The ACIT,Vapi Range, Vapi V. Bilakhia Holding P Ltd, Vapi

ITA 1478/AHD/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 89318 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 11 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-05-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2003-2004
• Appeal Filed On: 25-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIMALENDU VERMA
• Assessee Lawyers: M K PATEL
• Keywords: Gift; Depreciation; Bonafide belief; Question of law; Wrong claim; Difference of opinion; Capital receipt; Reason to believe
• Section: 115JB; 27

Judgement Text

, , , , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD 0 00 0 0 00 0 , , , , !' # $% !' # $% !' # $% !' # $%, , , , & & & & BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER ITA NOS. 1478 & 1479/AHD/2011 ASSESSMENT YEAR: 2003-04 & 2004-05 ACIT, VAPI CIRCLE, VAPI VS BILAKHIA HOLDINGS PVT LTD BILAKHIA HOUSE, MUKTANAND MARG, CHALA, VIA. VAPI PAN : AADCS 4420 J '( / APPELLANT *+'( / RESPONDENT REVEN UE BY : SHRI VIMALENDU VERMA, CIT - DR ASSESSEE(S) BY : SHRI M.K. PATEL, AR #!, - %/ // / DATE OF HEARING : 06/05/2015 ./0 - % / DATE OF PRONOUNCEMENT : 08/05/2015 1 1 1 1/ // / O R D E R PER SHRI N.S. SAINI, ACCOUNTANT MEMBER: THESE ARE THE APPEALS FILED BY THE REVENUE AGAINST A CONSOLIDATED ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS), VALSAD DATED 08.03.2011 PASSED IN THE ASSESSMENT YEARS 2003-04 A ND 2004-05. 2. THE COMMON GROUND OF APPEAL TAKEN IN BOTH THESE APPEALS BY THE REVENUE IS THAT THE CIT(A) ERRED IN DELETING THE PE NALTY OF RS.19,21,28,225/- IN ASSESSMENT YEAR 2003-04 AND RS .18,14,25,199/- IN ASSESSMENT YEAR 2004-05 LEVIED BY THE ASSESSING OFF ICER U/S 271(1)(C) OF THE INCOME-TAX ACT. 3. THE BRIEF FACTS OF THE CASE ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE-COMPANY HAD ITA NOS 1478 & 1479 AHD 2011 ACIT VS.- BILAKHIA HOLDINGS PVT LTD AY: 2003-04 TO 04-05 - 2 - SOLD 86,25,000 SHARES OF BILAG INDUSTRIES PVT LTD O N 05.04.2002 FOR RS.2,43,95,00,000/- AND ALSO SHARES OF OTHER COMPAN IES AND EARNED PROFIT OF RS.2,43,97,05,781/- ON SALES OF SHARES WHICH WERE C LAIMED TO HAVE BEEN RECEIVED AS GIFT BY WAY OF FAMILY ARRANGEMENT. THE ASSESSEE DID NOT SHOW THE PROFIT ON SALE OF SHARES IN THE PROFIT AND LOSS ACCOUNT BUT CREDITED THE SAME IN THE CAPITAL RESERVE ACCOUNT IN THE BALANCE -SHEET THEREBY REDUCING THE BOOK PROFIT OF THE ASSESSMENT YEAR 2003-04 BY T HE SAID AMOUNT OF RS.2,43,97,05,781/-. SIMILARLY, IN ASSESSMENT YEA R 2004-05, THE ASSESSEE SOLD 55,97,429 SHARES OF BILAG INDUSTRIES PVT LTD O N 31.12.2003 AND 25.03.2004 FOR RS.2,35,98,50,342/- AND 2700 SHARES OF CADILA AND EARNED PROFIT OF RS.2,36,00,02,591/- WHICH WAS CLAIMED TO HAVE BEEN RECEIVED AS GIFT BY WAY OF FAMILY ARRANGEMENT. THE ASSESSEE DI D NOT SHOW THE PROFIT ON SALE OF SHARES IN THE PROFIT AND LOSS ACCOUNT BUT C REDITED THE SAME IN THE CAPITAL RESERVE ACCOUNT IN THE BALANCE-SHEET THEREB Y REDUCING THE BOOK PROFIT OF THE ASSESSMENT YEAR 2004-05 TO THAT EXTENT. THE REFORE, THE ASSESSING OFFICER WHILE DETERMINING THE BOOK PROFIT OF THE AS SESSEE U/S 115JB OF THE ACT, ADDED A SUM OF RS.2,43,97,05,781/- IN ASSESSME NT YEAR 2003-04 AND RS.2,36,00,02,591/- IN ASSESSMENT YEAR 2004-05 TO T HE BOOK PROFITS COMPUTED U/S 115JB OF THE ACT. THE ACTION OF THE AS SESSING OFFICER WAS CONFIRMED IN APPEAL BY THE CIT(A). 4. THEREAFTER, THE ASSESSING OFFICER LEVIED PENALTY OF RS. 19,21,28,225/- IN ASSESSMENT YEAR 2003-04 AND RS.18,14,25,199/- IN ASSESSMENT YEAR 2004-05 U/S 271(1)(C) OF THE ACT FOR FURNISHING INA CCURATE PARTICULARS OF INCOME BY THE ASSESSEE. 5. ON APPEAL FILED BY THE ASSESSEE AGAINST THE LEVY OF PENALTY BY THE ASSESSING OFFICER, THE CIT(A) VIDE ITS CONSOLIDATED ORDER DATED 08.03.2011 FOR ASSESSMENT YEARS 2003-04 AND 2004-05 DELETED TH E PENALTY, BY OBSERVING AS UNDER:- 7.14 THE SCHEME OF SECTION 271(1)(C), AS WE HAV E NOTED EARLIER IN THIS ORDER, VISUALIZES IMPOSITION OF PENALTY WHEN T HE ASSESSEE HAS ITA NOS 1478 & 1479 AHD 2011 ACIT VS.- BILAKHIA HOLDINGS PVT LTD AY: 2003-04 TO 04-05 - 3 - CONCEALED INCOME OR WHEN THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME. IN ADDITION TO THESE TWO SIT UATIONS, PENALTY CAN ALSO BE IMPOSED, INTER ALIA, WHEN ASSESSEE IS DEEME D TO HAVE CONCEALED PARTICULARS OF INCOME UNDER EXPLANATION 1 TO SECTION 271(1)(C). THIS EXPLANATION PROVIDES THAT THE ASSES SEE WILL BE DEEMED TO HAVE CONCEALED PARTICULARS OF INCOME WHERE IN RE SPECT OF ANY FACTS MATERIAL TO THE COMPUTATION OF THE TOTAL INCOME OF ANY PERSON UNDER THIS ACT, (I) WHEN THE ASSESSEE FAILS TO PROVIDE AN EXPLANATION, (II) WHEN THE ASSESSEE PROVIDES AN EXPLANATION WHICH IS FOUND TO BE FALSE, AND (III) WHEN THE ASSESSEE PROVIDES AN EXPLANATION WHICH HE FAILS TO SUBSTANTIATE AND HE FAILS TO PROVE THAT THE EXPLANA TION WAS BONAFIDE AND THAT ALL THE FACTS NECESSARY FOR THE SAME AND M ATERIAL FOR COMPUTATION OF INCOME HAVE