Sri.S.L.Shahul Hameed, Calicut V. ITo, Calicut

ITA 285/COCH/2013

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 68936 (ITAT-COCHIN)
• Duration Of Justice: 3 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-09-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 25-07-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 10-05-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S VIJAYAPRABHA; M ANILKUMARCIT
• Assessee Lawyers: R V VEERAMANI
• Keywords: Unexplained investment; Reasonable cause

Judgement Text

IN THE INCOME TAX APELALTER TIBUNAL COCHIN BENCH , COCHIN BEFORE S/SH RI N.R.S. GANESAN, JM & B. R. BASKARAN, AM ITA NO. 285 /COCH/ 2013 (ASST YEAR 2006 - 07 ) SHRI S L SHAHUL HAMEED C/O AMEEN TOOLS KMATHI LANE CALICUT PIN - 673 001 VS THE INCOME TAX OFFICER WARD 1(2), KOZHIKODE ( APPELLANT) (RESPONDENT) PAN NO. AJLPS7162F ASSESSEE BY SHRI R V VEERAMANI REVENUE BY SMT S VIJAYAPRABHA, JR DR & SH M ANILKUMAR,CIT DATE OF HEARING 25 TH JULY 2013 DATE OF PRONOUNCEMENT 5 TH , SEPT 2013 OR D ER PER B.R .BASKARAN , A CCOUNTANT M EMBER : THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 17 - 02 - 2013 PASSED BY LD CIT(A), KOZHIKODE AND IT RELATES TO THE ASSESSMENT YEAR 2006 - 07. THE ASSESSEE IS ASSAILING THE DECISION OF LD CIT(A) IN PARTIALLY C ONFIRMING THE PENALTY LEVIED BY THE AO U/S 271 ( 1)(C) OF THE ACT. 2. THE FACTS RELATING TO THE ISSUE ARE STATED IN BRIEF. THE ASSESSEE WAS A PARTNER IN A FIRM NAMED M/S AMEEN TOOLS. HE FILED HIS RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION DECLA RING A TOTAL INCOME OF RS.1,23,120/ - . THE AIR INFORMATION RECEIVED BY THE AO SHOWED THAT THE ASSESSEE WAS MAKING HUGE INVESTMENTS IN THE MUTUAL I.T.A. NO. 285/ /COCH/20 13 2 FUNDS/SHARES. THE AO VERIFIED THE AIR INFORMATION WITH THE RETURN OF INCOME AND BANK ACCOUNTS OF THE ASSESSEE. THE AO NOTICED THAT THE ASSESSEE DID NOT DISCLOSE FOLLOWING INVESTMENTS MADE IN THE MUTUAL FUND UNIT S: - PRUDENTIAL ICICI 3,00,000 SBI MUTUAL FUND 3,00,000 SBI MUTUAL FUND 3,00,000 HSBC MUTUAL FUND 4,85,000 HDFC 3,50,000 HDFC 3,00,000 TAT A MUTUAL FUND 5,00,000 ----------------- 25,35,000 ========== THE AO ASSESSED THE ABOVE SAID SUM OF RS.25,35,000/ - AS THE INCOME OF THE ASSESSEE. THE ASSESSING OFFICER FURTHER NOTICED THAT THE ASSESSEE HAD REDEEMED/SWITCHED OVE R MUTUAL FUND UNITS. INITIALLY THE ASSESSEE DECLARED SHORT TERM CAPITAL GAINS OF RS.6,98,247/ - , VIDE HIS LETTER DATED 01.12.2008, WHICH WAS OMITTED TO BE INCLUDED IN THE RETURN OF INCOME. ON FURTHER VERIFICATION OF DETAILS, THE ASSESSEE OFFERED ADDITIONA L AMOUNT OF RS.3,16,723/ - AS SHORT TERM CAPITAL GAIN. ACCORDINGLY, THE AO ASSESSED THE AGGREGATE OF THE ABOVE SAID TWO AMOUNTS, I.E., RS.10,14,970/ - AS SHORT TERM CAPITAL GAINS IN THE HANDS OF THE ASSESSEE. THE ASSESSEE ACCEPTED THE INCOME ASSESSED BY TH E AO AND HENCE DID NOT PREFER ANY APPEAL. SUBSEQUENTLY, THE