Shri Surajmal Agarwal, Pune V. Income-tax Officer, Central -II, Pune

ITA 1384/PUN/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9801 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-11-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2003-2004
• Appeal Filed On: 09-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANN KAPTHUAMA
• Assessee Lawyers: NILESH KHANDELWAL
• Keywords: Search and seizure; Revised return
• Section: 143(3); 153A; 148; 132; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBE R AND SHRI R.K. PANDA, ACCOUNTANT MEMBER SR.NO. ITA NO. A.Y. APPELLANT RESPONDENT 1. 1384/PN/11 2003 - 04 SHRI SURAJMAL AGARWAL, BUDHWAR PETH, TULSIBAUG, PUNE2 PAN AAZPA 4500 E ITO CENT. II, PUNE. 2. 1385/PN/11 2004 - 05 SHRI MAHESH AGARWAL, PUNE - DO - 3. 1386/PN/11 2005 - 06 - DO - - DO - 4. 1387/PN/11 2004 - 05 SHRI RAKESH AGARWAL, PUNE - DO - 5. 1388/PN/11 2005 - 06 - DO - - DO - 6. 1389/PN/11 2004 - 05 SHR I YOGESH AGARWAL, PUNE - DO - 7. 1390/PN/11 2005 - 06 - DO - - DO - 8. 1391/PN/11 2005 - 06 SMT PRIYANKA AGARWAL, PUNE - DO - 9. 1392/PN/11 2005 - 06 SMT ALKA AGARWAL, PUNE - DO - 10. 1393/PN/11 2005 - 06 SMT JYOTI AGARWAL, PUNE - DO - 11. 1394/PN/11 2005 - 06 SMT SADHANA AGARWAL, PUNE - DO - APPELLANTS BY: SHRI NILESH KHANDELWAL RESPONDENT BY: SMT. ANN KAPTHUAMA DATE OF HEARING:15-11-2012 DATE OF PRONOUNCEMENT: 23-11-2012 ORDER PER BENCH PAGE 2 OF 6 ITA NO. 1394 TO 1394/PN/2011 AGARWAL GROUP ALL THESE APPEALS BY SAME GROUP OF ASSESSEES RAISE COMMON ISSUE I.E. LEVY OF PENALTY U/S 271(1)(C) BY THE AO AND UPHELD BY THE CIT(A). THEY WERE THEREFORE, HEA RD TOGETHER AND ARE BEING DISPOSED OFF BY THIS CONSOLI DATED ORDER FOR THE SAKE OF CONVENIENCE. ITA NO. 1384/PN/2011 IN THE CASE OF SHRI SURAJMAL A GARWAL 2. THE RELEVANT FACTS ARE THAT A SEARCH AND SEIZURE ACTION U/S 132 WAS CARRIED OUT IN THE CASE OF THE ASSESSEE ON 17-3- 2007 IN RESPONSE TO NOTICE U/S 153A, THE ASSESSEE FILED HIS RETURN OF INCOME ON 30-4-2007 DECLARING TOTAL INCOM E OF RS. 21,90,820/-. THE ASSESSEE FILED REVISED RETURN ON 2 9-10- 2007. THOUGH THE TOTAL INCOME REMAINED UNCHANGED, BUT AN AMOUNT OF RS. 13,68,969/- SHOWN AS LONG TERM CAP ITAL GAINS IN THE ORIGINAL RETURN WAS OFFERED AS SHORT T ERM CAPITAL GAIN IN THE REVISED RETURN. THE ASSESSMENT WAS COM PLETED U/S 153 R.W.S. 143(3) ON 28-11-2007. THE ASSESSING OFFICER THEREAFTER INITIATED PENALTY PROCEEDINGS U/S 271(1) (C) OF THE ACT AND LEVIED MINIMUM PENALTY OF RS. 2,73,794/- WH ICH WAS CONFIRMED BY THE CIT(A) IN THE FIRST APPELLATE PROCEEDINGS. THE SAME HAS BEEN CHALLENGED BY THE A SSESSEE BEFORE US. 3. AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIAL ON RECORD, WE FIND THAT THE ISSUES RAISED IN THIS APPEAL IS SQUARELY COVERED IN FAVOUR OF THE ASSESSE E BY THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF PRASHANT P ASHTEKAR AND PRALHAD B. ASHTEKAR IN ITA NO. 881 AND 882/PN/2010 FOR A.Y. 2003-04 DATED 28-3 - 2012, WHEREIN THE TRIBUNAL HAS DECIDED THE ISSUE BY OBSERVING AS UNDER : PAGE 3 OF 6 ITA NO. 1394 TO 1394/PN/2011 AGARWAL GROUP 7. HAVING GONE THROUGH THE DECISION OF PUNE BENCH IN THE CASE OF DHANANJAY VILAS JADHAV VS. ITO (ITA NO. 417/PN/2009 FOR A.Y. 2003-04 DATED 8-12-2010) RELIE D UPON BY THE LD. A.R., WE FIND THAT UNDER ALMOST SIM ILAR FACTS, THE TRIBUNAL HAS DELETED THE PENALTY LEVIED AND UPHELD BY THE AUTHORITIES BELOW WITH THIS OBSERVATI ON THAT THERE IS AN ELEMENT OF VOLUNTARY ACT ON THE PA RT OF THE ASSESSEE TO UNDO THE CLAIM MADE IN ORIGINAL RET URN AND THAT THE DEPARTMENT HAS NOT BROUGHT OUT ANY INCRIMINATING MATERIAL TO DEMONSTRATE THE IMPUGNED PENNY STOCK IN QUESTION WERE PURCHASED FOR CONVERTI NG THE UNACCOUNTED MONEY INTO ACCOUNTED MONEY. IN THAT CASE BEFORE THE TRIBUNAL, THE ASSESSEE HAD FIL ED HIS ORIGINAL RETURN CONSISTING OF INCOME FROM LONG TERM CAPITAL GAIN ON ACCOUNT OF SALES OF SHARES. H E SUBSEQUENTLY FILED REVISED RETURN WHEREIN THE LONG TERM CAPITAL GAIN ORIGINALLY SHOWN WAS REVISED AS SHORT TERM CAPITAL GAIN. PROCEEDINGS U/S. 148 WER E INITIATED AND ON THE BASIS OF ENQUIRIES CONDUCTED B Y THE INVESTIGATION WING OF DEPARTMENT AND ENQUIRIES CONDUCTED BY THE A.O, IT WAS HELD THAT NO PURCHASE/SALE TRANSACTION OF SHARES IN RESPECT OF WHICH CAPITAL GAIN SHOWN BY THE ASSESSEE ACTUALLY TOOK PLACE AND THE DOCUMENTARY EVIDENCE PRODUCED IN THIS REGARD WERE HELD TO BE FABRICATED. THE CLAIM OF RECEIPT OF CAPITAL GAIN WAS RETURNED AND SHORT TERM CAPITAL GAINS SHOWN BY THE ASSESSEE WAS ASSESSED AS INCOME FROM OTHER SOURCES AND PENALTY PROCEEDINGS U/S. 271(1)(C ) WERE INITIATED. PENALTY WAS LEVIED AND UPHELD BY THE LD CIT(A). BEFORE THE TRIBUNAL, THE ASSESSEE CONTENDED THAT IMPUGNED TRANSACTIONS WERE EFFECTED THROUGH BANKING CHANNELS AND THESE WERE DELIVERY BASED TRANSACTIONS OF THE PENNY SHARES. IT WAS SUBMITTED THAT THE PUNE BENCH OF THE TRIBUNAL HAS HELD IN NUMBER OF CASES THAT SUCH GAINS HAVE TO BE TAXED AS SHORT TERM CAPITAL GAINS AND NOT AS INCOME FROM OTHER SOURCES. IT WAS SUBMITTED THAT THERE IS DISPUTE ON A TAXABILITY OF SUCH GAINS ON A PARTICUL AR HEAD OF INCOME, THEREFORE, CONSIDERING THE DEBATAB LE NATURE OF THE ISSUE AND FURNISHING OR DISCLOSURE OF RELEVANT INFORMATION IN THE REVISED RETURN OF INCO ME, PENALTY U/S. 271(1)(C ) IS NOT LEVIABLE. RELIANCE WAS PLACED IN THE CASES OF SANTOSH NARAYAN KAPUR, 115 TTJ (LUCK.) 402 AND PREMCHAND GARG, 123 TTJ (DEL.)