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TMI Blog2012 (8) TMI 220X X X X Extracts X X X X X X X X Extracts X X X X ..... onclusion that the appellant has furnished inaccurate particulars in respect of income of Rs. 58778852/-and thereby confirming levy of penalty under section 271(1)(c) of the Act. Provisions of the Act ought to have been properly construed and regard being had to facts of the case no such conclusion should have been arrived at and penalty under section 271(1)(c) should not have been confirmed." 2. The appellant is a company engaged in the activity of infrastructure development and has developed industrial park at Vashi. It had shown book profit u/s.115 JB at Rs. 67,44,11,568/- and return of income was filed at an income of Rs. 10,93,98,307/-. As against the return income, the total income of the appellant was computed by the Assessing Officer u/s. 143(3) vide order dated 26.06.2009 in the following manner :- Income from Business As per the computation of income Rs. 60,59,34,129/- Add : Disallowance u/s.14A Rs. 58,57,339/- Add: Income from speculation activity Rs.5,87,78,833/- Rs. 67,05,70,301/- Income from Capital Gain NIL Income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of penalty before us is only with regard to the addition of Rs. 5,87,78,853/- on account of income from speculation business, as the CIT (Appeals) has deleted the penalty on the other disallowances and the department is not in appeal, therefore, we are confined to the addition made on account of speculation business. 3.2 On the issue of treatment of "income" from share transaction as "speculative income", the Assessing Officer held that the assessee was aware of the fact that such an income which was included in the composition of gross total income was within the purview of section 73 and still it had shown the said income under the head "Short Term Capital Gain" with an intention to reduce tax liability, since the said income is taxed at a concessional rate of 10%. Further the assessee has also failed to substantiate its claim of such income under the head "capital gains" instead of "speculation business" with supporting evidences. He, therefore, came to the conclusion that this issue is not a debatable issue and the assessee has failed to substantiate its explanation during the course of quantum of proceedings. After referring to the statutory provisions of section 271(1)(c) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as a 'speculation' cannot be held that the assessee is guilty of either furnishing of inaccurate particulars or has concealed the particulars of income within the purview of section 271(1)(c). He submitted that the appellant has duly disclosed all the particulars of income in the return of income and merely because such an income has been assessed under the different head will not amount to concealment of income or furnishing of inaccurate particulars. Even if in the quantum of proceedings, the said addition under the head "speculation business" have been confirmed, but for the purpose of penalty, the appellant cannot be held to be guilty of furnishing of any kind of inaccurate of particulars within the meaning of section 271(1)(c) of the Act. 5.1 The second main contention of the learned AR before us, is that, the assessment u/s. 143(3) has been finally completed under 115JB on the figure as shown by the appellant and not under the normal provisions of the Act under which such additions have been made and, therefore, penalty u/s. 271(1)(c) cannot be upheld. In support of this contention, he has relied upon the decision of the ITAT Mumbai Bench in the case of Ruchi Strips ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... analyse, whether in such a situation penalty u/s. 271(1)(c) can be levied in this case. Section 115JB starts with a non-obstante clause and provides that where in the case of an assessee company, the income tax is payable on the total income as computed under this Act is less than 15% of its book profit, such a book profit shall be deemed to be the total income of the assessee and the tax payable by the assessee on such total income shall be the amount of income tax. The scheme of the Act is that, if the tax payable under the normal procedure i.e. under the normal computation under the Income Tax Act is higher, then such amount is taxable income of the appellant. On the other hand, if the book profits are deemed to be the total income of the assessee in terms of section 115JB and is more than the income under the normal provisions of the Act, then by legal fiction such a book profit will be deemed to be the 'total income' of the assessee. Thus, if the tax has been imposed and collected on the deemed income u/s. 115JB in the assessment, then the tax under the normal provisions/computation is not leviable or charged. On the same logic, if any addition or disallowance has bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the prescribed percentage of the "book profits" computed under section 115JB of the Act. The higher of the two amounts is regarded as total income and tax is payable with reference to such total income. If the tax payable under the normal provisions is higher, such amount is the total income of the assessee, otherwise, "book profits" are deemed as the total income of the appellant in terms of section 115JB of the Act. ** ** ** 25. The judgment in the case of Gold Coin [2008] 304 ITR 308, obviously, does not deal with such a situation. What is held by the Supreme Court in that case is that even if in the income-tax return filed by the assessee losses are shown, penalty can still be imposed in a case where on setting off the concealed income against any loss incurred by the assessee under other heads of income or brought forward from earlier years, the total income is reduced to a figure lower than the concealed income or even a minus figure. The court was of the opinion that "the tax sought to be evaded" will mean the tax chargeable on the concealed income as if it were the total income. Once, we apply this rationale to Explanation 4 given by the Supreme Court, in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le of shares of other companies and, therefore, the Explanation to section 73 will not be applicable. Moreover the appellant company was having shares in the nature of 'investment' and accordingly they were shown under the head "investment" in the balance sheet and gain on sale of such shares was bonafidely shown under the head "capital gain". The Assessing Officer has rejected the explanation solely on the basis of the decision of Special Bench in the case of Concord Commercial (P.) Ltd. (supra). 9.1 In the penalty order, the Assessing Officer has observed that the findings given at the time of assessment are relevant and are probative value and during the course of the penalty proceedings, where the assessee was nothing beyond the explanation offered by him at the assessment, then penalty u/s. 271(1)(c) is leviable. 9.2 Such an observation of the Assessing Officer cannot be upheld, as the assessment order is not a final word in the penalty proceedings upon the pleas which can be taken at the penalty stage and howsoever relevant and good the findings be in the assessment proceedings may be they are not conclusive so far as penalty proceedings are concerned. The matter ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ield under the head of income. If the gross total income of the appellant is from business as specified in the explanation, then it would not be covered under the said Explanation. The judgment of Special Bench was ultimately decided in favour of the assessee, wherein the main business of the assessee was trading in sales and had also made purchase and sale of shares. The Special Bench came to the conclusion that in such a situation, Explanation to section 73 will not apply and the matter was decided in the favour of the assessee. Here in this case, the appellant was carrying out the business of infrastructure development and its main gross total income was from such business only. Thus the sale and purchase of shares was only ancillary and was shown to have been acquired only for the purpose of investment. The profit on such sale of shares cannot be held to be in any manner be treated as 'speculation business'. Thus the decision of the Special Bench does not in any manner decides the issue against the assessee as have been relied upon by the Assessing Officer solely to reject the explanation of the assessee. 9.4 Thus the appellant cannot be held to be guilty of furnishing ..... X X X X Extracts X X X X X X X X Extracts X X X X
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