The ITO, Ward-8(4), Ahmedabad V. Vraj Services Pvt.Ltd., Gandhidham

ITA 1405/AHD/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 1719 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 10 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-05-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 21-03-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 27-06-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NARENDRA SINGH
• Keywords: Reasonable cause

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD BEFORE SHRI S.S. GODARA, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER ./ ITA NO. 1405/AHD/2012 / ASSESSMENT YEAR: 2008-09 INCOME TAX OFFICER, WARD 8(4), AHMEDABAD VS. M/S. VRAJ SERVICES PVT. LTD., PLOT NO.529, WARD NO.11/A, GEETAGRAM SOCIETY, BHARAT NAGAR, GANDHIDHAM-370201 PAN : AAACV 6197 Q [ / (APPELLANT) / (RESPONDENT) REVENUE BY : SHRI NARENDRA SINGH, SR. DR. ASSESSEE BY : WRITTEN SUBMISSION ! '# / DATE OF HEARING : 21/03/2016 / DATE OF PRONOUNCEMENT: 02/05/2016 $%/ O R D E R PER MANISH BORAD, ACCOUNTANT MEMBER: THE REVENUE IS IN APPEAL BEFORE US AGAINST THE ORDER O F LD. COMMISSIONER INCOME-TAX (APPEALS)-XIV, AHMEDABAD IN APPEAL NO. CIT(A)X IV/WD.8(4) /48/2011-12 , DATED 20.04.2012, PASSED FOR ASSESSMENT YEAR 2008-09. PENALT Y U/S 271(1)(C) WAS FRAMED FOR ASSESSMENT YEAR 2008-09 ON 23.06.2011 BY IN COME TAX OFFICER, WARD-8(4), AHMEDABAD. THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPEAL:- 1. THE LD. COMMISSIONER OF INCOME-TAX (APPEALS)-XIV, AH MEDABAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE PENALTY OF RS.15,24,180/- LEVIED U/S 271(1)(C) OF THE ACT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. COMMISSIONER OF INCOME-TAX (APPEALS)-XIV, AHMEDABAD OUGHT TO HAVE UPHELD THE O RDER OF THE ASSESSING OFFICER. 3. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE LD. COMMISS IONER OF INCOME-TAX (APPEALS)-XIV, AHMEDABAD MAY BE SET ASIDE AND THAT OF THE OR DER OF THE ASSESSING OFFICER BE RESTORED. ITA NO. 1405/AHD/2012 ITO VS. VRAJ SERVICES PVT LTD AY : 2008-09 - 2 2. BRIEFLY STATED FACTS, AS CULLED OUT FROM THE RECORDS , ARE THAT THE ASSESSEE IS A PRIVATE LIMITED INVESTMENT COMPANY AND THE RETURN OF INCOME FOR ASSESSMENT YEAR 2008-09 WAS FILED ON 13.06.2009 DECLARING TOTAL INCO ME AT RS.NIL AFTER CLAIMING CARRIED FORWARD OF UNABSORBED LOSS OF RS.25,35,103/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSES SEE WAS CONFRONTED WITH REGARD TO AIR INFORMATION AVAILABLE WITH THE ASSESSING OFFICER RELATING TO PURCHASE AND SALE OF SHARES OF REI AGRO LIMITED AND IT WAS REVEALED THAT PROFIT ON PURCHASE AND SALE OF SHARES OF REI AGRO LIMITED WAS N OT DISCLOSED IN THE RETURN OF INCOME. HOWEVER, TRANSACTIONS WERE DULY REFL ECTED IN THE INVESTMENT ACCOUNT; ACCORDINGLY, ADDITION OF RS.1,34,52,600/- WAS MADE ON ACCO UNT OF NON- DECLARATION OF SHORT TERM CAPITAL GAIN ON SALE OF SHARES AFTER ALLOWING SET OFF OF BUSINESS LOSS IN BROUGHT FORWARDED LOSSES. INCOME WAS ASSESSED AT RS.1,30,27,505/-. THE ASSESSEE COULD NOT SUCCEED IN QUANTUM APP EAL BEFORE THE LD. CIT(A), WHEREIN THE ADDITION OF RS.1,30,27,505/- WAS CONFIRM ED. NO APPEAL WAS PREFERRED BEFORE THE TRIBUNAL AGAINST THE ORDER OF THE LD. CIT(A). THEREAFTER, PENALTY ORDER U/S 271(1)(C) WAS FRAMED ON 23.06.2011, IMP OSING PENALTY OF RS.15,24,180/- FOR CONCEALMENT OF INCOME OF RS.1,34,52,600/ -. THE ASSESSEE WENT IN APPEAL AGAINST THE ORDER U/S 271(1)(C) OF THE ACT BEFORE THE LD. CIT(A) WHO ALLOWED THE APPEAL OF THE ASSESSEE BY DELETI NG THE PENALTY LEVIED U/S 271(1)(C) OF THE ACT, BY OBSERVING AS UNDER:- I HAVE CAREFULLY CONSIDERED THE PENALTY ORDER AND THE SUBMIS SION MADE BY THE APPELLANT DURING THE COURSE OF APPELLATE PROCEEDINGS. D URING THE APPELLATE PROCEEDINGS, IT IS SUBMITTED BY THE APPELLANT THAT GAIN ARISING ON SALE OF SHARES WAS INADVERTENTLY LEFT TO BE SHOWN IN THE RETURN OF INCOME . APPELLANT HAD MADE AN INVESTMENT OF 287119 SHARES OF REI AGRO LIMITED FOR CONS IDERATION OF RS.31,71,17,872/- AND PAYMENT OF RS. 22 CRORES WAS ALSO MADE. THE APPELLANT COULD NOT MAKE REMAINING PAYMENT AND BROKER SOLD THE SHA RE LYING IN DEMAT ACCOUNT AND ADJUSTED THE SALE CONSIDERATION AGAINST THE OUTSTANDING. THE APPELLANT, THEREAFTER, CREDITED THE INVESTMENT ACCOUNT AND DEBITED THE BROKERS ACCOUNT AND FINALIZED THE ENTRY AND BOOKS OF ACCOUNTS. THE BOOKS OF ACCOUNT WERE SUBSEQUENTLY AUDITED AND THE AUDITOR'S ALSO COULD NOT DETEC T THE CAPITAL GAIN. HOWEVER, DURING THE COURSE OF SCRUTINY, WHEN THE DEMAT ACCO UNT WAS ANALYSED IT CAME TO ITS KNOWLEDGE AND IMMEDIATELY THE TAX WAS PAID. IN VIEW OF THE ABOVE FACTS, I AM INCLINED TO ACCEPT THE SUBMISSION OF THE A PPELLANT THAT THE MISTAKE WAS BONAFIDE AND APPELLANT HAD A REASONABLE CAUSE FOR NOT S HOWING PROFIT ON SALE OF ITA NO. 1405/AHD/2012 ITO VS. VRAJ SERVICES PVT LTD AY : 2008-09 - 3 SHARES IN THE RETURN OF INCOME. THE ENTRIES OF PURCHASE AND SALE OF SHARES WERE SHOWN IN ONE ACCOUNT AND THE BROKER REALIZED THE OUTSTANDING DUES B Y SELLING THE SHARES IN THE DEMAT ACCOUNT. THE APPELLANT DID NOT COME T O KNOW ABOUT THE PROFIT ON SALE OF SHARES AS THERE WAS HUGE PAYMENT TO BE MADE T O THE BROKER. THE ENTRIES OF SALE AND PURCHASE OF SHARES WERE ALREADY THERE BEFORE THE A. O. AND APPELLANT HAS HIMSELF GIVEN THE COPY OF DEMAT ACCOUNT TO THE A. O. DUR ING THE COURSE OF ASSESSMENT PROCEEDINGS. THESE EVENTS PROVE THE REASONABL E CAUSE OF THE APPELLANT. THEREFORE, THE PENALTY A. O. IS DIRECTED TO BE DELETED. THE GR OUND OF APPEAL IS, THEREFORE, ALLOWED. 3. AGGRIEVED THE REVENUE IS NOW IN APPEAL BEFORE THE TRIBUNAL . 4. THE LD. DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORD ER OF THE LD. ASSESSING OFFICER. 