(TM) 433. CONSIDERING THE TOTALITY OF THE F ACTS AND CIRCUMSTANCES OF THE CASE, THE TRIBUNAL HAS DELETED THE PENALTY LEVIED U/S. 271(1)(C ). PAGE 4 OF 6 ITA NO. 1394 TO 1394/PN/2011 AGARWAL GROUP 8. CONTENTION OF THE LD. A.R. REMAINED THAT THE CASES OF THE PRESENT ASSESSEES ARE ON BETTER FOOTIN GS IN COMPARISON TO THE CASE OF DHANANJAY VILAS JADHAV VS . ITO (SUPRA). HE POINTED OUT THAT THE ASSESSEES HAD PURCHASED SHARES OF DATABASE FINANCE LTD. THROUGH THE BROKER (IN CASE OF SHRI. P.P. ASHTEKAR 800 SHAR ES FOR RS. 9769/- AND 2000 SHARES IN CASE OF SHRI. P.B . ASHTEKAR FOR RS. 25,400/-). THESE SHARES WERE SHO WN AS INVESTMENT IN BALANCE SHEET DRAWN ON 31 ST MARCH 2002 ATTACHED AND FILED WITH THE RETURN OF INCOME F OR A.Y. 2002-03. THE AFORESAID FULLY PAID EQUITY SHA RES OF DATABASE FINANCE LTD., ON THE FACE VALUE OF RS. 10/ - EACH WERE SUB-DIVIDED INTO 8000 IN THE CASE OF SHRI . P.P. ASHTEKAR AND 20000 IN THE CASE OF SHRI.P.B. ASHTEKAR FULLY PAID EQUITY SHARES OF RUPEE 1/- EACH ON 30 TH AUGUST 2002. SUBSEQUENTLY, THE ASSESSEES SENT RETURN OF THE SHARES HELD BY THEM IN PHYSICAL FORM TO THE COMPANY FOR DEMATERIALIZATION AND ACCORDINGLY, THESE FULLY PAID EQUITY SHARES OF RUPEE 1/- EACH O F DATABASE FINANCE LTD. WERE DEMATERIALIZED ON 11.9.2002. AFTER DEMATERIALIZATION OF THE SHARES, THE ASSESSEES SOLD ALL THE SHARES ON 24.9.2002 THROUGH A BROKER ON BOMBAY STOCK EXCHANGE FOR A TOTAL SALE CONSIDERATION OF RS.7,03,200/- IN THE CASE OF SHRI P.P. ASHTEKAR AND THE ASSESSEE SHRI. P.B. ASHTEKAR SOLD ALL THE SHARES ON 23.9.2002 AND 30.9.2002 THROUGH A BROKER ON BOMBAY STOCK EXCHANGE FOR A TOTAL SALE CONSIDERATION OF RS. 17,69,815/-. THE SUBMISSION O F THE LD. A.R. REMAINED THAT IN CASE OF SHRI. P.P. ASHTEKAR, SHARES WERE HELD BY HIM FROM 20 TH APRIL 2001 TO 24.09.2002 AND IN CASE OF SHRI P.B. ASHTEKAR, TH ESE WERE HELD FROM 20 TH APRIL 2001 TO 23.9.2002 I.E. FOR A PERIOD MORE THAN 12 MONTHS. THE ASSESSEES IN THEIR ORIGINAL RETURNS OF INCOME FILED ON 30 TH MAY 2003 FOR THE A.Y. 2003-04 DECLARED LONG TERM CAPITAL GAINS I N CASE OF SHRI P.P. ASHTEKAR AFTER SET OFF OF ASSET S OF LONG TERM CAPITAL LOSS OF RS. 4,19,069/-. HE PAID TAX O N THE BALANCE CAPITAL GAIN AT THE RATE OF 10% AS PER PROVISIONS OF SEC. 112 OF THE ACT. SIMILARLY, IN T HE CASE OF SHRI. P.B. ASHTEKAR, AFTER SET OFF OF ASSETS, LO NG TERM CAPITAL GAIN LOSS OF RS.16,14,129/-, HE PAID TAX O N THE BALANCE CAPITAL GAIN AT THE RATE OF 10% AS PER PROVISIONS OF SEC. 112 OF THE ACT. 9. ON 26.10.2005, THERE WAS SEARCH ACTION AT THE RESIDENCE OF ASSESSEES. IN ANSWER TO QUERY RAISED BY THE LD. ADI REGARDING THE PURCHASE AND SALE OF SHAR ES, PAGE 5 OF 6 ITA NO. 1394 TO 1394/PN/2011 AGARWAL GROUP ALL THE DETAILS ALONG WITH PURCHASE AND SALE OF SHA RE CONTRACT AND BILLS WERE FILED TO HIM. HOWEVER, IN RESPONSE TO NOTICE U/S. 153A, THE ASSESSEES FILED T HEIR RETURN OF INCOME FOR THE YEAR OFFERING ENTIRE SALE PROCEEDS OF PAID SHARES OF DATABASE FINANCE LTD. A S SHORT TERM CAPITAL GAIN FOR THE FOLLOWING REASONS. I) THE APPELLANT WAS NOT SURE OF GETTING THE THIRD PARTY CONFIRMATION, SUPPORT AND PERSONAL APPEARANCES (IF SUMMONED) OF THE BROKER FROM WHOM THE SHARES WERE PURCHASED IN APRIL 2001. II) TO AVOID LONG DRAWN AND EXPENSIVE LITIGATION III) TO BUY PEACE OF MIND IV) TO AVOID PENALTY PROCEEDINGS 10. FROM THE ORDERS OF THE AUTHORITIES BELOW, WE FI ND THAT THERE IS NO DISPUTE REGARDING THE PURCHASE AN D SALES OF THE SHARES. THE ONLY DISPUTE IS REGARDING THE DATE OF PURCHASE. THE ASSESSEES HAVE SHOWN ONE OF THE REASONS FOR DECLARING THE GAIN AS SHORT TERM CAPITA L GAIN IN THEIR RETURNS FILED U/S. 153A, DEVIATING FR OM THEIR EARLIER DECLARATION AS LONG TERM CAPITAL GAIN IN THEIR ORIGINAL RETURN FILED U/S. 139(1) OF THE ACT IS THAT THEY WERE NOT SURE OF GETTING THE THIRD PARTY CONFIRMATION, SUPPORT AND PERSONAL APPEARANCE OF TH E BROKERS FROM WHOM THE SHARES WERE PURCHASED IN APRI L 2001. THERE IS NOTHING ON RECORD TO DOUBT SUCH EXPLANATION OF THE ASSESSEES FOR SHOWING THE GAIN AS SHORT TERM CAPITAL GAIN IN THEIR RETURN FILED U/S. 153A OF THE ACT TO ATTRACT PENAL PROVISION U/S. 271(1)(C ) OF THE ACT. UNDER THESE CIRCUMSTANCES, IT CANNOT BE INFERRED BEYOND DOUBT THAT THE ASSESSEES HAD FURNISHED INACCURATE PARTICULARS OF INCOME IN THEIR ORIGINAL RETURNS OF INCOME FILED U/S. 139 OF THE AC T DECLARING THE SALE PROCEEDS OF THE SHARES AS LONG T ERM CAPITAL GAIN. WE THUS WHILE SETTING ASIDE THE ORDE RS OF THE AUTHORITIES BELOW, DIRECT THE A.O TO DELETE THE PENALTY OF RS. 2,75,400/- IN THE CASE OF SHRI P.P. ASHTEKAR AND RS. 5,56,500/- IN THE CASE OF SHRI P.B . ASHTEKAR U/S. 271(1)( C ) OF THE ACT. THE GROUNDS ARE THUS ALLOWED IN FAVOUR OF THE ASSESSEES. PAGE 6 OF 6 ITA NO. 1394 TO 1394/PN/2011 AGARWAL GROUP FACTS BEING IDENTICAL, SO FOLLOWING THE DETAILED RE ASONING GIVEN IN THE CASE OF PRASHANT PRALHAD ASHTEKAR (SUP RA), WE SET ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE A. O TO DELETE THE PENALTY LEVIED U/S 271(1)(C) OF THE ACT. 4. SIMILAR ISSUE HAS BEEN RAISED BY REST OF THE ASS ESSEES IN THIS GROUP. FACTS BEING IDENTICAL, SO FOLLOWING THE SAME REASONING, WE SET ASIDE THE ORDERS OF THE AUTHORITI ES BELOW AND DIRECT THE A.O TO DELETE THE PENALTY LEVIED U/S 271(1)(C) OF THE ACT. 5. IN THE RESULT, ALL THE APPEALS OF THE RESPECTIVE ASSESSEES ARE ALLOWED. ORDER PRONOUNCED ON THE 23 RD NOVEMBER 2012 SD/- SD/- (R.K. PANDA) ACCOUNTANT MEMBER ( SHAILENDRA KUMAR YADAV) JUDICIAL MEMBER PUNE DATED THE 23 RD NOVEMBER 2012 ANKAM COPY OF THE ORDER IS FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A)- CENTRAL, PUNE 4. THE CIT- CENTRAL , PUNE 5. THE D.R, A BENCH, PUNE 6. GUARD FILE BY ORDER SR. P.S. ITAT PUNE BENCH