2015 (7) TMI 1013

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....ring 'nil' income. The assessee debited an amount of Rs. 1,69,75,525/- under the head 'other expenses', being loss on account of transactions in shares. The AO treated this loss, as loss arising from speculative business, on the ground that the assessee could not furnish any proof regarding actual delivery of shares on which the losses were incurred. He also recorded that the transactions in shares were of big magnitude and the assessee undertook purchase and sales activity of such nature throughout the year. While giving a finding that this activity constitutes business, the AO came to a conclusion that the loss in question, is loss from the speculative business. He initiated penalty proceedings u/s 271(1)(c) of the Act. 2.1. Ag....

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....ns etc. These code of transactions indicated as to whether the transactions were settled by actual delivery or not. 6. Under these circumstances we are of the considered opinion that the issue in question boils down to whether the loss in question should be treated as business loss or as speculative loss. This is a debatable issue. 7. The Hon'ble Karnataka High Court in the case of CIT vs. Manjunatha Cotton and Gining Factory, Manjunatha Ginning and Pressing, Veerabhadrappa Sangappa and Co., V.S. Lad and Sons, G.M. Exports (2013) 359 ITR 565 (Karn) in ITA Nos. 2564 of 2005, 2565 of 2005, 5020 of 2009, 5022 and 5023 of 2009, 5025 and 5026 of 2010 judgment dated 13th December, 2012 concluded as under. "(a) Penalty under Section 2....

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....y itself would not be sufficient for the authorities either to initiate penalty proceedings or impose penalty, unless it is discernible from the assessment order that, it is on account of such unearthing or enquiry concluded by authorities it has resulted in payment of such tax or such tax liability came to be admitted and if not it would have escaped from tax net and as opined by the Assessing Officer in the assessment order. (l) Only when no explanation is offered or the explanation offered is found to be false or when the assessee fails to prove that the explanation offered is not 'bonafide, an order imposing penalty could be passed. (m) If the explanation offered, even though not substantiated by the assessee, but is found to ....

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....e assessment proceedings insofar as "concealment of income" and "furnishing of incorrect particulars" would not operate as res judicata in the penalty proceedings. It is open to the assessee to contest the said proceedings on merits. However, the validity of the assessment or reassessment in pursuance of which penalty is levied, cannot be the subject matter of penalty proceedings. The assessment or reassessment cannot be declared as invalid in the penalty proceedings." 8. The Ld.Counsel for the assessee relied on the decision of Delhi C Bench of the Tribunal in ITA 156/Del/2010 for the AY 1997-98 in the case of ITO vs. M/s HT Ferro Pvt.Ltd. wherein at para 5 it was held as follows. "5. In the absence of the assessee on the date of hea....