Shri Champalal Jain, Kolkata V. I.T.O Wd - 34(3),kolkata, Kolkata

ITA 127/KOL/2013

• Counselvise Citation: 12723514 RSA 2013
• Duration Of Justice: 2 year(s) 4 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-06-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 18-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: TAPAS CHAKRABORTY

Judgement Text

I.T.A. NO . 127 / KOL ./20 1 3 ASSESSMENT YEAR: 200 7 - 200 8 PAGE 1 OF 6 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA SMC BENCH, KOLKATA BEFORE SHRI P.K. BANSAL , ACCOUNTANT MEMBER I.T.A. NO. 127 / KOL / 20 1 3 ASSESSMENT YEAR : 200 7 - 20 0 8 SHRI C HAMPALAL JAIN,.... . . .......................... ........ . APPELLANT 23A, NETAJI SUBHAS ROAD, 5 TH FLOOR, ROOM NO. 11, KOLKATA - 700 001 [PAN : A EPPJ 3134 D ] - VS. - INCOME TAX OFFICER , ........................ ............. ...... ..... . RESPONDENT WARD - 3 4 ( 3 ), KOLKATA, 110, SHANTIPALLY, AAYAKAR BHAWAN POORVA, KOLKATA - 700 107 APPEARANCES BY: SHRI TAPAS CHAKRABORTY, A.R. , FOR THE ASSESSEE S MT. MADHUMALATI GHOSH , JCIT, SR. D.R., FOR THE DEPARTMENT DATE OF CONCLUDING THE HEARING : JUNE 01 , 2 01 5 DATE OF PRONOUNCING THE ORDER : JUNE 01 , 201 5 O R D E R THIS APPEAL HAS BEEN FILED BY THE ASSESSE E AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) - XX , KOLKATA D ATED 0 1 . 11 .20 1 2 FOR THE ASSESSMENT YEAR 2007 - 08 . 2 THE ONLY ISSUE INVOLVED IN THIS APPEAL RELATES TO THE IMPOSITION OF PENALTY ON THE ASSESSEE UNDER SECTION 271(1)(C) OF THE INCOME TA X ACT, 1961 AMOUNTING TO RS.1,28,945/ - . 3. BRIEF FACTS RELATING TO THE IMPOSITION OF PENALTY, THE ASSESSING OFFICER FOUND THAT THE ASSESSEE HAS SHOWN LONG - TERM CAPITAL GAIN OF RS.11,50,000/ - ON SALE OF SHARES OF M/S. C.S.J. INFRA PVT. LIMITED AND CLAIMED EXEMPTION THEREON UNDER SECTION 10(38) OF THE ACT. THE SAID SHARES WERE NOT SOLD THROUGH ANY STOCK EXCHANGE. THEREFORE, NO SECURITY CASH TRANSACTION WAS PAID AS THE SHARES WERE OF PRIVATE LIMITED I.T.A. NO . 127 / KOL ./20 1 3 ASSESSMENT YEAR: 200 7 - 200 8 PAGE 2 OF 6 COMPANIES WHICH WERE NOT LISTED IN ANY RECOGNIZED STOCK EXCH ANGE. THE ASSESSING OFFICER REJECTED THE CLAIM OF THE ASSESSEE UNDER SECTION 10(38) AND IMPOSED PENALTY UNDER SECTION 271(1)(C) OF THE ACT BY OBSERVING AS UNDER: - THE ACT OF THE ASSESSEE CLAIMING FOR EXEMPTED LONG TERM CAPITAL GAINS IN THE RETURN OF INCOM E IS NOT BANAFIDE AND IS WITH COLOURABLE DESIGNS OF TAKING A CHANGE OF GIVING LESSER AMOUNT OF TAX THAN ACTUALLY PAYABLE. THE ASSESSEE IS QUITE KNOWLEDGEABLE OF VARIOUS PROVISIONS OF LAWS AND RULES OF THE INCOME TAX ACT AND HAD CLAIMED THE SHARE OF PROFIT FROM PARTNERSHIP FIRM, DIVIDENDS ETC. AS