IN INCOME TAX APPELLATE TRIBUNAL C Bench, Mumbai Before Shri R.C. Sharma (AM) & Shri Pawan Singh (JM) I.T.A. No. 2702/Mum/2012 (Assessment Year 2002-03) I.T.A. No. 2703/Mum/2012 (Assessment Year 2003-04) I.T.A. No. 2704/Mum/2012 (Assessment Year 2004-05) Panther Investrade Ltd. ACIT CC-40 Radha Bhavan Vs. Aayakar Bhavan 1 st Floor, 121 M.K. Road Nagindas Master Road Mumbai-400 020. Mumbai-400 023. (Appellant) (Respondent) PAN No.AAACP3259R Assessee by Shri Neelkant Khandelwal Department by Dr. P. Daniel Date of Hearing 11.8.2016 Date of Pronouncement 30.9.2016 ORDER Per R.C. Sharma (AM) :- These are appeals filed by assessee against order of learned CIT(A) for A.Y. 2002-03 and 2003-04, in matter of imposition of penalty u/s. 271(1)(c) of Income Tax Act. 2. At outset, learned AR placed on record order of Tribunal in assessee s own case for A.Y. 2001-02 dated 17.4.2013, and for A.Y. 2002-03 to 2004-05 dated 19.4.2013 and contended that additions with respect to disallowance from share trading loss and interest liability not provided in 2 P & L for which penalty have been levied, had been deleted by Tribunal in respective orders. Tribunal in its order dated 19.4.2013 observed as under :- These three separate appeals by assessee are preferred against three separate orders of Ld. CIT(A) pertaining to three different assessment years 2002-03, 2003-04 & 2004-05. As common issues are involved in all these appeals, they were heard together and disposed of by this common order for sake of convenience and brevity. 2. In ground No. 1, assessee has shown its grievance against order of Ld. CIT(A) who did not allow loss of Rs. 37,90,55,189/- on transactions backed by delivery holding that transactions are not genuine in nature. 3. During course of assessment proceedings, Assessing Officer observed that assessee has shown loss of Rs. 37,90,55,189!- on account of share trading. assessee was asked to furnish necessary details vide questionnaire dt. 24.12.2004. On receiving no compliance, AO further issued notice dt. 18.32005. assessee vide letter dt.22.3.2005 furnished details of share traded during year. However, AO observed that assessee has not furnished supporting documents. As per AO, shares traded by assessee are same which are mentioned by JPC in its report. AO observed period under consideration is just extension of scam period, details of which have been considered and discussed in assessment order for A.Y. 2001-02. Since losses of assessment year 2001-02 were disallowed and since circumstances for year under consideration have not changed, AO went on to disallow entire loss claimed by assessee to tune of Rs. 37,90,55,189/-. 4. assessee carried matter before Ld. CIT(A) but without any success. Ld. CIT(A) confirmed findings of AO which were based on findings of A.Y. 2001-02. Ld. CIT(A) further drew support from decision of his predecessor in case of another group entity i.e. Sal Mangal Investrade Ltd. in appeal No. IT-56/0405 dt. 4.5.2007. Ld. CIT(A) concluded that AO is fully justified in holding that whole series of transactions are required to be considered in consolidatory form rather than individual and fragmentary form as analysis of whole event lead to only conclusion that same are circuitous method of tax avoidance and accordingly confirmed order of AO. 5. Aggrieved by this finding, assessee is before us. Ld. Counsel for assessee submitted that though AO has based his finding by drawing support from assessment of 2001-02 but failed to 3 appreciate that in said assessment year, AO has accepted loss based on delivery based transaction. It is say of Counsel that loss during year under consideration relates to transactions which are backed by delivery and therefore same should be allowed as have allowed in A.Y. 2001-02 and also in A.Y. 2003-04. Ld. counsel drew our attention to page 22 of Paper book which contain details of shares invoked by Global Trust Bank Ltd. Further drawing our attention at page-37 of Paper Book, which is statement of bank amonts. Ld. Counsel submitted that sale consideration on shares sold by G1.13L have been credited in this bank account. Similar transaction is reflected at page-39 of Paper book which again is statement of bank accounts. Ld. Counsel further drew our attention at page-23 & 24 of Paper Book which contains analysis of loss on delivery based transaction and pointed out that in case of shares of M/s. DSQ Industries, loss is due to diminution in value and in case of shares of Global Tele Systems and Mascon Global, loss is-due to sale by invoking shares by Global Trust Bank Ltd. It is say of Counsel that all these shares were purchased in A.Y. 2000-01. 