ENVISION INVESTMENT CONSULTANTS, MUMBAI V. ACIT -CIR 9(1), MUMBAI

ITA 2896/MUM/2017

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 4942 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 6 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-10-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2008-2009
• Appeal Filed On: 21-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHRI
• Keywords: Unexplained cash credit; Business income; Bonafide belief; Question of law; Set aside
• Section: 271(1)(c); 143(3); 14A; 274; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH E, MUMBAI BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO.2896/M/2017 ASSESSMENT YEAR: 2008-09 M/S. ENVISION INVESTMENT CONSULTANTS, 228, BUSA INDUSTRIAL PREMISES, CENTURY BAZAR LANE, PRABHADEVI, MUMBAI 400 025 PAN: AAACE2990G VS. ACIT-CIR 9(1), AAYAKAR BHAVAN, MUMBAI (APPELLANT) (RE SPONDENT) PRESENT FOR: ASSESSEE BY : SHRI DHARMESH SHAH, A.R. REVENUE BY : SHRI PANKAJ KUMAR, D.R. DATE OF HEARING : 05.09.2019 DATE OF PRONOUNCEMENT : 22.10.2019 O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSES SEE AGAINST THE ORDER DATED 15.04.2013 OF THE COMMISSIO NER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS TH E CIT(A)] RELEVANT TO ASSESSMENT YEAR 2008-09. 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APP EAL: 1) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E LEARNED CIT(A) ERRED IN UPHOLDING THE ORDER OF THE ASSESSING OFFICER IN IMP OSITION OF PENALTY U/S 271(L)(C) OF THE ACT OF RS 38,38,802 ON THE DIFFERENTIAL TAX ON TREATMENT OF PROFIT ON SALE OF SHARES AS BUSINESS INCOME AS AGAINST SHORT TERM CAP ITAL GAINS AS RETURNED BY THE APPELLANT. 1.1 THE LEARNED AO ERRED IN LEVYING PENALTY MERELY ON THE CHANGE OF THE HEAD, I.E. BY TREATING THE SHORT-TERM CAPITAL GAIN OF RS.2,07, 05,512 AS BUSINESS PROFIT. THE CHANGE OF HEAD PER SE DOES NOT AMOUNT TO CONCEALMEN T OF INCOME NOR THE INACCURATE PARTICULARS OF INCOME. ITA NO.2896/M/2017 M/S. ENVISION INVESTMENT CONSULTANTS 2 2) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. C1T(A) LEGALLY ERRED IN NOT CONSIDERING THE ADDITIONAL GROUND FILED BY THE APPE LLANT FILED ON 23.08.2016. ADDITIONAL GROUND IS REPRODUCED AS UNDER: 'WITHOUT PREJUDICE, WITHOUT ADMITTING AND IN THE AL TERNATIVE, THE ORDER OF PENALTY PASSED UNDER SECTION 271(L)(C) OF THE ACT IS BAD IN LAW AS THE NOTICE ISSUED UNDER SECTION 274 READ WITH SECTION 271 OF THE ACT IS NOT DISCERNABLE AS TO WHETHER THE PENALTY PROCEEDINGS IS INITIATED FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME OR CONCEALMENT OF INCOME UNDER THE FACTS AND IN THE CI RCUMSTANCES OF THE APPELLANT'S CASE AND THEREFORE, THE IMPUGNED ORDER PASSED DESER VES TO BE CANCELLED. ' 3) THE APPELLANT CRAVES LEAVE TO ADD, TO ALTER OR AMEND THE GROUNDS OF APPEAL ON OR BEFORE THE HEARING OF THIS APPEAL. 