Assistant Commissioner of Income tax, Bangalore V. Sri Suresh Jain, Bangalore

ITA 1222/BANG/2014

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 1483 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-10-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 23-09-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 29-09-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUNIL KUMAR AGARWALA J
• Assessee Lawyers: C RAMESH
• Keywords: Wrong claim

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI VIJAY PAL RAO , JUDICIAL MEMBER A ND SHRI JASON P BOAZ, ACCOUNTANT MEMBER ITA NO. 1222 /BANG/201 4 (ASSESSMENT YEAR: 20 05 - 06 ) ASST. COMMISSIONER OF INCOME - TAX, CIRCLE 12(1), BA NGALORE. APPELLANT VS. SHRI SURESH JAIN, NO.26, REST HOUSE ROAD, BRIGADE ROAD, BANGALORE - 560001. RESPONDENT PAN:ACCPJ5227G APPELLANT BY: SHRI SUNIL KUMAR AGARWALA, JCIT(DR). RESPONDENT BY: SHRI C.RAMESH, CA. DATE OF HEARIN G : 23 /09/2015. DATE OF PRONOUNCEMENT: 09/ 1 0/2015. O R D E R PER VIJAY PA L RAO, JM : THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 23/6/2014 OF THE CIT(A) - III, BANGALORE, ARISING FROM THE PENALTY ORDER PASSED U/S 271(1)(C) OF THE INCOME - TAX ACT,1961[ THE ACT FOR SHORT] FOR THE ASSESSMENT YEAR 2005 - 06. ITA NO . 1222/BANG/2014 SHRI SURESH JAIN PAGE 2 OF 6 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS: 1) THE ORDER OF THE LEARNED C I T(A) IS OPPOSED TO LAW AND FACTS OF THE CASE. 2) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A) ERRED IN CANCELING THE PENALT Y U/S 271(1)(C) WITHOUT APPRECIATING THAT THE ASSESSEE FURNISHED INACCURATE PARTICULARS OF HIS INCOME IN RESPECT OF TERRACE RENTALS AND CLAIM OF LONG TERM CAPITAL LOSS AS DISCUSSED ELABORATELY BY THE AO IN AS SESSMENT ORDER AND PENALTY ORDER. 3) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LEARNED C1T(A) ERRED IN NOT APPRECIATING THAT THE MEMORANDU M OF AGREEMENT DATED 09.09.2003 PRODUCED BY THE ASSESSEE IS ONLY AND AGREEMENT OF SALE PERTAIN ING TO FY 2003 - 04 AND THE AGREEM ENT DOES NOT INDICATE THE NUMBER OF SHARES AND THEIR VALUE OWNED BY THE ASSESSEE IN HIS INDIVIDUAL CAPACITY. 4) FOR THESE AND OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING, IT IS PREYED THAT THE ORDER OF THE CIT(A) IN SO FAR AS IT RELATES TO THE ABOVE GROUNDS MAY BE REVE R SED AND !HAT OF THE ASSESSING OFFICER MAY BE RESTORED. 5) T HE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND AND/OR DELETE ANY OF THE GROUNDS MENTIONED ABOVE . 3. THE ASSESSEE FILED ITS RETURN OF INCOME ON 14/3 / 200 7 DECLARING TOTAL INCOME OF RS.3,82,030/ - . THE ASSESSEE ALSO CLAIMED LONG - TERM CAPITAL LOSS OF RS.1,37,48,67 8 / - ON SALE OF S HARES . THE AO REJECTED THE CLAIM OF LONG - TERM CAPITAL LOSS ON THE GROUND THAT THE ASSESSEE DID NOT PRODUCE EVIDENCE REGARDING T HE TRANSACTION OF SHARES AS WELL AS CORRECT NUMBER OF SHARES HELD BY THE ASSESSEE. WHILE COMPLETING THE ASSESSMENT U/S 143(3), THE AO MADE AN ADDITION OF RS.19,296/ - ON ACCOUNT OF DIFFERENCE IN RENTAL INCOME. I ITA NO . 