TMI Blog2010 (6) TMI 793X X X X Extracts X X X X X X X X Extracts X X X X ..... income was assessed at ₹ 76.87 lakhs. The only addition made by the Assessing Officer was of ₹ 8,59,817/- as per the provisions of section 94(7) of the Income Tax Act, 1961. The Assessing Officer initiated penalty proceedings u/s 271(1)(c) of the Act and show cause notice was issued to the assessee. The assessee was required to file reply to the show cause notice on 14.12.2007 but no reply was filed on that date. However, a written reply dated 21.4.2008 has been filed. Thereafter, again the Assessing Officer issued a notice dated 19.5.2008 asking the assessee to attend or submit written reply by 26.6.2008. On this date, Ld AR of the assessee Shri GC Baid attended the proceedings it was submitted by him that the written reply already filed on 21.4.2008 may be considered in this written reply, it was submitted by the assessee that during the assessment proceedings the assessee had calculated the disallowance of ₹ 8,59,817/- u/s 94 (7) at its own and surrendered it for tax subject to no penalty. It was also submitted in this written reply that the loss was incurred because of market movements and the units/shares were not held for earning dividend income. It was also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted 9.8.2007 and hence, this claim of the assessee is not correct that the assessee has suo moto surrendered this amount for addition in the course of assessment proceedings. It is also submitted that in Para No.5 of his order, it is stated by the Ld CIT(A) that applicability of section 94(7) is a debatable matter involving difference of opinion and hence provision of section 271(1)(c) are not attracted. It is submitted by him was this view of the Ld CIT(A) is not correct because there is nothing debatable in the provision of section 94(7) which are clear cut provision and hence his order should be reversed and that of the Assessing Officer should be restored. Regarding the Special Bench decision in the case of Walfort Share and Stock Broker Pvt. Ltd as reported in 96 ITD 1 (Bom) (Special Bench) and subsequent decision of Bombay High Court rendered in the case of CIT v. Walfort Shares and Stock Brokers Pvt Ltd as reported in 310 ITR 421 (Bom), it was submitted that as per these decision, it was held that sub section (7) was inserted in section 94 of the IT Act w.e.f. 1.4.2002 and hence prior to insertion the loss arising on transfer of units were not to be disallowed because there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sent case because the facts are different. It is submitted that in that case, it was found that the addition of ₹ 40.000/- has been sustained on estimate basis and the other addition of ₹ 4200/- on account of sales tax liability was a matter of debate whereas in the present case, there is no debate or estimation with regard to disallowance of ₹ 8.60 lakhs u/s 94(7) and hence, this judgment of Hon'ble Punjab and Haryana High Court is not applicable in the present case. 5. As against this, Ld AR of the assessee supported the order of Ld CIT(A). Reliance was placed on the recent judgment of Hon'ble Apex Court rendered in the case of CIT v. Reliance Petroproducts Pvt. Ltd in SLP (C) No.27161 of 2008 as per the decision dated 17.3.2010. It is submitted that as per this judgment, it was held by Hon'ble Apex court that merely because the assessee has claimed the expenditure which claim was not accepted or was not acceptable to the revenue, that by itself could not attract the penalty u/s 271(1)(c) of the Act. Reliance was also placed on the judgment of Hon'ble PandH High Court rendered in the case of CIT v. Haryana Warehousing Corporation as reported i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... visions of section 94(7) of the Act. Along with letter dated 21.8.2007 which is available on pages 32-35 of the paper book, it was for the first time submitted by the assessee before the Assessing Officer that in respect of shares of Bank of Rajasthan Ltd. and of Balaji Telefilm Ltd., the assessee has incurred loss on purchases and sale of these shares and at the same time received dividend also and it was submitted by the assessee that total loss of ₹ 859817/- attracts section 94(7) of the Act. In the said letter, it is stated by the assessee itself that these details are furnished in continuation of last hearing held on 9.8.2007 and as required by the Assessing Officer and hence it is apparent that this surrender of income is not suo-moto by the assessee and only when the assessee was cornered by the Assessing Officer the assessee has come out with this surrender. In the present case, the assessee has never disclosed that the assessee has purchased any share during 3 months before the record date and then sold the same within three months after the said date and has earned dividend and incurred loss on sale of such shares. The assessee has claimed double benefit by claiming ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of these shares to the extent of amount of dividend was not allowable to the assessee u/s 94(7). In addition to this, the assessee has sold 47176 shares of M/s Balaji Telefilm Ltd. at a loss of ₹ 2,44,371/- and on these shares the assessee has received dividend income of ₹ 7,54,816/-. In this case, the loss incurred by the assessee is less than the amount of dividend received by the assessee and hence entire loss of ₹ 2,44,371/- was not allowable to the assessee in view of section 94(7) of the Act. When we examine the computation of income filed by the assessee along with the return of income as