ACIT, Raigad V. Shri Ratanshi dahya Patel, Raigad

ITA 1167/PUN/2012

• Counselvise Citation: 116724514 RSA 2012
• Duration Of Justice: 1 year(s) 3 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-09-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 05-06-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: Y K BHASKAR
• Assessee Lawyers: S N DOSHI
• Keywords: Business income; Bonafide belief; Proportionate interest; Question of law; Difference of opinion
• Section: 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCHES A, PUNE BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO.1167/PN/2012 (ASSESSMENT YEAR: 2006-07) ASSTT. COMMISSIONER OF INCOME TAX PANVEL CIRCLE, PANVEL, DIST RAIGAD. . APPELLAN T VS. SHRI RATANSHI DAHYA PATEL KRISHNA NIWAS, NEAR VISHVESHWARA TEMPLE, MAHAD, DIST - RAIGAD PAN : AATPP5581C . RESPONDENT DEPARTMENT BY : MR. Y. K. BHASKAR ASSESSEE BY : MR. S. N. DOSHI DATE OF HEARING : 12-09-2013 DATE OF PRONOUNCEMENT : 19-09-2013 ORDER PER G. S. PANNU, AM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST AN ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-I, THANE DATED 29.02.2012 WHICH, IN TURN, HAS ARISEN FROM AN ORDER DATED 29.07.2010 PAS SED BY THE ASSESSING OFFICER, UNDER SECTION 271(1)(C) OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT), PERTAINING TO THE ASSESSMENT YEAR 2006-07. 2. IN THIS APPEAL, THE SOLITARY ISSUE RELATES TO TH E PENALTY IMPOSED BY THE ASSESSING OFFICER UNDER SECTION 271(1)(C) OF THE AC T AMOUNTING TO RS.28,48,775/-, WHICH HAS SINCE BEEN DELETED BY THE CIT(A). 3. IN BRIEF, THE FACTS ARE THAT ASSESSEE, AN INDIVI DUAL, FILED A RETURN OF INCOME DECLARING TOTAL INCOME OF RS.11,92,680/-, WH ICH WAS SUBJECTED TO A SCRUTINY ASSESSMENT UNDER SECTION 144 OF THE ACT DA TED 23.12.2008, WHEREBY THE TOTAL INCOME WAS DETERMINED AT RS.1,11,23,060/- . THE SAID INCOME WAS ITA NO.1167/PN/2012 A.Y. 2006-07 SCALED DOWN TO RS.96,56,060/- CONSEQUENT TO THE ORD ER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-I, THANE WHEREIN CERTAIN RE LIEF WAS ALLOWED. SUBSEQUENTLY, THE ASSESSING OFFICER PASSED AN ORDER ON 29.07.2010 TREATING THE ASSESSEE GUILTY OF CONCEALING THE INCOME AND/OR FOR FURNISHING INACCURATE PARTICULARS OF INCOME WITHIN THE MEANING OF SECTION 271(1)(C) OF THE ACT AND LEVIED PENALTY EQUIVALENT TO 100% OF TAX SOUGHT TO BE EVADED ON SUCH INCOME AND ACCORDINGLY, THE PENALTY WAS DETERMINED AT RS.2 8,48,775/-. SUCH DETERMINATION OF PENALTY BY THE ASSESSING OFFICER I S THE SUBJECT-MATTER OF THE PRESENT APPEAL FILED BY THE REVENUE BEFORE US, AS T HE CIT(A) HAS DELETED THE LEVY OF PENALTY ON AN APPEAL FILED BY THE ASSESSEE. 4. THE INCOME SUBJECTED TO THE LEVY OF PENALTY CAN BE UNDERSTOOD AS FOLLOWS. IN THE RETURN OF INCOME, ASSESSEE HAD DECL ARED LONG TERM CAPITAL GAIN ON PURCHASE AND SALE OF SHARES OF RS.84,51,484/- WH ICH WAS CLAIMED AS EXEMPT AS PER SECTION 10(38) OF THE ACT. HOWEVER, W HILE FRAMING THE ASSESSMENT, ASSESSING OFFICER HELD THAT INCOME EARN ED BY THE ASSESSEE ON ACCOUNT OF SALE OF SHARES WAS A BUSINESS INCOME A ND NOT CAPITAL GAINS AND THUS THE EXEMPTION CLAIMED BY THE ASSESSEE UNDER SE CTION 10(38) OF THE ACT WAS DENIED AND THE AMOUNT OF RS.84,51,484/- WAS BRO UGHT TO TAX AS BUSINESS INCOME. SECONDLY, OUT OF THE TOTAL INTEREST EXPEND ITURE, A SUM OF RS.11,901/- WAS DISALLOWED HOLDING THE SAME TO BE RELATABLE TO THE EXEMPTED INCOME, NAMELY, DIVIDENDS. FOR BOTH THE ABOVE ADDITIONS MAD E TO THE RETURNED INCOME, ASSESSING OFFICER HAS HELD THE ASSESSEE GUILTY OF C ONCEALING THE INCOME AND/OR FOR FURNISHING INACCURATE PARTICULARS OF INC OME WITHIN THE MEANING OF SECTION 271(1)(C) OF THE ACT, AND ACCORDINGLY, PENA LTY OF RS.28,48,775/- WAS IMPOSED. 5. IN APPEAL, THE CIT(A) DELETED THE LEVY OF PENALT Y REGARDING THE PROFIT ON SALE OF SHARES ON THE GROUND THAT ASSESSABILITY OF SUCH PROFIT AS CAPITAL GAIN OR BUSINESS INCOME WAS MERELY A DIFFERENCE OF OPI NION BETWEEN THE ASSESSEE ITA NO.1167/PN/2012 A.Y. 2006-07 AND THE REVENUE FOR WHICH NO PENALTY UNDER SECTION 271(1)(C) OF THE ACT COULD BE LEVIED. SECONDLY, WITH RESPECT TO THE DISALLOWAN CE OF PROPORTIONATE INTEREST OF RS.11,901/-, THE CIT(A) HAS DELETED THE SAME ON THE GROUND THAT IN THE ASSESSMENT ORDER NO PENALTY UNDER SECTION 271(1)(C) OF THE ACT WAS INITIATED ON THE SAID SCORE. ACCORDINGLY, THE ENTIRE PENALTY IMPOSED OF RS.28,48,775/- BY THE ASSESSING OFFICER WAS DELETED BY THE CIT(A). AGAINST THE AFORESAID DECISION OF THE CIT(A), REVENUE IS IN APPEAL BEFORE US. 6. THE LEARNED DEPARTMENTAL REPRESENTATIVE CONTENDE D THAT PENALTY HAS BEEN DELETED BY THE CIT(A) ON WRONG CONSIDERATIONS. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT BY DECLA RING THE PROFIT ON SALE OF SHARES AS LONG TERM CAPITAL GAIN, ASSESSEE MADE A W RONGFUL CLAIM OF EXEMPTION UNDER SECTION 10(38) OF THE ACT. THE LEAR NED DEPARTMENTAL REPRESENTATIVE POINTED OUT THAT PROFIT ON SALE OF S HARES WAS INDEED ASSESSABLE AS BUSINESS INCOME IN THE PRESENT CASE AS DISCUSSED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER, WHICH HA S SINCE BEEN UPHELD BY THE CIT(A); AND, THEREFORE THE CONCEALMENT OF INCOM E AND/OR FURNISHING OF INACCURATE PARTICULARS OF SUCH INCOME STOOD ESTABLI SHED. 7. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE A SSESSEE HAS POINTED OUT THAT THE CIT(A) MADE NO MISTAKE IN DELETING THE LEVY OF PENALTY. ACCORDING TO HIM, THE ASSESSEE HAD DISCLOSED ALL THE RELEVANT PARTICULARS IN THE RETURN OF INCOME AND THE ONLY POINT OF DIFFERENCE WITH THE AS SESSING OFFICER WAS AS TO WHETHER THE PROFIT ON SALE OF SHARES WAS ASSESSABLE AS A LONG TERM CAPITAL GAIN OR BUSINESS INCOME, WHICH IS A DEBATABLE IS SUE. IT HAS BEEN POINTED OUT THAT ASSESSEE HAD MADE A BONAFIDE CLAIM IN THE RETU RN OF INCOME INASMUCH AS LONG TERM AS WELL AS SHORT TERM CAPITAL GAINS ON SA LE OF SHARES WERE DISCLOSED BY THE ASSESSEE IN EARLIER YEARS ALSO. IT WAS POINT ED OUT THAT THE SHARES IN QUESTION WERE HELD FOR MORE THAN A PERIOD OF 18 MON THS PRIOR TO SALE AND THE GAIN ON SALE OF SUCH SHARES WAS CLEARLY A LONG TERM CAPITAL GAIN. MERELY ITA NO.1167/PN/2012 A.Y. 2006-07 BECAUSE THE ASSESSING OFFICER HAS NOT ACCEPTED THE SAME, AND HAS TAXED IT AS BUSINESS INCOME CANNOT LEAD TO AN INFERENCE OF CO NCEALMENT OF INCOME AND/OR FURNISHING OF INACCURATE PARTICULARS OF INCO ME. IT IS FURTHER POINTED OUT THAT AT NO STAGE ASSESSEE HAS CONCEALED ANY INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME AND IT IS A CASE WHERE A CLAI M MADE BY THE ASSESSEE IN THE RETURN OF INCOME HAS NOT BEEN ACCEPTED BY THE A SSESSING OFFICER. ACCORDINGLY, THE ORDER OF THE CIT(A) IS SOUGHT TO B E DEFENDED. 8. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. THE FACTUAL MATRIX OF THE PRESENT CASE CLEARLY BRINGS OUT THAT THERE I S NO DISPUTE THAT THE ASSESSEE DULY DISCLOSED THE TRANSACTION ON PURCHASE AND SALE OF SHARES WHICH RESULTED IN THE IMPUGNED PROFIT OF RS.84,51,484/-. IT IS ALSO NOT IN DISPUTE THAT THE DATE OF PURCHASE, THE DATE OF SALE AND THE PERI OD OF HOLDING ETC. OF THE SHARES RELATING TO SUCH TRANSACTIONS WERE DULY DISC LOSED AND NO DISCREPANCY IN SUCH PARTICULARS HAVE BEEN FOUND BY THE ASSESSING O FFICER. IN OTHER WORDS, IN SO FAR AS THE DISCLOSURE OF THE INCOME AND PARTICUL ARS THEREOF IS CONCERNED, THE SAME WERE DULY MADE AND NO FALSITY OR INACCURACY IN THE SAME WERE FOUND BY THE ASSESSING OFFICER. THE ONLY POINT OF DIFFERENCE IS AS TO WHETHER SUCH PROFIT IS ASSESSABLE AS A LONG TERM CAPITAL GAIN SO AS T O BE EXEMPT UNDER SECTION 10(38) OF THE ACT OR THE SAME IS ASSESSABLE AS A B USINESS INCOME RESULTING IN DENIAL OF EXEMPTION UNDER SECTION 10(38) OF THE ACT . THE ASSESSEE CLAIMED IN THE RETURN OF INCOME THAT SUCH PROFIT IS A LONG TE RM CAPITAL GAIN WHICH WAS EXEMPT UNDER SECTION 10(38) OF THE ACT. ON THE CONT RARY, AS PER THE REVENUE, THE SAME WAS TO BE ASSESSED AS A BUSINESS INCOME, THEREBY RESULTING IN DENIAL OF EXEMPTION UNDER SECTION 10(38) OF THE ACT AND ACCORDINGLY, THE AMOUNT OF RS.84,51,484/- HAS BEEN BROUGHT TO TAX AS BUSINESS INCOME. 9. IN OUR CONSIDERED OPINION, WHETHER A PARTICULAR TRANSACTION IS ASSESSABLE UNDER THE HEAD CAPITAL GAIN OR UNDER T HE HEAD BUSINESS INCOME IS AN ISSUE WHICH INVOLVES A MIXED QUESTION OF LAW AND FACTS. THERE IS A ITA NO.1167/PN/2012 A.Y. 2006-07 PLETHORA OF JUDICIAL PRONOUNCEMENTS ALSO ON THE SAI D SUBJECT. PRESENTLY, WE ARE DEALING WITH THE LEVY OF PENALTY UNDER SECTION 271( 1)(C) OF THE ACT AND NOT ON THE MERITS OF THE RESPECTIVE CLAIMS REGARDING THE A SSESSABILITY OF IMPUGNED TRANSACTION OF PURCHASE AND SALE OF SHARES. NEVERTH ELESS, IT IS IMPORTANT TO EXAMINE THE BONAFIDES OF ASSESSEES CLAIM MADE IN T HE RETURN OF INCOME THAT THE IMPUGNED GAIN ON PURCHASE AND SALE OF SHARES IS ASSESSABLE AS CAPITAL GAINS. FOR THE SAID PURPOSE, THE FOLLOWING FEATURE S OF THE CASE ARE NOTABLE I.E. THE IMPUGNED SHARES WERE HELD FOR A PERIOD EXCEEDIN G 18 MONTHS PRIOR TO SALE; ASSESSEES ASSERTIONS THAT SUCH SHARES HAVE B EEN ACQUIRED OUT OF OWN FUNDS; THAT THE ASSESSEE HAS BEEN DECLARING CAPITAL GAIN ON SALE OF SHARES IN EARLIER YEARS ALSO; THAT THERE IS NO BAR ON AN ASSE SSEE TO DEAL IN SHARES AS A TRADING ACTIVITY AS WELL AS AN INVESTMENT ACTIVITY; THAT THE SHARES IN QUESTION WERE PURCHASED AND SOLD ON DELIVERY BASIS. MOREOVER , IT IS NOTICED THAT THE PRIMARY REASON WHICH PREVAILED WITH THE ASSESSING O FFICER TO TREAT THE IMPUGNED PROFITS AS A BUSINESS INCOME IS THE FACT THAT ASSESSEE WAS NOT MAINTAINING ANY SEPARATE DEMAT ACCOUNT FOR THE TWO ACTIVITIES OF INVESTMENT IN SHARES, AND TRADING IN SHARES. CONSIDERING THE AFOR ESAID FACTORS, IN OUR VIEW, THE STAND OF THE ASSESSEE IN THE RETURN OF INCOME T O THE EFFECT THAT THE PROFIT ON SALE OF SHARES WAS ASSESSABLE AS LONG TERM CAPITAL GAIN BY TREATING SUCH SALE OF SHARES AS AN INVESTMENT ACTIVITY WAS ON BONAFIDE CONSIDERATIONS, THOUGH IT MAY NOT HAVE BEEN ULTIMATELY ACCEPTED BY THE ASSESS ING OFFICER. NOTABLY, IT IS ALSO FACTUALLY EMERGING THAT NONE OF THE PARTICULAR S OF SUCH INCOME HAVE BEEN FOUND TO BE INACCURATE OR FALSE. THEREFORE, IT WOUL D BE APPROPRIATE TO INFER IN THE PRESENT CASE THAT THE CLAIM MADE BY THE ASSESSE E IN THE RETURN OF INCOME WAS BONAFIDE AND THE PARTICULARS OF SUCH INCOME WER E DULY DISCLOSED. MERELY BECAUSE THERE IS A DIFFERENCE OF OPINION AS TO THE RELEVANT HEAD OF INCOME UNDER WHICH SUCH TRANSACTION IS ASSESSABLE, IT CANN OT IPSO FACTO LEAD TO A CONCLUSION OF CONCEALMENT OR FURNISHING OF INACCURA TE PARTICULARS OF SUCH INCOME WITHIN THE MEANING OF SECTION 271(1)(C) OF T HE ACT. ITA NO.1167/PN/2012 A.Y. 2006-07 10. IN THE ABOVE BACKGROUND, IN OUR VIEW, THE CIT(A ) MADE NO MISTAKE IN OBSERVING THAT FOLLOWING THE RATIO OF THE JUDGEMENT OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETROPRODUCTS (P) LTD. (2010) 322 ITR 158 (SC), THERE WAS NO FURNISHING OF INACCURATE PAR TICULARS IN THE PRESENT CASE WITHIN THE MEANING OF SECTION 271(1)(C) OF THE ACT. THE CIT(A) HAS FURTHER RELIED UPON THE JUDGEMENT OF THE HONBLE SUPREME CO URT IN THE CASE OF RELIANCE PETROPRODUCTS (P) LTD. (SUPRA) TO HOLD THA T MERELY MAKING OF AN INCORRECT CLAIM IN LAW WOULD ALSO NOT TANTAMOUNT TO FURNISHING INACCURATE PARTICULARS OF INCOME. THE AFORESAID CONCLUSION OF THE CIT(A), IN OUR VIEW, IS FAIR AND PROPER AND IS HEREBY AFFIRMED. SIMILARLY, THE CIT(A) HAS RELIED UPON THE JUDGEMENT OF THE HONBLE DELHI HIGH COURT IN TH E CASE OF CIT VS. VAMCHAMPIGONS & AGRO PRODUCE, 284 ITR 408 TO JUSTIF Y THE DELETION OF PENALTY IN THE PRESENT CASE. IN THE CASE BEFORE THE HONBLE DELHI HIGH COURT, ASSESSEE HAD SOLD DEBENTURES AND THE RESULTANT PROF IT WAS DECLARED AS CAPITAL GAIN AND CLAIMED AS EXEMPT. THE SAID CLAIM WAS DEN IED BY THE REVENUE AND CONSEQUENTLY PENALTY UNDER SECTION 271(1)(C) OF THE ACT WAS IMPOSED. THE REVENUE TREATED THE PROFIT ON SALE OF DEBENTURES AS BUSINESS INCOME AND NOT CAPITAL GAIN AS CLAIMED BY THE ASSESSEE. THE CIT( A) AND THE TRIBUNAL IN THE SAID CASE DELETED THE PENALTY ON THE GROUND THAT AS SESSEE WAS UNDER A BONAFIDE BELIEF THAT THE PROFIT ARISING ON SALE OF DEBENTURES WAS TAXABLE AS CAPITAL GAIN AND NOT AS BUSINESS INCOME. THE AF ORESAID VIEW WAS AFFIRMED BY THE HONBLE DELHI HIGH COURT. FOLLOWING THE AFOR ESAID PARITY OF REASONING, IN OUR VIEW, IN THE PRESENT CASE ALSO, PENALTY UNDER S ECTION 271(1)(C) OF THE ACT HAS BEEN RIGHTLY DELETED BY THE CIT(A), WHICH WE HE REBY AFFIRM. 11. IN SO FAR AS THE LEVY OF PENALTY WITH REGARD TO THE DISALLOWANCE OF PROPORTIONATE INTEREST OF RS.11,901/- WAS CONCERNED WE FIND NO REASONS TO INTERFERE WITH THE ASSERTION OF THE CIT(A) THAT IN THE ASSESSMENT ORDER NO PENALTY UNDER SECTION 271(1)(C) OF THE ACT HAS BEEN INITIATED ON THIS ASPECT. ITA NO.1167/PN/2012 A.Y. 2006-07 THE AFORESAID ASSERTION OF THE CIT(A) HAS NOT BEEN CONTROVERTED BY THE REVENUE BEFORE US AND ACCORDINGLY, THE SAME IS HERE BY AFFIRMED. 12. IN THE RESULT, THE ORDER OF THE CIT(A) IN DELET ING THE LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT AMOUNTING TO RS.28,48, 775/- IS HEREBY AFFIRMED. 13. AS A RESULT, THE APPEAL OF THE REVENUE IS DISMI SSED. ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH SEPTEMBER, 2013. SD/- SD/- (R.S. PADVEKAR) (G.S. PANNU) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE, DATED: 19 TH SEPTEMBER, 2013 SUJEET COPY OF THE ORDER IS FORWARDED TO : - 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A)-I, THANE; 4) THE CIT-I, THANE; 5) THE DR, A BENCH, I.T.A.T., PUNE; 6) GUARD FILE. BY ORDER //TRUE COPY// SR. PRIVATE SECRETARY I.T.A.T., PUNE