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Income Tax Appellate Tribunal, “E” BENCH, MUMBAI
Before: SHRI RAJENDRA, AM & SHRI SANDEEP GOSAIN, AM
आदेश / O R D E R
PER SANDEEP GOSAIN, J.M This appeal is preferred by Revenue against the order dated 06.09.2013 passed by CIT(A)-25, Mumbai and it pertains to A.Y. 2007-08 on the grounds mentioned below: -
“1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the penalty levied u/s 271(1)(c) as the assessee has misrepresented and furnished inaccurate particulars of his income in view of Shri Sunil Ganeriwal Hon'ble Delhi High Court judgment in the case of CIT Vs. Zoom Communication Pvt. Ltd. [191 Taxman 179].
The Ld. CIT(A) erred in not appreciating it’s own order given in the quantum appeal where action of the A.O. of treating STCG claimed by the assessee as Business Income was accept4ed. Also it is not proper justice to hold by the Ld. CIT(A) that as there is no tax sought to be evaded as there is Nil business income after set off of F&O loss and therefore penalty calculated based there on would also be nil.
Further the Ld. CIT(A) erred in relying on the judgement of the Hon'ble Supreme Court in the case of Reliance Petro Products Pvt. Ltd. [322 ITR 158 (SC)] as the facts of the case are different.”
2. The brief facts of the case are that the return of income for A.Y. 2007-08 was filed by assessee on 31.10.2007 declaring total income at `1,92,530/-. Assessment as completed under section 143(3) of the Act on 30.12.2008 assessing the total income at `3,80,08,280/-. After giving appeal effect to the CIT(A)'s order dated 13.03.2012, the total income of assessee was revised to `13,06,530/- due to loss in F&O transactions. During the course of assessment proceedings AO found that the assessee has purchased and sold shares almost all in the year and there has been a very regularity in trading of shares. There is nexus between the loans received, interest paid and investment made. It was found that these shares were not purchased by assessee for investment purpose, but were purchased and sold with the sole intention of earning profit from them. Taking that view it was clear that the assessee has shown all the characteristics of a trader rather than an investor. Hence, the STCG (`1,52,19,950/-) was treated as the income from the business/profession. Against the said order assessee preferred an appeal before the CIT(A). The CIT(A), vide his order dated 23.09.2010 has upheld the action of the AO of Shri Sunil Ganeriwal treating STCG as business income. Assessee preferred appeal before the ITAT but subsequently withdrew his appeal and filing the request rectification with CIT(A) on the ground that the loss from F&O has not been allowed in appellate proceedings. The application of the assessee was allowed by CIT(A) and his earlier order dated 23.09.2010 was modified by a rectification order under section 154 dated 13.03.2012. Therefore the main ground of addition of `1,52,19,950/- of short term capital gains treated as business income has been confirmed by CIT(A) and no further appeal was pending before ITAT. Considering all these facts AO passed penalty order thereby levying penalty vide order dated 12.11.2012.
3. Aggrieved by the order of penalty assessee filed appeal before CIT(A) and CIT(A), after considering the contentions of both the parties, has allowed the appeal of assessee and deleted the penalty levied by AO.
Aggrieved by the order of CIT(A) Revenue filed appeal before us on the grounds mentioned above. Since the grounds are interrelated and interlinked they are disposed off by the common order. The learned D.R. representing Revenue submitted that the AO has rightly held that assessee has purchased and sold shares almost all in the year and there has been a regularity in trading of shares and since there is nexus between the loans received, interest paid and investment made. Therefore it was clear that these shares were not purchased by assessee for investment purpose, but where purchased and sold with the sole intention of earning profit from it. Considering these facts AO has rightly held that assessee has shown all the characteristics of a trader rather than an investor. Therefore the short term capital gain of `1,52,19,950/- was rightly treated as income from business only. It Shri Sunil Ganeriwal was further submitted that although assessee preferred an appeal but the CIT(A) upheld the order passed by AO and subsequently aggrieved by the order of CIT(A) further preferred an appeal before ITAT but subsequently withdrawn the same filing a request for rectification before the CIT(A) and the CIT(A) has allowed and modified the earlier order dated 13.03.2002. Therefore the main ground of addition of `1,52,19,950/- of short term capital gains treated as business income has been confirmed by CIT(A). The learned D.R. relied upon the order passed by AO and submitted that assessee has squared off loan borrowings during the year which proves that assessee had committed himself to short term borrowings and that his intention to hold was never there in the first place. Therefore the motive of assessee was to make additional profits over and above his loan liability. The learned D.R. further submitted that considering all these fact AO was rightly satisfied that in this case assessee has concealed particulars of his income by furnishing inaccurate particulars of income by changing the head of income. Therefore penalty was rightly levied.
