Varun Resorts Ltd, Mumbai vs Department Of Income Tax

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES "E", MUMBAI ी आर.सी. शमा , लेखा सद य, एवं स ु मा चावला, या%यक सद य के सम& ।

ु ी सष

Before Shri R.C.Sharma, AM and Ms.Sushma Chowla, JM

ITA No.6224/Mum/2013 : Asst.Year 2007-2008

The Dy.Commissioner of Income-tax Circle 8(3) Mumbai. ....... Appellant

Vs. M/s.Varun Resorts Limited 3 rd Floor, Luthia House Anandrao Devale Road, Juhu Mumbai - 400 049 ....... Respondent PAN : AAACV1683R.

अपीलाथ क' ओर से /Appellant by : Shri Madhu Vani V

यथ क' ओर से /Respondent by : Shri Haresh P.Shah ु वाई क तार ख / सन घोषणा क तार ख / Date of Hearing : 01.06.2015 Date of Pronouncement : 05.06.2015.

आदे श / O R D E R

Per Sushma Chowla (JM) :

The present appeal filed by the Revenue is against the order of Commissioner of Income-tax (Appeals), dated 13.08.2013, relating to assessment year 2007-2008 against levy of penalty u/s.271(1)(c) of the Income-tax Act, 1961.

2. The Revenue has raised following grounds of appeal:-

"1. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in deleting the penalty imposed u/s 2 ITA No.6224/Mum/2013. M/s.Varun Resorts Limited.

271(1)(c) of the Act, observing that mere disallowance of a claim would not entail imposition of penalty u/s 271(1)(c) of the Act.

2. On the facts and in the circumstances of the case and in law, the Led.CIT(A) erred in deleting the penalty imposed u/s 271(1)(c) of the Act, holding that disallowance of mere a claim would not attract penalty u/s 271(1)(c) of the Act, without appreciating that -

a) The assessee has been carrying on the business of share trading and had shown profits from share trading business till A.Y. 2005-06 which it arbitrarily changed to short term capital gains solely with the intention to pay tax at the lesser rate applicable to short term capital gains.

b) As found by the Ld.CIT(A) during quantum appeal and as subsequently upheld by the ITAT, the share trading business carried on by the assessee till A.Y. 2005-06 remained the same in A.Y. 2006-07 & 2007-08 and therefore, the short term capital gains on share trading business claimed by the assessee was a false claim.

c) The Ld.CIT(A) in the order in quantum appeal found that the fact of closing stock of shares of Rs.3,82,77,523/- as on 31.03.2005 had been concealed by the assessee in its return for A.Y. 2006-07 and therefore, had the case not been selected for scrutiny, the fact of the assessee carrying on share trading business would not have come to light.

3. On the facts and in the circumstances of the case and in law, the ld.CIT(A) erred in deleting the penalty imposed u/s 271(1)(c) of the Act, ignoring the ratio of the decision of the Delhi High Court in the case of CIT vs. Zoom Communications Pvt. Ltd. (Del.) (327 ITR 510).

4. The appellant prays that the order of the CIT(A) on the above ground be set aside and that of the A.O. be restored.

3 ITA No.6224/Mum/2013. M/s.Varun Resorts Limited.

5. The appellant craves leave to amend or alter any grounds or add a new ground which may be necessary."

3. The only issue raised in the present appeal is against levy of penalty u/s 271(1)(c) of the Act. The learned AR for the assessee at the outset pointed out that the issue of levy of penalty u/s 271(1)(c) of the Act, is squarely covered in favour of the assessee by the order of the Tribunal in assessee's own case relating to assessment year 2006-2007. The learned DR for the Revenue, on the other hand, placed reliance on the orders of the Assessing Officer.

4. We have heard the rival submissions and perused the records. In the facts of the present case that during the course of assessment proceedings, the A.O. noted that the assessee had declared income from short term capital gain on sale of shares and mutual funds. The assessee was show caused as to why the said income should not be assessed as business income in the hands of the assessee. Rejecting the explanation of the assessee, the A.O. assessed the said income under the head `income from business'. Penalty proceedings u/s 271(1)(c) of the Act were initiated against the assessee. The AO noted in the order levying penalty u/s 271(1)(c) of the Act, that the facts of the case were identical to the facts in assessment year 2006-2007 and following the same, penalty u/s. 271(1)(c) was levied for filing inaccurate particulars of income at Rs.71,16,704.

