KIRAN KULKARNI, MUMBAI V. ASSTT.C.I.T.-19(3), MUMBAI

CO 30/MUM/2009

• Counselvise Citation: [2011] 122 COUNSELVISE.COM (IT) 5998 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 22 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 29-04-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 13-04-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 06-02-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: GOLI SRINIVASA RAO

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH H, MUMBAI BEFORE SHRI R.S. SYAL, A.M. AND SHRI V. DURGA RAO, J.M. ITA NO. 2746/MUM/2008 ASSESSMENT YEAR: 2004-05 ASSTT. COMMISSIONER OF INCOME-TAX, APPELLANT 19(3), MUMBAI. VS. KIRAN P. KULKARNI, RESPONDENT 502, KONARK CLASSIC HILL ROAD, BANDRA (WEST), MUMBAI 400 050 C.O. NO. 30/MUM/09 (IN ITA NO. 2746/MUM/2008 ASSESSMENT YEAR: 2004-05) KIRAN P. KULKARNI, CROSS OBJECTOR 502, KONARK CLASSIC HILL ROAD, BANDRA (WEST), MUMBAI 400 050 VS. ASSTT. COMMISSIONER OF INCOME-TAX, RESPONDENT 19(3), MUMBAI. REVENUE BY : MR. GOLI SRINIVASA RAO ASSESSEE BY : MR. K. SHIVRAM . ORDER PER V. DURGA RAO, J.M.: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAI NST THE ORDER OF CIT(A)- XIX, MUMBAI PASSED ON 15 TH FEBRUARY, 2008 FOR THE ASSESSMENT YEAR 2004-05. THE ASSESSEE ALSO FILED C. O. AGAINST THE VERY SAME ORDER OF CIT(A). ITA NO. 2746/MUM/09 AND C.O. 30/MUM/09 KIRAN P. KULKARNI 2 2. THE GROUNDS OF APPEAL OF THE REVENUE READ AS UND ER:- 1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW:- A) THE LEARNED CIT(A) ERRED IN ALLOWING RELIEF OF R S. 27,45,527/- IN QUANTUM OF PENALTY WITHOUT APPRECIATING THE FACT THAT THE ASSESSING OFFICER HAS MADE DETAILED ENQUIRY IN RESP ECT OF SHORT TERM CAPITAL LOSS OF RS. 2,37,83,600/-. B) THE LEARNED CIT(A) ERRED IN HOLDING THAT THE ASS ESSING OFFICER DID NOT MAKE ANY ENQUIRIES IN RESPECT OF SCRIPTS RE SULTING INTO SHORT TERM CAPITAL LOSS WHEREAS THE EVIDENCE ON REC ORD CONCLUSIVELY PROVED OTHERWISE. C) THE LEARNED CIT(A) OUGHT TO HAVE CONFIRMED THE P ENALTY OF RS. 30,63,130/- LEVIED UPON THE ASSESSEE IN RESPECT OF THE CLAIM OF SET OFF OF CAPITAL LOSS OF RS. 2,66,70,204/- BY APP RECIATING THE FACT THAT THE ASSESSEE HAS DELIBERATELY AND WITH FU LL KNOWLEDGE CLAIMED BOGUS LOSS ON SALE OF SCRIPTS WITH SOLE INT ENTION TO REDUCE HIS TAX LIABILITIES AND HENCE CLEARLY FALLS IN THE NET OF THE PROVISIONS OF PENALTY U/S 271(1)(C) OF THE ACT. RELIANCE IS PLACED ON THE FOLLOWING DECISIONS: I) CIT VS. IIAXI TEXTILES INDUSTRIES (1994) 49 ITD 330 (AHD. TRIBUNAL) II) ITO VS. VEENA ESTATES (P.) LTD. 81 ITD 401 (MUM . ITAT D BENCH) 2) THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE ASSESSING OFFIC ER BE RESTORED. 3. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSES SEE IS AN INDIVIDUAL. DURING THE YEAR UNDER CONSIDERATION, TH E ASSESSEE HAD FILED THE RETURN DECLARING THE TAXABLE INCOME OF RS . 43,30,850/- CLAIMING THE SHORT TERM CAPITAL LOSS OF RS. 2,37,11 ,206/-, WHICH WAS SET OFF AGAINST THE LONG TERM CAPITAL GAINS OF RS. 2,76,55,339/- BY OFFERING FOR TAXATION A NET LONG TERM CAPITAL GAIN OF RS. 39,44,133/-. ON BEING ASKED TO FURNISH THE DETAILS IN SUPPORT OF THE SAID CLAIM OF THE ASSESSEE, THE ASSESSEE FURNISHED THE DETAILS, F ROM WHICH THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE INCURR ED SHORT TERM/LONG TERM CAPITAL LOSS ON TRANSFER OF SHARES/SCRIPS FOR THE FOLLOWING COMPANIES:- ITA NO. 2746/MUM/09 AND C.O. 30/MUM/09 KIRAN P. KULKARNI 3 SR.NO. NAME OF THE CO. AMOUNT OF STC LOSS. LTC LOSS. 1. LIMTEX INVESTMENTS LTD. 48,01,200/- 2. MINOLTA FINANCE LTD. 53,71,200/- 3. SHARDARAJ TRADE LTD. 33,07,500/- 4. STENLY CREDIT LTD. 1,03,03,700/- TOTAL 2,37,83,600/- 5. KHUSHAL SOFTWARE LTD. 28,86,664/- 4. ON ENQUIRY, THE ASSESSING OFFICER NOTICED THAT T HROUGH THE INTERNATIONAL STOCK EXCHANGE OF INDIA LTD. VIDE THE IR LETTER NO. 06- 07/15F/181 15/RK DATED 19/09/06 THAT THE AGENT/BROK ER, M/S VRP FINANCIAL SERVICES PVT. LTD., THROUGH WHOM THE ASSE SSEE CLAIMED TO HAVE MADE THE TRANSACTION OF SHARES OF M/S KHUSHAL SOFTWARE LTD. HAD BEEN EXPELLED BY THE STOCK EXCHANGE AND IT WAS NO LONGER THE BROKER OF STOCK EXCHANGE. THE SAID INFORMATION WAS INTIMATED BY THE ASSESSING OFFICER TO THE ASSESSEE VIDE LETTER DATED 04/10/06 AND ASKED THE ASSESSEE TO FURNISH CORRECT ADDRESS OF TH E BROKER AND NAME OF THE STOCK EXCHANGE THROUGH WHICH THE SHARE TRANS ACTIONS HAD BEEN CARRIED OUT. IN REPLY, VIDE LETTER DATED 09/10/06, THE AR OF THE ASSESSEE WANTED TO BUY PEACE AND TO AVOID LITIGATIO N WITH THE DEPARTMENT, THE CLAIM OF LONG TERM CAPITAL LOSS AS WELL AS SHORT TERM CAPITAL LOSS TOTALING TO RS. 2,66,70,264/- WAS WITH DRAWN AND THEREBY REQUESTED TO TAX THE LONG TERM CAPITAL GAIN AFTER D ISALLOWING THE CLAIM OF SHORT TERM CAPITAL LOSS AND LONG TERM CAPITAL LO SS AS MENTIONED ABOVE. ACCORDINGLY, THE ASSESSING OFFICER ASSESSED THE LONG TERM CAPITAL GAIN AND SHORT TERM CAPITAL GAIN AT RS. 3,1 5,41,943/- AND RS. 80,279/-. THEREAFTER, THE ASSESSING OFFICER INITIA TED PENALTY PROCEEDINGS U/S 271(1) OF THE ACT ON THE GROUND TH AT THE ASSESSEE FURNISHED INACCURATE PARTICULARS AND CONCEALMENT OF INCOME AND ISSUED NOTICE U/S 274 R.W.S 271(1)(C) OF THE ACT, A SKING THE ASSESSEE TO SHOW CAUSE AS TO WHY PENALTY ORDER IMPOSING PENA LTY U/S 271(1)(C) ITA NO. 2746/MUM/09 AND C.O. 30/MUM/09 KIRAN P. KULKARNI 4 SHOULD NOT BE PASSED FOR SAID DEFAULT. IN REPLY, T HE ASSESSEE FILED DETAILED EXPLANATION DT. 25/03/07, WHICH WAS EXTRAC TED