RIGHTLY EXEMPTED. ALL THE ABOVE EVIDENCES PROVE THAT THE ASSESSEE HAD CONCEALED HIS TOTAL INCOME. MOREOVER, IN THE CASE OF UNION OF INDIA & OTHER VS. - DHARMENDRA TEXTILE PROCESSORS & OTHERS (2008) 306 ITR 277 THE APEX COURT DECIDED THAT MENS REA IS NOT REQUIRED FOR PENALTIES WHICH ARE CIVIL IN NATURE.. THE PENALTY UNDER SECTION 271(1)(C) WAS ALSO HELD TO BE CIVIL IN NATURE. FOR IMPOSING PENALTY UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961, ONLY THE INGREDIEN TS AS MENTIONED IN THIS SECTION ARE REQUIRED. IN THIS CAE, THE JUDGMENT OF APEX COURT IN CASE OF DILIP N. SHROFF VS. - JCIT (2007), 291 ITR 519(SC), WAS QUOTED AND WAS OVERRULED. AS SUCH THE ABOVE DECISION IN THE CASE OF M/S. DHARMENDRA TEXTILE OF THE HON BLE SUPREME COURT IS THE LAW OF THE LAND AND IT WAS CLEARLY HELD THAT CIVIL PENALTIES SUCH AS PENALTY U/S 271(1)(C) ARE NOT QUASI CRIMINAL IN NATURE AND CRIMINAL MOTIVE (MENS REA) WAS NOT A NECESSARY INGREDIENT FOR IMPOSING THIS PENALTY. CONSIDERING THE A BOVE FACTS AND PROVISIONS OF LAW, IT IS FOUND TO BE A FIT CASE FOR IMPOSITION OF PENALTY U/S. 271(1)(C) OF THE INCOME TAX ACT, 1961. CALCULATION OF TAX SOUGHT TO BE EVADED TAX ON RETURNED INCOME OF RS/1.76.110/ - ......NIL TAX ON RETURN INCOME PLUS INCOME SOUGHT TO BE EVADED RS.13,26,110/ - ...........................1,28,945/ - TAX SOUGHT TO BE EVADED..........................._______________ 1,28,945/ - __________________ THE MINIMUM PENALTY IMPOSABLE IS 100% OF TAX SOUGHT TO BE EVADED AND MAXIMUM PENALTY IS 300% OF TAX SOUGHT TO BE EVADED. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE, PENALTY OF RS.1,30,000/ - IS IMPOSED ON THE ASSESSEE . I.T.A. NO . 127 / KOL ./20 1 3 ASSESSMENT YEAR: 200 7 - 200 8 PAGE 3 OF 6 4. I HAVE HEARD THE RIVAL CONTENTION OF BOTH PARTIES AND CAREFULLY CONSIDERED THE S AME ALONG WITH THE ORDER OF THE AUTHORITIES BELOW. SECTION 271 (1)(C) READS AS UNDER: - 271 (1) IF THE ASSESSING OFFICER OR THE COMMISSIONER (APPEALS) [OR THE COMMISSIONER] IN THE COURSE OF ANY PROCEEDINGS UNDER THIS ACT, IS SATISFIED THAT ANY PERSON ( A) .. (B) .. (C) HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME, OR (D) .. HE MAY DIRECT THAT SUCH PERSON SHALL PAY BY WAY OF PENALTY, - EXPLANATION 1 - WHERE IN RESPECT OF ANY FACTS MATERIAL TO THE COMP UTATION OF THE TOTAL INCOME OF ANY PERSON UNDER THIS ACT, - (A) SUCH PERSON FAILS TO OFFER AN EXPLANATION OR OFFERS AN EXPLANATION WHICH IS FOUND BY THE AO OR THE COMMISSIONER (APPEALS) OR THE COMMISSIONER TO BE FALSE OR (B) SUCH PERSON OFFERS AN EXPLANATI ON WHICH HE IS NOT ABLE TO SUBSTANTIATE AND [FAILS TO PROVE SUCH EXPLANATION IS BONA FIDE AND THAT ALL