M/S. SYNCHEM CHEMICALS (I) PVT. LTD, MUMBAI v. THE ACIT 10(1), MUMBAI

ITA 5682/MUM/2007 | 2003-2004
Pronouncement Date: 31-05-2010 | Result: Allowed

Appeal Details

RSA Number 568219914 RSA 2007
Assessee PAN AAECS5576Q
Bench Mumbai
Appeal Number ITA 5682/MUM/2007
Duration Of Justice 2 year(s) 9 month(s)
Appellant M/S. SYNCHEM CHEMICALS (I) PVT. LTD, MUMBAI
Respondent THE ACIT 10(1), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 31-05-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted E
Tribunal Order Date 31-05-2010
Date Of Final Hearing 14-12-2009
Next Hearing Date 14-12-2009
Assessment Year 2003-2004
Appeal Filed On 30-08-2007
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E MUMBAI BEFORE SHRI R V EASWAR SENIOR VICE PRESIDENT AND SHRI R K PANDA ACCOUNTANT MEMBER I T A NO: 5682/MUM/2007 (ASSESSMENT YEAR: 2003-04) M/S SYNCHEM CHEMICALS (I) PVT. LTD. MUMBAI APPEL LANT (PAN: AAECS5576Q) VS ASSISTANT COMMISSIONER OF INCOME TAX 10(1) RESPON DENT MUMBAI APPELLANT BY: SMT VASANTHI PATEL RESPONDENT BY: SHRI NAVEEN GUPTA O R D E R R V EASWAR SENIOR VICE PRESIDENT: THIS IS AN APPEAL FILED BY THE ASSESSEE AND IT REL ATES TO THE ASSESSMENT YEAR 2003-04. THE ASSESSEE IS A PRIVATE LIMITED COMPANY ENGAGED IN THE MANUFACTURE OF BULK DRUGS D EVELOPMENT OF REAL ESTATE FINANCE ACTIVITIES AND BUSINESS IN SHA RES AND SECURITIES. THE PRESENT APPEAL IS DIRECTED AGAINST THE LEVY OF PENALTY IMPOSED UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT 1961 . 2. THE PENALTY CAME TO BE LEVIED IN THE FOLLOWING C IRCUMSTANCES. THE ASSESSEE FILED A RETURN OF INCOME DECLARING LOS S OF RS.3 18 05 000/-. THE RETURN WAS ACCOMPANIED BY TH E AUDITED PROFIT AND LOSS ACCOUNT BALANCE SHEET AND THE TAX AUDIT R EPORT. IT WAS PROCESSED UNDER SECTION 143(1) BUT LATER SELECTED F OR SCRUTINY. IN RESPONSE TO THE HEARING NOTICES THE ASSESSEE APPEAR ED BEFORE THE ASSESSING OFFICER AND FURNISHED THE RELEVANT DETAIL S. IN THE RETURN THE ASSESSEE HAD CLAIMED SPECULATION LOSS OF RS.96.65 L AKHS. BY LETTER ITA NO: 5682/MUM/2007 2 DATED 16.03.2005 THE ASSESSING OFFICER CALLED UPON THE ASSESSEE TO FURNISH FULL DETAILS OF SPECULATION LOSS CLAIMED AT RS.96.6 5 LAKHS . IN THE SAME LETTER HE HAD ALSO ASKED THE ASSESSEE TO F URNISH SEVERAL OTHER DETAILS INCLUDING DETAILS OF SALE AND PURCHAS E OF SECURITIES. THEREAFTER A NOTICE UNDER SECTION 142(1) WAS ISSUED ON 08.06.2005 AND IN THE LETTER ENCLOSED THERETO THE ASSESSING OF FICER REMINDED THE ASSESSEE TO FURNISH THE DETAILS CALLED FOR BY HIS E ARLIER LETTER DATED 16.03.2005. THE ASSESSING OFFICER ALSO CAUTIONED T HE ASSESSEE THAT IF THE DETAILS ARE NOT FILED BY 23.06.2005 THE ASSESS MENT WILL BE COMPLETED ON