BEEN DULY DISCLOSED BY T HE ASSESSEE. AS MENTIONED EARLIER, THE ONLY GROUND RAISED BY THE AO FOR LEVY OF PENALTY WAS FOR THE INCORRECT COMPUTATION OF MAT. 7.15 I AM NOT REALLY CONCERNED WITH THE MERITS OF T HE STAND TAKEN BY THE ASSESSEE IN THE PROCEEDING BUT ALL THAT IS NECE SSARY TO BE EXAMINED HERE IS WHETHER MAKING SUCH A CLAIM OR INC ORRECT MAT COMPUTATION CAN BE SAID TO CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS. 7.16 THE EXPRESSION 'CONCEALMENT OF INCOME' HAS NOT BEEN DEFINED IN THE ACT, BUT THE NATURAL MEANINGS OF THE EXPRESS ION 'CONCEALMENT ARE TO KEEP FROM BEING SEEN, FOUND, BE SERVED, OR D ISCOVERED'. IT WOULD, THEREFORE, FOLLOW THAT THE EXPRESSION CONCEA LMENT OF INCOME, IN ITS NATURAL SENSE AND GRAMMATICAL MEANING, IMPLIES AN INCOME IS BEING HIDDEN, CAMOUFLAGED OR COVERED UP SO AS IT CANNOT B E SEEN, FOUND, OBSERVED OR DISCOVERED. THE ASSESSEE HAS MADE A CLA IM FIRST TIME IN THE A.Y. 2002-03 ABOUT THE GIFT OF SHARES BY THE SH ARE HOLDERS WHICH WAS ACCEPTED BY THE DEPARTMENT. THE CASES FOR THE S UBSEQUENT A.YS, ALONG WITH A.Y.2002-03 WERE RE-OPENED. THE FAMILY P ARTITION ARRANGEMENTS WAS GIVEN IN THE R/I FILED. THE SALES PROCEEDS OF THE SHARES RECEIVED IN GIFT WERE TREATED AS LTCG AND TH E INVESTMENT IN THE TAX SAVING BONDS FOR CLAIMING BENEFIT U/S 54EC WAS FURNISHED IN THE RETURN OF INCOME. THE APPELLANT VIRTUALLY ENSURED T HAT THE FACT OF ASSESSEE'S HAVING MADE THIS CLAIM CANNOT REMAIN UNN OTICED BY THE ASSESSING OFFICER, AND HAS GIVEN SPECIFIC JUSTIFICA TION AND ALL THE SUPPORTING DETAILS FOR THE SAME EXCEPT THE CAPITAL GAINS NOT SHOWN IN THE MAT COMPUTATION UNDER BONANED BELIEF. BY NO STR ETCH OF LOGIC, THIS SITUATION CAN BE TREATED AS A SITUATION IN WHICH AN Y INCOME IS CONCEALED BY THE ASSESSEE. CONCEALMENT OF AN INCOME BY AN INCOME CANNOT BE A PASSIVE SITUATION ANYWAY; IT IMPLIES TH AT THE PERSON CONCEALING THE INCOME IS HIDING, COVERING UP OR CAM OUFLAGING AN INCOME - -SOMETHING WHICH ESSENTIALLY REQUIRES A CO NSCIOUS EFFORT. ON THE CONTRARY, THIS IS A SITUATION IN WHICH THE ASSE SSEE HAS ACTED IN VERY ITA NOS 1478 & 1479 AHD 2011 ACIT VS.- BILAKHIA HOLDINGS PVT LTD AY: 2003-04 TO 04-05 - 4 - TRANSPARENT AND BONAFIED MANNER. THERE CANNOT BE AN Y CONCEALMENT OF INCOME IN SUCH A SITUATION. 7.17 THE EXPRESSION 'FURNISHING OF INACCURATE PA RTICULARS OF INCOME HAS ALSO NOT BEEN DEFINED IN THE ACT. THE EXPRESSIO N 'INACCURATE REFERS TO 'NOT IN CONFORMITY WITH THE FACT OR TRUTH' AND T HAT IS THE MEANING WHICH, IN OUR CONSIDERED VIEW, IS RELEVANT IN THE C ONTEXT OF 'FURNISHING OF INACCURATE PARTICULARS'. THE EXPRESSION 'PARTICU LARS REFERS TO 'FACTS, DETAILS, SPECIFICS OR INFORMATION ABOUT SOMEONE OR SOMETHING'. THEREFORE, THE PLAIN MEANING OF THE EXPRESSION 'FUR NISHING OF INACCURATE PARTICULARS OF INCOME' IMPLIES FURNISHIN G OF DETAILS OR INFORMATION ABOUT INCOME WHICH ARE NOT IN CONFORMIT Y WITH THE FACTS OR TRUTH. THE DETAILS OR INFORMATION ABOUT INCOME DEAL WITH THE FACTUAL DETAILS OF INCOME AND THIS CANNOT BE EXTENDED TO AR EAS WHICH ARE SUBJECTIVE SUCH AS THE STATUS OF TAXABILITY OF AN I NCOME, ADMISSIBILITY OF A DEDUCTION AND INTERPRETATION OF LAW. THE FURNI SHING OF INACCURATE INFORMATION THUS RELATES TO FURNISHING OF FACTUALLY CORRECT DETAILS AND INFORMATION ABOUT INCOME. IN THE PRESENT CASE, HOWE VER, WHAT HAS BEEN TREATED AS FURNISHING OF INACCURATE PARTICULAR S, IN THE OPINION OF THE AO, IS THE CAPITAL GAINS RESULTING ON SALE OF S HARES RECEIVED AS GIFT WAS CREDITED DIRECTLY TO CAPITAL RESERVE AND NOT RO UTING THROUGH P&L A/C. THEREBY NOT CONSIDERED FOR COMPUTATION OF INCO ME UNDER MAT. THERE WERE VARIANCE IN THE FINDINGS OF AO IN THE AS SESSMENT ORDERS AND THE FINDINGS OF THE LD. CIT(A) WITH REGARDS TO THE SALES PROCEEDS ON THE SHARES RECEIVED IN GIFTS BY THE ASSESSES. TH E AO TREATED THE TRANSFER OF SHARES AS A DISCOUNTED PURCHASE AND NOT AS GIFT ALTHOUGH HE RECOGNISED THE FAMILY SETTLEMENT AG REEMENT, BUT THE LD, CIT(A) TREATED THE TRANSFER OF SHARES AS GIFT. THE AO TREATED THE PROFITS ON SALE OF SHARES AS SHORT TERM CAPITAL GAI N BUT THE LD. CIT(A) TREATED THE SAME AS LTCG. BUT BOTH THE AO AND THE L D. CIT(A) HAVE GIVING THE FINDINGS THAT CAPITAL GAINS AROUSED OUT OF SALE OF SHARES RECEIVED ON GIFT SHOULD BE INCLUDED FOR THE PURPOSE OF COMPUTING INCOME UNDER MAT. THIS FACTS ABSOLUTELY TELLS THE S TORY THAT THE NON- INCLUSION OF C.G. IN THE COMPUTATION OF INCOME UNDE R MAT IS A PERCEPTION AND NOT A DEFINITE. THE ASSESSEE HAD A BONAFIED BELIEF THAT THE SAID AMOUNT WAS THE RESULTANT PROCEEDS ON SALE OF SHARES RECEIVED ON GIFT AND THEREBY NOT INCLUDABLE IN COMPUTATION U NDER MAT. ALL THESE FACTS ARE AVAILABLE IN THE RETURN OF INCOME FILED B Y THE APPELLANT. THE ADMISSION OR REJECTION OF A CLAIM IS A SUBJECTIVE E XERCISE AND WHETHER A CLAIM IS ACCEPTED OR REJECTED HAS NOTHING TO DO W ITH FURNISHING OF INACCURATE PARTICULARS OF INCOME. THE AO HAVE APPAR ENTLY PROCEEDED TO TREAT ASSESSEE'S MAKING AN INCORRECT CLAIM OF INCOM E AS FURNISHING OF INACCURATE PARTICULARS. WHAT IS A CORRECT CLAIM AND WHAT IS AN INCORRECT CLAIM IS A MATTER OF PERCEPTION. IN MY CONSIDERED V IEW, RAISING A LEGAL CLAIM, EVEN IF IT IS ULTIMATELY FOUND TO BE LEGALLY UNACCEPTABLE, CANNOT AMOUNT OF FURNISHING OF INACCURATE PARTICULARS OF I NCOME. 