HEMANT S. SONAWALA, MUMBAI V. ASST CIT 16(2), MUMBAI

ITA 2496/MUM/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 4150 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-04-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: H
• Assessment Year: 2004-2005
• Appeal Filed On: 11-04-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL

Judgement Text

ITA NO. 2496/M/201 4 IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH H, MUMBAI BEFORE SH.B.R.BASKARAN, ACCOUNTANT MEMBER AND SH. PAWAN SINGH, JUDICIAL MEMBER ITA NO.2496/MUM/2014 ASSESSMENT YEAR: 2004-05 SH. HEMANT S. SONAWALA (SINCE DECEASED THROUGH L/RS)SH. SAURABH R. SONAWALA R/O 69A, JAGMOHAN DASS MARG, MUMBAI-400006 PAN- AAEPS7121E VS. ACIT-16(2) MATRU MANDIR TARDEO MUMBAI-36 (APPELLANT) (RESPONDENT) ASSESSEE BY -- MS.AARTI VIS SANJI REVENUE BY -- SH. ABHISHEK SHARMA DATE OF HEARING : 21.01.2016 DATE OF PRONOUNCEMENT : 12.04.2016 O R D E R PER PAWAN SINGH, JM 1. THE PRESENT APPEAL IS FILED BY ASSESSEE AGAINST THE ORDER OF CIT(A) DATED 26FEB2014,CHALLENGING THE VALIDITY OF ORDER IN CONFIRMATION THE PENALTY ORDER UNDER SECTION 271(1)(C ) OF THE A CT, IN RESPECT OF AY- 2004-05. 2. THE BRIEF FACTS OF THE CASE ARE THAT, THE ASSESS EE FILED RETURN OF INCOME FOR RELEVANT AY ON 28 OCTOBER 2004, DECLARI NG TOTAL INCOME OF RS.25,00,320/-. THE ASSESSMENT WAS MADE ON TOTAL INCOME OF RS.31,20,022/-. IN THE RETURN OF INCOME ASSESSEE CL AIMED SHORT TERM CAPITAL LOSS OF RS. 6,41,847/- ON ACCOUNT OF S ALE OF 5450 ITA NO. 2496/M/201 4 UNQUOTED SHARES OF M/S HINDUSTAN SCIENTIFIC INSTRUM ENT (INDIA) PRIVATE LIMITED. THE ASSESSEE HAD PURCHASED 450 SHA RES IN 1988 AND BALANCE 5000 SHARE IN 2002 AT THE RATE OF RS. 1 00/- PER SHARE AND THESE SHARES WERE SOLD TO HIS WIFE DURING THE R ELEVANT YEAR AT RS. 1/- PER SHARE. THE AO CONCLUDED THAT THE SAID C APITAL LOSS WAS NOT GENUINE ONE AS THE TRANSACTION OF SHARE TO THE ASSESSEE WIFE WAS NOT GENUINE, AND TRANSACTION OF SHARE WAS ONLY TO CLAIM SET OFF OF LOSS AND THEREBY TO REDUCE TAX LIABILITY. THE AO FURTHER CONCLUDED THAT SAID COMPANY WAS ON THE WAY OF CLOSURE AND WHO LE ARRANGEMENT OF PURCHASE AND SALE OF SHARES WAS NOT BONAFIDE AND DISALLOWED A LOSS OF STCG OF RS.6,41,847/-, BESIDES OTHER DEDUCTIONS. THE ASSESSEE FILED APPEAL AGAINST THE Q UANTUM ASSESSMENT BEFORE CIT(A). THE APPEAL OF ASSESSEE WA S DISMISSED IN FURTHER APPEAL TO ITAT WAS ALSO DISMISSED VIDE I TA NO.3051/M/2009 DATED 19.08.2011. 3. A SHOW CAUSE NOTICE FOR IMPOSING PENALTY UNDER S ECTION 271 (1) (C) OF THE ACT, WAS ISSUED AND SERVED UPON THE ASSESSEE . ASSESSEE SUBMITTED HIS REPLY IN TAPAL. AS PER THE CONTENTS O F THE PENALTY ORDER THE SAME CONTENTIONS (SUBMISSION) WHICH WERE PUT FO RTH DURING THE ASSESSMENT WERE REPEATED. THE CONTENTION OF ASSESSE E WAS REJECTED BEING NOT SATISFACTORY BY AO, AND CONCLUDE D THAT ASSESSEE HAS DELIBERATELY FURNISHED INACCURATE PARTICULARS O F HIS INCOME AND IMPOSED THE PENALTY OF RS. 1,59,770/ IN THE ORDER UNDER SECTION 271(1)(C ) IN ITS ORDER DATED 30/03/2011. 