BY THE ASSESSING OFFICER VIDE PARAS 7 TO 8 OF HIS ORDER. T HE EXPLANATION OFFERED BY THE ASSESSEE WAS NOT FOUND FAVOUR WITH T HE ASSESSING OFFICER, AND THE ASSESSING OFFICER LEVIED MINIMUM P ENALTY OF RS. 30,63,130/- U/S 271(1)(C) OF THE ACT OBSERVING THAT THE WITHDRAWAL OF CLAIM RELATING TO LOSSES ( LONG TERM CAPITAL LOSS A S WELL AS SHORT TERM CAPITAL LOSS) HAD BEEN MADE BY THE ASSESSEE ONLY WH EN HE REALIZED THAT THE DEPARTMENT HAD INVESTIGATED THE CASE AND T HE BOGUS LOSSES HAD BEEN DETECTED BY THE DEPARTMENT. IT WAS FURTHER MENTIONED BY THE ASSESSING OFFICER THAT VARIOUS JUDICIAL PRONOUNCEME NTS RELIED UPON BY THE ASSESSEE WERE NOT RELEVANT SINCE THE INTENTION OF CONCEALMENT BY THE ASSESSEE HAD BEEN PROVED BEYOND DOUBT. AGGRIEV ED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). 5. BEFORE THE CIT(A), THE ASSESSEE MADE VARIOUS SUB MISSIONS, WHICH WERE SUMMARIZED BY THE CIT(A) VIDE PARA 4 IN HIS ORDER AND THE SAME ARE EXTRACTED BELOW:- I) DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER HAD CONFRONTED THE APPELLANT REGARDING THE TRANSACTION OF A PARTICULAR SCRIPT NAMELY M/S KHUSHAL SOFTWARE LTD ., WHERE THE LOSS OF RS. 28,86,664/- HAD BEEN CLAIMED BY THE APP ELLANT. IN THIS REGARD THE APPELLANT MADE ALL EFFORTS TO FIND OUT THE PRESENT ADDRESS OF M/S VRP FINANCIAL SERVICES PVT. LTD. HOW EVER, SINCE THIS EFFORT FAILED, THE APPELLANT SUBMITTED A DECLA RATION WITHDRAWING THIS LONG TERM CAPITAL LOSS OF RS. 28,8 6,664/-. II) THE APPELLANT HAD BEEN ONLY CONFRONTED WITH THE QUERIES WHICH HAD BEEN DONE WITH REGARD TO RS. 28,86,664/- ON SAL E OF SHARES RELATING TO M/S KHUSHAL SOFTWARE LTD. HOWEVER, THE APPELLANT FURTHER SURRENDERED THE SHORT TERM CAPITAL LOSS OF RS. 2,37,83,600/- FOR THE SALE OF VARIOUS OTHER EQUITY SHARES REGARDING WHICH NO ENQUIRY OR INVESTIGATION HAD BEE N UNDERTAKEN BY THE ASSESSING OFFICER. IT WAS CONTENDED BY THE A R OF THE APPELLANT THAT SINCE THE AMOUNTS WERE SURRENDERED B Y THE APPELLANT ON ITS OWN AND VOLUNTARILY WITH A REQUEST NOT TO INITIATE PENALTY U/S 271(1) OF THE ACT, 1961 AND WITH A VIE W TO BUY PEACE AND TO AVOID PROTRACTED LITIGATION WITH THE I NCOME TAX AUTHORITIES, THE PENALTY LEVIED BY THE ASSESSING OF FICER SHOULD BE DELETED. ITA NO. 2746/MUM/09 AND C.O. 30/MUM/09 KIRAN P. KULKARNI 5 6. THE ASSESSEE RELIED UPON VARIOUS JUDICIAL PRONOU NCEMENTS IN SUPPORT OF HIS CASE AND THE GIST OF THE SAME WERE E XTRACTED BY THE CIT(A) IN HIS ORDER AT PAGES 6 TO 9. WITHOUT PREJUD ICE TO THE CLAIM OF CANCELLATION OF PENALTY ON THE FULL AMOUNT, THE ASS ESSEE ALSO SUBMITTED THAT THERE WAS NO ENQUIRY WHATSOEVER WITH RESPECT TO THE AMOUNT OF SHORT TERM CAPITAL LOSS OF RS. 2,37,83,60 0/- AND THIS AMOUNT WAS SURRENDERED WITHOUT ANY