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TMI Blog2021 (5) TMI 916X X X X Extracts X X X X X X X X Extracts X X X X ..... g Officer u/s 274 r.w.s 271 of the Act, dated 29.12.2011, a copy of which is placed at page 87 of the paper book shows that it is in only a printed form without striking off the inappropriate words in the said notice. Therefore, it is not understood as to under which limb of the provisions of section 271(1)(c), the Assessing Officer has initiated penalty proceedings i.e. whether for concealment of income or for furnishing of inaccurate particulars of such income. The Hon ble Delhi High Court in the case of PCIT vs Sahara India Life Insurance Company Ltd. [ 2019 (8) TMI 409 - DELHI HIGH COURT ] has dismissed the appeal filed by the Revenue on identical circumstances, the relevant observations of which have already been reproduced in the preceding paragraphs while recording the arguments of the learned counsel for the assessee. We, therefore, hold that the notice issued by the Assessing Officer is bad in law since it did not specify under which limb of section 271(1)(c) of the Act, the penalty proceedings have been initiated i.e. whether for concealment of income or for furnishing of inaccurate particular of income. In this view of the matter, we uphold the order of the learn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - in share trading business carried on at NSE and BSE and most of it was on account of trading in derivatives. The impugned transactions/ losses have been separately disclosed in the audited P L A/c filed by the assessee and accepted by the assessing officer. There is no dispute about the facts or figures of the case or manner of their disclosure. In the computation, the assessee had set off a part of this loss against the other business income and had carried forward the balance net loss of ₹ 25,94,45,470/-. During the assessment proceedings, the assessing officer applied provisions of explanation to section 73 and held these losses as speculative and denied the setoff. Accordingly, the assessing officer computed net income of ₹ 1,59,42,600/- for the year and increased the carry forward loss to ₹ 27,63,30,230/- against the claim of ₹ 25,94,45,470/-. In penalty order the assessing officer had reiterated the facts mentioned in assessment order. It is stated therein that by claiming set off, the assessee had tried to avoid due taxes on positive non-speculative income. The penalty u/s 271(l)(c) of the Act was, thus, levied for furnishing inaccurate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income tax authorities. 16. The next and main issue in the case is regarding claim of setoff of the share losses against the business income. In this context the claim of the assessee is that there was multiplicity of provisions on the matter and therefore, in its understanding there was ambiguity surrounding the interpretation of impugned provisions of law. It was also mentioned that derivatives and shares are different and the assessee had always believed so. It has also been argued that the explanation was introduced to curb the malpractice of creating artificial losses in shares of group companies to reap benefit of setoff against taxable income. Therefore, the assessee had always believed that explanation to section 73 can be used only where the loss in shares has been found as bogus. 17. I have gone through the relevant provisions on the statute in form of section 43(5)(d) and explanation to section 73 of the Act. Indeed section 43(5)(d) exempts the impugned derivative transactions from the gamut of being speculative. On the other hand, explanation to section 73 takes away such exemption in certain cases. I have also taken note of the fact that neither provisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld be imposed. 20. Having resolved the relevant issues arising in the matter, I now come to contemporary exposition directly covering the matter. The issue of levy of penalty, on the facts identical to the facts of this case, had already been dealt in various decisions. In the case of CIT vs. Jubilant Enpro Pvt. Ltd. wherein Hon'ble Delhi High Court has held as under: ..the assessee had made full disclosure and there was neither any concealment of income nor furnishing of inaccurate particulars. In fact, the Tribunal has found that the justification furnished by the respondent assessee was bonafide. Consequently, keeping in view the conclusion of facts arrived at by the Tribunal, the explanation offered by the respondent assessee is bonafide and the respondent assessee's case would fall within ambit of explanation 1 to section 271 of Act 21. It is pertinent to mention here that it was also a case wherein the assessee was in the business of dealing in shares and had treated the losses from share trading as nonspeculative. Similarly, in the case of CIT vs. Auric Investments Securities Ltd. (310 ITR 121)(Del), it was held that ..The mere t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The learned counsel for the assessee, on the other hands, heavily relied on the order of learned CIT(A) in cancelling the penalty levied by the Assessing Officer. Referring to page-4 of the assessment order, he drew the attention of the Bench to losses suffered during the year which are as under:- a. Loss on Trading in shares through BSE/NSE, amounting to ₹ 10,1,0,75,192/- b. Loss on Intraday trading on BSE/NSE in shares ₹ 25,38,407/- c. Loss on derivatives trading on NSE and BSE ₹ 17,27,16,630/- 7. The learned counsel for the assessee submitted that all details were filed before the Assessing Officer and there was neither any concealment of any income nor furnishing of any inaccurate particulars of income. Referring to page-80 of the paper book, the learned counsel for the assessee drew the attention of the Bench to a copy of the penalty notice which is as under:- 8. He submitted that the inappropriate words in the penalty notice has not been struck off and it is only a printed form and therefore, it is not understood as to under which limb of the provision, the Assessing Officer has initiated penalty proceedings. Referring to the decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reported in 323 ITR 358, he submitted that Hon ble Delhi High Court in the said decision has held that the penalty u/s 271(1)(c) was not leviable where the addition was made on account of treatment of business loss as speculation loss. Referring to the decision of the Hon ble Delhi High Court in the case of CIT vs Auric Investment Securities Limited reported in (310 ITR 121)(Del.), he submitted that the Hon ble High Court in the said decision has held that mere treatment of business loss as speculation loss by the Assessing Officer does not automatically justify interference for concealment of income and therefore, the penalty u/s 271(1)(c) of the Act is not leviable. Similar view has been taken by the Hon ble Delhi High Court in the case of CIT vs Arpetic Pvt. Ltd. reported in 39 DTR 243, where again it is held that mere fact that the Assessing Officer had treated the business loss as speculative loss did not automatically result in the inference of concealment of income justifying imposition of penalty u/s 271(1)(c) of the Act. He also relied on following decisions:- i. ACIT vs Sudarshan Fiscal Services (P) Ltd. (2010) 4 ITR 0532(ITAT Mum.) ii. SRJ Securities Ltd. vs ITO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has held that the assessee having submitted the requisite details of the share transactions during the course of assessment proceedings as required by the Assessing Officer, it cannot be said that the assessee has concealed any particulars relating to its computation of income. Merely because the Assessing Officer disallowed assessee s claim of business loss by treating it as speculation loss and therefore, the penalty u/s 271(1)(c) of the Act is not leviable. We find the Hon ble Delhi High Court in the case of CIT vs Aretic Investment Pvt. Ltd. has held that mere fact that the Assessing Officer had treated the business loss as speculative loss did not automatically result in the inference of the concealment of income justifying in imposition of penalty u/s 271(1)(c) of the Act. Similar view has been taken by the Co-ordinate Bench of the Tribunal in various other decisions filed by the assessee in case law compilation. Under these circumstances, we hold that merely because the Assessing Officer has treated the business loss claimed by the assessee as speculation loss, the same cannot tantamount to concealment of income warranting levy of penalty u/s 271(1)(c) of the Act. 13. The ..... X X X X Extracts X X X X X X X X Extracts X X X X
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