Jagadish Lal Gugnani, Bhubaneswar V. ITO, Bhubaneswar

ITA 2/CTK/2013

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 3826 (ITAT-CUTTACK)
• Duration Of Justice: 4 year(s) 4 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-05-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 17-05-2017
• Assessment Year: 2006-2007
• Appeal Filed On: 02-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D K PRADHAN
• Assessee Lawyers: C PARIDA
• Keywords: Business income; Reasonable cause
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK BEFORE S/SHRI N.S SAINI, ACCOUNTANT MEMBER AND PAV AN KUMAR GADALE, JUDICIAL MEMBER ITA NO.02/CTK/2013 ASSESSMENT YEAR : 2006 - 07 JAGDISH LAL GUGNANI, N - 3, 397, IRC VILLAGE, NAYAPALI, BHUBANESWAR. VS. ITO, WARD - 2(1), BHUBANESWAR. PAN/GIR NO. ABHPG 1121 A (APPELLANT ) .. ( RESPONDENT ) ASSESSEE BY : SHRI C.PARIDA , AR REVENUE BY : SHRI D.K.PRADHAN, DR DATE OF HEARING : 17 /05/ 2017 DATE OF PRONOUNCEMENT : 17 /05/ 2017 O R D E R PER PAVAN KUMAR G ADALE, JM THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) - II , BHUBANESWAR , DATED 19.10.2012 , FOR THE ASSESSMENT YEAR 2006 - 07 . 2. THE ONLY SUBSTANTIVE GROUND RAISED BY THE ASSESSEE IN THIS APPEAL IS THAT THE CIT(A) ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN LEVYING PENALTY OF RS.1,23,796 / - U/S. 271(1)(C) OF THE INCOME TAX ACT, 1961. 3 . BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A N INDIVIDUAL DERIVES INCOME FROM TRADING OF SHARES & STOCK S AND FIL ED THE RETURN OF INCOME FOR 2 ITA NO.02/CTK/2013 ASSESSMENT YEAR : 2006 - 07 THE ASSESSMENT YEAR 2006 - 07 ON 30.10.2006 DISCLOSING TOTAL INCOME OF RS.97,447/ - . THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) ON 30.12.2009 DETERMINING THE TOTAL INCOME AT RS.7,36,260/ - . THE ASSESSING OFFICER WHILE COMP LETING THE ASSESSMENT FOUND THAT THE ASSESSEE HAS INCOME FROM TRADING OF SHARES AS THE PROPRIETOR OF M/S. INDU INVESTMENT AND ALSO REFLECTED THE PURCHASE AND SALE OF SHARES IN THE PROFIT AND LOSS ACCOUNT AND WHEREAS IN RESPECT OF CLIENT S , THE ASSESSEE HAS DISCLOSED THE COMMISSION IN THE PROFIT AND LOSS ACCOUNT . BOTH THE INCOMES WERE REFLECTED BY THE ASSESSEE IN A FINANCIAL STATEMENT AND THE BOOKS OF ACCOUNT ARE AUDITED U/S.44AB AND FORM 3CD HAVE BEEN OBTAINED. AS PER THE FINANCIAL STATEMENT, THE ASSESSEE HAS TRANSFERRED THE PROFIT TO THE CAPITAL ACCOUNT. AT THE TIME OF FILING THE INCOME TAX RETURN, THE INCOME HAS BEEN SHOWN AS LONG TERM CAPITAL GAIN AND SHORT TERM CAPITAL GAIN WHEREAS THE ASSESSEE HAS CLAIMED EXEMPTION OF LONG TERM CAPITAL GAIN U/S.10(38 ) AND OFFERED THE SHORT TERM CAPITAL GAIN AT A CONCESS IONAL RATE OF 10%. WHEREAS, AS PER THE OPINION OF THE ASSESSING OFFICER, THE ASSESSEE COULD NOT SUBSTANTIATE IN T HE ASSESSMENT PROCEEDINGS