DCIT (OSD-II) CEN RG 7, MUMBAI vs. LEENA H DALAL, MUMBAI

In this appeal the assessee has disputed addition of `25,41,997/– on account of speculative profit in share transaction.

Briefly the facts are, the assessee an individual, filed her return of income for the impugned assessment year showing short term capital loss of ` 8,01,445/–. During the original assessment proceedings the Assessing Officer found that the assessee has computed short term capital loss after setting off losses of ` 25,41,997/– against profit from other share transactions. The Assessing Officer holding that loss was incurred in respect of non delivery based transaction, hence, in the nature of speculation loss, did not allow set off against other income and completed the assessment under section 143(3) of the Act by determining the total income at ` 23,70,050/–. Subsequently, the assessment record was called for and examined by the Commissioner of Income Tax in 3 Smt. Leena H. Dalal exercise of power under section 263 of the Act and during such examination he found the assessment order passed under section 143(3) of the Act to be erroneous and prejudicial to the interest of the Revenue. Accordingly, he set aside the assessment order passed under section 143(3) of the Act. In pursuance to the directions of the Commissioner of Income Tax under section 263 of the Act, the Assessing Officer passed an order under section 143(3) r.w.s. 263 of the Act disallowing claim of loss of `25,41,997/– by treating it as speculative loss. The learned Commissioner (Appeals) also confirmed the assessment order in appeal proceedings. Against the order of the Commissioner (Appeals) assessee went in appeal before the ITAT.

The Tribunal after taking note of the submissions made by the assessee that she will produce the broker involved in the said transaction before the Assessing Officer, restored the matter back to the Assessing Officer. While doing so, the Tribunal also observed that as far as finding of the Commissioner of Income Tax with regard to the nature of loss is concerned, same has become final and binding on the assessee. In the proceeding initiated in pursuance to the directions of the Tribunal, as alleged by the Assessing Officer, the assessee neither appeared nor produced the broker. Therefore, the Assessing Officer once again proceeded to complete the assessment under section 144 of the Act to the best of his judgement by making an addition of `

The learned Authorised Representative. submitted, in pursuance to the directions of the Tribunal the assessee did produce the broker Preeti N. Agarwala before the Assessing Officer. He submitted, the said

The learned Departmental Representative submitted, since, after examining all the evidences brought on record by the assessee before the First Appellate Authority and during remand, it was found that the 6 Smt. Leena H. Dalal share transaction was not genuine there is no need for again remitting the issue to the Assessing Officer for readjudication. He submitted, the addition made being on sound basis should be sustained.

We have considered rival submissions and perused the materials on record. Undisputedly, this is the second round of litigation before us as far as the dispute in the present appeal is concerned. In the first round of litigation the Tribunal vide order dated 31.07.2008 in has remitted the issue to the file of the Assessing Officer for fresh adjudication with certain directions. From the operative part of the Tribunal’s order, as reproduced in paragraph 4 of the impugned assessment order, following facts clearly emerge. Firstly, the Tribunal has held in no uncertain terms that as far as the nature of loss arising from share transaction is concerned, the issue has become final as the assessee did not challenge the order passed by the Commissioner of Income Tax under section 263 of the Act. Secondly, the Tribunal has directed the Assessing Officer to examine the genuineness of share transaction and in this context the Tribunal has directed the assessee to produce the broker involved in such transaction and also to furnish any other details to prove the genuineness of share transaction. Thus, in view of the aforesaid order of the Tribunal, the limited issue which arises for consideration before

In this appeal Department has challenged deletion of penalty imposed of ` 11,51,149/– under section 271(1)(c) of the Act for A.Y. 1994–95.

As discussed in the earlier part of the order, while completing assessment in pursuance to the directions of the Tribunal, the Assessing Officer made an addition of `25,41,997/– by holding the share transactions of the assessee as non genuine. The addition made by the Assessing Officer was also confirmed by the First Appellate Authority. On the basis of the addition made, as aforesaid, the Assessing Officer initiated proceedings for imposition of penalty under section 271(1)(c) of the Act by issuing a show cause notice to the assessee and ultimately passed an order imposing penalty of `11,51,149/– under section 271(1)(c) of the Act. The assessee challenged the penalty imposed by preferring appeal before the Commissioner (Appeals). The learned Commissioner (Appeals) after considering the submissions of the assessee found that the assessee

We have considered rival submissions and perused materials on record. The factual matrix of the case clearly reveals that the addition made by the Assessing Officer on the basis of which penalty under section 271(1)(c) was imposed was on account of lack of evidence. Notably, to prove the genuineness of share transaction the assessee has not only produced the concerned broker but also produced a number of documentary evidences before the Assessing Officer. The 11 Smt. Leena H. Dalal broker through an affidavit has also vouched for the genuineness of the share transaction with the assessee. Without controverting the evidences brought on record, the Departmental authorities have made the addition, since, according to them some more evidence was required for proving the genuineness of share transaction. As found by the learned Commissioner (Appeals), the assessee has made full disclosure of the share transaction in the return of income filed by her. In such circumstances, it cannot be said that the assessee has either concealed particulars of her income or furnished inaccurate particulars of income. That being the case, learned Commissioner (Appeals) was justified in deleting the penalty imposed. In any case of the matter, while deciding assessee’s appeal against the addition made on the basis of which the impugned penalty was imposed in the earlier part of the order, we have set aside the issue to the file of the Assessing Officer for fresh adjudication. Thus, the addition on the basis of which penalty was imposed survives no more. For this reason also the penalty imposed under section 271(1)(c) of the Act has to be deleted. Therefore, we uphold the order of the Commissioner (Appeals) by dismissing the ground raised by Revenue.

In the result, assessee’s appeal is allowed for statistical purposes and Department’s appeal is dismissed.