3. THE ISSUE RAISED IN GROUND NO.1 IS AGAINST THE C ONFIRMATION OF PENALTY OF RS.38,38,802/- BY LD. CIT(A) AS MADE BY THE AO UNDER SECTION 271(1)(C) OF THE ACT ON DIFFERENTIAL TAX WHICH HAS RESULTED FROM ASSESSING THE PROFIT ON SALE OF SHARE S AS BUSINESS INCOME AS AGAINST SHORT TERM CAPITAL GAIN RETURNED BY THE ASSESSEE. 4. THE FACTS IN BRIEF ARE THAT THE ASSESSMENT UNDER SECTION 143(3) WAS FRAMED ON 10.12.2010 ASSESSING THE TOTAL INCOME AT RS.100,13,51,470/- AS AGAINST THE RETURN OF INCOME OF RS.78,52,11,071/- BY MAKING THE FOLLOWING DISALLOWA NCES. 5. THEREAFTER, THE PENALTY NOTICE UNDER SECTION 274 READ WITH SECTION 271 OF THE ACT WAS ISSUED ON 10.12.2012 WHI CH WAS REPLIED BY THE ASSESSEE VIDE LETTER DATED 19.03.201 3 BY SUBMITTING THAT PENALTY IS NOT IMPOSABLE ON ACCOUNT OF TREATMENT OF SHORT TERM CAPITAL GAIN AS BUSINESS IN COME, DISALLOWANCE UNDER SECTION 14A AND ADDITION ON ACCO UNT OF UNEXPLAINED CASH CREDIT. THE ASSESSEE SUBMITTED TH AT DISALLOWANCE UNDER SECTION 14A WAS PARTLY ALLOWED B Y THE LD. CIT(A) WHEREAS THE ADDITION UNDER SECTION 68 WAS CO MPLETELY DELETED AND ONLY THE SURVIVING ADDITION IS ON ACCOU NT OF CHANGE ITA NO.2896/M/2017 M/S. ENVISION INVESTMENT CONSULTANTS 3 OF HEADS OF INCOME FROM SHORT TERM CAPITAL GAIN TO BUSINESS INCOME. THE AO IMPOSED THE PENALTY IN RESPECT OF T HE ISSUE OF TREATING THE SHORT TERM CAPITAL GAIN AS BUSINESS IN COME BY HOLDING THAT THE ASSESSEE HAS FILED INACCURATE PART ICULARS OF INCOME QUA THE SHORT TERM CAPITAL GAIN OF RS.2,07,0 5,512/- AND FINALLY A PENALTY OF RS.70,37,803/- BEING 100% OF T HE TAX SOUGHT TO BE EVADED WAS IMPOSED. 6. IN THE APPELLATE PROCEEDINGS, THE LD. CIT(A) PAR TLY SUSTAINED THE PENALTY BY HOLDING THAT THE PENALTY C AN NOT BE LEVIED BY CALCULATING THE TAX AS CALCULATED BY THE AO WHEREAS IT HAS TO BE LEVIED ON DIFFERENTIAL AMOUNT OF TAX AS T HE ASSESSEE HAS ALREADY PAID TAX @ 10% BY SHOWING THE SHORT TERM CA PITAL GAIN UNDER THE HEAD CAPITAL GAIN AND NOW THE AO HAS TREA TED THE SAID GAIN AS BUSINESS INCOME AND CHARGED THE INCOME AT T HE MAXIMUM APPLICABLE RATE. THE LD. CIT(A) THUS DIREC TED THE AO TO IMPOSE PENALTY ON THE DIFFERENTIAL TAX ONLY AND THUS PARTLY ALLOWED THE APPEAL WHICH HAS RESULTED IN THE PARTLY SUSTAINING THE PENALTY TO THE EXTENT OF RS.38,38,802/-. 7. THE LD. A.R. SUBMITTED BEFORE THE BENCH THAT IN THIS CASE THE PENALTY HAS BEEN IMPOSED BY AO FOR FILING INACC URATE PARTICULARS OF INCOME IN RESPECT OF SHORT TERM CAPI TAL GAIN OF RS.2,07,05,512/- WHICH WAS ASSESSED AS BUSINESS INC OME IN THE ASSESSMENT FRAMED UNDER SECTION 143(3) DATED 10.12. 