AND IN THE PENALTY PROCEEDINGS THAT THE ASSESSEE IS MAINTAINI NG SEPARATE BOOKS OF ACCOUNT. THE ASSESSEE FILED A DETAILED REPLY DATED 2.12.2008 WHICH ARE MENTIONED AT PAGES 1 TO 4 OF PENALTY ORDER AND RELIED ON JUDICIAL DECISION. THE ASSESSING OFFICER WAS NOT SATISFIED WITH THE EXPLANATION AND DISTINGUISHED THE JUD ICIAL DECISION AND HEL D THAT THERE IS CLEAR CUT CONCEALMENT OF INCOME AND FURNISHING OF INACCURATE PARTICULARS BY CLAIMING EXEMPTION AS LONG TERM CAPITAL GAIN S AND SHORT TERM CAPITAL GAIN S FROM THE SHARE TRADIN G PROFIT. HE, THEREFORE, LEVIED 3 ITA NO.02/CTK/2013 ASSESSMENT YEAR : 2006 - 07 PENALTY OF R S.1,23,800/ - AND PASSED ORDER UNDER SECTION 271(1)(C) OF THE ACT. 4. BEING AGGRIEVED BY THE PENALTY ORDER, THE ASSESSEE HAS FILED AN APPEAL BEFORE THE CIT(A) WHEREAS THE CIT(A) HAS PASSED A CONSOLIDATED ORDER ALONGWITH OTHER ASSESSMENT YEA S , WHEREIN HE HA S CONSIDERED THE FINDINGS OF THE ASSESSING OFFICER IN ASSESSMENT PROCEEDINGS AND PENALTY PROCEEDINGS AND SUBMISSIONS OF THE ASSESSEE AND OBSERVED THAT THE ASSESSEE HAS MAINTAINED ONE SET OF BOOKS OF ACCOUNT FOR THE INVESTMENT IN BUYING AND SELLING IN SHARES , AND PROFIT COMMISSION DISCLOSED IN THE PROFIT AND LOSS ACCOUNT AND FURTHER THE ASSESSEES INTENTION OF CLAIMING LONG TERM CAPITAL GAINS AND SHORT TERM CAPITAL GAIN S WAS AFTERTHOUGHT AND WAS CLAIMED AT THE TIME OF FILING THE RETURN OF INCOME. WITH THESE OBSERVATIONS, THE CIT(A) CONFIRMED THE ACTION OF THE ASSESSING OFFICER. 5. AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSESSE HAS FILED APPEAL BEFORE THE TRIBUNAL. 6. BEFORE US, LD A.R. ARGUED AND REITERATED THE SUBMISSIONS MA DE IN THE APPELLATE PROCEEDINGS AND EXPLAINED THAT THE A SSESSEE HAS BEEN MAINTAINING SYSTEM OF ACCOUNTING AND BOOKS OF ACCOUNTS ARE AUDITED U/S.44AB OF THE ACT AND THE ASSESSING OFFICER HAS LEVIED PENALTY AND THE SAME WAS CONFIRMED, WHICH IS NOT IN ACCORD ANCE WITH LAW AND PRAYED FOR ALLOWING THE APPEAL. 7. CONTRA, LD D.R. RELIED ON THE ORDER OF THE CIT(A). 4 ITA NO.02/CTK/2013 ASSESSMENT YEAR : 2006 - 07 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD. THE SOLE CRUX OF THE ISSUE IS THAT THE ASSESSEE DEALS IN PURCHASE AND SALE OF SHARES ON HIS BEHALF AND OTHERS. THE FACT THAT THE ASSESSEE CANNOT HAVE TWO SET OF BOOKS OF ACCOUNT FOR INDIVIDUAL TRADING AND FOR CLIENTS AND THE FACT THAT IN THE ASSESSMENT O RDER , IT IS CLEARLY EXPLAINED THAT THE ASSESSEE HAS DISCLOSED PURCHASE AND SALE OF SECURITIES AND INCOME HAS BEEN OFFERED TO TAX AND WHEREAS THE COMMISSION INCOME IS SHOWN IN THE PROFIT AND LOSS ACCOUNT AND THE EXPENDITURE HAS BEEN CLAIMED IN RESPECT OF BU SINESS ACTIVIT Y. THE ASSESSING OFFICER MAKES ALLEGATIONS THAT THE ASSESSEE IS NOT ENTITLED FOR CLAIMING OF EXEMPTION U/S.10(38) IN RESPECT OF LONG TERM CAPITAL