ENQUIRY OR QUERI ES MADE BY THE DEPARTMENT. THE SURRENDER LETTER WAS SUBMITTED ON 0 9/10/2006 AND THE ASSESSMENT WAS COMPLETED ON 20/10/2006. IT WAS SUBMITTED THAT THE ASSESSEE WAS NEVER CONFRONTED WITH ANY INFORMAT ION AVAILABLE WITH THE DEPARTMENT TO ESTABLISH THAT CONCEALMENT HAD BE EN DETECTED AND ON THE BASIS OF WHICH PENALTY SHOULD HAVE IMPOSED. IT WAS ALSO SUBMITTED THAT THE ASSESSEE HAD MADE A VOLUNTARY SU RRENDER OF INCOME AND PAID ALL THE TAXES DUE WITH THE INTENTIO N OF BUYING PEACE AND WITH THE EXPECTATION THAT NO CONCEALMENT PENALT Y WILL BE IMPOSED, HOWEVER, THE ASSESSING OFFICER HAD IGNORED THE VARI OUS JUDICIAL PRONOUNCEMENTS AND HAD GONE AHEAD TO LEVY PENALTY O N THE TOTAL AMOUNT OF SURRENDER WITHOUT APPRECIATING THE FACTS OF THE CASE. AFTER CONSIDERING THE FACTS OF THE CASE, VARIOUS JUDICIAL PRONOUNCEMENTS, SUBMISSIONS OF THE ASSESSEE, THE CIT(A) HELD THAT T HERE IS ADEQUATE JUSTIFICATION FOR LEVYING PENALTY U/S 271(1)(C) ONL Y IN RESPECT OF THE TRANSACTIONS RELATING TO M/S KHUSHAL SOFTWARE LTD. AMOUNTING TO RS. 28,86,664/-. HOWEVER, WITH REGARD TO THE BALANCE AM OUNT OF SURRENDER MADE BY THE ASSESSEE, THE ASSESSING OFFIC ER DID NOT HAVE ADEQUATE MATERIAL ON RECORD FOR ESTABLISHING THE CO NCEALMENT AND, THEREFORE, DIRECTED THE ASSESSING OFFICER TO RESTRI CT THE AMOUNT OF PENALTY RELATING TO LONG TERM CAPITAL LOSS AMOUNTIN G TO RS. 28,86,664/-. 7. AGGRIEVED BY THE ORDER OF THE CIT(A), THE REVENU E IS IN APPEAL BEFORE THE ITAT AND THE ASSESSEE ALSO FILED C.O. AG AINST SUSTAINING THE PENALTY RELATING TO LONG TERM CAPITAL LOSS. ITA NO. 2746/MUM/09 AND C.O. 30/MUM/09 KIRAN P. KULKARNI 6 8. THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS RELI ED UPON THE ORDER OF THE ASSESSING OFFICER WHEREAS THE LEARNED COUNSEL FOR THE ASSESSEE HAS RELIED UPON THE ORDER OF CIT(A) TO THE EXTENT OF PENALTY DELETED BY THE CIT(A). HOWEVER, WITH REGARD TO THE PENALTY SUSTAINED BY THE CIT(A), THE ASSESSEE CONTENDED THAT VARIOUS JUDICIAL PRONOUNCEMENTS HAD BEEN BROUGHT TO THE NOTICE OF TH E ASSESSING OFFICER AND THE ASSESSEE HAD MADE A VOLUNTARY SURRE NDER OF INCOME AND PAID ALL THE TAXES DUE WITH THE INTENTION OF BU YING PEACE AND WITH EXPECTATION THAT NO CONCEALMENT PENALTY WILL BE IMP OSED. THE LEARNED COUNSEL POINTED OUT THAT AFTER THE SURRENDER MADE BY THE ASSESSEE ON 09/10/2006, THE ASSESSMENT WAS FINALIZED SHORTLY TH EREAFTER ON 20/10/2006 AND NO OTHER ENQUIRY WHICH COULD RESULT IN ESTABLISHMENT OF CONCEALMENT WAS DONE AT ANY TIME BY THE ASSESSIN G OFFICER. 9. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF THE PARTIES AND PERUSED THE RECORD AS WELL AS GONE THROUGH THE DECI SIONS CITED. THE ASSESSEE HAS CLAIMED LONG TERM CAPITAL GAIN OF RS. 2,76,55,339/- AND SHORT TERM CAPITAL LOSS OF RS. 2,37,11,206/- AND AF TER ADJUSTMENT OF LONG TERM CAPITAL GAIN AGAINST SHORT TERM CAPITAL L OSS, A NET LONG TERM CAPITAL GAIN OF RS. 39,44,133/- WAS OFFERED FOR TAX ATION. ON ENQUIRY, THE ASSESSING OFFICER LEARNT THROUGH THE INTERNATIO NAL STOCK EXCHANGE OF INDIA LTD. THAT THE AGENT/BROKER, M/S VRP FINANC IAL SERVICES PVT. LTD., THROUGH WHOM THE ASSESSEE CLAIMED TO HAVE MAD E THE TRANSACTION OF SHARES OF M/S KHUSHAL SOFTWARE LTD., HAS BEEN EXPELLED BY THE STOCK EXCHANGE AND IT IS NO LONGER THE BROKE R OF STOCK EXCHANGE. THE ASSESSING OFFICER VIDE LETTER DATED 0 4/10/06 ASKED THE ASSESSEE TO FURNISH THE CORRECT ADDRESS OF THE BROK ER AND NAME OF THE STOCK EXCHANGE THROUGH WHICH THE SHARE TRANSACTIONS HAVE BEEN CARRIED OUT, AND THE ASSESSEE VIDE LETTER DATED 09/ 10/06 HAD WITHDRAWN THE TOTAL CLAIM OF LONG TERM CAPITAL LOSS AS WELL AS SHORT TERM CAPITAL LOSS TOTALING TO RS. 2,66,70,264/- STA TING THAT THE ASSESSEE WANTS TO BUY PEACE AND TO AVOID PROTRACTED LITIGATION WITH INCOME TAX AUTHORITIES. THEREAFTER, THE ASSESSING O FFICER INITIATED ITA NO. 2746/MUM/09 AND C.O. 30/MUM/09 KIRAN P. KULKARNI 7 PENALTY PROCEEDINGS U/S 271(1)(C) ON THE GROUND THA T THE WITHDRAWAL OF LOSSES HAD BEEN MADE BY THE ASSESSEE ONLY WHEN H E REALIZED THAT THE DEPARTMENT HAS INVESTIGATED THE CASE AND THE FR AUDULENT METHOD ADOPTED BY THE ASSESSEE FOR EVADING THE TAXES AND C LAIMING BOGUS LOSSES HAS BEEN DETECTED BY THE DEPARTMENT. ACCORDI NGLY, THE ASSESSING OFFICER LEVIED A MINIMUM PENALTY OF RS. 3 0,63,130/- U/S 271(1)(C). THE CIT(A) OBSERVED THAT ASSESSING OFFIC ER MADE SPECIFIC ENQUIRIES RELATING TO THE SALE OF THE SCRIP OF M/S KHUSHAL SOFTWARE LTD. WHEREIN LONG TERM CAPITAL LOSS OF RS. 28,86,66 4/-WAS MADE BY THE ASSESSEE. THE CIT(A) FURTHER OBSERVED THAT ON T HE BASIS OF FACTS AVAILABLE IT IS CLEAR THAT THE ASSESSING OFFICER HA D SPECIFIC INFORMATION AND EVIDENCES TO ESTABLISH THAT THE SHARE TRANSACTI ONS RELATING TO M/S KHUSHAL SOFTWARE LTD. WAS NOT A GENUINE TRANSACTION AND ACCORDINGLY IT WAS ONLY AFTER THE INFORMATION WAS CONFRONTED WI TH THE ASSESSEE THAT THE SURRENDER HAD BEEN MADE. THEREFORE, THE CI T(A) CONFIRMED THE ACTION OF THE ASSESSING OFFICER IN LEVYING PENA LTY IN RESPECT OF THE TRANSACTIONS RELATING TO M/S KHUSHAL SOFTWARE LTD., AMOUNTING TO RS. 28,86,664/-. AS REGARDS THE SURRENDER OF SHORT TERM CAPITAL LOSS OF RS. 2,37,83,600/-, THE CIT(A) OBSERVED THAT THE ASSESSI NG OFFICER DID NOT HAVE ANY MATERIAL AVAILABLE ON RECORD, AT THE TIME OF PASSING THE ASSESSMENT ORDER, TO ESTABLISH THAT CONCEALMENT HAD BEEN MADE BY THE ASSESSEE. HE FURTHER OBSERVED THAT IT IS PERTIN ENT TO NOTE THAT THE SURRENDER WITH REGARD TO THESE