DR MILIND KISHORE MADHANI,MUMBAI vs. ACIT 22(1), MUMBAI

PER MAHAVIR SINGH, JM:

Dr. Milind Kishore Madhani Asst. Year 2008-09 trading i.e. sales and purchases without taking delivery which is speculative transaction. According to him, assessee entered into total turnover of Rs.563,78,27,294/- and resulted net gain after setting off of loss on speculative transactions. Accordingly, the AO treated the transaction as speculative transaction and assessment was framed. The AO initiated penalty proceedings u/s. 271(1)(c) of the Act for furnishing of inaccurate particulars of income and levied penalty u/s. 271(1)(c) of the Act by stating that the speculation loss of Rs.52,79,391/- has been cleverly embedded by the assessee in share trading profit and thereby reducing his share trading loss. This addition was not contested by assessee. Accordingly, he levied the penalty u/s. 271(1)(c) of the Act amounting to Rs.17,59,621/-. Aggrieved, assessee preferred appeal before CIT(A), who also confirmed the action of AO by observing in para 4.5 as under: “4.5. The appellant has stated that these details were very much available on the record in form of contract note given by the broker, and thus as per the appellant he has not furnished any inaccurate particulars nor has concealed any income and hence the disallowance though accepted as the addition was made on the agreed basis does not call for levy of penalty u/s. 271(1)(c). I have gone through these submissions, the brokers note, the transaction statements as well as the arguments taken by the appellant and after going through the same, I am of the considered view that the appellant did tried to take advantage of speculation loss to get the set off from business profit arising out of trading in shares and hence it is not a case of mere disallowance of expenses on estimation basis or on technical reasons but it is a case where speculation transactions were embedded in a way that but for a minute analysis if would have not been possible to work out figure of speculation loss embedded in this transaction separately. Since as per provisions of sec. 43(5) speculation loss no way could have been adjusted against income from business profit as they can only be set off only against speculation profit. The appellant thus cannot plead ignorance of provisions also for the reasons that he has not even tried to maintain a separate account for in day trading resulting into speculation loss of profit. On the identical facts of the case, decision given in the case of ITO vs. M/s. Atheno Finance Research Pvt. Ltd. 2010 (TIOL) 80 ITAT, Delhi also decided that it was a clear cut case of speculation loss where the assessee was engaged in the case of business of sale and purchases of shares and claimed business loss but the A.O. held that trading in share was speculative loss made, the disallowance, upholding the addition. The Hon'ble I'I'A'I', Mumbai Bench on similar issue in the case of CIT vs. KNP Securities Pvt. Ltd. that speculative of transaction is attributed with a particular transaction is Dr. Milind Kishore Madhani Asst. Year 2008-09 considered as speculative u/s. 43(5). In view of this, there is intention to conceal.” Aggrieved, assessee is in appeal before Tribunal 4. Ld. counsel for the assessee, first of all, took us to assessee’s paper book at pages 98 to 105 wherein the copy of assessment order for Asst. Year 2009-10 is enclosed. From this, Ld. counsel for the assessee drew our attention to page 100 and inner page 2 of the assessment order wherein the speculation loss has been disallowed amounting to Rs.12,60,287/-. He further drew our attention to the order of CIT(A) for Asst. Year 2009-10, which is enclosed at pages 106 to 213 and particularly at page 112 wherein the CIT(A) has deleted the speculation loss by observing as under: “3. In this ground the appellant is aggrieved by the action of the AO in considering the day trading loss of Rs.12,60,287/- as speculation loss and not allowing set off of the same against his business income. It is seen from the record that the appellant is trading in shares and securities on a day to day basis. These shares and securities are held as a stock in trade. The appellant enters into intra day transactions to protect himself against falling price of the shares and securities held by him. Therefore, the transactions entered into by the appellant falls under clause (b) of section 45(3) of the Act, wherein it is clear that such transactions are not to be treated as speculative transactions. Therefore, I hold that loss arising out of intra day transactions is to be considered under the head business income and not under the head speculative income. Hence, the appellant gets relief on this account. This ground is accordingly allowed.” In view of this Ld. counsel for the assessee stated that revenue has not preferred any appeal against this order and accepted the CIT(A)’s order. Ld. counsel for the assessee after this made two folds argument. First of all, revenue has accepted the claim of assessee that this speculation loss is a genuine loss and moreover, the assessee has filed all particulars relating to the same. In view of this, ld. counsel for the assessee argued that penalty u/s. 271(1)(c) of the act cannot be leviable because firstly, the issue is debatable and secondly, the assessee has filed complete particulars relating to this transaction and nothing was concealed. For this proposition, ld. counsel for the assessee relied on the decision of Hon’ble Supreme court in Dr. Milind Kishore Madhani Asst. Year 2008-09 the case of CIT Vs. Reliance Petroproducts Pvt. Ltd. (2010) 322 ITR 158. He also relied on the decision of Hon’ble Bombay High Court in the case of Sesa Resources Ltd. Vs. ACIT (2013) 38 Taxmann 224 (Bom) wherein it has been held as under: “5. There is no dispute that the appellant disclosed all the facts. The appellant did not conceal any facts. Based on the disclosed material, the appellant sought the deduction which was denied on the ground that it was not entitled to the same as a matter of law. The Tribunal was in error in holding that merely because the claim for deduction was denied the appellant is liable to pay a penalty. 6.The question raised is answered in favour of the assessee by the judgment of the Supreme Court in CIT Vs. Reliance Petroproducts (P) Ltd. (2010) 322 ITR 158/189 taxman 322 and a judgment of this Court, to which one of us (S.J. Vazifdar, J) was a party dated 14th August, 2012 in CIT V. Aditya Birla Nova Ltd. (IT Appeal No. 3899 of 2010).”