1222/BANG/2014 SHRI SURESH JAIN PAGE 3 OF 6 4. THE AO INITIATED PENALTY PROCEEDINGS U /S 271(1)(C) AND LEVIED A PENALTY OF RS.27,55,525/ - AGAINST DISALLOWANCE OF CLAIM OF LONG - TERM CAPITAL LOSS AND ADDITION OF RS.19,296/ - TOWARDS RENTAL INCOME. 5. ON APPEAL, THE CIT(A) DELETED THE PENALTY LEVIED BY THE AO. 6. BEFORE US, LEARNED DEPARTMENTAL REPRESENTATIVE HAS SUBMITTED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE SUBMITTED CONTRADICTORY STATEMENTS REGARDING NUMBER OF SHARES HELD BY THE ASSESSEE. HE HAS REFERRED TO FINDING OF THE AO AND SUBMITTED THAT VIDE LETT ER DATED 27/8/2007, ASSESSEE CONFIRMED THE TOTAL SHARES OF 2,27,756/ - HELD BY THE ASSESSEE AND SOLD TO THREE PERSONS WHEREAS BY ANOTHER LETTER SUBMITTED BY THE AUTHORISED REPRESENTATIVE OF THE ASSESSEE ON 27/12/2007, THE TOTAL NUMBER OF SHARES STATED TO BE HELD BY THE ASSESSEE IS 1,45,756/ - . THEREFORE, THERE WAS A HUGE DIFFERENCE IN THE NUMBER OF SHARES CLAIMED BY THE ASSESSEE. THE AO ASKED THE ASSESSEE TO PRODUCE COPY OF AGREEMENT IN SUPPORT OF TRANSFER OF SHARES WITH REGARD TO LONG - TERM CAPITAL LOSS CLAIMED BY THE ASSESSEE BUT THE ASSESSEE COULD NOT PRODUCE ANY AGREEMENT AND ONLY A MEMORANDUM OF AGREEMENT DATED 9/9/2003 WAS PRODUCED. THE AO OBSERVED FROM THE SAID MEMORANDUM OF AGREEMENT THAT IT WAS ONLY AN AGREEMENT TO SELL AND PERTAINS TO FINANCIAL YEAR 2003 - 04 AND THEREFORE, IT DOES NOT INDICATE THE NUMBER OF SHARES ITA NO . 1222/BANG/2014 SHRI SURESH JAIN PAGE 4 OF 6 OWNED BY THE ASSESSEE, IN HIS INDIVIDUAL CAPACITY. ACCORDINGLY, LEARNED DEPARTMENTAL REPRESENTATIVE HAS SUBMITTED THAT THE ASSESSEE FURNISHED INACCURATE PARTICULARS OF INCOME BEFORE THE AO AND THEREFORE, THE AO WAS JUSTIFIED IN LEVYING PENALTY U/S 271(1)(C) OF THE ACT. ON THE OTHER HAND, LEARNED AR OF THE ASSESSEE HAS REFERRED TO THE REMAND REPORT AT PAGES 24 & 25 OF THE PAPER BOOK AND SUBMITTED THAT IN THE REMAND REPORT, THE AO ACCEPTED THE TOTAL NUMBER OF SHARES HELD BY THE ASSESSEE 2,27,756/ - AS CLAIMED BY THE ASSESSEE IN THE RETURN OF INCOME AND THEREFORE, THERE WAS NO CASE OF FURNISHING OF INACCURATE PARTICULARS OF INCOME BY THE ASSESSEE. HE HAS REFERRED TO THE ORDER OF THE CIT(A) IN QUANTUM APPEAL AND SUBMITTED THAT ALL THE RELEVANT DOCUMENTS WERE FILED BEFORE THE CIT(A) AS RECORDED IN THE SAID ORDER. HOWEVER, THE CIT(A) DOUBTED THE OCCURR ENCE OF CAPITAL LOSS IN THIS ASSESSMENT YEAR. THE LEARNED AR OF THE ASSESSEE HAS FUR THER CONTENDED THAT THE SHOW - CAUSE NOTICE ISSUED U/S 271 R.W.S 274 DATED 31/12/2007 DOES NOT SPECIFY AS TO WHETHER IT IS A CASE OF CONCEALMENT OF INCOME OR CASE OF FURNISHING OF INACCURATE PARTICULARS OF INCOME. THEREFORE, NO PENALTY CAN BE LEVIED IN VIEW OF THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. MANJUNATHA & GINNING MILLS LTD. REPORTED IN 359 ITR 565. ITA NO . 1222/BANG/2014 SHRI SURESH JAIN PAGE 5 OF 6 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD. THE AO REJECTED THE CLAI M OF LONG - TERM CAPITAL LOSS ON SALE OF SHARES ON THE GROUND THAT THE ASSESSEE FAILED TO ESTABLISH THE CLAIM AS NO EVIDENCE WAS PRODUCED TO SHOW THE DATE OF RECEIPT OF CONSIDERATION AMOUNT AND THE ACTUAL NUMBER OF SHARES HELD BY THE ASSESSEE. IN THE QUANTU M APPEAL, THE CIT(A) ISSUED A REMAND ORDER AND ACCORDINGLY THE AO CONDUCTED THE NECESSARY ENQUIRY. THE AO MADE CERTAIN OBSERVATIONS IN THE REMAND REPORT DATED 18/12/2014 IN PARAS.5 & 6 AS UNDER: 5. ON EXAMINATION OF THE DETAILS FILED, IT IS NOTICED TH AT THE ASSESSEE WAS HAVING 2,27,756 EQUITY SHARES IN A COMPANY M/S.MARUTI COMFORTS AND INN PVT.LTD. FOR THE YEAR ENDED 31.3.2003 AS PER THE ANNUAL RETURN FILED BEFORE THE DEPARTMENT OF COMPANY AFFAIRS, O/O. THE REGISTRAR, COMPANIES. THE MEMORANDUM OF AGREE MENT DTD.9.9.2003 WAS ENTERED BETWEEN SURESH JAIN (SELLER) AND RAVI DODDI (BUYER). 6. ON VERIFICATION OF BANK STATEMENT, IT IS NOTICED THAT THE ASSESSEE HAS RECEIVED THE SHARE AMOUNT IN THE FYS. 2002 - 03 AND 2003 - 04. HENCE, THE ASSESSEE HAS TO CALCUL ATE THE CAPITAL GAINS AS AND WHEN HE RECEIVED THE SALE CONSIDERATION. THE ASSESSEE CANNOT TAKE THE ENTIRE SALE CONSIDERATION IN THE FY 2004 - 05 AND CALCULATE THE CAPITAL GAINS. THUS IT IS CLEAR THAT THE AO ACCEPTED THE SALE TRANSACTION OF SHARES IN QUESTI ON. HOWEVER, THE TIME PERIOD DURING WHICH THE ASSESSEE RECEIVED SALE AMOUNT WAS NOT FOUND DURING THE ASSESSMENT YEAR UNDER CONSIDERATION. THUS IT WAS NOT A CASE OF BOGUS CLAIM MADE BY THE ASSESSEE BUT MAY BE A CASE WHERE PART ITA NO . 1222/BANG/2014 SHRI SURESH JAIN PAGE 6 OF 6 OF THE TRANSACTION OF SALES TO OK PLACE IN THE EARLIER ASSESSMENT YEAR. IN VIEW OF THE ABOVE FACTS THAT THE CLAIM OF LONG - TERM CAPITAL LOSS WAS NOT FOUND TO BE ABSOLUTELY FALSE OR BOGUS, MERELY REJECTION OF THE CLAIM WOULD NOT LEAD TO THE CONCLUSION THAT THE ASSESSEE HAS FURNISHED INAC CURATE PARTICULARS OF INCOME OR CONCEALED THE PARTICULARS OF INCOME ATTRACTING LEVY OF PENALTY U/S 271(1)(C). FURTHER, IT MAKES NO DIFFERENCE WHETHER THE CLAIM OF LONG - TERM CAPITAL LOSS IS MADE IN THIS YEAR OR WAS TO BE MADE IN THE EARLIER YEAR WHEN NO IN COME WAS AVAILABLE TO SET OFF THE SAID LOSS CLAIMED BY THE ASSESSEE. ACCORDINGLY, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE CIT(A) IN DELETING THE PENALTY LEVIED U/S 271(1)(C) OF THE ACT. 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 09 TH OCTOBER, 201 5 . SD/ - SD/ - (JASON P BOAZ ) ( VIJAY PAL RAO ) ACCOUNTANT MEMBER JUDICIAL MEMBER E KSRINIVAS ULU ,SPS COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME - TAX APPELLATE T RIBUNAL BANGALORE