'INACCURATE', AS NOTED ABOVE, IS SOMETHING FACTUALLY INCORRECT AN D INTERPRETATION OF ITA NOS 1478 & 1479 AHD 2011 ACIT VS.- BILAKHIA HOLDINGS PVT LTD AY: 2003-04 TO 04-05 - 5 - LAW CAN NEVER BE A FACTUAL ASPECT. JUST BECAUSE AN ASSESSING OFFICER DOES NOT ACCEPT AN INTERPRETATION, SUCH AN INTERPRE TATION IS NOT RENDERED INCORRECT. EVEN THE JUDGMENTS OF HON'BLE S UPREME COURT ARE REVERSED BY THE LARGER BENCHES OF HON'BLE SUPREME C OURT. THE DEVELOPMENT OF LAW IS A DYNAMIC PROCESS WHICH IS AF FECTED BY THE INNUMERABLE FACTORS, AND IT IS ALWAYS AN ONGOING EX ERCISE. IN SUCH CIRCUMSTANCES, A BONAFIDE LEGAL CLAIM BY THE ASSESS EE BEING VISITED WITH PENAL CONSEQUENCES ONLY BECAUSE IT HAS NOT BEE N ACCEPTED THUS FAR BY THE AO OR CIT(A) IS AN ABSURDITY. IN ANY EVE NT, AS MENTIONED ABOVE, THE CONNOTATIONS OF EXPRESSION 'PARTICULARS OF INCOME' DO NOT EXTEND TO THE ISSUES OF INTERPRETATION OF LAW AND A S SUCH MAKING A CLAIM, WHICH IS FOUND TO BE UNACCEPTABLE IN LAW, CA NNOT BE TREATED AS FURNISHING OF INACCURATE PARTICULARS OF INCOME. IN THIS VIEW OF THE MATTER, THE CASE OF THE ASSESSEE CAN NOT BE SAID TO BE A CASE OF 'FURNISHING OF INACCURATE PARTICULARS OF INCOME', I N ITS NATURAL SENSE, EITHER. 7.18 IN THE PRESENT CASE, AS POINTED ABOVE, THER E IS NO DISPUTE THAT ALL THE RELEVANT FACTS MATERIAL TO THE COMPUTATION OF TOTAL INCOME ARE DULY FURNISHED BY THE ASSESSEE AND NO DEFICIENCIES IN FURNISHING OF SUCH FACTS ARE POINTED OUT BY THE AO. THERE IS THUS NO CAUSE OF ACTION FOR DEEMING FICTION BEING TRIGGERED BY THE CONDUCT OF THE ASSESSEE. 7.19 BE THAT AS IT MAY, EVEN ASSUMING THAT DEEMI NG FICTION UNDER EXPLANATION 1 TO SECTION 271 (1)(C) CAN BE TRIGGERE D BY A WRONG LEGAL CLAIM, IT CANNOT BE THE CASE THAT MERELY BECAUSE TH ERE IS A WRONG CLAIM, EVEN IF THAT BE SO, PENALTY UNDER SECTION 27 1(1)(C) CAN BE IMPOSED. THIS DEEMING FICTION UNDER SECTION 271(1)( C) ONLY SHIFTS THE ONUS OF PROOF ON THE ASSESSEE, AS THIS EXPLANATION ITSELF PROVIDES THAT A PENALTY CAN ONLY BE IMPOSED (A) WHEN THERE IS NO EXPLANATION BY THE ASSESSEE, (B) WHEN THE EXPLANATION GIVEN BY THE ASS ESSEE IS FOUND TO BE FALSE, AND (C) WHEN THE ASSESSEE PROVIDES AN EX PLANATION WHICH HE FAILS TO SUBSTANTIATE AND HE FAILS TO PROVE THAT TH E EXPLANATION WAS BONAFLDE AND THAT ALL THE FACTS NECESSARY FOR THE S AME AND MATERIAL FOR COMPUTATION OF INCOME HAVE BEEN DULY DISCLOSED BY T HE ASSESSEE 7.20 IN THE INSTANT CASE (A) IS NOT SATISFIED AS THE ASSESSEE HAS FILED AN EXPLANATION TO THE EFFECT THAT HE WAS OF THE BON AFLDE VIEW THAT THE ASSESSEE HAD A BONAFIED BELIEF THAT THE SAID AMOUNT WAS THE RESULTANT PROCEEDS ON SALE OF SHARES RECEIVED ON GIFT AND THE REBY NOT INCLUDABLE IN COMPUTATION UNDER MAT. THERE ARE NO FINDINGS OF THE AO AGAINST THE BONAFIED BELIEF OF THE APPELLANT BUT A PERCEPTION W AS CREATED BY HIM BY SAYING THAT HAD THE ASSESSEE'S CASE NOT BEEN SEL ECTED FOR SCRUTINY, THE ASSESSEE COULD HAVE BEEN BENEFITED BY FILLING I NACCURATE PARTICULARS OF INCOME. THE CONDITION (B) IS ALSO NOT SATISFIED, AS THE EXPLANATION OF THE ASSESSEE HAS NOT BEEN FOUND TO BE FALSE. NEEDL ESS TO MENTION THAT ITA NOS 1478 & 1479 AHD 2011 ACIT VS.- BILAKHIA HOLDINGS PVT LTD AY: 2003-04 TO 04-05 - 6 - THE ONUS OF PROVING THAT THE EXPLANATION IS FALSE I S ON THE AO AND THERE IS NO FINDING IN THIS DIRECTION AT ALL. 7.21 AS FAR AS CONDITIONS IN (C) ABOVE ARE CONCERNE D, EVEN ASSUMING THAT THE ASSESSEE FAILS TO SUBSTANTIATE THE EXPLANA TION, HE HAS BEEN ABLE TO DEMONSTRATE THAT THE EXPLANATION IS BONAFLD E AND THAT THE ASSESSEE IN THE INCOME TAX RETURN ITSELF HAS DULY D ISCLOSED ALL THE FACTS NECESSARY FOR THE SAME AND NECESSARY FOR COMPUTATIO N OF INCOME. ALL THE DETAILS AND JUSTIFICATION OF CLAIM HAVE BEEN SE T OUT IN THE RETURN OF INCOME ITSELF. THERE WAS A DETAILED NOTE GIVING RAT IONALE AND COMPUTATION OF INCOME FILED BY THE ASSESSEE. 7.22 IN ANY EVENT, WHEN AN EXPLANATION IS OFFERE D BY THE ASSESSEE IN DISCHARGE OF THE ONUS CAST UPON HIM BY EXPLANATION 1 TO SECTION 271(1)(C), IT IS NOT FOR THE ASSESSING OFFICER TO P ONDER OVER WHAT SHOULD HAVE HAPPENED IN IDEAL CIRCUMSTANCES, AND RE JECT THE EXPLANATION BECAUSE WHAT HAS ACTUALLY HAPPENED IS L ESS THAN SUCH AN IMAGINARY IDEAL SITUATION; HE IS TO CONSIDER THE EX PLANATION OBJECTIVELY AND UNLESS HE FINDS THE SAME AGAINST THE HUMAN PROB ABILITIES OR UNLESS THERE ARE ANY REAL INCONSISTENCIES OR FACTUAL ERROR S IN SUCH AN EXPLANATION, THE ASSESSING OFFICER OUGHT TO ACCEPT THE SAME. IT CANNOT ALWAYS BE FEASIBLE TO PROVE THE CLAIM OF BONAFIDES TO THE HILT, NOR, IN OUR CONSIDERED VIEW, THE ASSESSEE CAN BE EXPECTED T O DO SO. THE ASSESSEE'S EXPLANATION REGARDING BONAFIDES OF THE C LAIM DOES NOT SUFFER FROM ANY APPARENT INCONSISTENCIES OR FACTUAL ERRORS AND IT IS QUITE IN TUNE WITH THE HUMAN PROBABILITIES. THERE I S NO GOOD REASON TO REJECT THE SAME AS UNACCEPTABLE FOR THE PURPOSE OF MAKING OF THE CLAIM OF DEDUCTION BEING COVERED BY THE DEEMING FIC TION UNDER EXPLANATION 1 TO SECTION 271(1)(C). 7.23 IN VIEW OF THE REASONS SET OUT ABOVE, THE CA SE OF THE ASSESSEE IS NOT EVEN HIT BY THE MISCHIEF OF ANY OF THE THREE EV ENTUALITIES ENVISAGED BY THE DEEMING FICTION UNDER EXPLANATION 1 TO SECTION 271(1)(C). ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE ASSESSEE COULD NOT BE SAID TO HAVE CONCEALED THE PA RTICULARS OF INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME. UNDE R THE SCHEME OF SECTION 271(1)(C), THEREFORE, IT WAS NOT A FIT CASE FOR THE IMPOSITION OF PENALTY. 6. THE DEPARTMENTAL REPRESENTATIVE HAS FILED WRITTE N SUBMISSIONS WHICH READ AS UNDER:- BEFORE THE HON'BLE 'D' BENCH ITAT-AHMEDABAD NAME OF THE CASE BILAKHIA HOLDING PL I TA NUMBER 1478&1479/AHD - 2011 ITA NOS 1478 & 1479 AHD 2011 ACIT VS.- BILAKHIA HOLDINGS PVT LTD AY: 2003-04 TO 04-05 - 7 - AY 2003 - 04, 2004 - 05 DATE OF HEARING 17 - 03 - 2015 HON'BLE MEMBERS, SUBJECT: FILING OF WRITTEN SUBMISSIONS 1. IN THE ASSESSMENT ORDER, A CLEAR CUT FINDING HA S BEEN GIVEN BY THE AO IN THE BODY OF ASSESSMENT ORDER THAT ASSESSEE CO MPANY HAS CREDITED A SUM OF RS 2,43,23,492/- DIRECTLY TO ITS CAPITAL RESERVE BEING PROFIT ON SALE OF SHARES CLAIMED TO BE RECEIVED AS GIFT, HOWEVER, THIS SUM WAS NOT ROUTED THROUGH THE PROFIT AND LOSS ACCO UNT OF THE COMPANY AND THIS WAS NOT CONSIDERED FOR CALCULATION OF BOOK PROFIT U/S. 115JB OF THE ACT. 2. THERE ARE NO TWO VIEWS OF DIFFERENCE OF OPINION AS CONTENDED BY THE ASSESSEE COMPANY. THE AO HAS VERY CATEGORICALLY HEL D IN THE BODY OF THE ASSESSMENT ORDER THAT THE PROFIT ON SALE OF SUC H SHARES HAS TO BE INCLUDED IN THE BOOK PROFIT AND SUCH FINDING HAS BE EN CONFIRMED BY THE FIRST APPELLATE AUTHORITY. 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTICED THAT THE ASSESSEE COMPANY HAD SOLD 86,25,000 SHARES FOR RS.2,43,95,00,000 OF BILAG INDUSTRIES P. LTD. ON 05 .04.02 AND ALSO OF OTHER COMPANIES AND HAS EARNED THE PROFIT OF RS. 2, 43,97,05,781/- ON SALE OF SHARES WHICH WERE CLAIMED TO HAVE BEEN RECE IVED AS GIFT BY WAY OF FAMILY ARRANGEMENT. THE ASSESSEE DID NOT SHO W ANY PROFIT ON SALE OF SHARES IN PROFIT AND LOSS ACCOUNT PREPARED UNDER THE PROVISIONS OF THE COMPANY ACT, 1956. THE SAME IS CREDITED TO T HE CAPITAL RESERVE ACCOUNT IN THE BALANCE SHEET. IN THIS WAY THE COMPA NY HAS REDUCED THE BOOK PROFIT FOR THE YEAR UNDER CONSIDERATION. A S PER THE PROVISIONS TO SECTION 115JB OF THE ACT, BOOK PROFIT HAS TO BE COMPUTED ON THE BASIS OF PROFIT AND LOSS ACCOUNT FOR THE RELEVANT A SSESSMENT YEAR IN ACCORDANCE WITH THE PROVISION OF PART II OF SCHEDUL E VI OF THE COMPANIES ACT, 1956. 4. IN THE PART-II OF THE SCHEDULE VI OF THE COMPANI ES ACT SAYS THAT THE COMPANY SHOULD DISCLOSE EVERY MATERIAL FEATURE IN R ESPECT OF NON- RECURRING OR TRANSACTION OR EXCEPTIONAL NATURE. THE COMPANY HAS TO DISCLOSE THE AMOUNT OF INCOME FROM INVESTMENT AS WE LL AS PROFIT AND LOSS ON SALE OF INVESTMENT IN PROFIT AND LOSS ACCOU NT. THEREFORE, BY NOT CONSIDERING THE FIGURE OF PROFIT ON SALE OF INVESTM ENT I.E. SALE OF SHARE, THE BOOK PROFIT DECLARED BY THE ASSESSEE WAS REQUIR ED FURTHER MODIFICATIONS/ADJUSTMENTS WHICH WILL BE IN ACCORDAN CE TO THE PROVISION OF COMPANIES ACT AS REQUIRED BY SECTION 115 JB(2) O F THE I. T. ACT. THE RELIANCE WAS PLACED ON THE DECISION OF THE HON'BLE BOMBAY HIGH ITA NOS 1478 & 1479 AHD 2011 ACIT VS.- BILAKHIA HOLDINGS PVT LTD AY: 2003-04 TO 04-05 - 8 - COURT'S DECISION IN THE CASE OF VEEKAYLAL INVESTMEN T CO. PVT. REPORTED IN 249 ITR 597 (BOM). 5. THERE WAS NOTHING IN THE DEED OF BILAKHIA FAMI LY ARRANGEMENT WHICH PROHIBIT THE BILAKHIA HOLDING P. LTD. TO DIST RIBUTE THE PROFIT EARNED ON SALE OF SHARES AS DIVIDEND AMONG THE SHAR E HOLDERS. ALL THE THREE YUNUS, ANJUM AND ZAKIR HAVE EQUAL SHARE HOLDI NG IN BILAKHIA HOLDINGS P. LTD. THE DISTRIBUTION OF DIVIDEND OUT O F PROFIT EARNED ON SALE OF SHARES DOES NOT VIOLATE THE INTENTION BEHIN D THE ARRANGEMENT. THE RELEVANT CLAUSE OF THE ARRANGEMENT DEED READS: '6. TO AVOID ANY FUTURE DISPUTES, DIFFERENCES AND DISAGREEMENTS WHIC H MAY AFFECT THE PEACE, HARMONY, HONOUR AND PRESTIGE OF THE FAMILY O R THE PARTIES AS ALSO AFFECT THE VARIOUS BUSINESS AND ASSETS AND WIT H A VIEW TO ALWAYS REMAIN A JOINT CLOSE KNIT FAMILY, THE PARTIES HAVE AGREED THAT EACH OF THE THREE BROTHERS NAMELY YUNUS, ANJUM AND ZAKIR SH OULD HAVE EQUAL RIGHTS AND OWNERSHIP IN THE VARIOUS BUSINESS AND AS SETS EXCEPT WHEN SPECIFICALLY PROVIDED OTHERWISE.' 6. IT IS MENTIONED WHETHER THE COMPANY DISTRIBUTE S THE DIVIDEND OR UTILIZES THE FUND FOR INVESTMENT OR OTHER BUSINESS BUT THE FACT IS THAT THE PROFIT ON SALE OF SHARES IS AVAILABLE TO THE CO MPANY. THEREFORE, CAPITAL RECEIPT I.E. PROFIT ON INVESTMENT WHICH ARE AVAILABLE FOR DISTRIBUTION AMONG THE SHARE HOLDERS AS DIVIDEND AR E REQUIRED TO BE PASSED THROUGH PROFIT AND LOSS ACCOUNT. OTHERWISE I T WILL BE AGAINST THE PROVISION OF THE COMPANIES ACT FOR PREPARATION OF S CHEDULE VI OF PART II. 7. ASSESSEE HAD INTENDED BY NOT MAKING THE ENTRY OF TRANSFER OF PROFIT ON SALE OF SHARES FROM PROFIT AND LOSS ACCOU NT AND TRANSFERRED RESERVE DIRECTLY TO THE BALANCE SHEET JUST TO REDUC E THE BOOK PROFIT AND TO AVOID PAYMENT OF MAT WHICH IS NOT IN ACCORDANCE TO THE PROVISION OF SCHEDULE II & III COMPANIES ACT AND AGAINST THE INT ENTION OF LEGISLATURE. FROM THIS, IT IS CRYSTAL CLEAR THAT TH E ASSESSEE HAS CONCEALED ITS TRUE AND CORRECT PARTICULARS OF ITS I NCOME AND ALSO FURNISHED INACCURATE PARTICULARS OF INCOME BY SHOWI NG THE LOWER PROFITS U/S. 115JB OF THE ACT, 1961. 8. THE AUDITED ACCOUNTS OF THE ASSESSEE COMPANY D ID NOT REFLECT THE CORRECT NET PROFIT OF THE ASSESSEE COMPANY AS THE S TATUTORY AUDITORS OF THE ASSESSEE COMPANY HAD QUALIFIED THEIR REPORT BY THEIR COMMENTS AND EXPLANATION APPENDED THERETO. SINCE THE ASSESSE E COMPANY HAS NOT PREPARED ITS PROFIT AND LOSS ACCOUNT FOR THE A. Y. 2003-04 IN ACCORDANCE WITH THE PROVISIONS OF PART II & III OF SCHEDULE VI TO THE COMPANIES ACT AS PER THE ACCOUNTING STANDARDS, WHIC H ARE MANDATORY W.E.F. 31.10.1998 AND FORM PART OF THE COMPANIES AC T, THE SAID COMMENTS OF THE STATUTORY AUDITORS REQUIRED TO BE T AKEN INTO ACCOUNTS AND RECALCULATE THE BOOK PROFIT OF THE ASSESSEE COM PANY. THE ASSESSEE ITA NOS 1478 & 1479 AHD 2011 ACIT VS.- BILAKHIA HOLDINGS PVT LTD AY: 2003-04 TO 04-05 - 9 - COMPANY IS OBLIGED TO INCLUDE PROFIT ARISING ON SAL E OF SHARES AS PART OF ITS BOOK PROFIT OF THE PROFIT AND LOSS ACCOUNT. 9. THE AUDIT REPORT U/S. 115JB IN FORM NO. 29B DO ES NOT CONTAIN THE NOTE ON NON-INCLUSION OF PROFIT EARNED ON SALE OF S HARES AS REFERRED IN CLAUSES (A) TO (F) OF EXPLANATION (2) OF SECTION 11 5JB OF THE ACT. IN VIEW OF THE ABOVE FACTS, THE AO HAD RIGHTLY CONC LUDED THAT HAD THE ASSESSEE'S CASE NOT BEEN SELECTED FOR SCRUT INY, THE ASSESSEE COULD HAVE BEEN BENEFITED BY FILLING INACCURATE PAR TICULARS OF INCOME. THE ASSESSEE TOOK CHANCE WITH THE DEPARTMENT. HAD T HE REVENUE NOT DETECTED THE INACCURATE PARTICULARS OF INCOME OF TH E ASSESSEE, THE ASSESSEE COULD HAVE ENJOYED THE FRUITS OF FILING IN ACCURATE PARTICULARS OF INCOME AND WOULD HAVE CAUSED LOSS TO THE REVENUE . THIS FACT IS REINFORCED BY THE FACT THAT THE ASSESSEE HAS PAID T HE DEMAND RAISED AGAINST THE ASSESSMENT FRAMED IN ITS CASE. FURTHERMORE, THE FACTS OF THE DECISION OF HON'BLE A PEX COURT IN THE CASE OF RELIANCE PETRO ARE ENTIRELY DIFFERENT T HAN THE FACTS IN THE CASE OF THE ASSESSEE-AOP AND ARE NOT SQUARELY APPLI CABLE IN THE CASE OF THE ASSESSEE-AOP AS PER DISCUSSION MADE HEREUNDE R: FACTS IN THE CASE OF RELIANCE PETRO FACTS IN THE CASE OF ASSESSEE. IN THIS DECISION, THE HON'BLE APEX COURT FOUND THAT THERE WAS NO FINDING THAT ANY DETAILS SUPPLIED BY THE ASSESSEE IN ITS RETURN WERE FOUND TO BE INCORRECT AND ERRONEOUS OR FALSE AND AS THE ASSESSEE HAD FURNISHED ALL THE DETAILS OF ITS EXPENDITURE AS WELL AS INCOME ITS RETURN, WHICH DETAILS, THEMSELVES WERE NOT FOUND TO BE INACCURATE NOR COULD BE VIEWED AS THE CONCEALMENT OF INCOME ON ITS PART. IN SUCH CIRCUMSTANCES, THE HON'BLE COURT HELD THAT MERELY BECAUSE THE ASSESSEE HAD CLAIMED THE EXPENDITURE, WHICH CLAIM WAS NOT ACCEPTED OR WAS NOT ACCEPTABLE TO THE REVENUE, THAT BY ITSELF WOULD NOT, IN OUR OPINION, ATTRACT THE PENALTY UNDER SECTION 271(1)(C) OF THE ACT. IN THIS CASE, THE ASSESSEE COMPANY HAS CREDITED A SUM OF RS.2,43,97,23,492/- DIRECTLY TO ITS CAPITAL RESERVE BEING PROFIT ON SALE OF SHARES CLAIMED TO BE RECEIVED AS GIFT, HOWEVER, THIS SUM WAS NOT ROUTED THROUGH THE PROFIT AND LOSS ACCOUNT OF THE COMPANY AND THIS WAS NOT CONSIDERED FOR CALCULATION OF BOOK PROFIT U/S. 115JB OF THE ACT. THE ASSESSEE DID NOT SHOW ANY PROFIT ON SALE OF SHARES IN THE PROFIT AND LOSS ACCOUNT PREPARED UNDER THE PROVISIONS OF THE COMPANY ACT, 1956. THE SAME IS CREDITED TO THE CAPITAL RESERVE ACCOUNT IN THE BALANCE SHEET. IN THIS WAY THE COMPANY HAS REDUCED THE BOOK PROFIT FOR THE YEAR UNDER CONSIDERATION. AS PER THE PROVISIONS TO SECTION 115JB OF THE ACT, BOOK PROFIT HAS TO BE COMPUTED ON THE BASIS ITA NOS 1478 & 1479 AHD 2011 ACIT VS.- BILAKHIA HOLDINGS PVT LTD AY: 2003-04 TO 04-05 - 10 - OF PROFIT AND LOSS ACCOUNT FOR THE RELEVANT ASSESSMENT YEAR IN ACCORDANCE WITH THE PROVISION OF PART II AND PART III OF SCHEDULE VI OF THE COMPANIES ACT, 1956. IN THE PRESENT CASE, THE STAND OF THE DEPARTMENT HAS BEEN ACCEPTED BY THE ASSESSEE AND PAID THE DEMAND RAISED AGAINST THE SCRUTINY ORDER. THUS THE ASSESSEE DELIBERATELY FURNISHED INACCURATE PARTICULARS OF INCOME AND THEREBY ATTRACTED THE PROVISIONS OF SECTION 271(1)(C) OF THE I. T. ACT, 1961. YOURS SINCERELY SD/- (VIMALENDU VERMA) CIT(DR)-IV, D' BENCH AHMEDABAD 7. THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE HA S ALSO FILED WRITTEN SUBMISSIONS WHICH READ AS UNDER:- FACTS OF THE CASE SHARES OF CERTAIN COMPANIES HELD BY THE PROMOTERS R ECEIVED BY THE COMPANY PURSUANT TO A FAMILY ARRANGEMENT (DATED 16/ 02/2001) WITHOUT ANY MONETARY CONSIDERATION. THE APPELLANT C OMPANY CONSIDERED THE SAME TO BE A CAPITAL RECEIPT BY WAY OF A GIFT AND CREDITED THE SALE PROCEEDS DIRECTLY TO THE CAPITAL RESERVE. THE ACCOUNTING OF SUCH CREDITS HAS BEEN DISCLOSED IN NO TE NO. M OF THE ANNUAL ACCOUNTS. THE AO CONSIDERED SUCH ACCOUNTING TREATMENT TO BE N OT IN ACCORDANCE WITH PART II & PART III TO SCHEDULE VI OF THE COMPA NIES ACT. THE AO'S OBSERVATIONS HAVE BEEN GIVEN IN PAGE NO. 3 & 4 OF T HE PENALTY ORDER AND ARE SUMMARIZED AS GIVEN IN PAGE NO. 7 & 8 OF TH E PENALTY ORDER AS UNDER:- 1. NOTES TO THE ACCOUNTS FORM PART OF AUDITOR'S Q UALIFICATION 2. DECISION OF APEX COURT IN THE CASE OF APOLLO TY RES LTD 255 ITR 0273 SUPPORTS THE CASE OF THE REVENUE. ITA NOS 1478 & 1479 AHD 2011 ACIT VS.- BILAKHIA HOLDINGS PVT LTD AY: 2003-04 TO 04-05 - 11 - 3. CAPITAL GAIN SHOULD BE INCLUDED FOR THE PURPOSE S OF COMPUTING BOOKS PROFIT AS HELD BY MUMBAI HC IN THE CASE OF VE EKAYAL INVESTMENT COMPANY REPORTED IN 249 ITR 597. 4. REASONS FOR RELYING PENALTY GIVEN IN PAGE NO. 8 AS UNDER - HAD THE ASSESSEE'S CASE NOT BEEN SELECTED FOR SC RUTINY, THE ASSESSEE COULD HAVE BEEN BENEFITED BY FILING INACCU RATE PARTICULARS OF INCOME. THE ASSESSEE TOOK CHANCE WIT H THE DEPARTMENT. HAD THE REVENUE NOT DELETED THE INACCUR ATE PARTICULARS OF INCOME OF THE ASSESSEE, THE ASSESSEE COULD HAVE ENJOYED THE FRUITS OF FILING INACCURATE PARTICULARS OF INCOME AND WOULD HAVE CAUSED LOSS TO THE REVENUE. OUR ARGUMENTS 1. CIT(A)'S FINDING AND THE RATIONALE - SEE PARA. 7.15 TO 7.25 OF THE CIT(A) ORDER 2. CIT(A) HAS RELIED ON MEANING OF CONCEALMENT AND INACCURATE PARTICULARS IN PARAGRAPH NO. 7.16 & 7.17 3. FULL PARTICULARS INCLUDING THE ACCOUNTING TREAT MENT HAVE BEEN DISCLOSED IN THE ACCOUNTS STATEMENTS AND RETURN OF INCOME. 4. ADOPTING NOTES TO ACCOUNTS DOES NOT AMOUNT TO Q UALIFICATION. RELIANCE IS PLACED ON PARAGRAPH 3.9 AND IN PARTICUL AR 3.12 OF THE ICAI'S GUIDELINES SPECIFY THE MANNER-OF QUALIFICATI ON - ADOPTION OF NOTES OF ACCOUNTS CANNOT AMOUNT TO A QUALIFICATI ON. 5. THE APEX COURT HAS CLEARLY HELD IN THE CASE OF APOLLO TYRES LTD REPORTED IN 255 ITR 273 THAT THE A.O. HAS NO POWER OF SCRUTINIZING OR RE-COMPUTING THE NET PROFIT OF THE COMPANY ADOPTED BY THE COMPANY IN ITS ANNUAL GENERAL MEETIN G. THE DECISION OF HON'BLE APEX COURT HAS BEEN FOLLOWED BY SEVERAL HIGH COURTS AND SUPREME COURT ITSELF IN SEVERAL CASES. 6. THE DECISION IN THE CASE OF VEEKAYLAL (BOM)-249 ITR 597 RELIED UPON BY THE AO IS NO LONGER GOOD LAW IN VIEW OF THE LATER DECISIONS OF THE BOMBAY HIGH COURT IN THE CASE OF C OMMISSIONER OF INCOME-TAX VS. ADBHUT TRADING CO. P. LTD. [2011] 338 ITR 94 (BOM) AND COMMISSIONER OF INCOME-TAX VS. AKSHAY TEX TILES TRADING AND AGENCIES P. LTD. [2008] 304 ITR 401 (BO M) WHICH HAVE HELD THAT IN VIEW OF THE DECISION OF APOLLO TY RES VS. CIT (255 ITR 273). 7. HENCE EVEN IN THE ORDER OF THE HONORABLE 1TAT ( PARA. 12 OF THE ORDER - PAGE 83 OF THE PB-1478/AHD/2011 & PAGE 89 O F PB- 1479/AHD/2011) THE FACT THAT SHARES HAVE BEEN RECEI VED BY THE COMPANY PURSUANT TO THE FAMILY ARRANGEMENT HAS BEEN UPHELD. THIS INDICATES THAT THIS IS A CAPITAL RECEIPT IN TH E HANDS OF THE COMPANY AND NOT A REVENUE RECEIPT. THE TREATMENT OF THE SAME IN THE ACCOUNTS IS BASED ON THE CURRENT ACCOUNTING PRINCIPLES THAT ONLY REVENUE ITEMS ARE TO BE CREDITED IN THE PROFIT AND LOSS ACCOUNT. ITA NOS 1478 & 1479 AHD 2011 ACIT VS.- BILAKHIA HOLDINGS PVT LTD AY: 2003-04 TO 04-05 - 12 - 8. APPELLANT COMPANY HAD MADE FULL DISCLOSURE IN I TS ACCOUNTS WHICH IS NOT IN DISPUTE AND FAMILY ARRANGEMENT FORMS PART OF THE ASSESSMENT ORDER. 9. CIT(A)'S FINDING THAT THERE IS NO CONCEALMENT OF INCOME OR FILING OF INACCURATE PARTICULARS SUPPORTS THE CASE OF THE APPELLANT. 10.THE HONOURABLE GUJARAT HC HAS ADMITTED THE AFORE SAID SUBSTANTIAL QUESTION OF LAW RELATING TO BOOK PROFIT FOR ADJUDICATION. (HC ORDER IS IN PAGE NO. 109 TO 117 O F PB- 1478/AHD/2011 & PAGE NO. 115 TO 123 OF THE PB- 1479/AHD/2011) 11. MUMBAI HC IN THE CASE OF NAYAN BUILDERS & DEVEL OPERS 368 ITR 722 HAS HELD THAT THE ADMISSION OF SUBSTANTIAL QUES TION OF LAW ITSELF PROVES THAT THE ISSUE IS DEBATABLE. 12.THE GUJARAT HC IN THE CASE OF CIT V/S. DHARAMSHI B. SHAH (REPORTED IN 366 ITR 140) HAS HELD THAT MERE ADMISS ION IS NOT SUFFICIENT BUT OTHER FACTORS HAVE TO BE CONSIDERED. 