On the other hand, the learned A.R. for the assessee relied upon the detailed reply dated 19.10.2012 which is as under: - “The intention of the assessee at the time of purchasing the shares was to hold the shares in order to earn dividend thereon and have capital appreciation in the valuation with passage of time. However, where the opportunity arose of gains and consequent to the change in fundamentals of the particular company, the assessee has sold off the particular scripts even in shorter times. Since all the purchase and sales of securities have been treated as investments, the gains arising therefrom have been shown as STCG depending upon the period of holding. The assessee has been consistently valued holding in shares on the Balance Sheet date at cost. This shows the consistent intention and motive to consider the holding as investments,
Shri Sunil Ganeriwal thereby treating the gains as capital gains on sale of such holdings of shares. The assessee has disclosed all the transactions in the books of accounts and return of income as STCG under a bonafide belief. However, the CIT(A) had a different view due to which he treated as STCG as business income. The question whether STCG or Business income is a matter of opinion and it may differ from case to case depending upon facts and circumstances. The offence of concealment is a direct attempt to hide an item or income or a portion thereof from the knowledge of the Income Tax Authorities. It is settled law that before levying penalty u/s 271(1)(c), it has to be held that the assessee has either concealed the particulars of income or has furnished inaccurate particulars of income. On the basis of the above submission and the fact we request your honour to drop the penalty proceedings u/s 271(1)(c) of the Income Tax Act for A.Y. 2007-08.” Apart from the above the learned A.R. for the assessee also relied upon various judicial decisions in support of his contention and supported the order of CIT(A).
We have heard the rival contentions and perused the material on record. The relevant portion of the CIT(A)’s order is as under: -
“6. I have perused the assessment order, appellate order, rectification order of the CIT(A), Hon'ble 1TAT order, written submissions of the appellant, remand report and the facts and circumstances of the case. I find that the case of assessee is squarely covered by the decision of Hon'ble ITAT, Mumbai 'E' Bench in the case of Sukhdham Construction & Developers vs. DCIT (ITA No. 2172/Mum/2011) relied upon by the assessee. In the said case on similar facts, it was held that "The issue of treatment of the income is a debatable issue and the view taken by the assessee in treating the same as capital gain, though not acceptable but could not ipso facto lead to the conclusion that the assessee concealed the particulars of income or furnished inaccurate particulars of income. Accordingly, in view of the decision of the Hon'ble Supreme court in the case of Reliance Petroproducts P Ltd reported in 322 ITR 158 (SC), the penalty is not justified in Shri Sunil Ganeriwal the facts of the present case; accordingly, we delete the penalty levied by the lower authorities." Relying upon the said judgment of jurisdictional ITAT, I delete the penalty levied under Section 271(1)(c). Hence, the ground of appeal is allowed. Without prejudice, I also find merit in the alternate contention of the appellant that under clause (c) of Explanation 4 to Section 271(1)(c), the amount of tax sought to be evaded in the present case would be Rs. Nil, after setting off the F&O loss and STT credit to be allowed on treating the share transactions as business income. In the present case, after allowing the said set off, the tax effect of treating the STCG as business income would be neutral. Hence, when there is no tax sought to be evaded, the penalty calculated based thereon would also be Nil. Therefore, in the present case, the issue of levy of penalty remains only academic in nature.
7. In the result, for statistical purpose, the appeal filed by the appellant is treated as allowed.”
7. CIT(A), while allowing the appeal filed by assessee has discussed in details the facts which is squarely covered by Hon'ble ITAT “E” Bench in the case of Sukhdham Construction & Developers vs. DCIT in ITA No. 2172/Mum/2011. We find that the order passed by CIT(A) is well reasoned and speaking order as the CIT(A) has rightly discussed in detail regarding the penal provisions of section 271(1)(c) of the Act and it was also noticed by us that after allowing the said tax effect of treating the STCG as business income will be neutral, therefore there is no tax to be evaded, the penalty calculated based thereon would also be nil. Therefore even from that angle also no penalty is attracted in the present case and the order passed by CIT(A) do not need any interference from our side. We uphold the same.
In the result, appeal filed by Revenue is dismissed. प�रणामतः राज�व क� अपील खा�रज क� जाती है ।