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TMI Blog2011 (11) TMI 858X X X X Extracts X X X X X X X X Extracts X X X X ..... along with the return of income giving similar details in respect of profit or loss suffered in other transactions. As noted by him in the assessment order, the loss of ₹ 37,09,019/- in respect of units of Birla Index Fund Plan-A was only indicated in the last column of the said statement without giving any details or particulars thereof. The assessee, therefore, was called upon by the AO to furnish the details of such loss. Accordingly the required details were furnished by the assessee which revealed that the assessee had purchased the units of Birla Index Fund on 17-10-2003 for ₹ 1 crore, the market value of which was adopted by the assessee at ₹ 62,90,982/- as on 31-03-2004 and the resultant loss due to diminution in the value of units amounting to ₹ 37,09,018/- was claimed by reducing the same from the profits from trading in shares. On perusal of the balance sheet of the assessee, the AO found that the Birla Index Fund units were shown by the assessee as investment and not stock in trade. He noted that similarly units of other mutual funds purchased by the assessee in the earlier years were shown as investment in the balance sheet as on 31-03-2003 at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4. The penalty imposed by the AO was challenged by the assessee in an appeal filed before the learned CIT(Appeals). During the course of appellate proceedings before the learned CIT(Appeals), it was submitted on behalf of the assessee that the loss in respect of Birla Index Fund was claimed as a business loss under the bonafide belief that the investment in the said units represented its trade investment. It was contended that the loss in respect of similar units was consistently claimed by the assessee as business loss under the bonafide belief that the said units represented its business assets. It was contended that the said bonafide belief was based on the normal practice prevailing in the prudential accounting norms. It was contended that although the units were classified as investment, the same were in the nature of trade investment and not long term investment. 5. The learned CIT(Appeals) did not find merit in the submissions made on behalf of the assessee. According to him, when the balance sheet was prepared by the assessee company as per the provisions of Companies Act and the same was approved by the shareholders and was also filed with the Registrar, the assessee c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess loss. He submitted that the assessee company as per Accounting Standard 13 issued by the ICAI was required to value the current investments at cost or market price whichever is lower and any deduction in the value of such investments was to be disclosed/reflected in the profits and loss statement. He contended that the assessee company was thus required to recognize the impairment loss in respect of units of Birla Index Fund which represented its current investment/asset. He also contended that while making the claim of loss, no inaccurate particulars were furnished by the assessee and even the AO has not made out any such case. Relying on the decision of Hon ble Supreme Court in the case of Reliance Petro Products P. Ltd. 322 ITR 158 (SC), he contended that the case of the assessee is not a fit case to impose penalty u/s 271(1)(c). He also relied on the decision of Hon ble Punjab Haryana High Court in the case of CIT vs. Arisudana Spinning Mills Ltd. 326 ITR 429 to contend that when the assessee has acted in a bonafide manner while making a claim, the disallowance of such claim does not attract penalty u/s 271(1)(c). 7. The learned DR, on the other hand, strongly relied o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... units of Birla Index Fund actually represented the stock in trade forming part of current assets of the assessee company and the same were shown as investment in the books of account by mistake. He has also contended that the said units even otherwise represented current investments of the assessee company and as per the accounting standard 13, the same were required to be valued at cost or market price whichever is lower and the loss as a result of reduction in the value of current investment was required to be recognized and reflected in the profit and loss statement. After perusing the relevant material on record, we find it difficult to accept these contentions of the learned counsel for the assessee. 10. It is observed that in its audited balance sheet as on 31-03-203, the units of other mutual funds purchased by the assessee company in the financial year 2002- 03 were shown under the caption Investment and the value thereof was taken at cost. In the statement of significant accounting policies annexed to and forming part of the balance sheet as on 31st March, 2003, it was clearly mentioned that the assessee company carried on the business of trading in shares and securi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in our opinion therefore, cannot be relied upon to accept the stand of the assessee. Similarly the accounting standard 13 relied upon by the learned counsel for the assessee is of no help to the assessee s case as the same requires the assessee to recognize any loss as a result of reduction in the value of current investments and not the long term investments. The said accounting standard actually supports the case of the Revenue because it specifies that the long term investments are usually valued at cost. In our opinion, the assessee thus has completely failed to substantiate its explanation in regard to its claim for loss as a result of reduction in the value of units of Birla Index Fund as business loss and it, therefore, cannot be said that there was any basis whatsoever to claim such loss in computing its business income by the assessee. The said claim, therefore, cannot be regarded as a bonafide claim made by the assessee. 12. At the time of hearing before us, the learned counsel for the assessee has relied on the decision of Hon ble Supreme Court in the case of Reliance Petro Products P. Ltd. (supra) in support of the assessee s case. It is observed that the said decisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law cannot tantamount to furnishing of inaccurate particulars. After analyzing the decision of Hon ble Supreme Court in the case of Reliance Petro Products P. Ltd. (supra) in the light of facts and circumstances involved in that case, the Hon ble Delhi High Court held in the case of Zoome Communication P. Lt. (supra) that the proposition of law which emerges from the said case when considered in the back drop of the facts of the case before the Court, is that so long as the assessee has not concealed any material fact or the factual information given by him has not been found to be incorrect, he will not be liable to imposition of penalty u/s 271(1)(c) of the Act even if the claim made by him is unsustainable in law, provided that he either substantiates the explanation offered by him or the explanation, even if not substantiated, is found to be bonafide. It was held that if the explanation is neither substantiated nor shown to be bonafide, Explanation 1 to section 271(1)(c) would come into play and the assessee will be liable to the prescribed penalty. 13. As already discussed, the explanation offered by the assessee in the present case in respect of its claim for deduction on ..... X X X X Extracts X X X X X X X X Extracts X X X X
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