6. Per contra, Ld. Departmental Representative strongly supported orders of lower authorities. 7. We have considered rival submissions and perused orders of lower authorities and material evidence brought on record in form of Paper book. It is not in dispute that AO has drawn support from findings of A.Y. 2001-02. We have benefit of perusing assessment order for A.Y. 2001-02 as exhibited from pages 52 to 61 of paper book. issue relating to non delivery based transaction has been discussed by AO at page-16, para 23 of his order and after discussing facts and circumstances, AO concluded that resulted losses in speculation transactions are held to be non genuine and is not allowed to be set off during year and is not allowed to be carried forward being non-genuine. It is also not in dispute that during year under consideration, loss has arisen out of delivery based transaction. This means that AO has accepted losses resulting from delivery based transaction in AY 2001 -02. Therefore, same view should have been adopted for year under consideration. 7.1. perusal of exhibit 23 and 24 which contain analysis of losses show that shares are brought forward from earlier years which means that assessee has not done any purchases during year under consideration. We further find that loss claimed by assessee is out of diminution in value of stock as on last day of accounting year as assessee follows cost price or market price whichever is lower as its method of valuation stock. Another factor 4 resulted into loss is due to fact that Global Trust bank invoked shares pledged with it and sold same which has resulted into losses to assessee. This also means that shares were pledged and brought forward from earlier years. Ld. CIT(A) has drawn support from decision of his predecessor in case of Sai Mangal Investrade Ltd. We find that said case travelled upto Tribunal and Tribunal has decided issue in favour of assessee in ITA No. 4229/M107. Tribunal in its order at page-12, para-12 has held as under: "We have also seen various other case laws on which reliance has been placed by Ld. Counsel for assessee, which are placed on record and found that directly or indirectly, ratio of those decisions are in favour of assessee. Therefore, in view of these facts and circumstances and in view of various case laws discussed above, we hold that loss suffered by assessee is on account of delivery basis transactions and on account of execution of trades totaling to Rs. 21.40 crores or so is allowable. Accordingly, we direct AO to allow claim of loss as claimed by assessee. After considering entire facts on record and also assessment for A.Y. 2001-02 and decision of Tribunal in case of Sai al Investrade Ltd (supra), in our considerate view, loss on account of delivery based transaction is genuine loss and AO is accordingly directed to treat loss as genuine. This ground of assessee is accordingly allowed. 8. Ground No. 2 relates to addition of sum of Rs. 2.40 crores being pro rata interest on ground that funds have not been used for purpose of business. 9. Ground No. 3 relates to disallowance of sum of Rs. 8,21,95,785/- being interest on secured loan from bank. 10. We propose to decide issue raised by ground No. 3. As similar issue came before us in case of MIs. Panther Fincap & Management Services Ltd., in ITA Nos. 193/M/07 & 7278 & 369/M/08 wherein we have decided issue in favour of assessee drawing support from decision of Tribunal in case of MIs. Chat Computer Pvt. Ltd. Vs DCIT in ITA No. 481 81Mum12007. As facts and circumstances are identical, we have no hesitation in following our order in case of /s. Panther Fincap & Management Services Ltd.(supra). We, accordingly direct AO to allow interest of Rs. 8,21,95,785/-. 11. Coming back to grievance raised in ground No.2, claim of interest is part of interest related to Madhavpura Mercantile Co-Op. Ltd., which is issue arised in ground No. 3. As we have decided 5 issue raised vide ground No. 3 in favour of assessee, grievance of assessee raised vide ground No. 2 become otiose and is accordingly missed. This ground of assessee is dismissed. 