Chintan Jaswantbhai Shah, Ahmedabad V. The ITO, Ward-5(3)(1), Ahmedabad

ITA 137/AHD/2022

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 4572 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-07-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2009-2010
• Appeal Filed On: 03-05-2022
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V.K. SINGH
• Keywords: Tax effect; Set aside
• Section: 271(1)(c)

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “C” BENCH Before: Shri P.M. Jagtap, Vice President And Shri Siddhartha Nautiyal, Judicial Member Ch in tan Jaswantbhai Shah, 302, Stuti Apartments, Nr. Ak ik Flat, B/H-S hefalia S uvidha Shopp in g Centre, Paldi, Ah medabad PAN: ALLPS077 3Q (Appellant) Vs The ITO, Ward-5(3)(1), Ah med abad (Resp ondent) Asses see b y : Shri Pritesh L. Shah, A. R. Revenue by : Shri V. K. Sing h, Sr. D. R. Date of hearing : 17-06 -2 022 Date of pronouncement : 22-07 -2 022 आदेश/ORDER PER : SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER:- This is an appeal filed by the assessee against the order of the ld. Commissioner of Income Tax (Appeals), Ahmedabad-5 in Appeal no. CIT(A)-5/ITO. Wd. 5(3)(1)/176/2016-17 vide order dated 05/02/2018 passed for the assessment year 2009-10. ITA No. 137/Ahd/2022 Assessment Year 2009-10 I.T.A No. 137/Ahd/2022 A.Y. 2009-10 Page No. Chintan Jaswantbhai Shah vs. ITO 2 2. The assessee has taken the following grounds of appeal:- “1. The learned CIT(A) erred in confirming the penalty of Rs. 4,16,455/- under section 271(1)(C) of the Income Tax Act, 1961, such penalty is requested to be deleted. Your appellant prays for leave to add, to alter and / or to amend the above ground before the final hearing of the appeal. Total tax effect Rs. 4,16,455/-” 3. The brief facts of the case are that the assessee in the present case is an individual and is engaged in the business of share trading. The AO in the present case received information from investigation wing Ahmadabad i.e. ADIT(inv), Unit-3 wherein it was found that the broker Mahipat Raichand Share Broker Pvt. Ltd., was engaged in client code modifications activity in various segments such as equity, derivatives etc. On analyzing the information/data received from the investigation wing, it was revealed that the broker has shifted the profit belonging to the assessee with respect to F & O to another client code amounting to 12,67,380/-. Accordingly, the AO made the addition to the total income of the assessee. Aggrieved, assessee preferred an appeal to the learned CIT (A).The assessee before the learned CIT (A) contended that the AO has not furnished the report received from the investigation which was used for the purpose of the addition of 12,67,380/- on account of client code modification. It was also submitted that the AO has not brought anything on record about the transaction which was modified and entered into the code of the other party. However, the learned CIT(A) disregarded the contention of the assessee and confirmed the I.T.A No. 137/Ahd/2022 A.Y. 2009-10 Page No. Chintan Jaswantbhai Shah vs. ITO 3 order of the Ld. Assessing Officer. Meanwhile, the Ld. Assessing Officer initiated penalty proceedings u/s 271(1)(c) of the Act in respect of the aforesaid additions and after giving opportunity of hearing to the assessee confirmed the penalty with the following observations: “7. I am, therefore, satisfied that the assessee has committed default by concealing particulars of income to the extent of Rs.12,67,380/- and committed default within the meaning of section 271 (1)(c) of the Act for which penalty is leviable. The minimum penalty leviable being 100% of tax sought to be evaded comes to Rs. 4,16,455/- and maximum penalty leviable being 300% of tax sought to be evaded comes to Rs, 12,49,365/-. I, therefore, levy minimum penalty of Rs,4,16,455/-, u/s. 271(l)(c) of the Act.” 3.1 Thereafter, in appeal, Ld. CIT(A) also confirmed the penalty u/s 271(1)(c) of the Act imposed by Ld. Assessing Officer with the following observations: “6.6 Despite giving ample opportunities as mentioned in para 5 above, the appellant had not furnished any submission or documentary evidence in support of his claim. It clearly shows that the appellant had nothing to explain or submit as regard taking artificial loss from the broker Mahipat Raichand Share Broking Pvt. Ltd'. through Client Code Modification. In the assessment order as well as penalty order, the AO had specifically given findings that how the appellant had taken the artificial loss and reduced his income and tried to avoid paying the due taxes. Thus, it is established that the appellant had furnished inaccurate particulars of income thereby concealed particulars of income and therefore, the AO had rightly levied the penalty u/s. 271(1)(c) of the Act.” 4. The assessee is in appeal before us against the aforesaid order passed by Ld. CIT(A) confirming the penalty imposed by Ld. Assessing Officer u/s I.T.A No. 137/Ahd/2022 A.Y. 2009-10 Page No. Chintan Jaswantbhai Shah vs. ITO 4 271(1)(c) of the Act. At the outset, Ld. Counsel for the assessee submitted that in quantum appeal against the additions confirmed by Ld. CIT(A), the ITAT Ahmedabad in the assessee’s own case, Shri Chintan Jaswantbhai Shah v. ITO in ITA Number 908/Ahd/2018 vide order dated 23-03-2021, has deleted the entire additions on merits. Accordingly, since all additions have been deleted on the basis of which penalty was imposed penalty u/s 271(1)(c) of the Act, the penalty may kindly be set aside. 4.1 In our view, since the quantum additions on the basis of which penalty was sought to be imposed has itself been deleted, the penalty is liable to set aside. For the sake of reference, we are reproducing the relevant extracts of the decision in the assessee’s case in which relief has been granted to the assessee in quantum proceedings: 15.2 Coming to the facts of the present case, admittedly client codes were modified of the assessee as per the information received from the investigation wing. However, the first question that arises whether such client codes were modified at the instance of the assessee or there was some punching error at the end of the share broker. It is because the stock exchange permits the share broker to rectify the mistakes occurred while punching the data. If that be so, then there cannot be any fault which can be attributed to the assessee for the mistakes committed by the share broker. 15.3 Furthermore, the client code modifications give rise to the doubt/ suspicion which requires detailed investigations from the I.T.A No. 137/Ahd/2022 A.Y. 2009-10 Page No. Chintan Jaswantbhai Shah vs. ITO 5 parties concerned to reveal the truth. Merely, there were client codes modifications carried out by the broker cannot the basis to draw an inference against the assessee. In fact, in the case of client code modification the code of the other party is entered at the place of the assessee. Thus the other party also required to be investigated whether the other party was involved in such transaction. Besides this other corroborative evidence has to be brought on record suggesting that there was the exchange of cash among the parties involved in such client code modification transaction. But we note that no such exercise has been carried out by the authorities below. As such there is no whisper in the order of the authorities below that there was the cash transfer between the parties for transferring the income of the assessee to the other party. Thus in the absence of such verification/examination carried out by the authorities below, we are not inclined to uphold their findings. 15.4 In view of the above and after considering the facts in totality, we are not inclined to uphold the findings of the authorities below. Accordingly, we set aside the finding of the learned CIT (A) and direct the AO to delete the addition made by him. Hence the ground of appeal of the assessee is allowed. 4.2 In view of the above, since the ITAT in the assessee’s own has allowed complete relief to the assessee in quantum proceedings, accordingly, we hereby direct that the order imposing penalty u/s 271(1)(c) of the Act be set aside. I.T.A No. 137/Ahd/2022 A.Y. 2009-10 Page No. Chintan Jaswantbhai Shah vs. ITO 6 5. In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 22-07-2022 Sd/- Sd/- (P.M. JAGTAP) (SIDDHARTHA NAUTIYAL) VICE PRESIDENT JUDICIAL MEMBER Ahmedabad : Dated 22/07/2022 आदेश क त ल प अ े षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/ आदेश से, उप/सहायक पंजीकार आयकर अपील य अ धकरण, अहमदाबाद