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Income Tax Appellate Tribunal, “A” BENCH, MUMBAI
Before: SHRI R.C.SHARMA, AM & SHRI AMARJIT SINGH, JM
Assessee by: Shri Kirit Kamdar Department by: Shri Sanjay BAhadur सुनवाई क� तार�ख / Date of Hearing: 12.05.2016 घोषणा क� तार�ख /Date of Pronouncement: 12.08.2016 आदेश / O R D E R PER AMARJIT SINGH, JM:
The assessee has filed the present appeal against the order dated 06.11.2013 passed by the Commissioner of Income Tax (Appeals) 10, Mumbai [hereinafter referred to as the “CIT(A)”] relevant to the ITA No.2764/M/2014 A.Y. 2007-08 A.Y.2007-08 wherein the said authority has confirmed the penalty levied by the Assessing Officer u/s.271(1)(c) of the Income Tax Act, 1961 ( in short “the Act”).
The assessee has raised the following grounds:-
“1. Erred in confirming the penalty of Rs.2,83,44,514/- levied by the Deputy Director of Income Tax, International Taxation 1(1), Mumbai (‘AO’) under section 271(1)© fo the Act.
2. Was not justified in confirming the penalty without appreciating the entire facts and circumstances under which the appellant, being a foreign company, decided to exist India by selling the shares after obtaining all regulatory and government approvals, therefore, incorrect to hold that loss was booked with an intention to conceal income.
3. Erred in confirming the action of the AO in levying penalty alleging, without any basis, that the appellant had claimed long term and short term capital loss with the intention to defraud the revenue without appreciating that the appellant had submitted all the papers / documents during the assessment proceedings.
4. Erred in confirming the penalty without appreciating the fact that the transactions were with unrelated parties wherein the appellant, a non resident company, wanted to exit from India on account of heavy losses suffered by the Indian company and there was no intention to claim long term capital loss and short term capital loss which infact has never been claimed or likely to be set off.
Failed to appreciate that penalty under section 271(1)(c) cannot be levied unless it is established that assessee has concealed income or furnished inaccurate particulars leading to concealment of income and since both things are ITA No.2764/M/2014 A.Y. 2007-08 absent in the case of appellant, there is no question of levy of penalty.
6. Failed to appreciate that appellant had suffered loss on account of sale of shares, on account of losses suffered by the Indian company, which is not likely to be claimed before it gets time barred as the appellant is not likely to have income to set off such loss.
7. Failed to appreciate that the assessment proceedings are different from penalty proceedings and merely because loss is not allowed in the assessment order, it does not automatically result in concealment of income leading to levy of penalty.”
The brief facts of the case are that the assessee filed the return of income on 24.10.2007 declaring total income to the tune of Rs.20,36,099/-. The case was selected for scrutiny and notice u/s.143(2) of the act was issued on 02.09.2008 and duly served upon the assessee. Order u/s.143(3) r.w.s 144C(13) of the Act was passed on 07.10.2010 determining total taxable income at loss of Rs.20,36,099/-. In the order of assessee’s claim of Long Term Capital Gain (LTCG) and Short Term Capital Gain (STCG) was thoroughly examined and after examination the same disallowed as it was a contrived loss. After concluding the assessment, the penalty proceedings u/s.271(1)(c) of the Act was initiated by the Assessing Officer and levied the penalty to the tune of Rs.2,83,44,514/- by virtue of order dated 16.03.2011. Being aggrieved the assessee filed the ITA No.2764/M/2014 A.Y. 2007-08 appeal before CIT(A) who confirmed the said order, therefore, the assessee has filed the present appeal before us.
We have heard the arguments advanced by the learned representative of the parties and perused the record carefully. The assessee has raised many ground in his appeal but basically he challenged the levy of penalty confirmed by the CIT(A) by virtue of order dated 06.11.2013. The learned representative of the assessee has argued that the addition for the A.Y.2007-08 has been deleted by the Income Tax Appellate Tribunal, Mumbai bench in view of the order dated 21.10.2015 in therefore in the said circumstances the penalty is not liable to be sustainable in the eyes of the law.
5. However, on the other hand the learned representative of the department has strongly relied upon the finding of the CIT(A) in question. In the present case the penalty was levied by the Assessing Officer in connection with the A.Y.2007-08. The Assessing Officer concluded the assessment by virtue of order dated 07.10.2010 which was confirmed by the CIT(A). Subsequently, the assessee challenged the order before the Income Tax Appellate Tribunal in wherein the assessee has raised the following issues:-
ITA No.2764/M/2014 A.Y. 2007-08
Disallowance of claim of Long Term Capital Loss
erred in disallowing the claim of long term capital loss amounting to INR 25,03,89,402 and short term capital loss amounting to INR 69,06,751, arising on sale of shares of Electrolux Kelvinator Limited (EKL), as claimed by the appellant in the return of income filed for the subject assessment year. Non grant of credit of TDS 2. erred in not following the directions of the DRP and denying the claim of tax deducted at source (TDS) on royalty payments from Videocon Industries Limited, as claimed by the appellant in the return of income for the subject assessment year by holding that credit for TDS will be granted in the year of loss without appreciating the fact that TDS credit is arising out of royalty income which is offered to tax in the subject assessment year.
Since the matter of controversy is very much confined to the issue no.1, therefore the finding of the Tribunal in this regard is hereby reproduced below:-
“ The entire chain of events-including delisting of shares, permissions of SEBI and RBI, agreement with third and unrelated party, losses suffered by ELK, erosion of value
ITA No.2764/M/2014 A.Y. 2007-08 of shares of ELK, valuation by independent valuer – we hold that the transaction entered into by the assessee was genuine and LTCL and STCL suffered by it on sale of shares and on redemption of preference shares of EKL has to be allowed. Grounds no.2-3 are decided in favour of the assessee.”
However this finding was given for the A.Y.2006-07 but the Hon’ble Income Tax Appellate Tribunal has applied the same for the A.Y.2007-08 which has been reproduced in para 6 below:
“6. First three ground of appeal raised by the assessee, deal with disallowance of claim of Long Term & Short Term Capital Loss, non grant of credit of TDS and levy of interest under section 234B and 234C. While deciding the appeal for the earlier year, we have adjudicated the identical issues. Following the same ground pertaining to disallowance of STCL and LTCL is decided in favour of the assessee. The AO is directed to verify the claim about the tax deducted at source and allow the claim maid by the assessee. As decided the issue of levy of interest u/s.234 is consequential in nature and hence is not being adjudicated.”
ITA No.2764/M/2014 A.Y. 2007-08