ACIT, Coimbatore V. Rajesh Devaraj, Coimbatore

ITA 1811/CHNY/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 86299 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 4 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-02-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 29-01-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 07-10-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P RADHAKRISHNAN
• Assessee Lawyers: G BASKAR
• Section: 54F

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI . , . ! '# , $ % BEFORE SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER AND SHRI V. DURGA RAO, JUDICIAL MEMBER ./ ITA NO. 1811/MDS/2013 $ # '# / ASSESSMENT YEAR : 2008-09 THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE III, 63, RACE COURSE ROAD, COIMBATORE 641 018. V. SHRI RAJESH DEVARAJ, NO.183, RACE COURSE ROAD, COIMBATORE 641 018. PAN : AAMPR 6840 B ()*/ APPELLANT) (+,)*/ RESPONDENT) )* - . / APPELLANT BY : SH. P. RADHAKRISHNAN, JCIT +,)* - . / RESPONDENT BY : SH. G. BASKAR, ADVOCATE ! - / / DATE OF HEARING : 29.01.2015 0' - / / DATE OF PRONOUNCEMENT: 20.02.2015 / O R D E R PER V. DURGA RAO, JUDICIAL MEMBER: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAI NST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-I , COIMBATORE, DATED 09.07.2013 RELEVANT TO THE ASSESSMENT YEAR 20 08-09. 2 I.T.A. NO. 1811/MDS/2013 2. FACTS IN BRIEF ARE THAT THE ASSESSEE IS AN INDIV IDUAL DERIVING INCOME FROM PARTNERSHIP FIRMS AND INTEREST AND CAPI TAL GAINS. THE ASSESSEE HAD FILED RETURN OF INCOME BY DECLARING A TOTAL INCOME OF ` 6,56,880/- . THE ASSESSEES CASE WAS SELECTED FOR SCRUTINY AND THE A.O. HAS COMPLETED THE ASSESSMENT BY ADDING AN AMOUNT OF ` 90,02,410/- UNDER THE HEAD LONG TERM CAPITAL GAIN S. 3. IN THE ASSESSMENT ORDER, THE A.O. HAS OBSERVED T HAT DURING THE RELEVANT PREVIOUS YEAR, THE ASSESSEE SOLD AN IM MOVABLE PROPERTY ON 27.12.2007 (A PLOT OF LAND MEASURING 23 .5 CENTS) JOINTLY HELD WITH HIS BROTHER. THE LONG TERM CAPITAL GAINS WAS WORKED OUT IN RESPECT OF THE ASSESSEES SHARE AT ` 1,41,88,479/-. ON THE OTHER HAND, THE ASSESSEE HAS CLAIMED LONG TERM CAPITAL LO SS OF ` 90,02,413/- ARISING ON SALE OF SHARES HELD BY HIM I N UNLISTED, DEFUNCT COMPANIES, I.E. M/S NARAYAN KRISHNA SPINNERS LTD. A ND M/S AISHWARYA TEXTILES LTD., WHICH ARE CLOSELY HELD COM PANIES BY HIS FAMILY MEMBERS. THE SALE OF THE SHARES OF THOSE TW O COMPANIES BY THE ASSESSEE TO HIS OWN MOTHER SMT. SUGANTHA DEVARA J WAS NOTHING BUT AN ARRANGEMENT TO SHOW LONG TERM CAPITA L LOSS THEREFROM FOR SETTING OFF AGAINST THE LONG TERM CAP ITAL GAINS DERIVED FROM THE SALE OF THE LAND. ACCORDINGLY, THE LONG T ERM CAPITAL LOSS OF ` 90,02,410/- WAS DISALLOWED. THEREAFTER, THE A.O . HAS INITIATED 3 I.T.A. NO. 1811/MDS/2013 PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT') BY ISSUING NOTICE UNDER S ECTION 274 READ WITH SECTION 271(1)(C) OF THE ACT DATED 21.04.2010. IN RESPONSE TO THE NOTICE ISSUED BY THE