11.1 In result, this appeal filed by assessee is partly allowed. ITA No. 603/Mum/2008- A.Y. 2003-04 12. Ground No. 1 is identical to ground No. 2 of ITA No. 192/M/2008. However, during this year there is no disallowance of interest relating to Madhavpura Mercantile Co-Op. Bank Ltd. But we find that interest debited during year to tune of Rs. 17,09,20,551/- is on account of loans obtained from Madhavpura Mercantile Co-Op. Bank Ltd and Global Trust Bank during earlier years. No interest bearing loans have been taken during year under consideration. Since we have allowed interest in earlier years, following same, we direct Assessing Officer to allow interest for year under consideration also. This ground of assessee is allowed. 13. Ground No. 2 relates to not allowing set off of sum of Rs. 13,747/- by treating said business loss as speculation loss. 14. At very outset, Ld. Counsel for assessee submitted that issue is covered by decision of Tribunal in case of Sai Mangal Investrade Ltd. in ITA No. 975 & 976/M108 wherein Tribunal had occasion to decide on similar issue vide ground No. 4 at para-10 page-5 of its order which is as under: "Ground No. 4 relates to invoking of provisions of Explanation to Sec. 73. AO assessed business loss of assessee at Rs. 8.73,0561-. He refused to set off dividend income of Rs. 1,00,9401- against this business loss by invoking Explanation below Sec. 73. assessee argues that issue is covered in its favour by following decisions: Plaza Investments (P) Ltd. 108 lTD 239 (Mum) Starline Ispat & Alloys Ltd. Vs DCIT 108 TTJ 321 (Mum) He submits that dividend income, though assessable under head "income from other sources", is nothing but business income and has to be set off against business loss and Explanation to Section 73 cannot be applied." Facts and circumstances being identical, respectfully following decision of Tribunal(supra), we direct AG to allow set off of loss as claimed by assessee. This ground of assessee is allowed. 6 15. Ground No. 3 relates to charging of interest u/s. 234B of Act. As charging of interest is consequential and mandatory, this ground is accordingly dismissed. 16. In result, this appeal filed by assessee is partly allowed. ITA No. 604/Mu m/2008 - A.Y. 2004-05 17. Ground No. I is identical to ground No. 1 in ITA No. 192/M/08, therefore it is allowed. 18. Ground No. 2 is identical to ground No. 2 of ITA No. 603/M/08, therefore it is allowed. 19. Ground No 3 is identical to ground No 3 of ITA No 603 /M/08, this ground of assessee is dismissed 20. In result, appeals filed by assessee are partly. 3. We have considered rival contentions and found that both issues under consideration with regard to disallowance of share trading loss and interest liability not provided in P&L account have been deleted by Tribunal in quantum appeal. Since quantum itself has been deleted, penalty so imposed has no legs to stand with respect to these additions. Accordingly we direct to delete penalty with respect to these two additions. 4. Now coming to additions made by AO on account of interest bearing funds diverted for non-business use on which, AO has levied penalty under Section 271 (1)(C) by observing that assessee has furnished inaccurate particulars of income. In Assessment Year 2003-2004, AO has observed as under:- In light of above, Assessing Officer in order to accord final opportunity of being heard, issued show cause notice under Section 271(1)(c) Of Income-Tax Act, 1961, vide letter dated 17/03/2009 and date of compliance was fixed on 23/03/2009 which was duly served on 19/03/2009. There is no compliance to notices issued till date. Hence, it is concluded that assessee is completely devoid of material to rebut findings observed by Assessing Officer & upheld by Ld. CIT(A). 7 Hence, order of penalty is passed on basis of material on record available with this office. As per explanation 4 to section 271(1)(c), penalty is to be levied on tax sought to be evaded. That means if there is attempt to reduce income to some extent by action of any adjustment in accounts other than which is permissible under Act, it can be concluded that there was element of tax which assessee sought to avoid. only requirement to levy penalty is to prove that attempt was deliberate. In instant case, assessing officer has already established this aspect in his assessment order which was upheld by appellate authorities. In instant case, there is total absence of material to rebut presumption raised by Explanation 