THE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM], THEN, THE AMOUNT ADDED OR DISALLOWED IN C OMPUTING THE TOTAL INCOME OF SUCH PERSON AS A RESULT THEREOF SHALL, FOR THE PURPOSES OF CLAUSE OF THIS SUB - SECTION BE DEEMED TO REPRESENT THE INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED. 5. FROM THE PERUSAL OF THE AFORESAID SECTION, IT I S APPARENT THAT PENALTY U/S 271 (1)(C) IS LEVIABLE IF THE AO IS SATISFIED IN THE COURSE OF ANY PROCEEDINGS UNDER THIS ACT THAT ANY PERSON HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF THE INCOME. THIS IS THE SETTLED LAW THAT THE PENALTY PROCEEDINGS AND ASSESSMENT PROCEEDINGS ARE DIFFERENT. THE PENALTY PROCEEDINGS CAN BE INITIATED ON 2 CHARGES I.E. I) CONCEALMENT OF PARTICULARS OF INCOME AND II) FURNISHING OF INACCURATE PARTICULARS OF INCOME. BOTH THE CHARGES ARE ENTIRELY DIFFERENT. IF THE PROCEEDINGS ARE INITIATED ON CHARGE OF CONCEALMENT, THEN PENALTY CANNOT BE LEVIED ON THE CHARGE OF FURNISHING OF INACCURATE PARTICULARS OF INCOME AND VICE VERSA. THUS, THERE MUST BE A CLEAR FINDING ABOUT THE CHARGE FOR WHICH PENALTY IS I MPOSED OR INITIATED. IT IS INCUMBENT UPON THE AO TO STATE WHETHER PENALTY WAS BEING LEVIED FOR CONCEALMENT OF INCOME OR FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME. IN THE ABSENCE OF SUCH FINDINGS, THE ORDER WOULD BE BAD IN LAW. THE CASE OF NEW SORA THIA ENGINEERING CO. LTD., 282 ITR 642, HON BLE GUJARAT HIGH COURT HAS HELD AS UNDER: - I.T.A. NO . 127 / KOL ./20 1 3 ASSESSMENT YEAR: 200 7 - 200 8 PAGE 4 OF 6 IT IS INCUMBENT UPON THE ASSESSING OFFICER TO STATE WHETHER THE PENALTY WAS BEING LEVIED FOR CONCEALMENT OF PARTICULARS OF INCOME BY THE ASSESSEE OR WHETHER ANY INACC URATE PARTICULARS OF INCOME HAD BEEN FURNISHED BY THE ASSESSEE. HELD , THAT THE PENALTY ORDER AND THE ORDER OF THE COMMISSIONER (APPEALS) SHOWED THAT NO CLEAR CUT FINDING HAD BEEN REACHED. THE TRIBUNAL HAD FAILED TO APPRECIATE THIS LEGAL ISSUE. THE RATION I N CIT V. MANU ENGINEERING WORKS 132 ITR 306 (GUJ) WAS APPLICABLE AND THE ORDER OF PENALTY COULD NOT BE UPHELD BY THE TRIBUNAL. THE ORDER WAS INVALID. 6. IN THE CASE OF COMMISSIONER OF INCOME TAX V. RAJAN AND CO. 291 ITR 340 (DEL), IT IS HELD THAT THE PRO VISION OF SECTION 271 (1) (C) OF THE INCOME TAX 1961 WOULD REQUIRE PROPER APPLICATION OF MIND AND RECORDING OF AT LEAST A BARE MINIMUM OPINION ON THE PART OF AO THAT A CASE FOR INITIATION OF PENALTY PROCEEDING WAS MADE AS THERE WAS CONCEALMENT OF INCOME OR THAT INCORRECT PARTICULARS HAD BEEN FURNISHED BY THE ASSESSEE WITH THE INTENTION TO AVOID PAYMENT OF TAXES. AO HAS NOT MADE OUT ANY CHARGE EITHER OF CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. 