THE BASIS OF THE MATERIAL ON RECORD. THERE WAS NO RESPONSE FROM THE ASSESSEE TO THIS LETTER ALSO AND THEREFORE THE ASSESSING OFFICER ISSUED ANOTHER NOTICE UNDER SECTI ON 142(1) ON 21.09.2005 REMINDING HIM TO FURNISH THE DETAILS ALR EADY CALLED FOR. EVENTUALLY ON 21.11.2005 THE ASSESSEE WROTE A LETTE R TO THE ASSESSING OFFICER A COPY OF WHICH IS AT PAGE 20 OF THE PAPER BOOK IN WHICH THE ASSESSEE STATED AS FOLLOWS: - .ON PERUSAL OF THE AUDITED ACCOUNTS AND THE TAX AUDIT REPORT ANNEXED THERETO YOUR HONOUR WOULD APPRECIATE THAT THE INVENTORIES (STOCK-IN-TRADE OF SHARES AND SECURITIES) WERE VALUED ON COST OR MARKET VALUE WHICHEVER IS LOWER. THE COMPANY WAS HOLDING 3 44 2 92 EQUITY SHARES OF LUPIN LIMITED AS CLOSING STOCK. T HE AVERAGE COST PER SHARE WAS RS.141.54. THE MARKET VALUE OF EACH SUCH SHARE AS ON 31/3/2003 WAS RS.125.30. SINCE THE MARKET VALUE WAS LOWER THAN T HE COST THE CLOSING STOCK IN RESPECT OF 3 44 292 EQUIT Y SHARES OF LUPIN LIMITED WAS TO BE VALUED AT MARKET VALUE OF RDS.4 31 39 788/- (I.E. 3 44 292 X RS.125.30) IN STEAD OF RS.2 10 91 266/- TAKEN IN TO THE ACCOUNTS. THIS WAS A PURE CALCULATION ERROR WHICH IS NOW RECTIFIED AND T HE DIFFERENCE OF RS.2 20 48 522/- IS (I.E. RS.4 31 39 788 RS.2 10 91 266) IS OFFERED TO TAX AS INCOME OF THE ASSESSMENT YEAR 2003-04. THE MISTAKE IS RECTIFIED ITA NO: 5682/MUM/2007 3 BEFORE THE SAME IS DETECTED OR UNEARTHED BY THE DEPARTMENT. IT MAY NOT BE OUT OF CONTEXT TO POINT OUT THAT THE INCREASED VALUE OF CLOSING STOCK OF 3 44 292 EQUITY SHARES WOULD BECOME THE OPENING STOCK OF THE SUCCEEDING ASSESSMENT YEAR 2004-05. THEREFORE THE RE IS NO LOSS TO THE REVENUE ALSO IN TOTALITY. ACCORD INGLY WE PRAY YOUR HONOUR TO TAKE INTO CONSIDERATION THE ADD ITIONAL INCOME OF RS.2 20 48 522/- AS INCOME OF AY 2003-04 WHEN THE ASSESSMENT PROCEEDINGS GET FINALIZED. SIN CE THE TIME AVAILABLE U/S 139(5) FOR REVISION OF THE R ETURN OF INCOME HAS ALREADY EXPIRED WE ARE REVISING OUR TAX ABLE INCOME BY WAY OF THIS LETTER. ANOTHER LETTER WAS WRITTEN BY THE ASSESSEE TO THE A SSESSING OFFICER ON 16.01.2006 IN WHICH IN PARAGRAPH 6 THE ASSESSEE ST ATED AS FOLLOWS: - 6) AS PER THE CONSISTENT METHOD OF ACCOUNTING FOLLOWED THE ASSESSEE IS VALUING SHARES HELD AS ST OCK-IN- TRADE AT COST OR MARKET VALUE WHICHEVER IS LOWER. ACCORDINGLY STATEMENT SHOWING VALUATION OF SHARES HELD IN STOCK-IN-TRADE IS ENCLOSED. FROM THE SAME YOUR HONOUR WOULD NOTICE THAT THE LOSS OF RS.96.65 LAKHS IS CLAIMED DUE TO DIMINUTION IN VALUE OF STOCK-IN-TRAD E AND SAME IS SHOWN AS SPECULATION LOSS. AFTER THE ABOVE LETTER ANOTHER LETTER WAS WRITTEN ON 25.01.2006 BY THE ASSESSEE. IN PARAGRAPH 8 OF THIS LETTER UNDER THE HEADING DETAILS OF SALE OF