1 to section 271(1) (c). If devise of accounting adopted by assessee has effect of keeping off certain portion of income either directly or indirectly, then, essence of above context is present and it is starting point of offence of concealment. penal action is not for concealment of facts but for not paying tax on certain income by any method adopted by assessee in manner which could have been possible normally by concealment. In this case there is direct attempt to reduce portion income from knowledge of income-tax authorities. In furnishing return of income, assessee is required to furnish particulars and accounts on which such returned income has been arrived at. These may be particulars as per his books of accounts, if he has so maintained or on any other basis upon which he had arrived at returned figure of income. Any adjustments made in such books of accounts or other wise which resulted in keeping off or hiding portion of his income is publishable as furnishing inaccurate particulars of his income or concealment of income if whole transaction was deliberately colored with attempt of any nature ultimately resulted in avoidance of tax payment. From above, it is clear that expression used in clause (c) of section 271(1) is both in cases of concealment and inaccuracy, phrase particulars of income is used. It will be noted that as regards concealment expression in that clause (c) is 'has concealed particulars of his Income and not has concealed his income. It is obvious that penal provisions would operate if there is failure of duty to disclose fully and truly particulars of income, imposed under act and rules there under. Having regard to above, I am satisfied that assessee company has furnished inaccurate particulars of its income to extent of Rs.2,40,00,007/- leading to concealment and sought to avoid payment of notional tax & tax on positive income as specified under explanation 4 to section 271(1)(c) and thus committed default within meaning of section 271(1)(c) read with explanation 1 to that section for which penalty is leviable. 8 5. By impugned order CIT(A) has confirmed penalty. 6. It was argued by learned AR that similar penalty was imposed in Assessment Year 2001-2002 against which Assessee was in appeal before tribunal and tribunal vide its order dated 17/04/2013 in ITA No.8688/Mum/2010, have deleted penalty, therefore, issue is covered by order of Tribunal in Assessee s own case. Accordingly it was pleaded that similar penalty so imposed in Assessment Years 2002-2003, 2003- 2004 and 2004-2005 should also be deleted. 7. On other hand, contention of learned DR was as under:- Addition Nos. 1 & 3, I fully rely on order of A.O. & CIT(A). However, in r/o interest on non-interest bearing funds it is submitted that assessee agreed for addition only after thorough Scrutiny of file and issue of Show cause notice. Hence it cannot be stated that assessee agreed addition to buy peace. In this connection it is submitted that Hon'ble Supreme Court in case of Mak Data Pvt. Ltd. v. C.LT (2013) 358 ITR 593 (SC) held that surrender of income - No automatic immunity from Penalty. It also held that voluntary disclosure does not release from mischief of penal proceedings. Law does not provide when assessee makes voluntary disclosure of his concealed income, he has to be absolved from penalty. A.O. should not be carried away by plea of assessee such as "Voluntary disclosure", "buy peace", "avoid litigation", "amicable settlement", to explain away its conduct. question is whether assessee has offered any explanation for concealment of particulars of income or furnishing inaccurate particulars of income". It is respectfully submitted no reason whatsoever has been shown by assessee for concealing particulars of income to extent of Rs.2,40,00,000/-. It is prayed that penalty on this account may kindly be confirmed. 8. Only contention of learned A.R. was that issue with regard to penalty levied for disallowance of interest is squarely covered by order of Tribunal in assessee s own case for Assessment Year 2001-2002 dated 17-04-2013 9. We have considered rival contentions and carefully gone through orders of authorities below as well as order of Tribunal in assessee s own case dated 17/04/2013 for Assessment Year 2001-2002 where in tribunal have deleted penalty levied for diversion of interest bearing funds after having following observation:- 9 perusal of assessment order show that money has been given for period of 1 to 5 days and maximum repayment period was 18th and 19th day. These facts clearly emerged from findings of AO during course of assessment proceedings. Thus, it is not case where assessee has given funds on perpetual basis even Assessing Officer has calculated disallowable interest by calculating interest on Daily basis. 