TRANSACTIONS WAS MAD E ON 09/10/2006 AND THE ASSESSMENT WAS COMPLETED ON 20/10/2006 AND THERE WERE NO SPECIFIC QUERIES MADE BY THE ASSESSING OFFICER RELA TING TO THE ABOVE MENTIONED FOUR TRANSACTIONS. THE CIT(A) HELD THAT E VEN IF ENQUIRIES HAD BEEN INITIATED THERE WAS NOTHING ON RECORD AVAI LABLE WITH THE ASSESSING OFFICER WHICH INDICATED THAT CONCEALMENT HAD BEEN MADE AND THEREFORE PENALTY SHOULD BE LEVIED FOR THE SAME . HE FURTHER HELD THAT THE ASSESSING OFFICER DID NOT BRING OUT ANY SP ECIFIC MATERIAL TO ESTABLISH THE MALAFIDE INTENTION OF THE ASSESSEE AN D AT THE SAME TIME HAS NOT HIGHLIGHTED THE EFFORTS MADE BY THE DEPARTM ENT TO DETECT THE CONCEALMENT OF INCOME RELATING TO FOUR TRANSACTION OF SHORT TERM ITA NO. 2746/MUM/09 AND C.O. 30/MUM/09 KIRAN P. KULKARNI 8 CAPITAL LOSS AMOUNTING TO RS. 2,37,83,600/-. THE CI T(A) HELD THAT ON THE BASIS OF FACTS AND EVIDENCES IT APPEARS THAT SU CH EVIDENCE WAS AVAILABLE WITH THE ASSESSING OFFICER ONLY TO THE EX TENT OF TRANSACTIONS RELATING TO THE SCRIPT OF M/S KHUSHAL SOFTWARE LTD. AND IF SIMILAR CONFIRMATIONS REGARDING THE OTHER FOUR TRANSACTIONS WERE ALSO AVAILABLE WITH THE ASSESSING OFFICER BEFORE THE FIN ALIZATION OF ASSESSMENT ON 20/10/06, THE IMPOSITION OF CONCEALME NT PENALTY COULD HAVE BEEN JUSTIFIED. IN VIEW OF THE ABOVE FIN DINGS, THE CIT(A) HELD THAT SINCE THE ASSESSING OFFICER DID NOT HAVE ADEQUATE MATERIAL ON RECORD FOR ESTABLISHING THE CONCEALMENT, DIRECTE D TO RESTRICT THE AMOUNT OF PENALTY RELATING TO THE LONG TERM CAPITAL LOSS AMOUNTING TO RS. 28,86,664/-.ON CAREFUL CONSIDERATION OF THE FAC TS OF THE CASE, WE FIND THAT THE CIT(A) HAS ELABORATELY DISCUSSED THE ISSUE AT LENGTH AND RESTRICTED THE PENALTY RELATING TO THE LONG TERM CA PITAL LOSS AMOUNTING TO RS. 28,86,664/- AND THEREFORE, WE FIND NO INFIRM ITY IN THE ORDER OF THE CIT(A) IN THIS REGARD. ACCORDINGLY, WE DISMISS THE APPEAL FILED BY THE REVENUE. 10. IN SO FAR AS THE CROSS OBJECTIONS FILED BY THE ASSESSEE ARE CONCERNED, THE LEARNED COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE ASSESSEE HAS MADE ALL THE DISCLOSURES OF SHORT TERM CAPITAL LOSS AND LONG TERM CAPITAL LOSS IN THE RETURN OF INCOME AND IN STATEMENT OF INCOME. IT IS SUBMITTED THAT ALL THE TRANSACTIONS W ERE MADE THROUGH DMAT ACCOUNT. IN RESPECT OF LONG TERM CAPITAL LOSS IS CONCERNED, THE LEARNED COUNSEL SUBMITTED THAT THE ASSESSEE HAS TRI ED HIS LEVEL BEST TO LOCATE ADDRESS OF THE BROKER, HOWEVER, HE COULD NOT TRACE OUT THE BROKER AND, THEREFORE, SURRENDERED THE CLAIM OF LON G TERM CAPITAL LOSS AS WELL SHORT TERM CAPITAL LOSS TOTALING TO RS. 2,6 6,70,264/-. IT IS CONTENDED THAT NO PENALTY CAN BE LEVIED ON VOLUNTAR Y SURRENDER OF INCOME AND WHEN SURRENDER WAS MADE WITH THE CONDITI ON THAT PENALTY WILL BE NOT BE LEVIED. FOR THIS CONTENTION, THE LEA RNED COUNSEL HAS RELIED UPON THE FOLLOWING CASE LAWS:- ITA NO. 2746/MUM/09 AND C.O. 30/MUM/09 KIRAN P. KULKARNI 9 1. SIR SHADILAL SUGAR AND GENERAL MILLS LTD. VS. CIT[1 987] 168 ITR 705 (SC). 