4. AGGRIEVED BY THE PENALTY ORDER ASSESSEE FILED AP PEAL BEFORE CIT (A), BUT NO SUCCESS, AGAINST WHICH THE PRESENT APPE AL IS FILED BEFORE US. DURING THE PENDENCY OF THE PRESENT APPEA L THE ASSESSEE DIED ON 30/05/2015 AND HIS (SON) LEGAL HEIR FILED A N APPLICATION ON 20/11/2015, FOR PURSUING THE APPEAL. AS THE APPLICA TION WAS NOT OPPOSED THE SAME WAS TAKEN ON RECORD AND THE LEGAL HEIR WAS ALLOWED TO FILE AMENDED MEMO AND TO REPRESENT THE A PPEAL. 5. WE HAVE HEARD LD AR FOR THE ASSESSEE AND DR FOR REVENUE AND PERUSE THE MATERIAL AVAILABLE ON RECORD. AR FOR ASS ESSEE ARGUED THAT MERE DISALLOWANCE OF SHORT TERM CAPITAL LOSS A ND OTHER DEDUCTION CLAIMED IN THE ASSESSMENT WOULD NOT AUTOM ATICALLY ATTRACT THE INITIATION OF PENALTY. THE ASSESSEE HAS NOT CONCEALED OR FILED INACCURATE PARTICULAR WHILE FILING THE RETURN OF INCOME. IT WAS ITA NO. 2496/M/201 4 FURTHER ARGUED THAT CIT (APPEAL) HAS ALREADY GIVEN A PARTIAL RELIEF IN RESPECT OF DISALLOWANCE OF RS. 40,000/-OUT OF THE E XPENSES FOR PROFESSIONAL INCOME AND DISALLOWANCE OF RS. 16,250/ - AS DEDUCTION OF INTEREST EXPENSES FROM INCOME FROM OTHER SOURCE S. LIKE THESE DISALLOWANCE THE PENALTY ORDER IS LIABLE TO BE DELE TED ON ACCOUNT OF DISALLOWANCE OF LONG TERM CAPITAL LOSS. AR FOR ASSE SSEE FURTHER RELIED UPON THE JUDGMENT OF KARNATAKA HIGH COURT RE PORTED VIDE (2013) 36 TAXMAN.COM 82 (KARNATAKA) TITLED AS BHORU KA ENGINEERING INDUSTRIES LTD VERSUS DCIT DATED 9 APRI L 2013. DR FOR REVENUE ARGUED THAT ALL THE FACT FINDING AUTHORITY I.E ASSESSING OFFICER, THE CIT (APPEAL) AND THE ITAT HAVE ALREADY HELD THAT TRANSACTION OF SALES OF SHARE BY THE ASSESSEE TO HI S WIFE WAS NOT BONAFIDE BUT WAS A DUBIOUS ONE. IF THE COMPANY WHI CH THE ASSESSEE HAD PROMOTED WAS IN DIRE NEED OF MONEY, TH E ASSESSEE COULD HAVE SIMPLY INVESTED THAT MONEY, WITHOUT FURT HER TAKING RECOURSE TO THE SALE OF SHARE TO HIS WIFE. ALL FACT S INDICATE TO THE DELIBERATE DESIGN OF GENERATING LOSS AND REDUCING T AX LIABILITY. BEHIND THESE SALES OF SHARE TO HIS WIFE, THE MOTIV E OF ASSESSEE WAS CLEAR OF REDUCING TAX LIABILITY. 6. WE HAVE CONSIDERED THE RIVAL CONTENTION OF THE PART IES AND CAREFULLY GONE THROUGH THE RECORD OF THE CASE. THE AO IMPOSED PENALTY UPON ASSESSEE ON ACCOUNT OF FILING INACCURATE PARTICULAR S FOR CLAIMING OF LONG TERM CAPITAL LOSS AND DISALLOWANCE OF CERTAIN OTHER DEDUCTIONS. THE PENALTY ON ACCOUNT OF DISALLOWANCE OF TWO DEDUC TIONS WHICH OTHERWISE WERE GENERAL IN NATURE, WAS DELETED BY CI T( A) IN THE IMPUGNED ORDER. THE ONLY QUESTION/ISSUE FOR OUR CON SIDERATION IS WHETHER THE ASSESSEE FURNISHED INACCURATE PARTICULA R OF INCOME AND CONCEALED INCOME WHILE FILING THE RETURN OF INC OME BY CLAIMING SHORT TERM CAPITAL LOSS TO EVADE TAX. WE HAVE NOTIC ED THAT COORDINATE BENCH OF THIS TRIBUNAL WHILE DECIDING THE APPEAL OF THE ASSESSEE AGAINST THE QUANTUM ASSESSMENT, VIDE ITA N O. 3051/M/2009 DATED 19.08.2011 HELD AS UNDER: WE HAVE HEARD THE RIVAL SUBMISSION OF THE PARTIES AND PERUSED THE RECORD. THE ASSESSEE ACQUIRED 5000 SHA RE OF HINDITRON SCIENTIFIC INSTRUMENTS (INDIA) PRIVATE LI MITED. WHICH ITA NO. 2496/M/201 4 WAS CONTINUOUSLY INCURRING LOSSES FROM AY-1995-96 TO 2003-04 AND DUE TO CONTINUOUS LOSSES, ENTIRE CAPITA L LOSS HAS BEEN ERODED AND THE