ASHOK NATHMAL GARODIA,MUMBAI V. ITO WARD 13(1)(1), MUMBAI

MA 171/MUM/2024

AI Insights

The case revolves around the assessee, Ashok Nathmal Garodia, who initially claimed exemption on long-term capital gains from the sale of shares of M/s. Action Financial Services (India) Ltd. The Income Tax Department later issued a notice under section 148, suspecting the transactions to be part of a scheme to introduce unaccounted income into the books. In response, the assessee declared the income from these transactions in a revised return. The Assessing Officer (AO) imposed a penalty under section 271(1)(c) for concealment of income, which was upheld by the Commissioner of Income Tax (Appeals) and the Tribunal. The assessee's subsequent Miscellaneous Application, which argued that the Tribunal had relied on a Supreme Court decision not cited during the original appeal, was dismissed as it was deemed to be seeking a review rather than rectification.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 473998 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 9 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 02-12-2024
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 30-08-2024
• Assessment Year: 2013-2014
• Appeal Filed On: 23-07-2024
• Other Referred Cases: MAK Data (P.) Ltd. Vs. CIT, Inventure Growth and Securities Ltd. vs. ITAT, DCIT vs. Avinash Nivrutti Bhosale
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: MANOJ KUMAR SINGHA
• Assessee Lawyers: NEHA PARANJAPE
• Keywords: Capital Gains; Bogus
• Section: 147; 148; 143(3); 254(2); 271(1)(c); 274

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, MUMBAI BEFORE SHRI NARENDRA KUMAR BILLAIYA, ACCOUNTANT MEMBER AND SHRI SANDEEP SINGH KARHAIL, JUDICIAL MEMBER MA No.171/MUM/2024 (Arising out of ITA No.553/MUM/2024) (Assessment Year : 2013–14) Ashok Nathmal Garodia 4, Piramal Industrial Estate, S. V. Road, Goregaon (W), Mumbai - 400062 PAN- AAMPG2442G ……………. Appellant v/s ITO Ward-13(1)(1) Aayakar Bhawan, M. K. Road Mumbai - 400020. ……………. Respondent Assessee by : Ms Neha Paranjape Revenue by : Shri Manoj Kumar Singha, Sr. DR Date of Hearing – 30/08/2024 Date of Order – 27/11/2024 O R D E R PER SANDEEP SINGH KARHAIL, J.M. The assessee has filed the present Miscellaneous Application under section 254(2) of the Income Tax Act, 1961 (\"the Act\") seeking rectification of the order dated 28.05.2024 passed by the Co-ordinate Bench of the Tribunal in assessee’s appeal being ITA No.553/Mum./2024, for the A.Y. 2013-14. 2. The brief facts of the case, leading to the filing of the present Miscellaneous Application, are: The assessee is an individual and for the year under consideration filed his original return of income on 16.07.2013 declaring a total income of Rs.26,14,480/- after claiming exemption of the long-term capital gains arising from the transaction of sale of shares of M/s. Action MA No.171/MUM/2024 (A.Y. 2013-14) 2 Page | 2 Financial Services (India) Ltd. The return filed by the assessee was selected for scrutiny and vide order passed under section 143(3) of the Act, the assessment was completed accepting the returned income. Subsequently, on the basis of the information that M/s. Action Financial Services (India) Ltd. is a penny stock and the assessee is a beneficiary of the accommodation entry transaction of claiming bogus long-term capital gains, notice under section 148 of the Act was issued on 27.03.2019 and re-assessment proceedings under section 147 of the Act were initiated. In response to the notice issued under section 148 of the Act, the assessee filed his return of income on 09.10.2019 declaring a total income of Rs.32,02,220/- after offering to tax the long-term capital gains of Rs.5,87,740/- arising from the transaction in shares of M/s. Action Financial Services (India) Ltd. Vide order passed under section 143(3) r.w.s. 147 of the Act, the total income of the assessee was assessed at the returned income. Meanwhile, penalty proceedings under section 271(1)(c) of the Act were initiated and notice under section 274 r.w.s. 271(1)(c) of the Act was issued to the assessee. In response to the aforesaid notice, the assessee submitted that he did not obtain any accommodation entry and the aforesaid transaction in shares was a genuine transaction. The assessee further submitted that there is no concealment of income nor furnishing of any inaccurate particulars of income as the return of income filed by the assessee, pursuant to the notice issued under section 148 of the Act, offering the capital gains of Rs.5,87,740/- received on the sale of shares of M/s. Action Financial Services (India) Ltd. has been accepted by the AO vide assessment order passed under section 143(3) r.w.s. 147 of the Act. The AO vide order passed under section 271(1)(c) of the Act did not agree with the submissions of the assessee on the basis that the assessee offered to tax the capital gains received on the sale of shares of M/s. Action Financial Services (India) Ltd. only after the issuance of notice under section 148 of the Act, and if the assessee’s case had not been taken up for scrutiny there would have been obvious revenue loss. The AO further held that the difference between the income offered to tax pursuant to the notice issued under section 148 of the Act and the original return of income filed by the assessee represents MA No.171/MUM/2024 (A.Y. 2013-14) 3 Page | 3 concealed income within the meaning of section 271(1)(c) of the Act. Accordingly, the AO levied a penalty of Rs.90,922/- under section 271(1)(c) of the Act. 3. In further appeal, the learned Commissioner of Income Tax (Appeals) dismissed the appeal filed by the assessee. Being aggrieved, the assessee filed an appeal before the Tribunal. 4. The Co-ordinate Bench of the Tribunal after considering the submissions of both sides and upon perusal of the material available on record upheld the levy of penalty under section 271(1)(c) of the Act and dismissed the appeal filed by the assessee, by observing as follows: - “7. We have considered the submissions of both sides and perused the material available on record. In the present case, it is undisputed that in the original return of income, the assessee declared a total income of Rs.26,14,480/, after claiming exemption of Long Term Capital Gain u/s 10(38) of the Act on sale of shares of M/s. Action Financial Services (India) Ltd. However, upon receipt of notice u/s 148 of the Act on the basis that M/s. Action Financial Services (India) Ltd is a penny stock listed on the Bombay Stock Exchange and has been used to facilitate the introduction of unaccounted income of the assessee in the form of exempt Long Term Capital Gain, the assessee filed return of income declaring a total income of Rs.32,02,220/- offering the Long Term Capital Gain of Rs.5,87,740/-, arising from the sale of shares of M/s. Action Financial Services (India) Ltd, to tax. During the hearing, the learned AR submitted that though the purchase and sale transaction with respect to the shares of M/s. Action Financial Services (India) Ltd was genuine and the assessee has not obtained any accommodation entry, however, since M/s. Action Financial Services (India) Ltd was alleged to be a penny stock, therefore, in order to buy peace, the assessee offered to tax the Long Term Capital Gain, which was initially claimed as exempt. It is the further plea of the assessee that since the returned income and assessed income are identical, therefore, no penalty can be levied u/s 271(1)(c) of the Act. 8. We find that the Hon’ble Supreme Court in MAK Data (P.) Ltd. Vs. CIT, [2013] 358 ITR 593 (SC) held that voluntary disclosure does not release the assessee from the mischief of penal proceedings. Further, it is evident from the record that though the assessee claimed the transaction of shares of M/s. Action Financial Services (India) Ltd to be genuine, however, did not bring any material of record to support its contention and straight away upon receipt of notice u/s 148 of the Act offered to tax the Long Term Capital Gain on the sale of shares of M/s. Action Financial Services (India) Ltd. Further, there is also no material on record to show that the assessee subsequently again claimed the Long Term Capital Gain to be exempt. Since the additional income on account of the aforesaid Long Term Capital Gain was offered to tax only in response to the notice issued u/s 148 of the Act, we agree with the findings of the lower MA No.171/MUM/2024 (A.Y. 2013-14) 4 Page | 4 authorities that the same is not voluntary but is consequential to the issuance of notice u/s 148 of the Act. In view of the above, we also do not find any merits in the submissions of the assessee that no penalty can be levied in the present case since the returned income and assessed income are same, as the only basis of issuance of notice u/s 148 of the Act was the alleged bogus Long Term Capital Gain claimed as exempt by the assessee in the original return of income and which was subsequently offered to tax by the assessee in response to notice issued u/s 148 of the Act. Accordingly, we find no infirmity in the impugned order in upholding the levy of penalty u/s 271(1)(c) of the Act, and therefore, the same is upheld. As a result, the grounds raised by the assessee are dismissed. 9. In the result, the appeal by the assessee is dismissed.” 5. During the hearing the learned Authorized Representative (“learned AR”) by referring, to the contentions made in the present Miscellaneous Application, submitted that the decision of the Hon’ble Supreme Court in Mak Data (P.) Ltd. Ltd. vs. CIT, reported in (2013) 358 ITR 593 (SC), placed reliance upon the Co-ordinate Bench, was neither cited by either party nor referred by the Co-ordinate Bench during the hearing and thus the assessee did not get an opportunity to deal with and distinguish the aforesaid decision of the Hon’ble Supreme Court. Accordingly, the learned AR submitted that the same has resulted in a mistake apparent from the record as per the provisions of section 254(2) of the Act. 6. From the perusal of the findings of the Co-ordinate Bench, as noted in the foregoing paragraph, we find that the Co-ordinate Bench referred to the legal proposition laid down by the Hon’ble Supreme Court in Mak Data (P.) Ltd. (supra) only for the assessee’s submission made before the lower authorities that in order to buy peace, the assessee offered to tax the long-term capital gains earned from the transaction in shares of M/s. Action Financial Services (India) Ltd. and the said transaction was otherwise a genuine transaction. From the perusal of the decision of the Co-ordinate Bench, it is evident that the Co-ordinate Bench arrived at an independent finding that in the present case, additional income on account of aforesaid long-term capital gains offered to tax by the assessee was not voluntary but was in response to notice issued under section 148 of the Act. Further as noted above, the Co-ordinate Bench MA No.171/MUM/2024 (A.Y. 2013-14) 5 Page | 5 also rejected the submission of the assessee that no penalty can be levied in the present case since returned income and assessed income are the same on the basis that the only basis for issuance of notice under section 148, pursuant to which the return of income was filed by the assessee, was the alleged bogus long term capital gains claimed as exempt by the assessee in his original return of income. Thus, we are of the considered view that the reliance placed on the decision of the Hon’ble Supreme Court was for a limited purpose of referring to the legal proposition laid down therein. 7. In support of its submission, the learned AR placed reliance upon the decision of the Hon’ble Jurisdictional High Court in Inventure Growth and Securities Ltd. vs. ITAT, reported in (2010) 324 ITR 319 (Bom.). In the aforesaid decision, the Hon’ble High Court after considering the fact therein that the decision relied upon by the Co-ordinate Bench was not available when the appeal was argued before the Tribunal and thus was not placed before the Tribunal by either party, allowed the writ petition filed by the assessee and restored the appeal to the file of the Tribunal for fresh consideration. From a careful perusal of the aforesaid decision, we find that the Hon’ble High Court held that it cannot be laid down as an inflexible proposition of law that an order of remand on a Miscellaneous Application under section 254(2) would be warranted merely because the Tribunal has relied upon a judgment which was not cited by either party before it. In the present case, as noted above, it is not a case where the decision of the Hon’ble Supreme Court in Mak Data (P.) Ltd. (supra) was not available when the appeal was argued as the said decision was pronounced by the Hon’ble Supreme Court on 30.10.2013. Secondly, since the decision of the Hon’ble Supreme Court in Mak Data (P.) Ltd. (supra) was only referred for the purpose of the legal proposition laid down therein and the Co-ordinate Bench has rendered its own independent findings to uphold the levy of penalty under section 271(1)(c) of the Act, therefore, we are of the considered opinion that the decision of the Hon’ble Jurisdictional High Court in Inventure Growth and Securities Ltd. (supra) is factually distinguishable, and thus is not applicable. MA No.171/MUM/2024 (A.Y. 2013-14) 6 Page | 6 8. Further the decision of the Co-ordinate Bench of the Tribunal in DCIT vs. Avinash Nivrutti Bhosale, in ITA No.664/Mum/2024, relied upon by the learned AR is also factually distinguishable as in that case proceedings under section 153A were initiated and it was not a case where the assessee pursuant to initiation of re-assessment proceedings and receipt of reasons recorded for the same filed its return of income offering the income to tax, which was earlier claimed as exempt. Thus, we find that this decision is also not applicable to the facts of the present case. 9. Upon consideration of submissions made by the assessee in the present Miscellaneous Application, it is sufficiently evident that in the guise of seeking rectification of the order, the assessee has sought a review of the order passed by the Co-ordinate Bench on 28.05.2024 in assessee’s appeal being ITA No.553/Mum/2024, which is completely impermissible under section 254(2) of the Act. Therefore, we find no merit in the submissions of the assessee. Hence, the present Miscellaneous Application filed by the assessee is dismissed. 10. In the result, the present Miscellaneous Application by the assessee is dismissed. Order pronounced in the open Court on 27/11/2024 Sd/- NARENDRA KUMAR BILLAIYA ACCOUNTANT MEMBER Sd/- SANDEEP SINGH KARHAIL JUDICIAL MEMBER MUMBAI, DATED: 27/11/2024 Prabhat Copy of the order forwarded to: (1) The Assessee; (2) The Revenue; (3) The PCIT / CIT (Judicial); (4) The DR, ITAT, Mumbai; and (5) Guard file. True Copy By Order Assistant Registrar ITAT, Mumbai "