5. ON THE OTHER HAND, LD. AUTHORIZED REPRESENTATIVE SUBM ITTED THAT THE ASSESSEE MADE GROSS INVESTMENT IN 287119 SHARES OF REI AGRO LIMITED FOR CONSIDERATION OF RS.31.71 CRORES AND MADE PAYMENT OF RS.22 CROR ES FROM TIME TO TIME; AND FURTHER, LATE PAYMENT INTEREST OF RS.25.05 LAKHS W AS CHARGED BY THE BROKER. THE APPELLANT WAS NOT ABLE TO MAKE REMAINING PAYM ENT AND THEREFORE, IN ORDER TO REALIZE HIS DUES, THE BROKER SOLD THE SHAR ES LYING IN THE DEMAT ACCOUNT OF THE APPELLANT IN OPEN MARKET FOR A CONSIDERATI ON OF RS.9.80 CRORES AND ADJUSTED THE OUTSTANDING. THE LD. AUTHORIZED REPRESE NTATIVE FURTHER SUBMITTED THAT ON THE BASIS OF INFORMATION RECEIVED F ROM BROKER ABOUT THE SALE AND ADJUSTMENT IN OUTSTANDING ACCOUNT, THE APPELLANT CRED ITED THE INVESTMENT ACCOUNT AND DEBITED BROKERS ACCOUNT FOR RS.9.80 CRORES WH ICH HAS BEEN CONFIRMED BY THE BROKER. IN THE PROCESS, GAIN ARISING O N SALE OF SHARES WAS CAMOUFLAGED IN THE INVESTMENT ACCOUNT OF SHARES AND INADV ERTENTLY & UNINTENTIONALLY THIS GAIN WAS NOT OFFERED FOR TAXATION S INCE IT DID NOT COME TO THE NOTICE OF THE APPELLANT AT THE TIME OF FILING THE RETURN OF INCOME. THE LD. AUTHORIZED REPRESENTATIVE ALSO SUBMITTED THAT THIS WAS PUREL Y AN UNINTENTIONAL ERROR, THERE WAS NO INTENTION TO DEFRAUD REVENUE, SUPP RESS GAIN TO AVOID PAYMENT OF TAX THEREON. THE AUTHORIZED REPRESENTATIVE FU RTHER SUBMITTED THAT THE BONAFIDE OF THE APPELLANT CAN BE JUDGED ON THE BASI S OF THE FACT THAT ALL THE DETAILS WERE SUBMITTED BY THE APPELLANT DURING THE COU RSE OF ASSESSMENT, AND ITA NO. 1405/AHD/2012 ITO VS. VRAJ SERVICES PVT LTD AY : 2008-09 - 4 ONLY ON THE BASIS OF THESE DETAILS THE ASSESSING OFF ICER COULD DIG OUT PROFIT ON SALE OF SHARES, WHICH WAS CAMOUFLAGED IN INVESTMENT ACCOU NT, SINCE THE SHARES WERE SOLD BY THE BROKER TO REALISE OUTSTANDING DUES A DMITTEDLY UNDER INTIMATION TO APPELLANT BUT PROFIT WAS NOT VISUALIZED SINCE THE INVESTMENT END OUTSTANDING WERE ADJUSTED AGAINST EACH OTHER. HE ALSO S UBMITTED THAT THE ASSESSEE DID NOT COME TO KNOW ABOUT THE PROFIT ON SALE OF SHARES AS THERE WAS HUGE PAYMENT TO BE MADE TO THE BROKER. HE ALSO CONTEND ED THAT ON THE ASSESSMENT OF UNDERLYING FACTS AND CIRCUMSTANCES OF THE CASE THE BONAFIDE OF THE APPELLANT CANNOT BE DOUBTED. THE LD. AUTHORIZED RE PRESENTATIVE ALSO SUBMITTED THAT THE BOOKS OF ACCOUNTS OF THE ASSESSEE C OMPANY ARE DULY AUDITED. EVEN DURING THE COURSE OF AUDIT BY QUALIFIED CHARTERE D ACCOUNTANT, THE SAID GAIN WAS NOT VISUALIZED AND REMAINED CAMOUFLAGED IN THE INVES TMENT ACCOUNT OF SHARES. HE FURTHER SUBMITTED THAT IN THE COURSE OF AS SESSMENT, ALL THE DETAILS VIZ. COPY OF DEMAT ACCOUNT, DETAILS OF PURCHASE AND SALES OF SHARES, ASKED BY THE ASSESSING OFFICER WERE SUBMITTED IMMEDIATELY AND ON SUBMISSION THESE DETAILS ONLY THE ASSESSING OFFICER HAS