ASSESSEE WAS FULLY AWARE OF SAID BAD FINANCIAL STATUS OF THE SAID COMPANY. IT WAS SO THEN CERTAINLY IT IS STRANGE TO CONSIDER THE ASSESSEE AS PRUDENT BUSINESSMAN AND THAT HE MAKES THE INVESTMENT OF RS. 5 LACKS AND PURCHASED SHARES AND WHITH IN A SPAN OF O NE YEARS AND 4 MONTHS, THE SAME SHARE WERE SOLD. NOWHE RE IS IT CONTROVERTED THAT THE SAID COMPANY WAS (NOT ) OWNED BY THE ASSESSEE AND HIS CLOSE FAMILY RELATIONS. WE FAIL TO UNDERSTAND WHEN THE ASSESSEE HAS DECIDED TO STRIKE DOWN THE NAME OF THE COMPANY FROM THE RECORD OF ROC AS THE COMPANYS FINANCIAL POSITION WAS BAD AN D WAS THERE NECESSITY TO SALE THE SHARE TO HIS WIFE GENER ATING THE FICTITIOUS LOSS?. IN OUR OPINION, APPLYING PRINCIPL E OF PROBABILITY OF PRUDENCE, THE ASSESSEE HAS USED DEVI CE BY SHOWING THE SALES OF SHARES TO HIS WIFE AT RS. 1/- FOR CREATING THE LOSS TO TAKE TAX BENEFITS. AFTER GIVING OUR ANX IOUS CONSIDERATION TO THE DETAILS FINDING OF LD CIT(A), WE CONCUR WITH THE SAME AND WE ARE OF THE OPINION THAT THE TRANSACTIONS OF SALE IS A DUBIOUS ONE AS RIGHTLY HELD BY THE AO. 7. ADMITTEDLY THE ASSESSEE HAS NOT FILED ANY FURTHE R APPEAL TO THE JURISDICTIONAL HIGH COURT. THE FINDING OF THE ITAT IN RESPECT OF QUANTUIM ASSESSMENT HAS ATTAINED FINALITY. AS PER OUR CONSIDERED OPINION THE DEVICE DEVELOPED BY THE ASSESSEE ABOUT THE TRANSACTIONS OF SHARE OF HINDITRON SCIENTIFIC INST RUMENTS (INDIA) PRIVATE LIMITED WAS ARTIFICIAL ONE AND WERE MADE ON LY TO CLAIM SHORT TERM CAPITAL LOSS. AT THIS STAGE WE CANNOT TAKE A D IFFERENT VIEW. THE COORDINATE BENCH OF THIS TRIBUNAL HAS ALREADY THAT THE TRANSACTION OF SHARE BY ASSESSEE TO HIS WIFE AS DUBIOUS ONE. THE A O AS WELL AS CIT APPEALS RIGHTLY CONCLUDED THAT THE EXPLANATION OFFERED BY ASSESSEE IN RESPECT OF DISALLOWANCE OF LONG TERM CA PITAL LOSS WAS NEITHER PROVED NOR BONAFIDE. 8. THE ASSESSEE RELIED UPON THE JUDGMENT OF HONBLE KARNATAKA HIGH COURT REPORTED VIDE (2013) 36 TAXMAN.COM 82 (K ARNATAKA) ITA NO. 2496/M/201 4 TITLED AS BHORUKA ENGINEERING INDUSTRIES LTD VERSUS DCIT. WITH UTMOST REGARDS TO THE JUDGMENT OF KARNATAKA HIGH CO URT, WE MAY NOTE THAT THE FACT OF CASE RELIED BY THE ASSESSEE A RE ENTIRELY DIFFERENT. IN THE SAID CASE THE SHARE OF SICK COMPA NY WERE SOLD THROUGH MAGADH STOCK EXCHANGE WITH THE PERMISSION O F SEBI, AND CLAIMED EXEMPTIONS FROM LONG TERM CAPITAL GAIN ARIS ING ON SALE OF SHARE. IN THE PRESENT CASE, THE SALE AND PURCHASE OF SHARES WERE HELD BETWEEN HUSBAND AND WIFE THUS THE FACTS ARE E NTIRELY DIFFERENT. 9. IN VIEW OF THE ABOVE DISCUSSION WE DO NOT FIND A NY ILLEGALITY OR INFIRMITY IN THE ORDER PASSED BY LD. CIT(A). THE AP PEAL FILED BY THE ASSESSEE HAS NO MERIT AND THE SAME IS DISMISSED. 10. WITH THIS OBSERVATION THE APPEAL OF ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 12 TH APRIL 2016. SD/- SD/- (B.R.BASKARAN) (PAWAN SINGH) .ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; DATED 07/04/2016 S.K.PS / COPY OF THE ORDER FORWARDED TO : / BY ORDER, / (ASSTT.REGISTRAR) 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A), MUMBAI. 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. !'# / GUARD FILE. $ //TRUE COPY/