AO INITIATED PENALTY PROCEEDINGS AND LEVIED PENALTY AT 200% OF THE TAX SOUGHT TO BE EVADED. IN THE APPELLATE PROCEEDINGS, THE LD CIT(A) REDUCED THE PENALTY TO 150% OF THE TAX SOUGHT TO BE EVADE D. STILL AGGRIEVED, THE ASSESSEE HAS FILED THIS APPEAL BEFORE US. 3. THE LD COUNSEL SUBMITTED THAT THE ASSESSEE WAS UNDER THE BONA FIDE BELIEF THAT THE CAPITAL GAIN IS ASSESSABLE ONLY ON REDEMPTION OF THE MUTUAL FUND UNITS AND HE WAS I.T.A. NO. 285/ /COCH/20 13 3 NOT AWARE THAT THE C APITAL GAIN IS REQUIRED TO BE COMPUTED ON SWITCHING OF UNITS FROM ONE SCHEME TO ANOTHER SCHEME. ACCORDINGLY HE SUBMITTED THAT THERE WAS REASONABLE CAUSE IN NOT DISCLOSING SHORT TERM CAPITAL GAIN. WITH REGARD TO THE UNDISCLOSED INVESTMENT IN MUTUAL FUND U NITS, THE LD A.R SUBMITTED THAT THE INVESTMENTS MADE IN THE FOLLOWING UNITS IS AVAILABLE IN THE BANK ACCOUNTS MAINTAINED BY THE ASSESSEE. SBI MUTUAL FUND 3,00,000 SBI MUTUAL FUND 3,00,000 TATA MUTUAL FUND 5,00,000 THE LD COUNSEL SUBMITTED THAT THE IN VESTMENT MADE IN TATA MUTUAL FUND IS AVAILABLE IN THE JOINT BANK ACCOUNT MAINTAINED WITH S.L.ABDUL HASSAN. THE LD COUNSEL SUBMITTED THAT THE INVESTMENTS IN SBI MUTUAL FUND WAS MADE THROUGH IDBI BANK ACCOUNT. HOWEVER, THE ASSESSEE ISSUED CHEQUE OF RS.5,98 ,600/ - ONLY , FOR MAKING AN INVESTMENT OF RS.6.00 LAKHS, I.E., THE CHEQUE WAS ISSUED NET OF D.D CHARGES. THE LD COUNSEL SUBMITTED THAT THE PENALTY IN RESPECT OF THESE AMOUNTS MAY BE DELETED, AS THE SOURCE FOR MAKING THESE INVESTMENTS IS TRACEABLE TO THE BA NK ACCOUNTS. HE FURTHER SUBMITTED THAT THE ASSESSEE HAS ACCEPTED THE ADDITION OF THESE AMOUNTS IN ORDER TO BUY PEACE FROM THE DEPARTMENT AND ACCORDINGLY PLEADED THAT THE PENALTY MAY BE DELETED. 4. ON THE CONTRARY, THE LD D.R SUBMITTED THAT THE ASSESS EE DID NOT DISCLOSE THE INVESTMENTS IN HIS RETURN OF INCOME AND FURTHER HE COULD NOT EXPLAIN THE SOURCES FOR MAKING THESE INVESTMENTS. HENCE, THE LD CIT(A) WAS JUSTIFIED IN CONFIRMING THE PENALTY LEVIED ON THE UNEXPLAINED INVESTMENTS. WITH REGARD TO THE CLAIM MADE BY THE LD A.R THAT THE SOURCES FOR MAKING THREE INVESTMENTS, REFERRED SUPRA, THE LD D.R SUBMITTED THAT THE SAID CLAIM NEEDS VERIFICATION AT THE END OF THE AO. WITH REGARD TO THE PENALTY I.T.A. NO. 285/ /COCH/20 13 4 LEVIED ON SHORT TERM CAPITAL GAINS, THE LD D.R SUBMITTED T HAT THE ASSESSEE HAS OMITTED TO DISCLOSE THE ENTIRE AMOUNT OF SHORT TERM CAPITAL GAINS IN HIS RETURN OF INCOME AND HENCE THE LD CIT(A) WAS JUSTIFIED IN CONFIRMING THE PENALTY LEVIED ON IT. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND CAREFULLY PERUSED T HE RECORD. ADMITTEDLY, THE ASSESSEE COULD NOT EXPLAIN THE SOURCES FOR MAKING INVESTMENTS IN MUTUAL FUND UNITS TO THE TUNE OF RS.25.35 LAKHS. HENCE, THE AO ASSESSED THE SAID AMOUNT AS THE INCOME OF THE ASSESSEE AND IT WAS ALSO ACCEPTED BY THE ASSESSEE. T HE ASSESSEE HAS NOT OFFERED ANY EXPLANATION WITH REGARD TO THE SOURCES OR OMISSION ON HIS PART TO DISCLOSE THESE INVESTMENTS IN HIS RETURN OF INCOME. HENCE, IN OUR VIEW, THE LD CIT(A) WAS JUSTIFIED IN CONFIRMING THE LEVY OF PENALTY IN RESPECT OF THIS ADDI TION. NOW, THE LD A.R CLAIMS BEFORE US THAT THE SOURCES TO THE TUNE OF RS.11.00 LAKHS ARE TRACEABLE TO THE BANK ACCOUNTS. AS SUBMITTED BY LD D.R, THIS CLAIM OF LD A.R NEEDS VERIFICATION AT THE END OF THE AO. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD CIT (A) IN RESPECT OF THE ABOVE SAID AMOUNT OF RS.11.00 LAKHS AND RESTORE THE SAME TO THE FILE OF THE AO WITH THE DIRECTION TO EXAMINE THE CLAIM OF THE ASSESSEE AND TAKE APPROPRIATE DECISION IN ACCORDANCE WITH THE LAW. THE ORDER OF LD CIT(A) IN RESPECT OF THE BALANCE AMOUNT OF INVESTMENT IS CONFIRMED. 6. WITH REGARD TO THE SHORT TERM CAPITAL GAIN AMOUNT OF RS.10,14,970/ - ASSESSED IN THE HANDS OF THE ASSESSEE, IT IS AN ADMITTED FACT THAT THE ASSESSEE DID NOT DISCLOSE THE SAME IN HIS RETURN OF INCOME. THE ASSESSEE CLAIMS THAT HE WAS NOT AWARE OF THE FACT THAT THE CAPITAL GAIN IS REQUIRED TO BE COMPUTED ON SWITCHING OF UNITS FROM ONE SCHEME TO ANOTHER SCHEME. IN OUR VIEW, THIS EXPLANATION OF THE ASSESSEE MAY BE CONSIDERED I.T.A. NO. 285/ /COCH/20 13 5 FOR DELETING THE PENALTY, PROVIDED THE ASSESSEE HAD DISCLOSED THE INVESTMENTS MADE IN THE MUTUAL FUND UNITS IN HIS RETURN OF INCOME. SINCE THE ASSESSEE DID NOT DISCLOSE THE INVESTMENTS AND ALSO FAILED TO COMPUTE THE CAPITAL GAIN ARISING THERE FROM ON REDEMPTION AND SWITCHING OVER, IN OUR V IEW, THE LD CIT(A) WAS JUSTIFIED IN CONFIRMING THE PENALTY ON SHORT TERM CAPITAL GAIN ALSO. 7. THE AO HAD LEVIED PENALTY AT 200% OF THE TAX SOUGHT TO BE LEVIED AND THE SAME WAS REDUCED TO 150% BY LD CIT(A). DURING THE COURSE OF HEARING, THE LD A.R SU BMITTED THAT THE ASSESSEE DID NOT PREFER APPEAL AGAINST THE QUANTUM ASSESSMENT AND ACCORDINGLY PLEADED FOR TAKING LENIENT VIEW IN THE MATTER OF PENALTY. ON A CONSPECTUS OF THE MATTER, WE ARE OF THE VIEW THAT IT WOULD MEET THE ENDS OF JUSTICE IF THE PENALT Y IS LEVIED AT 100% OF THE TAX SOUGHT TO BE LEVIED. ACCORDINGLY, WE MODIFY THE ORDER OF LD CIT(A) ON THIS POINT AND DIRECT THE AO TO LEVY PENALTY AT 100% OF THE TAX SOUGHT TO BE EVADED. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. PRONOUNCED ACCORDINGLY ON 05 - 0 9 - 2013 . SD/ - SD/ - ( N. R.S.GANESAN ) ( B.R.BASKARAN ) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: KOCHI DATED: 5 TH , SEPTEMBER , 2013 RAJ* I.T.A. NO. 285/ /COCH/20 13 6 COPY TO: 1 APPELLANT - SHRI S L SHAHUL HAMEED C/O AMEEN TOOLS - KMATHI LANE CALICUT 673 001 2 THE RESPONDENT - THE INCOME TAX OFFICER, WARD 1(2), CALICUT 3. THE COMMISSION ER OF INCOME - TAX (APPEALS) KOZHIKODE 4 . THE COMMISSIONER OF INCOME - TAX , KOZHIKODE 5 . D.R. , I.T.A.T., COCHIN BENCH, COCHIN. 6 . GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) I.T.A.T, COCHIN