7. THE PENALTY U /S 271(1) (C) CAN BE LEVIED FOR EITHER OF THE CHARGE. FROM THE PENALTY ORDER, I NOTED THAT IN THIS CASE, THE ASSESSING OFFICER HAS NOT MADE OUT ANY CHARGE EXCEPT THAT HE STATED THAT IT IS FOUND TO BE A FIT CASE FOR IMPOSITION OF THE PENALTY UNDER SECTION 2 71(1)(C) OF THE INCOME TAX ACT, 1961. IT DOES NOT STATE FOR WHAT DEFAULT PENALTY IS LEVIED S. 271(1) (C) (III) IS EXPRESSLY CLEAR THAT THE PENALTY CAN BE LEVIED FOR CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. IT IS THE PARTICULARS OF INCOME WHICH IS THE COMMON SUBJECT MATTER OF BOTH THE CHARGES. THE WORD CONCEAL AS PER WEBSTER S DICTIONARY MEANS TO HIDE, WITHDRAW, OR REMOVE FROM OBSERVATION; COVER OR KEEP FROM SIGHT; TO KEEP SECRET; TO AVOID DISCLOSING OR DIVUL GING. THAT MEANS NON DISCLOSURE OF PARTICULARS OF INCOME. ON THE OTHER HAND, WHERE PARTICULARS ARE DISCLOSED BUT SUCH DISCLOSURE IS NOT CORRECT, TRUE OR ACCURATE, IT WOULD AMOUNT TO FURNISHING OF INACCURATE PARTICULARS OF INCOME. FOR EXAMPLE, IN CASE OF BU SINESSMAN, IF A PARTICULAR TRANSACTION OF SALE IS NOT SHOWN IN THE BOOKS, IT WOULD AMOUNT TO CONCEALMENT OF PARTICULARS OF INCOME WHILE SALE IS SHOWN BUT AT A LESSER VALUE, IT WOULD AMOUNT TO FURNISHING OF INACCURATE PARTICULARS OF INCOME. I.T.A. NO . 127 / KOL ./20 1 3 ASSESSMENT YEAR: 200 7 - 200 8 PAGE 5 OF 6 8. IN MY OPINIO N, EXPLANATION 1 TO SECTION 271(1) (C) CANNOT BE APPLIED WHERE CHARGE AGAINST THE ASSESSEE IS FURNISHING OF INACCURATE PARTICULARS OF INCOME SINCE IT PROVIDES A DEEMING FICTION QUA CONCEALMENT OF PARTICULARS OF INCOME ONLY AND CONSEQUENTLY CANNOT BE EXTE NDED TO A CASE WHERE CHARGE AGAINST THE ASSESSEE IS FURNISHING OF INACCURATE PARTICULARS OF INCOME. ON THE OTHER HAND, WHERE CHARGE AGAINST THE ASSESSEE IS CONCEALMENT OF PARTICULARS OF INCOME, THE AO HAS TO ESTABLISH EITHER THAT ASSESSEE HAS NOT DI SCLOSED THE PARTICULARS OF INCOME UNDER THE MAIN PROVISIONS OR THE CASE OF ASSESSEE FALLS WITHIN THE SCOPE OF THE DEEMING FICTIONS CREATED UNDER THE EXPLANATIONS. FOR EXAMPLE, THE ASSESSEE MIGHT NOT DISCLOSE PARTICULAR SALES OR DIVIDEND INCOME OR INCOM E FROM ANY SOURCE. SUCH INSTANCES WOULD FALL UNDER THE MAIN PROVISIONS ITSELF. IN SUCH CASES, THE BURDEN IS ON THE AO TO ESTABLISH THE EXISTENCE OF THE CHARGE ON THE BASIS OF MATERIAL ON RECORD. 9. EXPLANATION 1 TO SECTION 271(1) (C) STATES THAT THE AMOUN T ADDED OR DISALLOWED IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE SHALL BE DEEMED TO BE THE INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED. THIS DEEMING PROVISION IS NOT ABSOLUTE ONE BUT IS REBUTTABLE ONE. IT ONLY SHIFTS THE ONUS ON THE ASSES SEE. EXPLANATION 1 REFERS TO THE TWO SITUATIONS IN WHICH PRESUMPTION OF THE CONCEALMENT OF THE PARTICULARS OF INCOME IS DEEMED. IT IS NOT APPLICABLE WHERE THE CHARGE AGAINST THE ASSESSEE IS FURNISHING INACCURATE PARTICULARS OF THE INCOME. THE FIRST SITUATI ON IS WHERE THE ASSESSEE IN RESPECT OF ANY FACT MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME FAILS TO OFFER AN EXPLANATION OR OFFERS AN EXPLANATION, WHICH IS FOUND BY THE AO OR THE COMMISSIONER TO BE FALSE. THE SECOND SITUATION IS WHERE THE ASSESSEE IN RESPECT OF ANY FACTS MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME OFFERS AN EXPLANATION, WHICH, THE ASSESSEE IS NOT ABLE TO SUBSTANTIATE AND ALSO FAILS TO PROVE THAT SUCH EXPLANATION WAS BONA FIDE ONE AND THAT ALL THE FACTS RELATING TO THE COMPUTATION O F TOTAL INCOME HAVE BEEN DISCLOSED BY HIM. THE PRESUMPTION AVAILABLE UNDER EXPLANATION TO SECTION 271(1) (C), CANNOT BE DRAWN UNLESS THE CASE OF THE ASSESSEE FALLS UNDER EITHER OF THE CLAUSES (A) OR (B). 10. IN THIS CASE, THE AO HAS NOT BROUGHT OUT ANY SP ECIFIC CHARGE FOR WHICH THE PENALTY HAS BEEN IMPOSED ON THE ASSESSEE U/S 271(1) (C) OF THE ACT. HE HAS NOT BROUGHT OUT WHETHER THE ASSESSEE HAS CONCEALED THE PARTICULARS OF INCOME OR WHETHER THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME. I.T.A. NO . 127 / KOL ./20 1 3 ASSESSMENT YEAR: 200 7 - 200 8 PAGE 6 OF 6 11. THE AO IN THIS CASE LEVIED THE PENALTY FOR BOTH THE CHARGES WITHOUT MENTIONING ANY SPECIFIC CHARGE. IN CIT V. ATUL MOHAN BINDAL (2009) 9 SCC 589, WHERE HON BLE SUPREME COURT WAS CONSIDERING THE SAME PROVISION, IT OBSERVED THAT THE ASSESSING OFFICER HAS TO BE SATISFIED THAT A PERSON HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. THUS THE SATISFACTION OF THE AO ABOUT THE CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF SUCH INCOM E IS ESSENTIAL BEFORE LEVYING ANY PENALTY U/S 271(1) (C). THE AO AS IS APPARENT FROM THE PENALTY ORDER HAS NOT SATISFIED ABOUT THE CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME ON THE PART OF THE ASSESSEE. ON THIS B ASIS ITSELF THE PENALTY DELETED. 12 . IN THE RESULT, THE APPEAL FILED BY THE ASSESSE E S TANDS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON JUNE 0 1 , 201 5 . SD/ - P.K. BANSAL ( ACCOUNTANT MEMBER) KOLKATA, THE 1 ST D AY OF JUNE , 201 5 COPIES TO : (1) SHRI CHAMPALAL JAIN, 23A, NETAJI SUBHAS ROAD, 5 TH FLOOR, ROOM NO. 11, KOLKATA - 700 001 (2) INCOME TAX OFFICER, WARD - 34(3), KOLKATA, 110, SHANTIPALLY, AAYAKAR BHAWAN POORVA, KOLKATA - 700 107 (3) COMMISSIONE R OF INCOME - TAX (APPEALS) (4) COMMISSIONER OF INCOME TAX ( 5 ) THE DEPARTMENTAL REPRESENTATIVE ( 6 ) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRI BUNAL KOLKATA B ENCHES, KOLKATA LAHA/SR. P.S .