2010. THE LD. A.R. VEHEMENTLY SUBMITTED BEFORE THE BENCH THAT ASSESSEE HAS FULLY DISCLOSED ALL THE PARTICULARS OF INCOME Q UA THE SHORT TERM CAPITAL GAIN IN THE RETURN OF INCOME AND WHAT THE AO HAS DONE IS MERELY CHANGING THE HEADS OF INCOME FROM CA PITAL GAIN TO BUSINESS INCOME WHICH IS NOT AMENABLE TO LEVYING THE PENALTY ITA NO.2896/M/2017 M/S. ENVISION INVESTMENT CONSULTANTS 4 UNDER SECTION 271(1)(C) OF THE ACT. IN DEFENCE OF H IS ARGUMENT, THE LD. A.R. RELIED ON A SERIES OF DECISIONS: 1. CIT VS. SHRI HIRALAL DOSHI (ITA NO.2331 OF 2013) DATED 09.02.2016 2. CIT VS. BENNETT COLEMAN & CO. LTD. (259 CTR 383) THE LD. A.R. SUBMITTED THAT THE HONBLE BOMBAY HIG H COURT IN BOTH THE ABOVE DECISIONS HAVE HELD THAT IN CASE OF CHANGE OF HEADS OF INCOME WHILE FRAMING THE ASSESSM ENT ORDER WOULD NOT RESULT INTO LEVYING OF PENALTY UNDER SECT ION 271(1)(C) EVEN THOUGH IT RESULTS IN HIGHER INCOME TAX LIABILI TY PAYABLE BY THE ASSESSEE. THE LD. A.R. THEREFORE PRAYED THAT T HE PENALTY AS SUSTAINED BY LD. CIT(A) MAY KINDLY BE DELETED BY FO LLOWING THE RATIO LAID DOWN IN THE AFORESAID TWO DECISIONS BY T HE JURISDICTIONAL HIGH COURT. 8. THE LD. D.R. HEAVILY RELIED ON THE ORDER OF LD. CIT(A) AND SUBMITTED THAT THE FIRST APPELLATE AUTHORITY HAS DI RECTED THE AO TO CALCULATE THE PENALTY ON THE DIFFERENTIAL AMOUNT OF TAX WHICH BECOMES PAYABLE AS A RESULT OF CHANGE OF HEAD FROM CAPITAL GAIN TO BUSINESS INCOME. THE LD. D.R. SUBMITTED THAT TH E ASSESSEE HAS FILED INACCURATE PARTICULARS OF INCOME BY SHOWI NG THE SHORT TERM CAPITAL GAIN UNDER THE HEADS CAPITAL GAIN WHER EAS THE SAME WAS ASSESSABLE UNDER THE HEAD INCOME FROM BUSINESS AND PROFESSION AND THUS JUSTIFIED THE IMPOSITION OF PEN ALTY ON THE DIFFERENTIAL AMOUNT OF TAX WHICH BECAME PAYABLE AS A RESULT OF CHANGE OF HEADS OF INCOME. 9. AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIAL ON RECORD, WE OBSERVE THAT THE PENALTY HAS BEEN SUSTAI NED BY THE LD. CIT(A) ON THE DIFFERENTIAL AMOUNT OF TAX RESULT ING FROM ITA NO.2896/M/2017 M/S. ENVISION INVESTMENT CONSULTANTS 5 CHANGE OF HEADS OF INCOME FROM CAPITAL GAIN TO INCO ME FROM BUSINESS AND PROFESSION BY THE AO. THIS HAS HAPPEN ED BECAUSE THE ASSESSEE WAS OF THE BONAFIDE BELIEF THAT THE SH ORT TERM CAPITAL GAIN ARISING FROM THE SALE SHARES IS ASSESS ABLE UNDER THE HEAD CAPITAL GAIN WHEREAS ACCORDING TO THE AO, THE SAME IS ASSESSABLE UNDER THE HEAD INCOME FROM BUSINESS AND PROFESSION. THUS THERE IS NO DISPUTE THAT PENALTY HAS ARISEN ONLY DUE TO THE DIFFERENTIAL TAX LIABILITY ARISING FROM CHANGE OF HEADS OF INCOME. IN OUR OPINION, THE ASSESSEE HAS DISCLOSED FULL PARTICULARS AS TO THE INCOME FROM SHORT TERM CAPITA L GAIN IN THE RETURN OF INCOME AND THEREFORE NO PENALTY CAN BE IM POSED UNDER SECTION 271(1)(C) OF THE ACT AS THERE HAS BEEN NO C ONCEALMENT OF FACTS OR FILING OF INACCURATE PARTICULARS ON THE PA RT OF THE ASSESSEE. THE CASE OF THE ASSESSEE FINDS