ASST CIT CIR 4(3)(1), MUMBAI vs. KHANDWALAL SECURITIES LTD, MUMBAI

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ITA 4560/MUM/2016Status: DisposedITAT Mumbai28 March 2018AY 2009-104 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that since the assessee furnished full particulars and the addition was based on a different view of the AO, penalty under section 271(1)(c) was not leviable. Furthermore, the quantum appeal on the addition was restored to the AO, making the penalty unsustainable.

What were the facts?

The Assessing Officer treated the assessee's share trading loss as deemed speculation loss and added it back to income. Subsequently, a penalty under section 271(1)(c) was imposed for furnishing inaccurate particulars of income.

What were the issues?

Whether penalty under section 271(1)(c) can be imposed when the addition is based on a difference of opinion regarding the nature of loss and the quantum addition itself is subject to fresh adjudication.

Which sections of the Income-tax Act were involved?

Section 271(1)(c),Section 73,Section 274

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “J” BENCH, MUMBAI

Before: SHRI SAKTIJIT DEY & SHRI N.K. PRADHAN

For Respondent: Ms. Aarju Garodia

Date of Hearing – 08.03.2018 Date of Order – 28.03.2018

O R D E R PER SAKTIJIT DEY, J.M.

This is an appeal by the Revenue against order dated 16th March 2016, passed by the learned Commissioner (Appeals)–9, Mumbai, deleting the penalty of ` 19,49,997, imposed under section 271(1)(c) Income-tax Act, 1961 (for short "the Act").

2.

Brief facts are, the assessee a company is engaged in the business of investment, share broking and providing advisory services. In the assessment year under dispute, the assessee filed its return of income on 29th May 2009, declaring total income of ` 75,72,390.

2 M/s. Khandwala Securities Ltd. During the assessment proceeding, the Assessing Officer noticing that the assessee has claimed loss of ` 68,20,061, on account of share trading treated it as deemed speculation loss under section 73 of the Act and added back to the income of the assessee. While completing the assessment, the Assessing Officer also initiated proceedings for imposition of penalty under section 271(1)(c) alleging furnishing of inaccurate particulars of income by the assessee. Subsequently, the Assessing Officer issued a show cause notice under section 274 r/w section 271(1)(c) calling upon the assessee to explain why penalty under section 271(1)(c) shall not be imposed for furnishing inaccurate particulars of income in respect of claim of loss. Though, the assessee objected to initiation of proceedings under section 271(1)(c), however, the Assessing Officer rejecting the explanation of the assessee proceeded to impose penalty of ` 19,49,997 under section 271(1)(c). The assessee challenged the imposition of penalty before the first appellate authority.

3.

The learned Commissioner (Appeals) after considering the submissions of the assessee in the light of the judicial precedent cited before him, came to the conclusion that penalty cannot be imposed on account of addition made of deemed speculation loss. Accordingly, he deleted the penalty.

3 M/s. Khandwala Securities Ltd. 4. When the appeal was called for hearing no one was present for assessee in spite of issuance of hearing notice through registered post with A.D. Therefore, we proceed to dispose–off the appeal ex–parte qua the assessee after hearing the learned Departmental Representative.

5.

Heard the learned Departmental Representative and perused the material on record. Learned Departmental Representative fairly submitted that while considering the issue of disallowance of share trading loss in assessee’s appeal the Tribunal has restored the issue back to the file of the Assessing Officer for fresh adjudication. A copy of the order was also placed before the Bench.

6.

As could be seen, the basis for imposition of penalty is the addition made by treating the loss from share trading as deemed speculation loss. However, it is evident on record that the assessee has furnished full particulars relating to the loss claimed and the addition made is on the basis of a different view entertained by the Assessing Officer with regard to the nature of loss. That being the case, the assessee cannot be charged with the offence of furnishing inaccurate particulars of income so as to invite levy of penalty under section 271(1)(c). In any case fo the matter, while deciding the assessee’s quantum appeal in ITA no.7677/Mum./2012, dated 17th March 2017, the Tribunal has restored the issue relating to the 4 M/s. Khandwala Securities Ltd. addition made on account of deemed speculation loss to the Assessing Officer for fresh adjudication. Thus, at present, the addition on the basis of which penalty under section 271(1)(c) of the Act was imposed no longer survives. As a natural corollary the penalty imposed on the basis of such addition also cannot survive. Accordingly, we uphold the order of the learned Commissioner (Appeals) in deleting the penalty imposed.

7.

In the result, Revenue’s appeal is dismissed. Order pronounced in the open Court on 28.03.2018

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