ITA No. 2581/Mum/2016. Case: Meghayields Vs DCIT - 17(2). ITAT (Income Tax Appellate Tribunal)

Case NumberITA No. 2581/Mum/2016
CounselFor Appellant: Dhirandra M. Shah, Adv. and For Respondents: Raiat Mittal, Adv.
JudgesJason P. Boaz, Member (A) and Sandeep Gosain, Member (J)
IssueIncome Tax Act, 1961 - Sections 139(1), 139(2), 142(1), 143(2), 143(3), 148, 154, 271, 271(1)(c), 271(1)(c)(iii), 274, 292B, 292BB, 43(5), 73; Indian Income-tax Act, 1922 - Sections 22(1), 22(2), 22(4), 23(2), 34; Wealth-tax Act, 1957 - Section 18(1)
Judgement DateApril 05, 2017
CourtITAT (Income Tax Appellate Tribunal)

Order:

Jason P. Boaz, Member (A), (ITAT Mumbai 'C' Bench)

1. This appeal by the assessee is directed against the order of the CIT(A)-32, Mumbai dated 25.02.2016 for A.Y. 2008-09.

2. The facts of the case, briefly, are as under:-

2.1 The assessee, a firm having income from the business of trading in shares and securities filed its return of income for A.Y. 2008-09 on 03.09.2008 declaring loss of ` 44,86,620/- on account of trading loss as well as speculation loss (jobbing) in shares and securities. In the courses of assessment proceedings, the Assessing Officer (AO) noticed that the assessee was having profits in delivery based transactions against which it set off the loss of non-delivery based transactions, i.e. speculative transactions. On being queried in this regard, the assessee submitted that in scrips where no delivery has taken place during the year, the same are separately shown as speculation (jobbing). However, where even one share of a scrip is delivered, then all transactions in that scrip in the year are reported under trading in the Profit & Loss account. This explanation/position put forth by the assessee was not accepted by the AO; who held that the loss incurred by assessee from non-delivery based transactions constituted speculation loss under section 43(5) of the Act and could not be set off against normal business income from trading of shares. The assessment was accordingly completed under section 143(3) of the Act vide order dated 27.12.2010 where in the income of the assessee was determined at ` 52,29,550/-. Penalty proceedings under section 271(1)(c) of the Act was simultaneously initiated by issue of notice under section 274 r.w.s. 271 of the Act of even date for furnishing of inaccurate particulars of income. On appeal, the learned CIT(A) vide order dated 19.04.2012 dismissed the assessee's appeal and upheld the AO's addition holding that whatever loss arose on account of non-delivery of shares has to be classified as speculative loss and such loss is to be allowed set off only against speculation income in accordance with the provisions of section 73 of the Act.

2.2 Subsequently, the AO took up penalty proceedings initiated vide notice under section 274 r.w.s. 271 of the Act dated 27.12.2010. In response to show cause notice as to why penalty should not be levied under section 271(1)(c) of the Act the assessee, inter alia, submitted that since the income of the assessee was rectified, under section 154 of the Act vide order dated 29.11.2011, to NIL by setting off previous year's loss, the penalty proceedings initiated should be dropped. This explanation of the assessee was rejected as the AO was of the view that setting off of previous year's loss does not obviate the fact that the assessee has adjusted losses from speculation against income from business income which is in direct contravention to the mandate of the provisions of section 43(5) of the Act. The AO was of the opinion that in view of the decision of the Hon'ble Apex Court in CIT vs. Gold Coin Health Food Pvt. Ltd. (SC) 304 ITR 308 even if there was no positive income after additions on account of concealed income, penalty under section 271(1)(c) of the Act could be levied. In that view of the matter, the AO proceeded to levy penalty under section 271(1)(c) of the Act @100% of tax on income of ` 52,29,547/- sought to be evaded by the assessee for concealment of income/furnishing of inaccurate particulars of income. On appeal the learned CIT(A)-32, Mumbai vide the impugned order dated 25.02.2016 dismissed the assessee's appeal and further enhanced the penalty to be levied under section 271(1)(c) of the Act for furnishing of inaccurate particulars of income of ` 1,02,83,292/- as against income of ` 52,29,550/- adopted by the AO.

3. Aggrieved by the order of the CIT(A)-32, Mumbai dated 25.02.2016, the assessee has preferred this appeal raising the following grounds:-

1. On the facts and in the circumstances of the case, the learned CIT(A) erred in confirming the penalty and enhancing the penalty to Rs. 31,77,536/-. The appellant prays that, the penalty levied be deleted.

2. The learned assessing officer erred in stating that, the appellant had concealed the income and furnished inaccurate particulars of income and CIT(A) erred in confirming the same, the appellant prays that, there is no concealment of income and submission of inaccurate particulars.

3. On the facts and in the circumstances of the case, the learned assessing officer erred in levying penalty without issuing correct and proper notice u/s. 274 and without recording any reasons for levy of penalty the penalty order being bad in law it be cancelled.

4. On the facts and in the circumstances of the case, the learned CIT(A) erred in issuing notice of enhancement which is contrary to the facts and hence the same should be cancelled.

5. The appellant prays that, the penalty levied u/s. 271(1)(c) be cancelled. Without prejudice the penalty levying be excessive it be reduced.

6. The appellant craves leave to add amend or alter any or all of...

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