SUPPORT O F THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. SHRI HIRALAL DOSHI (ITA NO.2331 OF 2013) DATED 09.02.2016 WHEREI N THE HONBLE BOMBAY HIGH COURT HAS HELD THAT NO PENALTY WOULD BE ATTRACTED UNDER SECTION 271(1)(C) OF THE ACT IF THE TAX LIABILITY HAS ARISEN ON ACCOUNT OF CHANGE OF HEADS OF INCOME DURI NG THE ASSESSMENT PROCEEDINGS. WHILE PASSING THE ORDER TH E HONBLE BOMBAY HIGH COURT HAS FOLLOWED ANOTHER DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. BENNETT CO LEMAN & CO. LTD. (259 CTR 383) IN WHICH THE CO-ORDINATE BEN CH OF THE HIGH COURT HAS HELD THAT NO PENALTY CAN BE LEVIED U NDER SECTION 271(1)(C) OF THE ACT IN CASE OF CHANGE OF HEADS OF INCOME WHICH IS NOT SHOWN TO BE PERVERSE. IN THIS CASE THE AO HAS ASSESSED THE PREMIUM RECEIPT ON REDEMPTION OF DEBENTURE UNDER TH E HEAD INCOME FROM OTHER SOURCES WHICH WAS DISCLOSED BY TH E ASSESSEE UNDER THE HEAD CAPITAL GAIN AND THE TRIBUNAL DELETE D THE PENALTY ITA NO.2896/M/2017 M/S. ENVISION INVESTMENT CONSULTANTS 6 ON THE GROUND THAT THERE IS ONLY CHANGE OF HEAD OF INCOMES WHICH IS NOT PERVERSE AND THE HONBLE BOMBAY HIGH C OURT DISMISSED THE APPEAL OF THE REVENUE AS NOT HAVING A NY SUBSTANTIAL QUESTION OF LAW. THEREFORE, ON THIS CO UNT THE PENALTY IS LIABLE TO BE DELETED. EVEN OTHERWISE, THE NOTIC E ISSUED BY THE AO UNDER SECTION 274 READ WITH SECTION 271(1)(C) OF THE ACT DATED 10.12.2010, A COPY OF WHICH IS FILED AT PAGE NO.1 OF THE PAPER BOOK THAT HAS BEEN ISSUED IN A MECHANICAL MAN NER WITHOUT SPECIFYING THE LIMB UNDER WHICH THE PENALTY IS PROPOSED TO BE LEVIED. ON THIS COUNT ALSO THE ASSESSEE HAS NOT BEEN GIVEN A REASONABLE OPPORTUNITY TO RESPOND ON WHICH ONE O F THE TWO LIMBS ,THE ASSESSEE IS BEING PENALIZED. ACCORDINGL Y, THE PENALTY PROCEEDINGS ARE BAD IN LAW. THE CASE OF THE ASSESS EE IS SUPPORTED BY THE DECISION OF THE HONBLE BOMBAY HIG H COURT IN THE FOLLOWING CASES: A)CIT VS SSAS EMERALD MEADOWS(SC) (2016) 73 TAXMA NN.COM 241 KARNATAKA SLP DISMISSED AS REPORTED IN (2016) 73 TAXMANN.COM 248 (SC) B) CIT VS. MANJUNATH COTTON AND GINNING FACTORY (20 13) 359 ITR 565 (KAR.) C) CIT VS. SHRI SAMSON PERINCHERY (2017) 392 ITR 4 (BOM.) D) CIT VS. MRS. PIEDADE PERINCHERY ITXA NO.1310 OF 2014 ORDER DATED 10.01.2017 (BOM. HC) 10. IN VIEW OF THE ABOVE DISCUSSION AND IN THE LIGH T OF THE RATIO LAID DOWN BY THE HONBLE BOMBAY HIGH COURT, WE ARE INCLINED TO SET ASIDE THE ORDER OF LD. CIT(A) AND DIRECT THE AO TO DELETE THE PENALTY. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 22.10.2019. SD/- SD/- (MAHAVIR SINGH) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 22.10.2019. * KISHORE, SR. P.S. ITA NO.2896/M/2017 M/S. ENVISION INVESTMENT CONSULTANTS 7 COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY /ASSTT. REGISTRAR, ITAT, MUMBAI.