2. CIT VS. SURESH CHANDRA MITTAL [2000] 241 ITR 124 (M .P.) 3. CIT VS. BHIMJI BHANJI & CO., [1984] 146 ITR 145 (BO M) 4. CIT VS. NAVNITLAL POCHALAL [1995] 213 ITR 69 (GUJ.) 5. RAMNATH JAGANATH VS. STATE OF MAHARASHTRA [1984] 57 STC 46 (51) (BOM.) 6. CIT VS. KIRAN & CO. [1996] 217 ITR 326 (BOM) 7. BHAGAT & CO. VS. ACIT [2006] 101 TTJ 553 (MUM.) 8. ITO VS. MANJIT SINGH BALDEV SINGH COMMISSION AGENTS , 69 ITD 197 (ASR.) 9. CIT VS. RELIANCE PETROCHEMICALS PVT. LTD. [2010] 32 2 ITR 158 (SC). 11. THE LEARNED CIT(A) HAS CONFIRMED THE PENALTY IN RESPECT OF THE TRANSACTIONS RELATING TO M/S KHUSHAL SOFTWARE LTD. AS THE ASSESSING OFFICER MADE AN ENQUIRY IN THIS REGARD AND FOUND TH AT THE SALE OF SHARE TRANSACTIONS RELATING TO M/S KHUSHAL SOFTWARE LTD. WERE NOT GENUINE FOR THE REASON THAT THE STOCK EXCHANGE EXPE LLED M/S VRP FINANCIAL SERVICES PVT. LTD. AND NO LONGER IS THE B ROKER OF STOCK EXCHANGE SINCE JULY, 2003. WHEN IT WAS CONFRONTED T O THE ASSESSEE ON 04/10/06, THE ASSESSEE IMMEDIATELY ON 09/10/06 SURR ENDERED THE CLAIM OF LONG TERM CAPITAL LOSS AS WELL SHORT TERM CAPITAL LOSS TOTALING TO RS. 2,66,70,264/-, WHICH COMPRISED ALL FIVE TRAN SACTIONS INCLUDING THE SALE OF SHARES RELATING TO M/S KHUSHAL SOFTWARE LTD. WHEN THE ASSESSING OFFICER BROUGHT TO THE NOTICE OF THE ASSE SSEE REGARDING EXPELLING THE BROKER M/S VRP FINANCIAL SERVICES PVT . LTD. FROM THE STOCK EXCHANGE, THE ASSESSEE WAS UNABLE TO EXPLAIN ANY REASON AS TO HOW HE MADE TRANSACTIONS WITH THE ABOVE BROKER AND NOTHING WAS BROUGHT ON RECORD OR BEFORE US TO ESTABLISH THAT PR OPER ENQUIRY IS MADE TO KNOW THE WHEREABOUTS OF THE BROKER M/S VRP FINANCIAL SERVICES PVT. LTD. AND THE TRANSACTIONS WITH IT AR E GENUINE. WE FIND THAT THE SURRENDER WAS MADE BY THE ASSESSEE IS WIT HIN 5 DAYS AND ITA NO. 2746/MUM/09 AND C.O. 30/MUM/09 KIRAN P. KULKARNI 10 THAT TOO ON BEING ASKED TO FURNISH THE CORRECT ADDR ESS DETAILS OF THE BROKER BY THE AO. IN VIEW OF THE ABOVE, WE ARE OF T HE CONSIDERED OPINION THAT THE ASSESSEE HAS NOT MADE ANY REASONAB LE ENQUIRY WITH REGARD TO THE SALE OF SHARE TRANSACTIONS RELATING T O M/S KHUSHAL SOFTWARE LTD. AND THE ASSESSEE HAS NOT EXPLAINED AN Y REASON TO JUSTIFY THE SALE IN RESPECT OF M/S KHUSHAL SOFTWARE LTD. A RE GENUINE. SIMPLY BECAUSE THE DISCLOSURE WAS MADE AND THE TRANSACTION S ARE MADE THROUGH DMAT ACCOUNT, IT CANNOT BE SAID THAT THE TR ANSACTIONS ARE GENUINE. WHEN THE ASSESSING OFFICER MADE INVESTIGAT ION AND FOUND THAT THE CONCERNED BROKER I.E. M/S VRP FINANCIAL SE RVICES PVT. LTD. WAS EXPELLED FROM THE STOCK EXCHANGE, THE BURDEN LI ES ON THE ASSESSEE TO PROVE THE GENUINENESS OF THE TRANSACTIO NS MADE WITH THE SAID BROKER BY WAY DOCUMENTARY EVIDENCE BEFORE THE ASSESSING OFFICER, BUT, THE ASSESSEE FAILS TO DO SO. THE LEA RNED COUNSEL FOR THE ASSESSEE HAS RELIED ON VARIOUS CASE LAWS (CITED SUP RA), WHICH ARE DISTINGUISHABLE ON THE FACTS TO THE PRESENT CASE UN DER CONSIDERATION. WHEN SURRENDER WAS MADE BY THE ASSESSEE IN A CASE WHERE THE ASSESSING OFFICER MADE INVESTIGATION, WHETHER SUCH SURRENDER IS VOLUNTARY OR NOT IS TO BE DECIDED BY TAKING INTO CO NSIDERATION OF ALL THE FACTS AND CIRCUMSTANCES OF EACH CASE. IN THE PR ESENT CASE THE ASSESSEE HAD MADE SURRENDER WITHIN 5 DAYS AFTER INV ESTIGATION MADE BY THE ASSESSING OFFICER. THEREFORE, IN OUR CONSIDE RED OPINION THE SURRENDER IN RESPECT OF SALE OF SHARES RELATING TO M/S KHUSHAL SOFTWARE LTD. PURCHASED THROUGH THE BROKER M/S VRP FINANCIAL SERVICES PVT. LTD. IS NOT A VOLUNTARY SURRENDER. TH EREFORE, THE CASES RELIED UPON BY THE LEARNED COUNSEL FOR THE ASSESSEE ARE NOT OF ANY HELP TO THE FACTS OF THE PRESENT CASE. WE FIND THAT THERE IS NO MATERIAL ON RECORD TO SHOW THAT THE ASSESSEE MADE ENQUIRY WI TH REGARD TO THE ADDRESS AND WHEREABOUTS OF THE BROKER M/S VRP FINAN CIAL SERVICES PVT. LTD. IN VIEW OF THE ABOVE DISCUSSION, WE FIN D NO INFIRMITY IN THE ORDER OF THE CIT(A) IN CONFIRMING THE PENALTY IN RE SPECT OF THE SALE MADE BY THE ASSESSEE RELATING TO M/S KHUSHAL SOFTW ARE LTD. SO, THIS PART OF THE ORDER OF THE CIT(A) IS HEREBY UPHELD AN D THE CROSS ITA NO. 2746/MUM/09 AND C.O. 30/MUM/09 KIRAN P. KULKARNI 11 OBJECTIONS FILED BY THE ASSESSEE WITH REGARD TO CON FIRMING THE PENALTY OF RS. 3,17,603/- ON LONG TERM CAPITAL LOSS OF RS. 28,86,664/-, IS HEREBY DISMISSED. 12. IN THE RESULT, THE APPEAL FILED BY THE REVENUE AS WELL AS C.O. FILED BY THE ASSESSEE ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 29 TH APRIL, 2011. SD/- SD/- (R.S. SYAL) (V. DURGA RA O) ACCOUNTANT MEMBER JUDI CIAL MEMBER MUMBAI, DATED: 29 TH APRIL, 2011. COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) CONCERNED. 4) THE CIT CONCERNED. 5) THE DEPARTMENTAL REPRESENTATIVE, H BENCH, I.T .A.T., MUMBAI. BY ORDER //TRUE COPY// ASST. REGISTRAR, I.T.A.T., MUMBAI. KV ITA NO. 2746/MUM/09 AND C.O. 30/MUM/09 KIRAN P. KULKARNI 12 S.NO. DESCRIPTION DATE INTLS 1. DRAFT DICTATED ON 25/04/11 SR.P.S./P.S 2. DRAFT PLACED BEFORE AUTHOR 27/04/11 SR.P.S/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR.P.S./PS SR.P.S./P.S 6. KEPT FOR PRONOUNCEMENT ON SR. P.S./P.S. 7. FILE SENT TO THE BENCH CLERK SR.P.S./P.S 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER