IN INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI BEFORE SHRI SANJAY ARORA, AM AND SHRI AMARJIT SINGH, JM I.T.A. No. 6292/Mum/2014 ( Assessment Year: 2009-10) Girdharilal K. Agrawal Asst. CIT-12(3), 302, Vikas Building, Room No. 658, 6th Floor, 11, Bank Street, Fort, Vs. Aayakar Bhavan, M. K. Road, Mumbai-400 001 Mumbai-400 020 PAN/GIR No. AABPA 1257 E (Appellant) : (Respondent) Appellant by : Miss Arati Vissanji Respondent by : Shri Airiju Jaikaran : 23.06.2016 Date of Hearing : 05.10.2016 Date of Pronouncement O R D E R Per Sanjay Arora, A. M.: This is Appeal by Assessee directed against Order by Commissioner of Income Tax (Appeals)-23, Mumbai ( CIT(A) for short) dated 11.7.2014, confirming levy of penalty u/s. 271(1)(c) of Income Tax Act, 1961 ( Act hereinafter) for assessment year (A.Y.) 2009-10 vide order dated 22.05.2012. 2. facts of case in brief are that assessee, individual, claimed set off of loss in commodities (Rs.14,16,135/-) against speculative income, i.e., to extent available (Rs.5,31,333/-), and balance (Rs.8,84,802/-) against non-speculative 2 ITA No. 6292/Mum/2014 (A.Y. 2009-10) Girdharilal K. Agrawal vs. Asst. CIT business income (by way of interest on capital in partnership firm), per his return of income for year. Broker Notes revealed expiry of contracts to be at future date. commodity trading was further through NCX of India Ltd., which Exchange was not recognized exchange (at relevant time), being notified as such only vide Notification dated 22.5.2009. loss was accordingly speculative in nature, and its adjustment against non-speculative income, i.e., Rs.8,84,802/-, in clear contravention of law. In penalty proceedings, initiated on conclusion of assessment proceedings, holding thus (and, correspondingly, assessment of speculative loss of Rs.8.85 lacs, allowed to be carried forward), assessee, relying on CIT vs. Reliance Petroproducts (P) Ltd. [2010] 322 ITR 158 (SC), based his case on having not furnished inaccurate, or concealed, any particulars of income; his return clearly stating both nature of income/loss, i.e., loss on commodity trading, as well as it set off against non-speculative income. Assessing Officer (AO), however, found assessee s claim for impugned set off as clearly impermissible in law, which did not admit of two views. This was not corrected even per revised return filed subsequently. In appellate proceedings, contesting penalty (levied at minimum rate of 100% of tax sought to be evaded), assessee emphasized his conduct, claimed bona fide, i.e., that claim was made under bona fide belief of being entitled to claim (for set off) as made. return was filed not through professional but employee. same, even assuming it as fact, was found not relevant in-as-much as assessee had, per his return of income, clearly preferred wrong claim. Further, no basis for formation of belief as to validity of said claim had been disclosed. ld. CIT(A), accordingly, relying on CIT vs. Zoom Communication (P) Ltd. [2010] 327 ITR 510 (Del) and CIT vs. HCIL Arsspl Triveni (in ITA No. 481/2012 dated 29.7.2013), also quoting from latter, confirmed penalty, also discussing import of decision in Reliance Petroproducts (P) Ltd. (supra), which he found, rather, as supportive of Revenue s case, as well as decisions relied upon, 3 ITA No. 6292/Mum/2014 (A.Y. 2009-10) Girdharilal K. Agrawal vs. Asst. CIT which were considered as inapplicable on facts. Aggrieved, assessee is in second appeal. 3. We have heard parties, and perused material on record. knowledge of nature of loss as speculative is confirmed by fact of its set off against speculative income (to extent of availability of such income), returned as such. same also proves, if one was required, that assessee is also aware about legal difference between speculative and non-speculative income, as well as that speculative loss is adjustable only against income of same nature, i.e., speculative income. This is as very provision that allows set off of speculative loss against speculative income, i.e., section 72(1) r/w s.71, would also clarify that such loss can only be set off against income of speculative business only. On what basis, then, does he claim balance, unabsorbed speculative loss against non-speculative income, which therefore remains only unexplained? law in matter is unambiguously clear (refer Explanation 2 to section 28; sections 71 and 72). claim is fatuous, if not false. Qua conduct, it is, firstly, conduct in preferring claim that is relevant, and is to be explained. No basis for same has been furnished at any stage. same, as afore-stated, suggests clear understanding and knowledge of legal concepts, i.e., awareness of relevant provisions, which clearly provide for two to be adjusted and carried forward separately, belying claim of bona fide conduct. How then same be regarded as made under mistaken, albeit, bona fide belief. assessee s conduct is, in fact, on contrary, not bona fide. Apart from manner of making claim, suggesting awareness of legal concepts, as afore-noted, soon after receiving notice u/s. 143(2) dated 18/8/2010, assessee filed revised return on 30/9/2010 setting off entire speculative loss against non- speculative income, contrary to understanding conveyed per original return. On what basis, one may ask? same, given that commodity trading is admittedly 4 ITA No. 6292/Mum/2014 (A.Y. 2009-10) Girdharilal K. Agrawal vs. Asst. CIT speculative, i.e., by definition, inexplicable; assessee thereby, rather than correcting his erroneous claim, compounding it further by claiming entire loss on commodity trade against non-speculative income. As it would appear, same stands filed to convey impression that assessee was not aware of loss on commodity trading, which is speculative by definition (section 43(5)), is not so. On what basis? There is no explanation for this strange conduct. This is precisely what AO observes when he states that assessee did not rectify mistake - clear mistake of law in undisputed facts, even per revised return. Could revision be possible without visiting law in matter? same casts clear shadow and serious and grave doubt on assessee s conduct. plea of return having been filed through employee is again specious. same is firstly unproved, with assessee being represented, both before Revenue authorities as well as before us, by Chartered Accountants/tax counsels. argument is also without any factual basis in view of claim/s made and in manner done - per original and revised returns, with no basis for same being explained at any stage. same in fact is tacit admission of claim being without any legal basis. Reference, apart from decisions relied upon by ld. CIT(A), may be made to decision in CIT vs. N. G. Technologies Ltd. (in ITA No. 82/2012 dated 01.12.2014), SLP against which stands dismissed by Hon ble Apex Court. Through whom, then, one may ask, was return revised? Given clear provision of law, both Explanation (1A) and (1B) to s. 271 (1)(c) are attracted in instant case. We, accordingly, confirm levy of penalty. 4. In result, assessee s is dismissed. Order pronounced in open court on October 05, 2016 Sd/- Sd/- (Amarjit Singh) (Sanjay Arora) Judicial Member Accountant Member 5 ITA No. 6292/Mum/2014 (A.Y. 2009-10) Girdharilal K. Agrawal vs. Asst. CIT Mumbai; Dated : 05.10.2016 Roshani, Sr. PS Copy of Order forwarded to : 1. Appellant 2. Respondent 3. CIT(A) 4. CIT - concerned 5. DR, ITAT, Mumbai 6. Guard File BY ORDER, (Dy./Asstt. Registrar) ITAT, Mumbai Girdharilal K. Agrawal v. Asst. CIT-12(3), Mumbai