Goyam Stock Broking P.Ltd, Mumbai vs Department Of Income Tax

Dy.Commissioner of Income बनाम/ M/s Goyam Stock Broking Pvt.Ltd, Tax -10(2), 1-41, Guruprasad, Vs. Room No.432, 4th Floor, Gadoria Nagar, Ghatkopar East, Aayakar Bhavan,M.K.Road, Mumbai-400077 Mumbai-400020 (अपीलाथ /Appellant) .. ( यथ / Respondent)

थायी ले ख ा सं . /जीआइआर सं . /PAN/GIR No. :AAACF4291M

अपीलाथ ओर से / Revenue by: Shri Vijay Kumar Bora

यथ क! ओर से/Assessee by : Shri Rajeev Waglay

सन ु वाई क! तार%ख / Date of Hearing : 6.1.2015 घोषणा क! तार%ख /Date of Pronouncement : 13.2.2015

आदे श / O R D E R

Per B.R.BASKARAN, Accountant Member:

The revenue has filed this appeal challenging the order dated

22.4.2013 passed by Ld CIT(A)-21, Mumbai cancelling the penalty levied

u/s 271(1)(c) of the Act for the assessment year 2009-10.

2. The Ld D.R submitted that the assessee had received dividend

income and claimed the same as exempt. However the assessee had

disallowed a sum of Rs.81,600/- only u/s 14A of the Act, but the same was

not in accordance with section 14A read with Rule 8D. Hence the assessing

officer computed the disallowance as per Rule 8D at Rs.39,27,054/- and ITA No.5081/M/2013 2

accordingly completed the assessment. The assessee also accepted the

same. Later the assessing officer levied a penalty of Rs.12,13,459/- u/s

271(1)(c) of the Act for furnishing inaccurate particulars of income. The Ld

D.R submitted that the assessee is well aware that the provisions of Rule

8D are applicable to the year under consideration and hence non-

compliance of the same would lead to furnishing of inaccurate particulars

of income. Accordingly he contended that the Ld CIT(A) was not justified

in cancelling the penalty.

3. On the contrary, the Ld A.R submitted that the assessee is a trader

in stocks and shares and hence the question as to whether the provisions

of Rule 8D r.w.s. 14A shall apply to a trader or not remained a debatable

issue on the date when the assessee filed its return of income. Further

the constitutional validity of the above said provisions were also challenged

at that point of time before the Hon'ble Bombay High Court in the case of

Godrej & Boyce Manufacturing Company Ltd. However, by the time the

assessment was completed, the Hon'ble Bombay High Court had confirmed

the constitutional validity and hence the assessee accepted the addition

made by the AO. He further submitted that the AO has computed

disallowance only under Rule 8D(2)(ii) and Rule 8D(2)(iii), i.e., relating to

indirect expenses only. Accordingly he submitted that the Ld CIT(A) was

justified in deleting the penalty by placing reliance on the decision of

Hon'ble Supreme Court rendered in the case of Reliance Petro Products ITA No.5081/M/2013 3

(322 ITR 158). Further he submitted that the penalty shall also not lie,

since the applicability of provisions of sec. 14A to a share trader remains a

debatable issue.

4. We have heard the rival submissions and perused the record. We

notice that the assessee has furnished an explanation for not computing

the disallowance in terms of Rule 8D r.w.s.14A of the Act and the said

explanation has not been found to be false. Further, the claim of

expenditure became unsustainable due to the legal provisions and hence

the Ld CIT(A) was justified in placing reliance on the decision of Hon'ble

Supreme Court rendered in the case of Reliance Petro Products (supra),

wherein it has been held that the claim, which is not sustainable in law,

would not lead to a case of furnishing of inaccurate particulars of income.

Accordingly, we uphold the order of Ld CIT(A).

5. In the result, the appeal filed by the revenue is dismissed.

The above order was pronounced in the open court on 13th Feb, 2015.

घोषणा खल ु े यायालय म) *दनांकः 13th Feb, 2015 को क! गई ।

sd sd

( वजय पाल राव/VIJAY PAL RAO) (बी.आर. बा करन,/ B.R. BASKARAN)

या यक सद य / Judicial Member लेखा सद य/Accountant Member

मुंबई Mumbai: 13th Feb,2015.

व. न.स./ SRL , Sr. PS ITA No.5081/M/2013 4

आदे श क !त#ल$प अ%े$षत/Copy of the Order forwarded to :

1. अपीलाथ / The Appellant

2. यथ / The Respondent.

3. आयकर आय0 ु त(अपील) / The CIT(A)- concerned

4. आयकर आय0 ु त / CIT concerned

5. वभागीय त न2ध, आयकर अपील%य अ2धकरण, मंब ु ई/ DR, ITAT, Mumbai concerned

6.

गाड फाईल / Guard file.

आदे शानुसार/ BY ORDER, true copy सहायक पंजीकार (Asstt. Registrar) आयकर अपील%य अ2धकरण, मंब ु ई /ITAT, Mumbai