GAIN AT A CONCESSIONAL RATE AND WANTS TO TREAT THE ENTIRE INCOME AS BUSINESS INCOME. PRIMA FA CIE, THE DEPARTMENT COULD NOT PROVE ON THE FACTS THAT THE ASSESSEE IS INDULGING IN ANY ACTIVITY OF CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS. WE ARE SATISFIED THAT THE ASSESSEE HAS GIVEN AN EXHAUSTIVE EXPLANATION IN THE PENALTY PROCEE DINGS, WHICH HAS BEEN REFLECTED IN THE PENALTY ORDER AND THERE IS REASONABLE CAUSE OF DISC LOSURE WHICH THE CIT(A) HAS OVERLOOKED. WE ARE OF THE OPINION THAT THE ASSESSEE HAS NOT CONTESTED THE QUANTUM APPEAL AND ACCEPTED THE ADDITION TO AVOID LITIGATION W ITH THE INCOME TAX DEPARTMENT AND TO BUY PEACE. FURTHER, AS A PRINCIPLE EVERY ADDITION CANNOT BE A GATEWAY FOR THE ASSESSING OFFICER TO LEVY THE PENALTY. THE ASSESSING OFFICER HAS WIDE DISCRETIONARY POWER S AND HAS TO CONSIDER THE REASONABLE CAUSE BEFORE INITIATING THE PEN ALTY PROCEEDINGS. WE ALSO SUPPORT OUR VIEW ON THE PRINCIPLES LAID DOWN BY HONBLE KARNATAKA HIGH 5 ITA NO.02/CTK/2013 ASSESSMENT YEAR : 2006 - 07 COURT IN THE CASE OF CIT VS MANJUNATHA COTTON AND GINNING FACTORY , REPORTED IN [2013] 359 ITR 565 (KAR), WHEREIN, THEIR LORDSHIPS HAVE HELD THAT PENALTY CANNOT BE LEVIED ON THE ADDITION IN A GENERAL WAY AND HELD AS UNDER: MERELY BECAUSE THE ASSESSEE AGREED FOR ADDITION AND THE ASSESSMENT ORDER WAS PASSED ON THE BASIS OF THIS ADDITION, WHEN THE ASSESSEE HAD PAID THE TAX AND THE INTEREST THEREON IN THE ABSENCE OF ANY MATERIAL ON RECORD TO SHOW THE CONCEALMENT OF INCOME, IT COULD NOT BE INFERRED THAT THE ADDITION WAS ON ACCOUNT OF CONCEALMENT. MOREOVER, THE ASSESSEE HAD OFFERED AN EXPLANATION. THE EXPLANATION WAS NOT FOUND TO BE FALSE. ON THE CONTRARY, IT WAS HELD TO BE BONAFIDE. THE CANCELLATION OF PENALTY BY THE TRIBUNAL WAS JUSTIFIED. 9 . CONSIDERING THE APPARENT FACTS AND MATERIALS ON RECORD AND JUDICIAL DECISION , WE ARE SATISFIED THAT THERE IS A REASONABLE CAUSE EXPLAINED BY THE ASSESSEE AND THERE IS NO CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS AND ACCORDINGLY SET ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE ASSESSING OFFICER TO DELETE THE PENALTY OF RS.1,23,800 / - LEVIED UNDER SECTION 271(1)(C) OF THE ACT. 10 . IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 17 /05/2017 IN THE PRESENCE OF PARTIES. SD/ - SD/ - ( N.S SA INI ) ( PAVAN KUMAR GADALE) A CCOUNTANT MEMBER JUDICIAL MEMBER CUTTACK; DATED 17 /05/2017 B.K.PARIDA, SPS 6 ITA NO.02/CTK/2013 ASSESSMENT YEAR : 2006 - 07 COPY OF THE ORDER FORWARDED TO : BY ORDER, SR.PRIVATE SECRETARY ITAT, CUTTACK 1. THE APPELLANT : . JAGDISH LAL GUGNANI, N - 3, 397, IRC VILLAGE, NAYAPALI, BHUBANESWAR. 2. THE RESPONDENT. ITO, WARD - 2(1), BHUBANESWAR. 3. THE CIT(A) - II , BHUBANESWAR 4. PR.CIT , BHUBANSWAR. 5. DR, ITAT, CUTTACK 6. GUARD FILE. //TRUE COPY//