10. It is very clear from observation of tribunal that money was given for period of 1 to 5 days and maximum repayment period was 18 to 19 days. tribunal has also recorded finding to effect that these facts of money having advanced only for period of 1 to 5 days and maximum repayment period was 18 to 19 days are clearly emerged from findings of AO during course of Assessment proceedings. On basis of these findings/observation Tribunal has based their conclusion of deleting penalty so imposed for diverting interest bearing funds for non business purposes. Tribunal while deleting penalty also observed that it is not case where Assessee has given funds on perpetual basis even AO himself has calculated disallowance of interest by calculating interest on daily basis. On basis of these findings Tribunal has concluded that it is not fit case for levy of penalty u/s 271(1)(c). However, in all three years under consideration facts are entirely different, wherein diversion of interest bearing funds for non business purposes was not for 1 to 5 days or 18 to 19 days but for entire year i.e., 365 days. assessee also kept on diverting interest bearing funds not only during entire assessment year 2002-03, even this thing continued in next two assessment years also i.e., 2003-2004 and 2004-2005. Thus, in all three years under consideration, assessee has diverted interest bearing funds for non- business purposes. Under these facts and circumstances, issue under consideration cannot be said to be covered by facts recorded in order of tribunal dated 17/04/2013. As facts are entirely different in all 10 three years under consideration, conclusion drawn by Tribunal in Assessment Year 2001-2002 based on finding that diversion of funds was only for 1 to 5 days and maximum repayment period was 18 to 19 days, cannot be followed during years where in default in diverting interest bearing funds was for entire period of 365 days in all three assessment years under consideration. Tribunal in assessment year 2001-02 have precisely observed that assessee had not given funds on perpetual basis. However, in all three years under consideration funds were diverted by assessee perpetually i.e., for full year i.e., 365 days in Assessment Year 2002-2003. Moreover this diversion of interest bearing fund continued for another two years i.e. A.Y.2003-04 & 2004-05 for which AO had levied penalty and CIT(A) has also confirmed same after recording findings. 11. Under these circumstances, it is not correct to say that facts and circumstances of all three years under consideration are same as considered by tribunal in Assessment year 2001-2002. In interest of justice and fair play, we restore issue back to file of AO in all three years for deciding afresh levy in penalty u/s. 271(1)(C) of IT Act in light of our above observations. We direct accordingly. 12. In assessment year 2004-05 assessee was in respect of interest on IT Refund of Rs.11,38,158/-, which was not offered for tax. Accordingly, AO levied penalty on same. By impugned order CIT(A) confirmed penalty by observing that there is no compliance to notices issued till date, hence, it was concluded that assessee was completely devoid of material to rebut findings recorded by AO. However, nothing was brought to our notice by ld. AR so as to persuade us to deviate from finding recorded by lower authorities. Accordingly, we confirm penalty with respect to addition of Rs.11,38,158/- on account of interest received on IT Refund, which was added by AO under head income from other sources. 11 12. In result appeal of assessee in all three years are allowed in part in terms indicated hereinabove. Order has been pronounced in Court on 30.9.2016 Sd/- sd/- (PAWAN SINGH) (R.C. SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai; Dated : 30/9/2016 Copy of Order forwarded to : Appellant 1. Respondent 2. CIT(A) 3. CIT 4. DR, ITAT, Mumbai 5. Guard File. BY ORDER, //True Copy// ( Dy./Asstt. Registrar) ITAT, Mumbai Karuna, Sr.P.S. Panther Investrade Ltd. v. ACIT, CC-40, Mumbai