SECURITIES THE ASSESSEE BROUGHT THE FOLLO WING FACTS TO THE NOTICE OF THE ASSESSING OFFICER: - 8) DETAILS OF SALE OF SECURITIES THE ASSESSEE COMPANY IS HOLDING CERTAIN SHARES AS A PART OF STOCK-IN-TRADE. IT IS VALUED AT COST OR MARKET VALUE WHICHEVER IS LOWER. CERTAIN PART OF SUCH STOCK OF SHARES IS SOLD DURING THE YEAR TOTALING TO RS.55.24 LAKHS. SALES PROCEEDS OF THE SAME ARE CREDITED TO PROFIT AND LOSS ACCOUNT UNDER THE HEAD SALES. DETAILS OF ITEM-WISE SALE OF SHARES ARE ENCLOSED. IT MAY BE NOTED THAT SINCE WE ARE VALUING STOCK OF SHARES AT COST OR MARKET VALUE WHICHEVER IS LOWER LOSS ARISING OUT OF SUCH VALUATION (AFTER SETTING O FF ITA NO: 5682/MUM/2007 4 OF PROFIT ON ACCOUNT OF VALUATION AND SALES) IS TREATED AS SPECULATION LOSS AND THE SAID LOSS OF RS.95.66 LAKHS IS SEPARATELY TREATED AS SPECULATION LOSS IN THE RETURN OF INCOME FILED. TH E STATEMENT OF SUCH SPECULATION LOSS IS ENCLOSED. HOWEVER WHILE COMPUTING THE VALUATION OF CLOSING STOCK THERE WAS ERROR IN VALUATION OF SHARES OF LUPIN LIMITED. THIS MISTAKE WAS REALIZED AND IMMEDIATELY A LETTER WAS FILED ON 22.11.2005 WHEREIN THE VALUATION OF SHARES OF LUPIN LIMITED WAS INCREASED BY RS.220.48 LAKHS WHICH AUTOMATICALLY INCREASES CLOSING STOCK OF SHARES AND IN THE RESULT PROFITS OF THE COMPANY. COPY OF THE SAID LETTER IS ENCLOSED. WE ARE ENCLOSING HEREWITH REVISED STATEMENT SHOWING VALUATION OF CLOSING STOCK OF SHARES AND PROFIT ARISING THEREFROM. FROM THE SAME IT MAY BE NOTED THAT ENTIRE LOSS OF RS.95.66 LAKHS WHICH IS TREATED AS SPECULATION LOSS DOES NOT REMAIN INTO EXISTENCE BUT IT HAS RESULTED INTO PROFIT OF RS.124.02 LAKHS. THIS PROFIT IS OFFERED TO TAX TREATING THE SAME AS BUSINESS PROFIT AND ACCORDINGLY REVISED COMPUTATION OF INCOME IS ENCLOSED. 3. THE ASSESSMENT WAS COMPLETED ON 22.02.2006 UNDER SECTION 143(3) OF THE INCOME TAX ACT 1961. IN PARAGRAPH 7 OF THE ASSESSMENT ORDER THE ASSESSING OFFICER ACCEPTED THE REVISED CO MPUTATION OF INCOME FILED BY THE ASSESSEE ALONG WITH THE LETTER DATED 25.01.2006 (SIC). HE HOWEVER OBSERVED THAT SINCE THE ASSESS EE OFFERED THE AMOUNT TO TAX IN THE REVISED COMPUTATION OF INCOME FILED SUBSEQUENT TO THE QUERY RAISED ABOUT THE SPECULATION LOSS THE AS SESSEE WAS GUILTY OF HAVING CONCEALED OR FURNISHED INACCURATE PARTICULAR S OF INCOME TO THE EXTENT OF RS.220.49 LAKHS. ACCORDINGLY PENALTY PR OCEEDINGS WERE INITIATED UNDER SECTION 271(1)(C) OF THE ACT. ITA NO: 5682/MUM/2007 5 4. IN RESPONSE TO THE PENALTY NOTICE THE ASSESSEE FILED A DETAILED REPLY ON 30.08.2006 A COPY OF WHICH IS AT PAGES 40 TO 48 OF THE PAPER BOOK. THE GIST OF THE REPLY IS THAT THE REVISED CO MPUTATION OF INCOME WAS FILED BY THE ASSESSEE ON ITS OWN BEFORE ANY CON CEALMENT WAS DETECTED BY THE ASSESSING OFFICER AND THAT THE COMP UTATION WAS REVISED VOLUNTARILY AND IN GOOD FAITH AFTER HAVING MADE TRUE AND FULL DISCLOSURE OF SUCH PARTICULARS AS WERE REQUIRED BY LAW. THE ASSESSEE ALSO RELIED ON SEVERAL AUTHORITIES IN SUPPORT OF IT S EXPLANATION THAT NO PENALTY SHOULD BE LEVIED WHERE THERE WAS NO DETECTI ON OF CONCEALMENT AND THE INCOME IS OFFERED BY THE ASSESSEE VOLUNTARI LY. 5. THE ASSESSING OFFICER DID NOT ACCEPT THE ASSESSE ES EXPLANATION. IN THE PENALTY ORDER DATED 31.08.2006 HE HELD THAT THE ASSESSEE COMPANY OUGHT TO HAVE FILED A REVISED RETU RN UNDER SECTION 139(5) OF THE ACT ON OR BEFORE 31.03.2005 AND THAT THE REVISED COMPUTATION OF INCOME FILED UNDER COVER OF THE LETT ER DATED 21.11.2005 IN THE COURSE OF THE ASSESSMENT PROCEEDINGS CANNOT BE CONSIDERED AS A VOLUNTARY RETURN SINCE IT WAS FILED ONLY AFTER HE HAD QUERIED ABOUT THE ASSESSEES CLAIM. THE ASSESSING OFFICER ALSO OBSER VED THAT BUT FOR THE QUERY THE ASSESSEE WOULD NOT HAVE OFFERED THE ADDIT IONAL INCOME. IN THIS VIEW OF THE MATTER AND ALSO RELYING ON EXPLANA TION 1 TO SECTION 271(1)(C) THE ASSESSING OFFICER HELD THAT THE ASSE SSEE COMPANY HAS CONCEALED THE PARTICULARS OF ITS INCOME OR FURNISHE D INACCURATE PARTICULARS TO THE EXTENT OF RS.3 17 13 082/- BEIN G THE LOSS OF RS.96.65 LAKHS CLAIMED AS SPECULATION LOSS RESULTING IN AN I NCOME OF ITA NO: 5682/MUM/2007 6 RS.2 20 48 522/-. A MINIMUM PENALTY OF RS.1 16 54 557/- WAS ACCORDINGLY IMPOSED. 6. ON APPEAL THE CIT(A) HELD THAT THE REVISED COMP UTATION FILED BY THE ASSESSEE WAS NOT VOLUNTARY AND IT WAS DONE ONLY AFTER QUERIES WERE RAISED BY THE ASSESSING OFFICER. HE FURTHER N OTED THAT EVEN WHEN THE ASSESSING OFFICER RAISED A QUERY ABOUT THE SPEC ULATION LOSS ON 16.03.2005 THE ASSESSEE TRIED TO JUSTIFY THE SAME B UT WHEN THE ASSESSING OFFICER CALLED FOR THE BREAKUP OF THE SPE CULATION LOSS THE ASSESSEE FILED THE REVISED COMPUTATION OF INCOME IN JANUARY 2006. ACCORDING TO THE CIT(A) THIS IS NOT A CASE OF A CL ERICAL MISTAKE CORRECTED VOLUNTARILY BUT WAS A CASE OF THE ASSESSE E COMING FORWARD ONLY AFTER DETECTION OF CONCEALMENT. IN THIS VIEW OF THE MATTER HE HELD THAT THE ASSESSEE HAD INTENTIONALLY UNDERSTATED THE VALUE OF THE CLOSING STOCK AND HAD TRIED TO EVADE THE TAX. HE THUS CONF IRMED THE LEVY OF PENALTY. 7. THE ASSESSEE IS IN FURTHER APPEAL BEFORE THE TRI BUNAL REITERATING ITS SUBMISSIONS MADE BEFORE THE DEPARTMENTAL AUTHOR ITIES AGAINST THE LEVY OF PENALTY. IN THE COURSE OF THE ARGUMENTS T HE LEARNED COUNSEL FOR THE ASSESSEE ALSO PLACED RELIANCE ON THE CONTEN TS OF A PAPER BOOK CONTAINING 9 PAGES AND SOUGHT TO EXPLAIN HOW THE MI STAKE HAD OCCURRED WHILE TAKING THE FIGURE OF CLOSING STOCK. THE SUBMISSION OF THE LEARNED COUNSEL FOR THE ASSESSEE IS LIKE THIS. THE ASSESSEE HAD 89 810 SHARES OF LUPIN LIMITED AS ON 31.03.2002. O UT OF THESE SHARES 58 970 SHARES WERE ACQUIRED BY THE ASSESSEE COMPANY AT A COST OF RS.1 85 08 416/-. THE BALANCE OF 30 840 SH ARES HAD BEEN ITA NO: 5682/MUM/2007 7 ACQUIRED BY ANOTHER COMPANY CALLED SHALVA POLYMERS PVT. LTD. WHICH HAD BECOME PART OF THE ASSESSEE COMPANY AND THESE S HARES HAD BEEN ACQUIRED BY THAT COMPANY FOR RS.25 82 850/-. THUS THE TOTAL COST OF THE 89 810 SHARES CAME TO RS.2 10 91 266/-. FOR PURPOSES OF VALUATION OF THE CLOSING STOCK OF THESE SHARES AS O N 31.03.2002 THE ASSESSEE FOLLOWED THE RULE COST OR MARKET PRICE WH ICHEVER IS LOWER. THE MARKET PRICE WAS LOWER SO FAR AS THE LOT OF 58 970 SHARES WERE CONCERNED AND THIS FIGURE WHICH CAME TO RS.68 99 49 0/- WAS TAKEN AS THE VALUE OF THE CLOSING STOCK. AS REGARDS THE LOT OF 30 840 SHARES THE COST WAS LOWER AND THE SAME WAS TAKEN AT RS.25 82 8 50/-. THE AGGREGATE VALUE OF THE CLOSING STOCK OF THE SHARES OF LUPIN LIMITED AS ON 31.03.2002 WAS THUS SHOWN AT RS.94 82 340/- IN T HE BALANCE SHEET AS ON 31.03.2002. DURING THE ACCOUNTING YEAR ENDE D 31.03.2003 RELEVANT TO THE ASSESSMENT YEAR 2003-04 WHICH IS T HE YEAR UNDER APPEAL THERE WAS OPENING STOCK OF 89 810 SHARES OF LUPIN LIMITED (58 970 + 30 840) AND AFTER ADDING THE 2 64 070 SHA RES PURCHASED AND DEDUCTING 9 588 SHARES SOLD OR CONVERTED DURING THE YEAR THE CLOSING STOCK OF LUPIN LIMITED SHARES CAME TO 3 44 292 SHAR ES. AS ON 31.03.2003 THE MARKET VALUE OF THE SHARE STOOD AT RS.125.30 AS PER THE ANNUAL REPORT OF THE ASSESSEE COMPANY AS AGAINS T THE COST OF RS.313.86 PER SHARE. IN THIS SITUATION APPLYING T HE RULE FOLLOWED BY THE ASSESSEE FOR VALUATION OF CLOSING STOCK THE STOCK OF 3 44 292 SHARES OF LUPIN LIMITED SHOULD HAVE BEEN VALUED AT RS.125.30 PER SHARE WHICH WOULD HAVE GIVEN THE CLOSING STOCK FIGURE OF RS.4 3 1 39 788/- AS ON 31.03.2003. THE CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE IS ITA NO: 5682/MUM/2007 8 THAT INSTEAD OF TAKING THE AFORESAID FIGURE AS CLOS ING STOCK THE FIGURE OF AGGREGATE COST OF 89 810 SHARES WHICH WAS RS.2 10 91 266/- IN THE ASSESSEES BOOKS DURING THE YEAR ENDED 31.03.2002 W AS BY MISTAKE REPRODUCED AS THE CLOSING STOCK VALUE OF 3 44 292 S HARES OF LUPIN LIMITED AS ON 31.03.2003. THE CONTENTION IS THAT T HIS WAS PURELY AN INADVERTENT MISTAKE WHICH WAS NOT NOTICED EVEN BY T HE STATUTORY AUDITORS AND THAT THE MOMENT IT WAS NOTICED THE ASS ESSEE HASTENED TO FILE A REVISED COMPUTATION. IN SUPPORT OF THE AFOR ESAID EXPLANATION THE LEARNED COUNSEL FOR THE ASSESSEE STRONGLY RELIED ON THE 9 PAGE PAPER BOOK CONTAINING