13. IN THE CASE OF THE APPELLANT COMPANY FULL DISCL OSURE COUPLED WITH CIT(A)'S FINDINGS ARE FACTORS SUPPORTIVE OF OUR CAS E. THE AO HAS MERELY STATED THAT THE ADDITION HAS RESULTED OWING TO THE CASE BEING SELECTED FOR SCRUTINY. HE HAS NOT MENTIONED A NYWHERE AS TO HOW THE APPELLANT HAS CONCEALED ITS INCOME OR FI LED INACCURATE PARTICULARS 8. THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE AL SO SUBMITTED THAT WHERE THE ASSESSEE MAKES FULL DISCLOSURE OF PARTICU LARS OF INCOME AND UNDER A BONAFIDE BELIEF THAT THE INCOME IS NOT LIABLE TO TAX AND DID NOT INCLUDE IN THE COMPUTATION OF INCOME IN THE RETURN OF INCOME, NO PENALTY IS LEVIABLE EVEN IF SUBSEQUENTLY THE INCOME IS HELD AS ASSESSAB LE. FOR THIS, HE PLACED RELIANCE ON THE FOLLOWING DECISIONS:- I) CIT VS. RELIANCE PETROPRODUCTS PVT LTD, [2010] 3 22 ITR 158 (SC), WHEREIN THE HONBLE APEX COURT HELD AS UNDER:- WHERE THERE IS NO FINDING THAT ANY DETAILS SUPPLIED BY THE ASSESSEE IN ITS RETURN ARE FOUND TO BE INCORRECT OR ERRONEOU S OR FALSE THERE IS NO QUESTION OF INVITING THE PENALTY UNDER SECTION 2 71(1)(C) . A MERE MAKING OF A CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULAR S REGARDING THE INCOME OF THE ASSESSEE. SUCH A CLAIM MADE IN THE RE TURN CANNOT AMOUNT TO FURNISHING INACCURATE PARTICULARS. ITA NOS 1478 & 1479 AHD 2011 ACIT VS.- BILAKHIA HOLDINGS PVT LTD AY: 2003-04 TO 04-05 - 13 - II) PRICE WATERHOUSE COOPERS PVT. LTD. VS. CIT & AN OTHER, [2012] 348 ITR 306 (SC), WHEREIN THE HONBLE APEX COURT HELD A S UNDER:- NOTWITHSTANDING THAT THE ASSESSEE WAS A REPUTED FIR M AND HAD GREAT EXPERTISE AVAILABLE WITH IT, IT WAS POSSIBLE THAT EVEN THE ASSESSEE COULD MAKE A 'SILLY' MISTAKE. THE FACT THA T THE TAX AUDIT REPORT WAS FILED ALONG WITH THE RETURN AND THAT IT UNEQUIVOCALLY STATED THAT THE PROVISION FOR PAYMENT WAS NOT ALLOW ABLE UNDER SECTION 40A(7) OF THE ACT INDICATED THAT THE ASSESS EE MADE A COMPUTATION ERROR IN ITS RETURN OF INCOME. THE CONT ENTS OF THE TAX AUDIT REPORT SUGGESTED THAT THERE WAS NO QUESTION O F THE ASSESSEE CONCEALING ITS INCOME OR OF THE ASSESSEE FURNISHING ANY INACCURATE PARTICULARS. APART FROM THE FACT THAT THE ASSESSEE DID NOT NOTICE THE ERROR, IT WAS NOT EVEN NOTICED EVEN BY THE ASSESSIN G OFFICER WHO FRAMED THE ASSESSMENT ORDER. ALL THAT HAD HAPPENED WAS THAT THROUGH A BONA FIDE AND INADVERTENT ERROR, THE ASSE SSEE WHILE SUBMITTING ITS RETURN, FAILED TO ADD THE PROVISION FOR GRATUITY TO ITS TOTAL INCOME. THE ASSESSEE SHOULD HAVE BEEN CAREFUL BUT THE ABSENCE OF DUE CARE, IN A CASE SUCH AS THE PRESENT, DID NOT MEAN THAT THE ASSESSEE WAS GUILTY OF EITHER FURNISHING I NACCURATE PARTICULARS OR ATTEMPTING TO CONCEAL ITS INCOME. ON THE PECULIAR FACTS OF THIS CASE, THE IMPOSITION OF PENALTY ON TH E ASSESSEE WAS NOT JUSTIFIED. III) SARABHAI CHEMICALS PVT. LTD. VS. CIT, [2002] 2 57 ITR 355 (GUJ), WHEREIN THE HONBLE GUJARAT HIGH COURT HELD AS UNDE R:- ASSESSEE HAVING PASSED A RESOLUTION POSTPONING THE DATE OF CHARGING CONTRACTUAL INTEREST ON THE DEFERRED PURCH ASE CONSIDERATION OF ITS BUSINESS UNDERTAKING AND ACCOR DINGLY FILED A NIL ESTIMATE OF ADVANCE TAX IT COULD NOT BE SAID THAT THE ASSESSEE HAD REASON TO BELIEVE THAT THE ESTIMATE WAS UNTRUE MERELY BECAUSE ON ASSESSMENT THE INTEREST INCOME WAS HELD TO BE ACCRUED INCOME AND INCLUDED IN THE ASSESSABLE INCOME; PENAL TY UNDER SECTION 273(2)(A) WAS NOT LEVIABLE. 9. FURTHER, HE ALSO ARGUED THAT NO ADJUSTMENT TO TH E PROFIT AND LOSS ACCOUNT PREPARED BY THE ASSESSEE AND PLACED BEFORE THE ANNUAL GENERAL MEETING OF THE COMPANY CAN BE MADE BY THE ASSESSING OFFICER. FOR THIS, HE HAS RELIED UPON THE FOLLOWING DECISIONS:- I) CIT VS. ADBHUT TRADING CO. P. LTD, [2011] 338 ITR 9 4 (BOM) WHEREIN THE HONBLE BOMBAY HIGH COURT HELD AS UNDER :- ITA NOS 1478 & 1479 AHD 2011 ACIT VS.- BILAKHIA HOLDINGS PVT LTD AY: 2003-04 TO 04-05 - 14 - ONCE THE ACCOUNTS INCLUDING THE P&L A/C ARE CERTIFI ED BY THE AUTHORITIES UNDER THE COMPANIES ACT IT IS NOT OPEN TO THE AO TO CONTEND THAT THE P&L A/C HAS NOT BEEN PREPARED IN A CCORDANCE WITH THE PROVISIONS OF THE COMPANIES ACT, 1956 AND MAKE ADDITION TOWARDS BOOK PROFITS UNDER SECTION 115JB II) APPOLLO TYRES LTD VS. CIT, [2002] 255 ITR 273 (SC), WHEREIN THE HONBLE APEX COURT HELD AS UNDER:- WHILE ASSESSING A COMPANY FOR INCOME-TAX UNDER S. 1 15J THE CORRECTNESS OF THE P&L A/C PREPARED BY THE ASSESSEE -COMPANY AND CERTIFIED BY THE STATUTORY AUDITORS OF THE COMPANY AS HAVING BEEN PREPARED IN ACCORDANCE WITH THE REQUIREMENTS OF PAR TS II AND III OF SCH. VI TO THE COMPANIES ACT CANNOT BE EXAMINED BY THE AO; AO DOES NOT HAVE THE JURISDICTION TO GO BEHIND THE NET PROFIT SHOWN IN THE P&L A/C EXCEPT TO THE EXTENT PROVIDED IN THE EX PLANATION TO SECTION 115J. III) MALAYALA MANORAMA CO. LTD. VS. CIT, [2008] 300 ITR 251 (SC), WHEREIN THE HONBLE APEX COURT HELD AS UNDER:- ITO HAS NO JURISDICTION TO REWORK THE BOOK PROFIT U NDER S. 115J BY SUBSTITUTING THE RATES OF DEPRECIATION PRESCRIBED I N SCH. XIV OF THE COMPANIES ACT, 1956, FOR THE RATES PRESCRIBED IN TH E IT RULES WHICH HAVE BEEN CONSISTENTLY APPLIED BY THE ASSESSE E COMPANY. IV) CIT VS. RUBAMIN P. LTD., [2009] 312 ITR 18 (GUJ), WHEREIN THE HONBLE HIGH COURT HELD AS UNDER:- ASSESSEE IS ENTITLED TO CHANGE THE METHOD OF DEPREC IATION FROM STRAIGHT LINE METHOD TO WDV METHOD AND CLAIM EXTRA DEPRECIATION FOR CURRENT YEAR AS ALSO ARREARS OF PAST YEARS FOR PURPOSE OF COMPUTING BOOK PROFIT UNDER S. 115J. 10. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND MATERIAL AVAILABLE ON RECORD. IN T HE INSTANT CASE, THE ASSESSING OFFICER LEVIED PENALTY U/S 271(1)(C) OF R S. 19,21,28,225/- IN ASSESSMENT YEAR 2003-04 AND RS.18,14,25,199/- IN TH E ASSESSMENT YEAR 2004-05 ON THE GROUND OF FURNISHING OF INACCURATE P ARTICULARS OF INCOME BY THE ASSESSEE RELATING TO CAPITAL GAINS OF RS.2,43,9 7,05,781/- IN THE ITA NOS 1478 & 1479 AHD 2011 ACIT VS.- BILAKHIA HOLDINGS PVT LTD AY: 2003-04 TO 04-05 - 15 - ASSESSMENT YEAR 2003-04 AND RS.2,36,00,02,591/- IN THE ASSESSMENT YEAR 2004-05. 11. DURING THE COURSE OF ASSESSMENT, THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS CREDITED PROFITS ON SALES OF SHARE S DIRECTLY TO CAPITAL RESERVE AND NOT CREDITED THE SAME TO THE PROFIT AND LOSS ACCOUNT. THE ASSESSEE THOUGH INCLUDED THE CAPITAL GAIN DERIVED F ROM SALE OF SHARES IN THE NORMAL COMPUTATION BUT NOT INCLUDED THE SAME WHILE COMPUTING BOOK PROFIT U/S 115JB OF THE ACT; THEREFORE, IN THE OPINION OF THE ASSESSING OFFICER, NON- INCLUSION OF THE CAPITAL GAIN WHILE COMPUTING BOOK PROFIT U/S 115JB AMOUNTS TO FURNISHING OF INACCURATE PARTICULARS OF INCOME B Y THE ASSESSEE. 12. ON APPEAL, THE CIT(A) DELETED THE ABOVE LEVY OF PENALTY BY OBSERVING THAT THE ACTION OF THE ASSESSEE IS NEITHER AMOUNTIN G TO FURNISHING OF INACCURATE PARTICULARS OF INCOME NOR CONCEALMENT OF INCOME AND ALSO NOR DEEMED CONCEALMENT OF INCOME. 13. BEFORE US, THE DEPARTMENTAL REPRESENTATIVE MAIN LY CONTENDED THAT THE ACTION OF THE ASSESSEE OF CREDITING PROFIT ON SALE OF SHARES DIRECTLY TO CAPITAL RESERVE AND NOT CREDITING TO PROFIT AND LOSS ACCOUN T AMOUNTED TO FURNISHING OF INACCURATE PARTICULARS OF INCOME AS IT CONSEQUEN TLY LED TO NON-INCLUSION OF CAPITAL GAIN FOR COMPUTING OF BOOK PROFIT U/S 115JB OF THE ACT. 14. ON THE OTHER HAND, THE AUTHORIZED REPRESENTATIV E OF THE ASSESSEE CONTENDED THAT THE PARTICULARS IN RESPECT OF CAPITA L GAIN EARNED BY THE ASSESSEE-COMPANY WAS DULY DISCLOSED IN THE RETURN O F INCOME AS WELL AS IN THE AUDITED FINANCIAL STATEMENTS. NO PARTICULARS O F INCOME FURNISHED WAS FOUND TO BE INACCURATE OR INCORRECT. IN THE NOTES T O THE ACCOUNTS WHICH FORM PART OF FINANCIAL STATEMENTS, FULL DISCLOSURE IN RE SPECT OF CAPITAL GAIN EARNED WAS MADE. 15. WE FIND THAT THE ASSESSING OFFICER WAS NOT JUST IFIED IN HOLDING THAT THE INACCURATE PARTICULARS OF INCOME RELATING TO CAPITA L GAIN WAS FURNISHED BY THE ITA NOS 1478 & 1479 AHD 2011 ACIT VS.- BILAKHIA HOLDINGS PVT LTD AY: 2003-04 TO 04-05 - 16 - ASSESSEE. NO INACCURACY IN ANY OF THE PARTICULARS I N RESPECT OF CAPITAL GAIN EARNED BY THE ASSESSEE WAS FOUND BY THE ASSESSING O FFICER AND THE ADDITION TO THE BOOK PROFIT WAS MADE BECAUSE OF DIFFERENCE I N THE OPINION IN RESPECT OF PRESENTATION OF SUCH CAPITAL GAIN WHETHER SUCH C APITAL GAIN SHOULD HAVE BEEN CREDITED IN THE PROFIT AND LOSS ACCOUNT OR DIR ECTLY TO CAPITAL RESERVE IN THE BALANCE-SHEET. 16. THE ASSESSEE WAS OF THE OPINION THAT SUCH CAPIT AL GAIN COULD HAVE BEEN DIRECTLY CREDITED TO CAPITAL RESERVE ACCOUNT I N THE BALANCE-SHEET, WHEREAS AS PER THE ASSESSING OFFICER SUCH CAPITAL G AIN SHOULD HAVE BEEN CREDITED IN THE PROFIT AND LOSS ACCOUNT ONLY. THE H ONBLE SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETROPRODUCTS PVT LTD, REPORTED IN [2010] 322 ITR 158 (SC), HAS HELD AS UNDER :- WHERE THERE IS NO FINDING THAT ANY DETAILS SUPPLIED BY THE ASSESSEE IN ITS RETURN ARE FOUND TO BE INCORRECT OR ERRONEOUS O R FALSE THERE IS NO QUESTION OF INVITING THE PENALTY UNDER SECTION 271( 1)(C) . A MERE MAKING OF A CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REGARDI NG THE INCOME OF THE ASSESSEE. SUCH A CLAIM MADE IN THE RETURN CANNO T AMOUNT TO FURNISHING INACCURATE PARTICULARS. WE, THEREFORE, FIND NO REASON TO INTERFERE WITH THE ORDER OF THE CIT(A) WHICH IS A WELL REASONED ORDER. THEREFORE, THE GROU ND OF APPEAL OF THE REVENUE IN BOTH THE YEARS IS DISMISSED. 17. IN THE RESULT, THE APPEALS OF THE REVENUE IN BO TH ASSESSMENT YEARS ARE DISMISSED. ORDER PRONOUNCED IN THE COURT ON FRIDAY, THE 8 TH OF MAY, 2015 AT AHMEDABAD. SD/- SD/- (KUL BHARAT) JUDICIAL MEMBER ( N.S. SAINI) ACCOUNTANT MEMBER AHMEDABAD; DATED 08/05/2015 *BIJU T. ITA NOS 1478 & 1479 AHD 2011 ACIT VS.- BILAKHIA HOLDINGS PVT LTD AY: 2003-04 TO 04-05 - 17 - 1 - *%2 320% 1 - *%2 320% 1 - *%2 320% 1 - *%2 320%/ COPY OF THE ORDER FORWARDED TO : 1. '( / THE APPELLANT 2. *+'( / THE RESPONDENT. 3. '' % #4 / CONCERNED CIT 4. #4 ( ) / THE CIT(A)- XV, AHMEDABAD 5. 2!$7 *% , , / DR, ITAT, AHMEDABAD 6. 78 9, / GUARD FILE. 1# 1# 1# 1# / BY ORDER, TRUE COPY : :: :/ // / '; '; '; '; ( DY./ASSTT.REGISTRAR) , , , , / ITAT, AHMEDABAD