4.1 The CIT(A), in turn, following his order in assessee's own case for assessment year 2006-2007, deleted the said penalty levied u/s 271(1)(c) of 4 ITA No.6224/Mum/2013. M/s.Varun Resorts Limited.

the Act. The Revenue is in appeal against the said deletion of penalty levied u/s 271(1)(c).

4.2 We find that the Tribunal in assessee's own case relating to assessment year 2006-2007 in ITA No.5015/Mum/2013 vide order dated 31.10.2014, on identical issue of levy of penalty u/s 271(1)(c) of the Act, on treatment of transactions in shares and mutual funds whether assessable under the head `income from short term capital gains' as declared by the assessee and whether to be assessed under the head `income from business', had held as under:-

"6. We have heard rival submissions and perused material before us. We find that the AO had held that assessee company was engaged trading in share and had not made investments, that First Appellate Authority (FAA) had upheld the quantum order passed by the AO, that the AO had levied penalty invoking the provisions of section 271(1)(c) of the Act but was same deleted by the FAA. We further find that till last assessment year the assessee was showing income from share business under the head business income, that during the year it had converted its stock in trade in to investment, that it was maintaining two portfolios in the year under appeal, that it had showed income from certain share transaction under the business head. As per the provisions of the Act, the assessee can convert his stock in trade in to investment. So, if in the year under consideration, it had opted for that option, there was no reason to reject its claim. It had passed necessary entries in the books of accounts. Therefore just because of a decision taken in quantum proceedings, it cannot be held that the assessee had concealed particulars of income. It is said that decision in the assessment proceedings do not result in automatic imposition of penalty. In the matter before us, the assessee had filed all the necessary details before the AO. There was difference of option between the assessee and the AO about the treatment to be given to the 5 ITA No.6224/Mum/2013. M/s.Varun Resorts Limited.

share transactions undertaken by the assessee. The admission of the appeal by the Hon'ble jurisdictional High Court against the quantum proceedings prove that there is difference of opinion about the issue in question. In such matters, in our opinion, penalty should not be levied. So, considering the particular facts and circumstances of the case, we hold that the order of the FAA does not suffer from any legal infirmity. Confirming his order, we decide the effective ground of appeal against the AO."

4.3 Both the authorities below before us have followed the respective orders in assessment year 2006-2007 while deciding the issue of levy of penalty u/s 271(1)(c) of the Act in the case of the assessee for the instant assessment year. The issue and facts arising in the present appeal is identical to the issue and facts before the Tribunal (supra) in assessee's own case and following the same parity of reasoning, we confirm the order of the CIT(A) in deleting the penalty levied u/s 271(1)(c). Accordingly, grounds of appeal raised by the Revenue are dismissed.

5. प रणामतः राज व क अपील! खा रज क जाती है । In the result, Revenue's appeal is dismissed.

Order pronounced on this 5th day of June, 2015.

आदे श क घोषणा (दनांकः को क गई ।

Sd/- Sd/- (R.C.Sharma) (Sushma Chowla) लेखा सद य / ACCOUNTANT MEMBER या%यक सद य / JUDICIAL MEMBER

मुंबई Mumbai; (दनांक Dated : 5th June, 2015. Devdas* 6 ITA No.6224/Mum/2013. M/s.Varun Resorts Limited.

आदे श क' *%त,ल-प अ.े-षत/Copy of the Order forwarded to :

1. अपीलाथ / The Appellant

2. यथ / The Respondent.

3. आयकर आय/ ु त(अपील) / The CIT, Mumbai.

4. आयकर आयु/त / CIT(A)- , Mumbai

5. -वभागीय .त.न3ध, आयकर अपील य अ3धकरण, मुंबई / DR, ITAT, Mumbai

6. गाड7 फाईल / Guard file.

आदे शानस ु ार/ BY ORDER, स या-पत .त //True Copy//

उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपील य अ धकरण, मुंबई / ITAT, Mumbai