A.O., THE ASSESSEE FILED A DETAILED REPLY VIDE LETTER DATED 17.01.2011BY STATING THAT HE NEIT HER CONCEALED ANY REQUIRED PARTICULARS NOR FURNISHED INACCURATE PARTI CULARS OF HIS INCOME AND REQUESTED TO DROP THE PROCEEDINGS. HOWE VER, THE A.O. HAS NOT ACCEPTED THE SUBMISSIONS OF THE ASSESSEE AN D HE CAME TO A CONCLUSION THAT THE SALE OF SHARES BY THE ASSESSE E TO HIS OWN MOTHER IS NOTHING BUT AN ARRANGEMENT TO SHOW THE LO NG TERM CAPITAL LOSS THEREFROM FOR SETTING OFF AGAINST LONG TERM CA PITAL GAINS DERIVED FROM THE SALE OF THE LAND WHICH ULTIMATELY RESULTIN G INTO FURNISHING OF INACCURATE PARTICULARS OF INCOME AND WILFUL TO EVAD E THE TAX. THEREFORE HOLDING THAT THIS AMOUNTS TO FURNISHING O F INACCURATE PARTICULARS AND CONCEALMENT OF INCOME, THE A.O. LEV IED PENALTY UNDER SECTION 271(1)(C) OF THE ACT. 4. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(APPEALS). THE LD. CIT(APPEALS), AFTER CONSIDER ING THE EXPLANATION OF THE ASSESSEE, DELETED THE PENALTY BY OBSERVING AS UNDER:- 4 I.T.A. NO. 1811/MDS/2013 6. I HAVE GONE THROUGH THE SUBMISSIONS MADE BY THE ALT AND ALSO THE ORDER OF THE ASSESSING OFFICER. THE MAIN ISSUE BASED ON THE FACTS OF THE CASE IS REGARDING THE CON CLUSION OF THE ASSESSING OFFICER THAT THE LONG TERM CAPITAL LOSS O N SALE OF SHARES IS NOT ELIGIBLE FOR SET OFF. AS SEEN FROM T HE ASSESSMENT ORDER, THE ASSESSING OFFICER AFTER GIVING OPPORTUNI TY TO THE ASSESSEE, ON VERIFICATION OF THE DETAILS, CONCLUDED THAT THE SALE OF SHARES IN UNLISTED COMPANIES, I.E. M/S NARAYAN K RISHNA SPINNERS AND M/S AISHWARYA TEXTILES LTD. (CLOSELY H ELD COMPANIES OF THE FAMILY MEMBERS) TO MOTHER IS ONLY AN ARRANGEMENT FOR GENERATING LONG TERM CAPITAL LOSS. THE ASSESSEE DURING THE COURSE OF APPELLATE PROCEEDINGS ALSO SUBMITTED THAT THERE WERE HUGE ACCUMULATED LOSSES I N THE M/S NARAYAN KRISHNA SPINNERS AND M/S AISHWARYA TEXTILES LTD. AND THUS SHARES WERE SOLD TO HIS MOTHER AND SUBMITTED T HAT HE WAS ENGAGED IN SOURCING OF YARN FOR REPUTED FABRIC MANU FACTURERS AND BOTH THE COMPANIES HAVE ENORMOUS GOODWILL ON AC COUNT OF PAYMENT OF DEBTS. THE APPELLANT HAS SOLD LAND AND FOR SETTING OFF OF THE LONG TERM CAPITAL GAINS DERIVED FROM THE SALE OF LAND, THE ASSESSEE HAS SHOWN THE CAPITAL LOSS FROM THE SALE OF SHARES. IN THE ASSESSMENT ORDER, THE ASSESSING OFF ICER STATED THAT SALE OF SHARES HELD BY THE ASSESSEE IN THE TWO CLOSELY HELD COMPANIES TO HIS MOTHER IS NOTHING BUT AN ARRANGEME NT TO REDUCE THE CAPITAL GAIN TAX LIABILITY. THE ASSESSI NG OFFICER HAS NOT ALLOWED THE SET OFF OF LONG TERM CAPITAL LOSS O N SALE OF SHARES. THE ACTION OF THE ASSESSING OFFICER WAS CO NFIRMED IN THE FIST APPEAL. ON VERIFICATION OF THE FACTS, THE ASSESSEE HAS SUBMITTED ALL THE DETAILS BEFORE THE ASSESSING OFFI CER AND HAS NOT FURNISHED ANY INACCURATE PARTICULARS OF INCOME. THE APPELLANT WAS TRYING TO SET OFF THE CAPITAL GAIN IN COME AGAINST THE CAPITAL GAIN LOSS ON THE SALE OF SHARES WHICH W AS NOT ACCEPTED BY THE ASSESSING OFFICER. IN MY OPINION, THERE IS NO CONCEALMENT OF INCOME OR FURNISHING ANY INACCURATE PARTICULARS OF INCOME RELATING TO THIS TRANSACTION. THE MAKING OF A CLAIM WHICH IS ULTIMATELY HELD NOT TO BE SUSTAINABLE IN L AW, WOULD NOT AMOUNT TO FURNISHING OF INACCURATE PARTICULARS REGA RDING INCOME OF AN ASSESSEE. IT IS THE CASE WHERE THE ASSESSING OFFICER HAS NOT ACCEPTED THE LONG TERM CAPITAL LOSS SHOWN BY TH E APPELLANT. 