POINTED OUT PR OFIT ON SALE OF SHARES, WHEN IT WAS SURFACED, IMMEDIATELY IT WAS ACCEPTED AND TAX WAS PAI D ON SAME WITHOUT ANY ARGUMENT OR HESITATION. THE LD. AUTHORIZED REPRESENTAT IVE ALSO SUBMITTED THAT A DULY SWORN AFFIDAVIT OF MANAGING DIRECTOR DECLARIN G FACTS ON OATH WAS ALSO SUBMITTED BEFORE THE LD. CIT (A). LD. AUTHORIZED R EPRESENTATIVE REFERRED AND RELIED ON THE DECISIONS OF HONBLE SUPREME COURT IN THE CASE OF PRICE WATERHOUSE COOPERS PVT LTD VS. CIT, KOLKATA-1, REPORTED IN [2012] 348 ITR 306 (SC) AND T. ASHOK PAI VS. CIT, REPORTED IN 292 ITR 11 (SC). THE LD. AUTHORIZED REPRESENTATIVE ALSO SUBMITTED THAT IN VIEW OF THE ABOVE FACTS AND LEGAL DECISIONS, THE PENALTY LEVIED BY THE LD. ASSESSING OFF ICER IS NOT WARRANTED AND THE LD. CIT(A) HAS RIGHTLY DIRECTED THE ASSESSING OF FICER TO DELETE THE PENALTY LEVIED. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MA TERIAL ON RECORD. THE ONLY ISSUE IN THIS APPEAL OF THE REVENUE IS AGAINST THE ACTION OF LD. CIT(A) IN DELETING THE PENALTY OF RS.15,24,180/- LEVIED U/S 271(1)(C) O F THE ACT FOR ITA NO. 1405/AHD/2012 ITO VS. VRAJ SERVICES PVT LTD AY : 2008-09 - 5 CONCEALMENT OF INCOME OF SHORT TERM CAPITAL GAIN OF RS .1,34,52,600/-. FROM GOING THROUGH THE ASSESSMENT AND APPELLATE PROCEEDINGS IN REL ATION TO QUANTUM AS WELL AS PENALTY, WE ARE ABLE TO OBSERVE THAT THE SHORT TERM CAPITAL GAIN OF RS.1,34,52,600/- WAS HAVING ITS SOURCE FROM TRANSACTIONS OF PURC HASE AND SALES OF SHARES OF REI AGRO LIMITED. FURTHER, THERE IS NO D ISPUTE TO THE FACT THAT THE TRANSACTIONS RELATING TO PURCHASE AND SALE OF SHARES OF RE I AGRO LIMITED WERE ENTERED THROUGH REGISTERED STOCK BROKER AND ALL ENTRIES WE RE PASSED THROUGH THE INVESTMENT ACCOUNT. CERTAINLY, THE PROFIT AND LOSS PORT ION WHICH WAS EMBEDDED IN THE TRANSACTIONS OF SALE OF SHARES SHOWN IN THE INVE STMENT ACCOUNT WAS NOT BIFURCATED AND FURTHER WAS NOT SHOWN IN THE RETURN OF INCOME UNDER THE HEAD CAPITAL GAINS; BUT, CERTAINLY THE TRANSACTIONS WERE APPE ARING IN THE REGULAR BOOKS OF ACCOUNTS OF THE ASSESSEE. 7. WE FURTHER OBSERVE THAT HONBLE APEX COURT IN THE C ASE OF PRICE WATERHOUSE COOPERS PVT LTD (SUPRA) HAS HELD THAT NO PEN ALTY CAN BE LEVIED U/S 271(1)(C) FOR BONAFIDE, INADVERTENT MISTAKE, HUMAN ERROR AND FURTHER HELD THAT ALL THAT HAS HAPPENED IN THE PRESENT CASE IS THAT THROUG H BONA FIDE AND INADVERTENT ERROR, THE ASSESSEE WHILE SUBMITTING ITS RETURN, FAIL ED TO ADD THE PROVISION FOR GRATUITY TO ITS TOTAL INCOME. THIS CAN ONLY BE DESCRIBED AS A HUMAN ERROR WHICH WE ARE ALL PRONE TO MAKE. THE CALIBER AND EXPERTISE OF THE ASSESSEE HAS LIT TLE OR NOTHING TO DO WITH THE INADVERTENT ERROR. THAT THE ASSESSEE SHOULD HAVE BEEN CAREFUL CANNO T BE DOUBTED, BUT THE ABSENCE OF DUE CARE, IN A CASE SUCH AS THE PRESENT, DOE S NOT MEAN THAT THE ASSESSEE IS GUILTY OF EITHER FURNISHING INACCURATE PARTICULARS OR ATTEMPTING TO CONCEAL ITS INCOME. FURTHER, THE HONBLE SUPREME COURT IN THE CASE OF T. A SHOK PAI (SUPRA) HAS HELD THAT THE TERM INACCURATE PARTICULARS IS NOT DEFINED. FURNISHING O F AN ASSESSMENT OF VALUE OF THE PROPERTY MAY NOT BY ITSELF BE FURNISHING OF INACCURATE PARTICULARS. EVEN IF THE EXPLANATIONS ARE TAKEN RECOURSE TO, A FINDING HAS TO BE ARRIVED AT HAVING REGARD TO CLAUSE (A) OF EXPLANATION 1 TO SECTION 271(1)(C) THAT THE EXPLANATION OFFERED BY AN ASSESSEE, IN THE EVENT, HE OFFERS ONE WAS FALSE. HE MU ST BE FOUND TO HAVE FAILED TO PROVE THAT SUCH EXPLANATION IS NOT ONLY NOT BONA FIDE BUT A LL THE FACTS RELATING TO THE SAME AND MATERIAL TO THE INCOME WERE NOT DISCLOSED BY HIM. THUS, A PART FROM HIS EXPLANATION ITA NO. 1405/AHD/2012 ITO VS. VRAJ SERVICES PVT LTD AY : 2008-09 - 6 BEING NOT BONA FIDE, IT SHOULD BE FOUND AS OF FACT THAT HE HAS NOT DISCLOSED ALL THE FACTS WHICH WAS MATERIAL TO THE COMPUTATION OF HIS INCOME. CON CEALMENT OF INCOME AND FURNISHING OF INACCURATE PARTICULARS CARRY DIFFERENT CONNOTATIONS. CONCEALMENT REFERS TO DELIBERATE ACT ON THE PART OF THE ASSESSEE. A MERE OMISSION OR NEGLIGENCE WOULD NOT CONSTITUTE A DELIBERATE ACT OF SUPPRESSIO VERY OR SUGGESTIO N FALSI. 8. RESPECTFULLY RELYING ON THE DECISIONS OF HONBLE APEX COURT IN THE CASE OF PRICE WATERHOUSE COOPERS PVT LTD (SUPRA) AND T. ASHOK PAI (SUPRA), WE ARE OF THE VIEW THAT AS THE PURCHASES AND SALE TRANSACTIONS WERE DULY REFLECTED IN THE INVESTMENT ACCOUNT SHOWN BY THE ASSESSEE IN ITS B ALANCE-SHEET, BUT DUE TO INADVERTENT ERROR, THE ASSESSEE WHILE SUBMITTING ITS R ETURN FAILED TO ADD THE SHORT TERM CAPITAL GAIN TO ITS INCOME AND THE SAME HAS ALREADY BEEN SUBJECTED TO TAX; AND THEREFORE, UNDER THESE CIRCUMSTANCES, THE ASS ESSEES CASE IS NOT A FIT CASE FOR BEING VISITED WITH PENALTY U/S 271(1)(C) OF THE ACT. WE, THEREFORE, FIND NO REASON TO INTERFERE WITH THE ORDER OF THE LD. CIT(A) WHICH IS UPHELD. 9. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE COURT ON 2 ND MAY, 2016 AT AHMEDABAD. SD/- SD/- ( S.S. GODARA ) JUDICIAL MEMBER (MANISH BORAD) ACCOUNTANT MEMBER AHMEDABAD; DATED, 2 /5 /2016 $% ! &''( )$(*'/ COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ++ ' ,' / CONCERNED CIT 4. ,' ) ( / THE CIT(A)- 5. (/0 &'& , , 123 /DR,ITAT, AHMEDABAD, 6. 045 6 / GUARD FILE. $% / BY ORDER, TRUE COPY +1 (ASSTT.REGISTRAR) ITAT, AHMEDABAD ITA NO. 1405/AHD/2012 ITO VS. VRAJ SERVICES PVT LTD AY : 2008-09 - 7 1. DATE OF DICTATION 18.04.2016.. 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER : 18.04.2016 3. OTHER MEMBER .. 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S . 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT .. 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P.S./P.S . 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER