COMMISSIONER OF INCOME TAX Vs. NAVINCHANDRA AND CO.

JUDGEMENT

(1.) Feeling aggrieved and dissatisfied with the impugned judgment and order dated 19.04.2013 passed by the learned Income Tax Appellate Tribunal [hereinafter referred to as "ITAT"] in ITA No. 64/Ahd/2013 for Assessment Year 2005-06, by which the learned ITAT has deleted the penalty imposed under section 271(1)(c) of the Income-tax Act, 1961 [hereinafter referred to as "the Act"], the Revenue has preferred the present tax appeal with the following proposed substantial question of law:

(2.) Shri Parikh, learned advocate appearing on behalf of the appellant has vehemently submitted that learned ITAT has materially erred in deleting the penalty imposed under section 271(1)(c) of the Act. It is submitted that as such the assessee was very much aware and/or he know the fact that the derivative transactions were in the nature of speculative transactions and still he treated the speculative loss on derivative transactions as business loss and set-off/adjusted the same against income from other sources and tried to evade the tax. It is submitted that therefore the AO was justified in imposing the penalty under section 271(1)(c) of the Act, which was not required to be and therefore, the learned ITAT is not justified in deleting the penalty imposed by the AO.

(3.) Heard Shri Parikh, learned advocate appearing on behalf of the appellant-Revenue. At the outset it is required to be noted that while submitting the return of income, the assessee claimed/treated the loss from derivative transactions as normal business loss. However, the AO did not accept the same and treated the same as speculative in nature and therefore, disallowed the same. Therefore, it was a bona fide claim made on behalf of the assessee which was not accepted by the AO. It is also required to be noted that at the relevant time there were divergent views of various Tribunals on the point and the assessee claimed/treated the loss from derivative transactions as normal business loss and adjusted the same against other business income. Considering the above and relying upon the decision of the Hon'ble Supreme Court in the case of CIT v. Reliance Petroproducts (P) Ltd, 2010 322 ITR 158, when the learned CIT(A) has deleted the penalty which has been confirmed by the learned Tribunal by passing the impugned order, no error has been committed in deleting the penalty. While deleting the penalty in para. 4.3, the learned CIT(A) has observed and held as under: