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TMI Blog2014 (12) TMI 516X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee has tried to take the benefit of provisions of section 43(5)(d) which provides for the purpose of section 43(5) that an eligible transaction in respect of trading in derivatives referred to in clause (ac) of section 2 of the Securities Contracts (Regulation) Act, 1956 carried out in a recognized stock exchange - once it is established that the claim is wholly untenable in law and unsustainable, then the assessee would be liable to the imposition of penalty for making a claim of this nature - The assessee’s claim that all the relevant facts were disclosed in the return of the income is not correct - He has not disclosed that the loss was on the transactions where no delivery of commodities has taken place - assessee has not disclosed in the return that loss was of speculative loss, not short term capital loss - The explanation submitted by the assessee is not a bonafide explanation and it is also unsustainable in law - The law clearly defines the ‘speculative transactions’. Assessee was well in the knowledge of the fact that for the transactions entered into, delivery of commodities has not taken place - It is a clear case of “speculation transaction” - assessee had not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... confirmed the levy of penalty and directed the Assessing Officer to compute the tax on the amount of ₹ 1,61,27,836/- as per the relevant laws at that time and then levy the penalty on that tax which was sought to be evaded. The relevant part of the CIT (A) is reproduced as under :- 4. I have gone through the submissions of the appellant, the facts on records and have also perused the penalty order and considered the decisions relied upon both by the appellant and the AO. 4.1 Section 271(l)(c), provides for imposition of penalty in case the assessing officer, in the course of any proceeding under Act, is satisfied that (i) any person had concealed particulars of his income or (ii) had furnished inaccurate particulars of such income. Further, after insertion of Explanation 1 to Section 271(l)(c), the onus is on the assessee to show that there was no intention of concealment and not on the revenue. 4.2 In this context two landmark judgments were given by Apex Court in Dilip N. Shroff Vs Joint CIT (2007) 291 ITR 519 (SC) and T. Ashok Pai Vs CIT (2007) 292 !TR 11 (SC), which spell out mainly the following rules for the purpose of penalty imposable: (i) Both t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ruling in Dharmendra Textile Processor's Case (Supra) has not overruled their decision in Dilip N. Shroff's case except for its mention of Mens rea therein. 4.5 It is also pertinent to mention here that after the ruling of Dharamendra Textile Processor, the Supreme Court has come out with the ruling in 2 different case namely CIT Vs Atul Mohan Bindal (2009) (317 ITR1) and UOI Vs Rajasthan Spinning Weaving Mills (20l0) (1GSTR66) (SC) and have given a finding that that for applicability of Section 271(1)(c) the conditions stated therein must exist. Even in the decision in the case of CIT(LTU) Vs. MTNL, ITA NO.626/2011 dated 10.10.2011, the jurisdictional Delhi High Court has upheld the same view. From above, it is very clear that for imposing penalty under Section 271(1)(c), the AO have to be satisfied that: (a) assessee has concealed the particulars of income or (b) assessee has furnished inaccurate particulars of such income. 4.6. Thus in view of the above discussion and in view of the Hon'ble Supreme Court in Reliance Petroproducts (supra) it is clear that the legislature did not intend to impose penalty on every assessee whose Claim was reje ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble by them would get away without paying the tax legally payable by them, if their cases are not picked up for scrutiny. This would take away the deterrent effect, which these penalty provisions in the Act have .. 4.10 The appellant in its submission has stated that since they have disclosed all the facts in their return of income hence in view of the ruling of Reliance Petro product (supra), penalty under 271(1)(c) is not attracted. This view of the appellant is not admissible, because if for an example in a case, where any assessee debits the cost of an asset to its profit and loss account or debits any capital expenditure or any patently wrong claim in its profit and loss accounts and claim it as revenue expense, I am afraid in such an event no assessee can be allowed to go scot free. In that case ho assessee should be allowed to take shelter and claim that since they have disclosed the facts, therefore in such a case no penalty is leviable in view of the decision of Supreme Court in the case of Reliance Petro Products Ltd. (supra). Such an interpretation would make provisions of Section 271(1)(c) redundant, which in my humble view is not the intention of the legislature. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1)(c), which is not only bad in law but also against the facts and circumstances of the case. 3. We have heard both the sides on the issue. We have also considered the case laws relied upon by both the sides including the decision of Hon'ble Supreme Court in the case of CIT vs. Reliance Petro Products Pvt. Ltd. reported in 322 ITR 158 (SC) and decision of Hon'ble Delhi High Court in the case of CIT vs. Zoom Communication Pvt. Ltd. reported in 327 ITR 510 (Del.). The assessee claimed that he has disclosed all the relevant facts in the return of income. The assessee entered into contracts of purchasing and selling commodities and these contracts were settled without actual delivery of commodities. Prima facie this loss incurred of ₹ 1,61,27,836/- was a speculative loss incurred on speculation transaction of commodities. The speculation loss can be allowed only against the speculation profits and it cannot be allowed to set off against any other income of the assessee. The speculation transactions are clearly defined in section 43(5) of the Income-tax Act, 1961 wherein a speculative transaction means a transaction in which a contract for the purchase or sale of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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