7. FURTHER, THE APPELLANT ALSO FILED DETAIS CLAIMI NG DEDUCTION U/S 54F OF THE INCOME-TAX ACT. THE ASSESSEES ALTE RNATE CLAIM OF DEDUCTION U/S 54F WAS NOT ACCEPTED BY THE ASSESS ING OFFICER AND ALSO BY THE COMMISSIONER OF INCOME TAX (APPEALS ). REGARDING THE DEDUCTION U/S 54F, THE APPELLANT HAS NOT FURNISHED ANY INACCURATE PARTICULARS OF INCOME OR C ONCEALED INCOME. HE WAS ONLY TRYING TO PUT UP AN ALTERNATE CLAIM OF DEDUCTION U/S 54F. THE DISALLOWANCE BY THE ASSESSI NG OFFICER CANNOT BE TAKEN AS FURNISHING OF INACCURATE PARTICU LARS BY THE APPELLANT. TAKING THESE FACTS INTO CONSIDERATION, THE ASSESSING 5 I.T.A. NO. 1811/MDS/2013 OFFICER IS DIRECTED TO DELETE PENALTY. THE GROUNDS OF APPEAL ARE ALLOWED . 5. ON BEING AGGRIEVED, THE REVENUE HAS CARRIED THE MATTER BEFORE THE TRIBUNAL. LD. D.R. HAS STRONGLY SUPPORT ED THE ORDER PASSED BY THE A.O. 6. LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT ASSESSEE NEITHER CONCEALED HIS INCOME NOR FURNISHED ANY INAC CURATE PARTICULARS OF INCOME. HENCE, NO PENALTY CAN BE LE VIED UNDER SECTION 271(1)(C) OF THE ACT. 7. WE HAVE HEARD THE PARTIES, PERUSED THE RECORD AN D GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. IN TH IS CASE, THE ASSESSEE HAS SOLD AN IMMOVABLE PROPERTY ALONG WITH HIS BROTHER. THE LONG TERM CAPITAL GAINS IN RESPECT OF THE ASSES SEES SHARE WAS ` 1,41,88,479/-. AGAINST THIS LONG TERM CAPITAL GAIN S, THE ASSESSEE HAS CLAIMED LONG TERM CAPITAL LOSS OF ` 90,02,410/- ARISING ON SALE OF HIS SHARES TO HIS OWN MOTHER. ACCORDING TO A.O., T HE SHARES SOLD BY THE ASSESSEE TO HIS MOTHER AMOUNTS TO AN AGREEMENT TO SHOW THE LONG TERM CAPITAL LOSS THEREBY REDUCING THE LONG TE RM CAPITAL GAINS. HOWEVER, IT IS A FACT THAT THE ASSESSEE WAS HAVING SHARES IN M/S NARAYAN KRISHNA SPINNERS LTD. AND M/S AISHWARYA TEX TILES LTD. AND THE SAME SHARES WERE SOLD TO THE ASSESSEES MOTHER THEREBY 6 I.T.A. NO. 1811/MDS/2013 SHOWING LONG TERM CAPITAL LOSS ARISING THEREFROM AN AMOUNT OF ` 90,02,410/-, WHICH IS CLAIMED TO BE SET OFF AGAINST THE LONG TERM CAPITAL GAINS. UNDER THESE FACTS AND CIRCUMSTAN CES OF THE CASE, WE ARE OF THE OPINION THAT THE ASSESSEE NEITHER CON CEALED THE INCOME NOR FURNISHED ANY INACCURATE PARTICULARS. I N OUR CONSIDERED OPINION, THIS IS NOT A FIT CASE TO LEVY PENALTY UND ER SECTION 271(1)(C) OF THE ACT. WE FIND NO INFIRMITY IN THE ORDER PASS ED BY THE LD. CIT(APPEALS). 8. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER PRONOUNCED ON FRIDAY THE 20 TH OF FEBRUARY, 2015 AT CHENNAI. 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