THE DETAILS OF THE STOCK VALUATION BOTH AS ON 31.03.2002 AND 31.03.2003. IT IS FURTHER CONTENDED THAT THERE WAS NO DETECTION BY THE ASSESSING OFFICER THAT THE CLOSING STOCK FIGURE OF LUPIN LIMITED SHARES WAS UNDERSTATED IN THE ASSESSEES BA LANCE SHEET AS ON 31.03.2003. IT IS SUBMITTED THAT THE QUERY RAIS ED BY THE ASSESSING OFFICER RELATED ONLY TO THE CLAIM OF SPECULATION LO SS OF RS.96.65 LAKHS CLAIMED IN THE RETURN OF INCOME AND THEREFORE IT WAS NOT CORRECT TO SAY THAT THE ASSESSING OFFICER HAD DETECTED CONCEALMENT BEFORE THE ASSESSEE FILED THE REVISED COMPUTATION OF INCOME. OUR ATTENTION WAS DRAWN TO THE VARIOUS LETTERS AND NOTICES ISSUED BY THE ASSESSING OFFICER TO THE ASSESSEE IN AN ATTEMPT TO SHOW THAT NO QUERY RELATING TO THE VALUATION OF CLOSING STOCK HAD BEEN RAISED BY T HE ASSESSING OFFICER. IT IS REITERATED THAT IT IS ONLY A CASE O F MISTAKE COMMITTED WHILE CARRYING OUT THE CLOSING STOCK FIGURES IN THE BALAN CE SHEET AND THAT EVEN THE STATUTORY AUDITORS WERE NOT ABLE TO DETECT THE MISTAKE. IT IS STRONGLY CONTENDED THAT IN THESE CIRCUMSTANCES THE REVISED ITA NO: 5682/MUM/2007 9 COMPUTATION OF INCOME SHOULD BE TAKEN TO HAVE BEEN VOLUNTARILY FILED AND ACCORDINGLY THE PENALTY SHOULD BE CANCELLED. S EVERAL AUTHORITIES WERE ALSO CITED IN SUPPORT OF THE CONTENTIONS. 8. ON THE OTHER HAND THE LEARNED SENIOR DEPARTMENT AL REPRESENTATIVE SUBMITTED THAT THERE WAS NO EVIDENCE TO SHOW THAT THE UNDERSTATEMENT OF THE CLOSING STOCK WAS DUE TO A MI STAKE COMMITTED INADVERTENTLY BY THE ASSESSEE AND THAT BUT FOR THE QUERY RAISED BY THE ASSESSING OFFICER THE INCOME TO THE EXTENT OF RS.3 .17 CRORES WOULD HAVE ESCAPED ASSESSMENT. HE CONTENDED THAT THERE I S NO EVIDENCE TO SHOW THAT THE FIGURE OF COST OF RS.2 10 91 266/- HA D BEEN RECORDED ANYWHERE IN THE ACCOUNTS OF THE ASSESSEE FOR THE YE AR ENDED 31.03.2002 WHICH ALLEGEDLY GOT INADVERTENTLY ADOPTE D AS THE VALUE OF THE SAID SHARES AS ON 31.03.2003. HE ALSO POINTED OUT THAT THE REVISED COMPUTATION OF INCOME WAS FILED IN NOVEMBER 2005 W HEREAS THE ASSESSING OFFICER HAD RAISED THE QUERY IN MARCH 200 5 AND THERE WAS NO EXPLANATION FOR THE DELAY OF EIGHT MONTHS WHICH IS SIGNIFICANT IN THE FACTS OF THE PRESENT CASE. IT IS POINTED OUT THAT IT IS A VERY REMOTE POSSIBILITY THAT EVEN THE STATUTORY AUDITORS OF THE ASSESSEE HAD OMITTED TO NOTE THE ERROR. HE STRONGLY RELIED ON THE FINDI NGS OF THE DEPARTMENTAL AUTHORITIES AND CONTENDED THAT THE ASS ESSEE WAS CERTAINLY GUILTY OF CONCEALMENT OF THE PARTICULARS OF INCOME OR FURNISHING INACCURATE PARTICULARS THEREOF. 9. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIO NS. THE FUNDAMENTAL QUESTION TO BE DECIDED IS WHETHER THE F ILING OF THE REVISED COMPUTATION OF INCOME WAS A VOLUNTARY ACT ON THE PA RT OF THE ASSESSEE ITA NO: 5682/MUM/2007 10 OR WHETHER IT WAS PROMPTED OR PROVOKED BY THE QUERY RAISED BY THE ASSESSING OFFICER. IN OUR OPINION THE FILING OF T HE REVISED COMPUTATION OF INCOME APPEARS TO HAVE NOTHING TO DO WITH THE QU ERY RAISED BY THE ASSESSING OFFICER IN HIS LETTER DATED 16.03.2005. A PERUSAL OF THE LETTER (PAGE 16 OF THE PAPER BOOK) SHOWS THAT AS MANY AS 1 8 POINTS WERE RAISED BY THE ASSESSING OFFICER. NONE OF THESE SPE CIFICALLY REFER TO THE VALUATION OF THE CLOSING STOCK MUCH LESS TO THE VA LUATION OF THE SHARES OF LUPIN LIMITED. IN THE BALANCE SHEET AS ON 31.03 .2003 THE INVENTORY OF SECURITIES WAS VALUED AT 337.86 LAKHS AS SEEN FR OM SCHEDULE 7 TO THE BALANCE SHEET A COPY OF WHICH IS AT PAGE 97 OF THE PAPER BOOK. IN THE BALANCE SHEET AS SUCH THERE IS NO SEPARATE DISCLOSURE OF THE SHARES OF LUPIN LIMITED. THE ASSESSEE HELD A NUMBE R OF SHARES AND THE SHARES OF LUPIN LIMITED WERE PART OF ITS STOCK- IN-TRADE. THE CASE OF THE INCOME TAX AUTHORITIES IS THAT BUT FOR THE QUER Y REGARDING DETAILS OF THE SPECULATION LOSS THE ASSESSEE WOULD NOT HAVE C OME UP WITH THE REVISED COMPUTATION OF INCOME. BUT WE ARE UNABLE T O SEE ANY IMMEDIATE CONNECTION BETWEEN THE QUERY RELATING TO THE SPECULATION LOSS AND THE REVISED COMPUTATION OF THE INCOME. IN THE COMPUTATION OF THE TOTAL INCOME FILED ORIGINALLY (PAGE 50 OF THE P APER BOOK) THE ASSESSEE CLAIMED RS.96.65 LAKHS AS SPECULATION LOSS UNDER SECTION 73 OF THE ACT. IN THE NOTE APPENDED TO THE COMPUTATIO N THE LOSS WAS CLAIMED TO BE CARRIED FORWARD. IT IS TRUE THAT THE ASSESSEE DID NOT RESPOND TO THE LETTER OF THE ASSESSING OFFICER FOR QUITE SOMETIME INVITING THE ASSESSING OFFICER TO ISSUE REMINDERS I N JUNE 2005 AND SEPTEMBER 2005. BUT EVEN IN THESE REMINDERS / NOTI CES NO SPECIFIC ITA NO: 5682/MUM/2007 11 QUERY WAS MADE WITH REGARD TO THE VALUATION OF THE CLOSING STOCK OR THE SHARES OF LUPIN LIMITED IN PARTICULAR. IN THESE NO TICES / REMINDERS THE ASSESSING OFFICER CALLED UPON THE ASSESSEE TO FILE THE DETAILS ASKED FOR BY HIS LETTER DATED 16.03.2005 AND NOTHING MORE. I N ITS LETTER DATED 21.11.2005 THE ASSESSEE EXPLAINED HOW THE MISTAKE H AD ARISEN IN ADOPTING THE FIGURES OF THE CLOSING STOCK AS ON 31. 03.2003 AND HAS ALSO EXPLAINED THAT IT WAS DUE TO THE MISTAKE COMMI TTED IN ADOPTING THE FIGURES OF VALUATION OF THE SHARES OF LUPIN LIMITED . THIS WAS FURTHER AMPLIFIED BY THE ASSESSEE IN ITS LETTER DATED 25.01 .2006. WHAT CAN AT BEST BE SAID IS THAT THE QUERY RELATING TO THE CLAI M OF SPECULATION LOSS WAS MERELY AN OCCASION FOR THE ASSESSEE TO REVISIT THE VALUATION OF CLOSING STOCK OF SHARES BUT BECAUSE OF THAT IT CANN OT BE SAID THAT THE ASSESSING OFFICER DETECTED CONCEALMENT OF INCOME ON ACCOUNT OF DELIBERATE UNDERVALUATION OF THE CLOSING STOCK OF T HE SHARES OF LUPIN LIMITED. WE ARE THEREFORE INCLINED TO VIEW THE FIL ING OF THE REVISED COMPUTATION OF INCOME AS A VOLUNTARY ACT ON THE PAR T OF THE ASSESSEE BEFORE DETECTION OF ANY CONCEALMENT OR EVEN UNDERVA LUATION OF THE CLOSING STOCK. IT IS QUITE POSSIBLE THAT WHILE PRE PARING THE FINAL ACCOUNTS CONTAINING A LARGE NUMBER OF NAMES AND FIG URES THERE WAS AN INADVERTENT ERROR IN ADOPTING THE FIGURE OF CLOS ING STOCK OF THE SHARES OF LUPIN LIMITED IN THE CIRCUMSTANCES NARRAT ED BY THE LEARNED COUNSEL FOR THE ASSESSEE. THERE CAN POSSIBLY BE NO EXPLANATION AS TO HOW AND WHY A MISTAKE OCCURRED BECAUSE A MISTAKE B Y ITS VERY NATURE IS THE RESULT OF NON-APPLICATION OF MIND AND ONE WO ULD BE HARD PUT TO EXPLAIN HOW THE MISTAKE OCCURRED. IF ONE WERE TO W RITE THAT 5 + 6 = 12 ITA NO: 5682/MUM/2007 12 INSTEAD OF THE CORRECT FIGURE OF 11 AND HE IS ASKE D TO EXPLAIN HOW SUCH A MISTAKE COULD HAVE OCCURRED ALL THAT HE CAN POSS IBLY DO IS TO THROW UP HIS HANDS AND SAY THAT IT IS DUE TO LAPSE OF CON CENTRATION OR NON- APPLICATION OF MIND OR THE MIND NOT BEING FOCUSED A ND SO ON AND SO FORTH. BEYOND THAT WE DO NOT THINK ANYBODY CAN EX PLAIN AS TO WHY AND HOW A MISTAKE HAD OCCURRED. IN THIS PERSPECTIVE TH E EXPLANATION OF THE ASSESSEE THAT BY MISTAKE THE COST OF 89 810 SHARES WHICH CAME TO RS.2 10 91 266/- WAS TAKEN AS THE VALUE OF THE SHAR ES AS ON 31.03.2003 SEEMS PLAUSIBLE. THE OBJECTION OF THE L EARNED SENIOR DR THAT THIS FIGURE OF RS.2 10 91 266/- DOES NOT APPEA R ANYWHERE IN THE ACCOUNTS OF THE ASSESSEE CANNOT BE CORRECT BECAUSE THIS IS ACTUALLY THE COST OF THE SHARES AND THE ASSESSEE BEING A COM PANY THE SAME WOULD HAVE BEEN CERTAINLY REFLECTED IN ITS ACCOUNTS FOR THE YEAR ENDED 31.03.2002. 10. IN THE FORESAID CIRCUMSTANCES WE ARE SATISFIED THAT THE FILING OF THE REVISED COMPUTATION OF INCOME WAS A VOLUNTARY A CT ON THE PART OF THE ASSESSEE AND ACCORDINGLY WE HOLD THAT THE ASSES SEE CANNOT BE SAID TO HAVE CONCEALED ITS INCOME OR FURNISHED INAC CURATE PARTICULARS THEREOF JUSTIFYING THE LEVY OF PENALTY. WE CANCEL THE PENALTY AND ALLOW THE APPEAL OF THE ASSESSEE WITH NO ORDER AS TO COST S. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST MAY 2010. SD/- SD/- (R K PANDA) (R V EASWAR) ACCOUNTANT MEMBER SENIOR VICE PRESI DENT MUMBAI DATED 31 ST MAY 2010 SALDANHA ITA NO: 5682/MUM/2007 13 COPY TO: 1. M/S SYNCHEM CHEMICALS (I) PVT. LTD. 159 CST ROAD KALINA SANTACRUZ (EAST) MUMBAI 400 098 2. ACIT 10(1) 3. CIT-X 4. CIT(A)-X 5. DR E BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR ITAT MUMBAI