Commissioner of Income Tax vs Auric Investment and Securities Ltd.

V.B. Gupta, J.—The Income Tax Appellate Tribunal (for short as "the Tribunal"), vide its impugned order dated October 28, 2005, passed in ITA No. 800/Del/2005 for the assessment year 2001-02 dismissed the appeal of the Revenue and upheld the order of the Commissioner of Income Tax (Appeals) deleting the penalty amounting to Rs. 8,80,000 imposed by the Assessing Officer u/s 271(1)(c) of the Income Tax Act, 1961 (for short as "the Act").

Aggrieved with the order passed by the Tribunal, the Revenue has filed the present appeal.

The assessee in the present case filed its return on October 31, 2001, declaring a loss of Rs. 23,05,096. The return was selected for scrutiny and assessment was made at the loss of Rs. 85,259. During the assessment proceedings, the Assessing Officer found that the loss claimed by the assessee was speculative in nature which could be allowed to be adjusted against speculative income only and as the income was assessed at a loss, the loss shown by the assessee could not be adjusted, therefore, the Assessing Officer initiated penalty proceedings u/s 271(1)(c) of the Act. The Assessing Officer also held that the assessee had furnished inaccurate particulars of income to the extent of making a wrong claim of share trading loss against normal income and hence he was liable for imposition of penalty and, thus, the penalty in question was imposed.

The assessee filed an appeal before the Commissioner of Income Tax (Appeals) who, vide its order dated November 29, 2004, cancelled the penalty following the ratio of the decision of the apex court in Commissioner of Income Tax Vs. Prithipal Singh and Co., .

The Revenue challenged the order of the Commissioner of Income Tax (Appeals) before the Tribunal and, vide the impugned order the Tribunal dismissed the appeal filed by the Revenue.

It has been contended by learned Counsel for the Revenue that in the present case there is not only concealment of income but also furnishing of inaccurate particulars which attracts penalty u/s 271(1)(c) of the Act. Further, the applicability of Section 43(5) of the Act is only an afterthought and it was taken before the Commissioner of Income Tax (Appeals) for the first time.

Section 271 of the Act deals with failure to furnish returns, comply with notices, concealment of income, etc. The relevant provision of this section for the disposal of the present appeal is Sub-section (1)(c) and it read as under:

(1) If the Assessing Officer or the Commissioner (Appeals) or the Commissioner in the course of any proceedings under this Act, is satisfied that any person--....

(c) has concealed the particulars of his income or furnished inaccurate particulars of such income, or....

he may direct that such person shall pay by way of penalty,--....

The provisions of this section are attracted where in the course of any 8 proceedings under the Act, the Assessing Officer or the first appellate authority is satisfied that any person has concealed the particulars of his income or has furnished inaccurate particulars of such income.

As per the order passed u/s 271(1)(c) of the Act, it has been 9 stated by the Assessing Officer that:

The assessee in its return of income has claimed an amount of Rs. 22,15,837 in its profit and loss account on account of share trading loss and has treated the same as normal business expense. However, it was found and established during the assessment proceedings that this loss is speculative in nature and cannot be adjusted against normal income of the assessee. Consequently, the loss of the assessee has been assessed at the amount of Rs. 85,259 against returned loss of Rs. 23,05,096. By doing so the assessee has furnished inaccurate particulars of income to the extent of making a wrong claim of share trading loss against normal income. The assessee is liable to furnish true and correct particulars of income in its return of income which he has failed to do so in the present case. In view of the facts discussed as above, penalty of Rs. 8,80,000 is hereby levied u/s 271(1)(c) of the Income Tax Act, 1961, for furnishing inaccurate particulars of income.

Now, the question which arises for consideration in the present appeal is as to whether the assessee has furnished inaccurate particulars of income to the extent of making a wrong claim of share trading loss against the normal income or not and for that matter, we refer to the assessment order passed by the Assessing Officer in this case.

According to the assessment order, during the year under consideration, 11 the assessee has declared income from brokerage and other income against which it has claimed share trading loss of Rs. 22,15,837 in the profit and loss account. The assessee was required to explain why this loss be not treated as a speculation loss. The assessee, vide his reply dated November 18, 2002, submitted that--

The assessee as a prudent stock broker has to meet out his commitments in respect of orders received on telephone and without receiving any money. If market price of these shares got reduced, those clients sometimes do not turn up to take delivery of these shares. The assessee therefore sell these shares at the prevailing market rates in order to avoid any further loss. Such transactions, therefore, take the shape of a jobbing transaction as it is a self-trading transaction.

Vide letter dated January 15, 2004, the assessee was intimated that no detailed evidence has been furnished and he was required to furnish the complete details with evidence of purchase and sale of shares, in the absence of which the loss claimed will be treated as "speculative loss".

The assessee, vide its letter dated February 3, 2004, filed during the course of such proceedings, submitted the details of transaction.

So, it is clear from the record that all the requisite information as required by the Assessing Officer, was furnished by the assessee. There is nothing on record to show that in furnishing its return of income, the assessee has either concealed its income or has furnished any inaccurate particulars of income. The mere treatment of the business loss as speculation loss by the Assessing Officer does not automatically warrant inference of concealment of income. The assessee did not conceal any particulars of income, as he filed full details of the sale of shares. In any case, it cannot be said that the assessee has concealed any particulars so far as its computation of income is concerned and as the such provisions of Section 271(1)(c) of the Act are not attracted in this case and we do not find any infirmity in the reasoning given by the Tribunal.

The above being the position, no fault can be found with the view taken by the Tribunal. Thus, the order of the Tribunal does not give rise to a question of law, much less a substantial question of law, to fall within the limited purview of Section 260A of the Act, which is confined to entertaining only such appeal against the order which involves a substantial question of law.

For the record, we may note that learned Counsel for the assessee contended that in view of the recent decision of the Supreme Court in Virtual Soft Systems Ltd. Vs. Commissioner of Income Tax, Delhi-I, , since the assessee had filed a loss return and was assessed as such, there is no question of any penalty being levied on the assessee. While this may be so, we have found on the merits that the Revenue has not made out any substantial question of law, we are not going into this issue in this case.

The present appeal filed by the Revenue is, hereby, dismissed.