available on page No.1 of the paper book, we find that there is no indication given by the assessee regarding any sale of such shares on which the assessee has received the dividend of ₹ 46.30 lakhs which was claimed to be exempt u/s 10(32) of the Act. In the audited accounts also, there is no note annexed in this regard indicating any basis on which the Assessing Officer can examine this claim of the assessee regarding loss on sale of shares in the light of provisions of section 94(7) of the Act. Hence, it is apparent that in the present case, the assessee has not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of various other High Courts were against the assessee and by following these judgments. Revenue held that rental income for letting out of godowns and ware houses was taxable in assessment year 1992-93 and 1993-94. It is also noted by Hon'ble High Court in Para 27 of this judgment that the claim of the assessee for exemption u/s 10(29) of entire income in assessment year 1991-92 was accepted by the revenue on 15.12.1993. Hence, in our opinion, on 31.12.1993, when the assessee filed the return of income for this assessment year i.e., 1993-94, claim by the assessee in the return filed on 31.12.1993 cannot be said to be wrong or mala fide. But in the present case, the claim of the assessee is a false claim without disclosing the relevant facts in computation and statement of accounts filed with the return of income and hence this judgment is also of no help to the assessee. 8. Regarding this basis of ld. CIT(A) that disallowance of loss u/s 94(7) is a debatable matter as stated by him in Para No.5 of his order, we reproduce the provisions of section 94(7) of IT Act which are as under:- 94(7) where .............. (a) any person buys or acquires any securities or uni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ransaction tax and in this manner, the assessee has worked out the net income from operation at ₹ 188.23 lakhs Such income is bounds to be after adjustment of losses incurred on certain sale of shares and the assessee has not added back such loss which are hit by the provisions of section 94(7). No note is given about applicability or non applicability of section 94(7) but the assessee could furnish the complete details of such loss which is hit by the provisions of section 94(7) as per its letter dated 21.8.2007 after query raised by the Assessing Officer on 9.8.2007 i.e. within a period of 12 days of such query and it goes to show that the assessee was very much in a position to work out the loss disallowable u/s 94(7) within a very short period of 12 days after raising of queries by the Assessing Officer and hence, it cannot be said that the assessee was not aware about the provisions of section 94(7) or that the assessee was not in a position to work out the losses to be disallowed under the provisions of section 94(7) because the assessee could furnish within a period of 12 days only after the query of the Assessing Officer whereas the return of income was filed by the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (7) were not disclosed by the assessee before the Assessing Officer in the return of income filed by it and hence, even if it is accepted that some explanation was offered by the assessee, we find that such explanation is not bona fide because no reason has been given by the assessee for not making disallowance u/s 94(7) in the computation of income and for this reason also that the facts relating to the same and material to the computation of total income have not been disclosed by the assessee. Hence, in the present case, explanation-1 to section 271(1)(c) is directly applicable and the penalty is rightly imposed by the Assessing Officer Regarding this issue that the issue was debatable as held by the Ld. CIT(A) in Para No.5 of his order, we are not in agreement with him because no material has been brought on record by ld. CIT(A) in his order or by the assessee in the course of hearing before us to show regarding any difference of opinion on this aspect. Regarding various judgments which are considered and followed by the Ld. CIT(A), we find that the same are not applicable in the present case in view of out decision above as per which we have seen that in the present case, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as over ruled the decision of Hon'ble Apex Court goes to show that how casually Ld. CIT(A) has considered and decided this appeal. In fact, it is stated by the Tribunal in the case of Kanbay Software India Pvt. Ltd. (supra) that even after the judgment of Hon'ble Apex Court rendered in the case of Dharmendra Textiles and processor (supra), the penalty is not automatic and it is still to be seen that there was concealment and/or furnishing of inaccurate particulars of income by the assessee. We have seen in the present case that explanation-1 to section 271(1)(c) is directly applicable in the present case because the assessee has not furnished any explanation regarding its failure to apply the provisions of section 94(7) and moreover the assessee has not furnished full facts with regard to this disallowance. Hence, the Tribunal decision rendered in the Kanbay Software India Pvt. Ltd. (supra) is also of no help to the assessee in the present case. We are surprised to note that in Para No.8 of the order, it is again stated by the Ld. CIT(A) that ITAT in the case of ACIT vs. VIP Industries Ltd. as reported in 2 DTR 153 (Mum.) has over ruled ratio of the Hon'ble Apex Court d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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