE CASE OF RELIANCE PETRO CHEMICALS PRODUCT LTD 322 ITR 158 TH AT MERE DISALLOWANCE OF CLAIM DOES NOT ATTRACT LEVY OF PENALTY U/S 271(1)(C). SI NCE THERE IS NO FURNISHING OF INACCURATE PARTICULARS NOR THERE IS ANY CONCEALMENT OF INCOME MERE TREATMENT OF BUSINESS LOSS INCURRED IN SHARE TRADING CONSIDERED AS SPECULATION LOSS DOES NOT ATTRACT ANY PENALTY. ACCORDINGLY WE SET ASIDE THE ORDERS OF THE ASSESSING OFFICER AND CIT (A) AND CANCEL THE PENALTY LEVIED. ASSESSEES GROU NDS ARE CONSIDERED ALLOWED. 9. IN THE RESULT APPEAL IS ALLOWED. PRONOUNCED IN THE OPEN COURT TODAY ON THE 21ST DAY OF MAY 2010. SD/- (D K AGARWAL) JUDICIAL MEMBER SD/- (B RAMAKOTAIAH) ACCOUNTANT MEMBER MUMBAI DATE: 21ST MAY 2010 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A)-XXIX MUMBAI. 4) THE CIT 8 MUMBAI. 5) THE D.R. J BENCH ITAT MUMBAI. BY ORDER / / TRUE COPY / / ASSTT. REGISTRAR CHAVAN* I.T.A.T. MUMBAI ITA 4366/M/2008 STEECON PLASTOPACK PVT L TD 5 SR.N. EPISODE OF AN ORDER DATE INITIALS CONCERNED 1 DRAFT DICTATED ON 10.5.2010 SR.PS 2 DRAFT PLACED BEFORE AUTHOR 11.5.2010 SR.PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/A M 5 APPROVED DRAFT COMES TO THE SR.PS SR.PS 6 KEPT FOR PRONOUNCEMENT ON SR.PS 7 FILE SENT TO THE BENCH CLERK SR.PS 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER .