ACIT, Uttrakhand V. Smt. Kamlesh Pal, Haldwani

ITA 3025/DEL/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 2688 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 10 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-04-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 06-03-2013
• Assessment Year: 2004-2005
• Appeal Filed On: 08-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: TARUN SEEM
• Keywords: Unexplained investment; Gift
• Section: 143(3); 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH E NEW DELHI) BEFORE SHRI G.D. AGRAWAL, HONBLE VICE-PRESIDENT AND SHRI RAJPAL YADAV, HONBLE JUDICIAL MEMBER ITA NO. 3025/DEL/2011 ASSESSMENT YEAR: 2004-05 ASSISTANT COMMISSIONER OF IT, VS. KAMLESH PAL, AM BIKA VIHAR, DISTRICT; NAINITAL AMBIKA VIHAR, CIVIL LINES, (UTTRAKHAND) HALDWANI. (PAN: AMMPP0375P) (APPELLANT) (RESPONDENT) ITA NO. 3026/DEL/2011 ASSESSMENT YEAR: 2006-07 ASSISTANT COMMISSIONER OF IT, VS. ASHOK PAL, AMBI KA VIHAR, DISTRICT; NAINITAL AMBIKA VIHAR, CIVIL LINES, (UTTRAKHAND) HALDWANI. (PAN: AIIPP6758BP) (APPELLANT) (RESPONDENT) ITA NO.3027/DEL/2011 ASSESSMENT YEAR: 2006-07 ASSISTANT COMMISSIONER OF IT, VS. JAMUNA PAL, AMB IKA VIHAR, DISTRICT; NAINITAL AMBIKA VIHAR, CIVIL LINES, (UTTRAKHAND) HALDWANI. (PAN: AGHPP6105NP) (APPELLANT) (RESPONDENT) ITA NO.3028/DEL/2011 ASSESSMENT YEAR: 2006-07 ASSISTANT COMMISSIONER OF IT, VS. MAHESH PAL, AMB IKA VIHAR, DISTRICT; NAINITAL AMBIKA VIHAR, CIVIL LINES, (UTTRAKHAND) HALDWANI. (PAN: ALVPP1367R) (APPELLANT) (RESPONDENT) ITA NO.3029/DEL/2011 ASSESSMENT YEAR: 2006-07 ASSISTANT COMMISSIONER OF IT, VS. MOHAN PAL, AMBI KA VIHAR, DISTRICT; NAINITAL AMBIKA VIHAR, CIVIL LINES, (UTTRAKHAND) HALDWANI. (PAN: AIIPP3271E) (APPELLANT) (RESPONDENT) 2 ITA NO.3030/DEL/2011 ASSESSMENT YEAR: 2006-07 ASSISTANT COMMISSIONER OF IT, VS. RACHANA PAL, AM BIKA VIHAR, DISTRICT; NAINITAL AMBIKA VIHAR, CIVIL LINES, (UTTRAKHAND) HALDWANI. (PAN: AIIPP6380Q) (APPELLANT) (RESPONDENT) ITA NO.3031/DEL/2011 ASSESSMENT YEAR: 2006-07 ASSISTANT COMMISSIONER OF IT, VS. RAMESH PAL, AMB IKA VIHAR, DISTRICT; NAINITAL AMBIKA VIHAR, CIVIL LINES, (UTTRAKHAND) HALDWANI. (PAN: AIIPP6379F) (APPELLANT) (RESPONDENT) ITA NO.3032/DEL/2011 ASSESSMENT YEAR: 2006-07 ASSISTANT COMMISSIONER OF IT, VS. ROMA PAL, AMBIK A VIHAR, DISTRICT; NAINITAL AMBIKA VIHAR, CIVIL LINES, (UTTRAKHAND) HALDWANI. (PAN: AMNPP5812C) (APPELLANT) (RESPONDENT) ITA NO.3033/DEL/2011 ASSESSMENT YEAR: 2006-07 ASSISTANT COMMISSIONER OF IT, VS. SURESH PAL, AMB IKA VIHAR, DISTRICT; NAINITAL AMBIKA VIHAR, CIVIL LINES, (UTTRAKHAND) HALDWANI. (PAN: ACLP5842L) (APPELLANT) (RESPONDENT) ITA NO.3034/DEL/2011 ASSESSMENT YEAR: 2006-07 ASSISTANT COMMISSIONER OF IT, VS. TARA PAL, AMBIK A VIHAR, DISTRICT; NAINITAL AMBIKA VIHAR, CIVIL LINES, (UTTRAKHAND) HALDWANI. (PAN: AIPP6509P) (APPELLANT) (RESPONDENT) 3 ITA NO.3035/DEL/2011 ASSESSMENT YEAR: 2006-07 ASSISTANT COMMISSIONER OF IT, VS. VINOD PAL, AMBI KA VIHAR, DISTRICT; NAINITAL AMBIKA VIHAR, CIVIL LINES, (UTTRAKHAND) HALDWANI. (PAN: AEXPP3953G) (APPELLANT) (RESPONDENT) ITA ITA NO.3036/DEL/2011 ASSESSMENT YEAR: 2006-0 7 ASSISTANT COMMISSIONER OF IT, VS. GOPAL SINGH PAL (HUF),AMBIKA VIHAR, DISTRICT; NAINITAL CIVIL LINES, HALDWANI (UTTRAKHAND) (PAN: AAEHM9657H) (APPELLANT) (RESPONDENT) ITA NO.3037/DEL/2011 ASSESSMENT YEAR: 2006-07 ASSISTANT COMMISSIONER OF IT, VS. GOPAL SINGH PA L,AMBIKA VIHAR, DISTRICT; NAINITAL CIVIL LINES, HALDWAN I (UTTRAKHAND) (PAN: ACLPP5840G) (APPELLANT) (RESPONDENT) ITA NOS.3038 & 3039/DEL/2011 ASST.YEA RS: 2004-05 & 06-07 ASSISTANT COMMISSIONER OF IT, VS. NEHA PAL, AMBIK A VIHAR, DISTRICT; NAINITAL AMBIKA VIHAR, CIVIL LINES, (UTTRAKHAND) HALDWANI. (PAN: AIIPP6381R) (APPELLANT) (RESPONDENT) ITA NOS.3040 & 3041/DEL/2011 ASST.YRS: 2004-05 & 20 06-07 ASSISTANT COMMISSIONER OF IT, VS. MEENU PAL, AMBI KA VIHAR, DISTRICT; NAINITAL AMBIKA VIHAR, CIVIL LINES, (UTTRAKHAND) HALDWANI. (PAN: ALOPP3821H) (APPELLANT) (RESPONDENT) 4 ITA NOS.3042 & 3043/DEL/2011 ASST. YRS: 2004-05 & 2 006-07 ASSISTANT COMMISSIONER OF IT, VS. MEERA PAL, AMBI KA VIHAR, DISTRICT; NAINITAL AMBIKA VIHAR, CIVIL LINES, (UTTRAKHAND) HALDWANI. (PAN: AIIPP6448D) (APPELLANT) (RESPONDENT) ITA NOS.3044/DEL/2011 ASST. YRS: 2004-05 ASSISTANT COMMISSIONER OF IT, VS. SUSHIL K UMAR,HUF,AMBIKA VIHAR, DISTRICT; NAINITAL AMBIKA VIHAR, CIVIL LIN ES, (UTTRAKHAND) HALDWANI. (PAN: AAOHS8525C) (APPELLANT) (RESPONDENT) ITA NOS.3045/DEL/2011 ASST. YRS: 2006-07 ASSISTANT COMMISSIONER OF IT, VS. SUSHIL K UMAR,AMBIKA VIHAR, DISTRICT; NAINITAL AMBIKA VIHAR, CIVIL LIN ES, (UTTRAKHAND) HALDWANI. (PAN: ACLPP5841K) (APPELLANT) (RESPONDENT) REVENUE BY: SHRI TARUN SEEM, SR. DR ASSESSEE BY: SHRI RAHUL K HARE, ADV. ORDER PER BENCH: THE PRESENT TWENTY ONE APPEALS ARE DIRECTED AT THE INSTANCE OF REVENUE AGAINST THE SEPARATE ORDERS OF LEARNED CIT(APPEALS) DATED 15.12.2010, PASSED ON THE APPEALS OF RESPONDENTS IN ASSESSMENT YEARS 2004-05 AND 2006- 07. THE SOLITARY GRIEVANCE OF THE REVENUE IS THAT L EARNED CIT(APPEALS) HAS ERRED IN DELETING THE PENALTY IMPOSED UNDER SECTION 271(1)(C) OF THE INCOME- TAX ACT, 1961 UPON EACH RESPONDENTS. SINCE THE ISSU E INVOLVED IN ALL THE 5 APPEALS IS COMMON, THE FACTS ARE ALSO COMMON, THERE FORE, WE HARD ALL THESE APPEALS TOGETHER AND DEEM IT APPROPRIATE TO DISPOSE OF THEM BY THIS COMMON ORDER. FOR THE FACILITY OF REFERENCE, WE ARE TAKING UP THE FACTS, MAINLY, FROM ITA NO.3025/DEL/2011 I.E. AN APPEAL IN THE CASE OF SMT. KAMLESH PAL. ANY VARIATION OF FACTS FOUND TO BE NECESSARY FOR ADJUD ICATION OF THE CONTROVERSY AVAILABLE IN ANY OTHER APPEAL, WE WILL MAKE A SPECI FIC REFERENCE TO THOSE FACTS. 2. IT APPEARS THAT THERE WAS A CHEQUERED HISTORY IN DETERMINATION OF TAX LIABILITY OF ALL THE RESPONDENTS. IN THE CASES OF S IX ASSESSEES, THREE ASSESSMENT ORDERS WERE PASSED. THE ASSESSEE SMT. KAMLESH PAL H AS FILED HER RETURN OF INCOME ON 31 ST OCTOBER 2004 DECLARING AN INCOME OF RS.9,65,110 AN D AGRICULTURAL INCOME OF RS.43,500 FOR ASSESSMENT YEA R 2004-05. AN ASSESSMENT ORDER WAS PASSED UNDER SEC. 143(3) ON 29 .12.2006 WHEREBY THE INCOME OF THE ASSESSEE WAS DETERMINED AT RS.23,19,4 10. LEARNED COMMISSIONER TOOK COGNIZANCE UNDER SEC. 263 OF THE ACT AND SET ASIDE THE ASSESSMENT ORDER. THE ORDER OF THE LEARNED COMMISSI ONER WAS NOT CHALLENGED, AS STATED BY THE LEARNED COUNSEL FOR TH E ASSESSEE. IN PURSUANCE OF THE LEARNED COMMISSIONERS ORDER, FRESH ASSESSMENT ORDER WAS PASSED UNDER SEC. 143(3) READ WITH SEC. 263 OF THE INCOME-TAX AC T, 1961 ON 28.12.2008. 6 THE ASSESSEE DID NOT FILE APPEAL AGAINST THIS ASSES SMENT ORDER BUT FILED A REVISION BEFORE THE LEARNED COMMISSIONER UNDER SEC. 264 OF THE INCOME-TAX ACT, 1961. LEARNED COMMISSIONER HAS DECIDED THE REV ISION OF ASSESSEE VIDE ORDER DATED 29.3.2010. LEARNED ASSESSING OFFICER TH EREAFTER PASSED THIRD ASSESSMENT ORDER ON 24.12.2010 UNDER SEC. 143(3) RE AD WITH SEC. 264 OF THE INCOME-TAX ACT, 1961. DISSATISFIED WITH THIS ORDER, ASSESSEE FILED AN APPEAL BEFORE THE LEARNED COMMISSIONER WHICH HAS BEEN DECI DED ON IST OF JUNE 2011. 3. THE ABOVE FACTS ARE COMMON IN THE CASE OF SMT. K AMLESH PAL, JAMUNA PAL, SHRI GOPAL PAL (HUF) & INDIVIDUAL, NEHA PAL AN D MEENU PAL. THE ORDER OF THE LEARNED COMMISSIONER DATED IST OF JUNE 2011 HAS NOT BEEN CHALLENGED. ORIGINALLY, LEARNED ASSESSING OFFICER H AS MADE ADDITIONS UNDER FIVE HEADS WHICH ARE MENTIONED IN THE PENALTY ORDER OF SMT. KAMLESH PAL. IT READS AS UNDER: (I) ADDITION ON ACCOUNT OF CLAIM OF ALLEGED LONG TERM CAPITAL GAIN RS.7,94,300 (II) ADDITION ON ACCOUNT OF TRANSPORTATION INCOME RS.17,98,504 (III)ADDITION ON ACCOUNT OF CLAIM OF ALLEGED GIFT RS. 5,00,000 (IV) ADDITION ON ACCOUNT OF UNEXPLAINED INVESTMENT RS.2,33,570 ( V) ADDITION ON ACCOUNT OF CLAIM OF ALLEGED AGRIC ULTURAL INCOME RS. 43,500 7 4. IN THE SUBSEQUENT PROCEEDINGS, THIS ADDITION OF RS.7,94,300 WAS CONFIRMED BY THE LEARNED COMMISSIONER WHILE DECIDIN G THE REVISION OF THE ASSESSEE UNDER SEC. 264 OF THE ACT. THE CONFIRMATIO N OF THIS ADDITION WAS NOT CHALLENGED BY THE ASSESSEE IN FURTHER APPEAL OR IN ANY OTHER PROCEEDINGS. SIMILARLY, ADDITION OF RS.5 LACS ON ACCOUNT OF UNEX PLAINED GIFT WAS ALSO CONFIRMED BY THE LEARNED COMMISSIONER WHICH REMAINE D UNCHALLENGED. THE OTHER ADDITIONS WERE DELETED EITHER BY THE LEARNED ASSESSING OFFICER WHILE GIVING EFFECT TO THE ORDER OF THE LEARNED COMMISSIO NER PASSED UNDER SEC. 264 OR BY THE LEARNED COMMISSIONER(APPEALS) ON THE PROCEEDINGS ARISEN FROM AN ASSESSMENT ORDER PASSED UNDER SEC. 143(3) R EAD WITH SEC. 264 OF THE ACT. IN OTHER WORDS, THE ADDITIONS MADE AT SR. NOS. 4 AND 5 WERE NOT MADE BY THE ASSESSING OFFICER HIMSELF, WHILE PASSING ASS ESSMENT ORDER UNDER SEC. 143(3) READ WITH SEC. 264 ON 24.12.2010. THE ADDITI ON ON ACCOUNT OF TRANSPORTATION INCOME MENTIONED SR. NO. 2 WAS MADE BY THE ASSESSING OFFICER BUT WAS DELETED BY THE LEARNED CIT(APPEALS) VIDE HER ORDER DATED IST OF JUNE 2011. 5. IN THE REST OF THE FIFTEEN APPEALS, ORIGINAL ASS ESSMENT ORDER WAS PASSED UNDER SEC. 143(3) ON 26.12.2008. THE ASSESSEE FILED A REVISION BEFORE THE LEARNED COMMISSIONER AND IN PURSUANCE OF THE ORDER PASSED UNDER SEC. 264, 8 LEARNED ASSESSING OFFICER HAS PASSED SECOND ASSESSM ENT ORDER UNDER SEC. ,143(3) READ WITH SEC. 264 ON 24.12.2010. THE RESPO NDENTS HAVE FILED THE APPEALS AGAINST THE ASSESSMENT ORDERS AND THE APPEA LS HAVE BEEN DECIDED ON IST OF JUNE 2011. 6. IN BRIEF, WE ARE CONCERNED MAINLY WITH TWO ISSU ES I.E. WHETHER PENALTY UNDER SEC. 271(1)(C) OF THE ACT IS IMPOSABL E UPON THE RESPONDENTS ON THE ADDITIONS MADE ON ACCOUNT OF LONG TERM CAPITAL GAIN AND GIFTS RECEIVED BY THEM. ALL OTHER ADDITIONS WERE EITHER DELETED BY TH E LEARNED CIT(APPEALS) OR NOT MADE BY THE LEARNED ASSESSING OFFICER WHILE PASSING ASSESSMENT ORDER UNDER SEC. 143(3) READ WITH SECTION 264, I.E. IN PU RSUANCE OF THE ORDER OF LEARNED CIT PASSED UNDER SEC. 264 OF THE INCOME-TAX ACT,1961, OR PARTLY REDUCED BY THE LEARNED CIT(APPEALS) BY HER ORDER DA TED 01.06.2011. 7. THE FIRST COMMON ADDITION AVAILABLE IN THE ASSES SMENTS OF ALL THE RESPONDENTS AND WHICH LED THE ASSESSING OFFICER TO IMPOSE THE PENALTY UNDER SEC. 271(1)(C) IS WITH REGARD TO THE CLAIM OF LONG TERM CAPITAL GAIN. IN THE CASE OF SMT. KAMLESH PAL, THE FACTS ARE THAT LEARNE D ASSESSING OFFICER HAS DIRECTED THE ASSESSEE TO PRODUCE EVIDENCE FOR SUBST ANTIATING SUCH CLAIM. HE CALLED FOR THE FOLLOWING DETAILS: 9 (I) EVIDENCE OF SHARE TRANSFER THROUGH CERTIFICATE OF SHARE TRANSFER AGENT FROM WHICH PHYSICAL DELIVERY OF SHARES AND PU RCHASE/SALE COULD BE ASCERTAINED; (II) ANY EVIDENCE TO THE EFFECT THAT SHARES WERE RO UTED THROUGH KOLKATA STOCK EXCHANGE ALSO COULD NOT BE PRODUCED; (III) ANY EVIDENCE TO THE EFFECT OF AVAILABILITY OF FUNDS FOR PURCHASE OF SHARES ALSO COULD NOT BE FURNISHED; (IV) COPY OF BANK ACCOUNT FROM WHICH THE CHEQUE TH E PAYMENTS WAS RECEIVED; (V) COPY OF BROKER ACCOUNTS THROUGH WHOM TRANSACTI ON UNDERTAKEN. 8. THE ASSESSEE HAS SUBMITTED THAT SHARES WERE PURC HASED THROUGH THE SHARE BROKER AND PAYMENTS WERE MADE TO THEM. THE YE AR IN WHICH SHARES WERE PURCHASED, NO DOUBT WAS RAISED BY THE LEARNED ASSESSING OFFICER ABOUT THE PURCHASES. THE SHARES WERE HELD FOR MORE THAN 1 2 MONTHS AND SOLD THROUGH THE SHARE BROKERS, WHO WERE MEMBERS OF THE STOCK EXCHANGE. THE SALE CONSIDERATION WAS RECEIVED FROM THE SHARES BRO KERS THROUGH ACCOUNT PAYEE DRAFT. THE SHARE BROKERS HAVE CHARGED THE SEC URITY TRANSACTION TAX ON THE SAID TRANSACTION. THE ASSESSEE HAS FILED COPY O F THE CONTRACT NOTES FOR PURCHASE AND SALE OF SHARES, COPY OF SHARE CERTIFIC ATE, COPY OF THE D-MAT 10 ACCOUNT AND COPY OF CAPITAL GAIN CALCULATION SHEET. LEARNED ASSESSING OFFICER OBSERVED THAT ALL THE ASSESSEES RELATES TO PAL GROU P OF CASES, WHICH IS A BUSINESS FAMILY, PRIMARILY CARRYING OUT BUSINESS IN THE INDUSTRY OF STONE CRUSHERS, SOAP STONE, MINERALS, CONSTRUCTION OF BUI LDING AND REAL ESTATES BUSINESS. IN THIS GROUP, THERE ARE 21 ASSESSMENTS O F 17 INDIVIDUALS/HUF ASSESSEES. ALL OF THEM HAVE MADE INVESTMENT IN SHAR ES WHICH GIVE RISE TO THEM SUBSTANTIAL CAPITAL GAIN. HE CALLED FOR INFORM ATION FROM ADI, CALCUTTA ABOUT THE SHARE BROKERS AND OBSERVED THAT SMT. KAML ESH PAL, NEHA PAL, MEERA PAL AND SMT. MEENU PAL HAVE SHOWN PURCHASES O F SCRIP FROM P.K. AGGARWAL & CO. WHO IS A TAINTED BROKER. SIMILARLY, THEY HAVE SOLD THE SHARES THROUGH N.M. LOHIA & CO. AND BACHHAWAT & CO. WHO WE RE NOT FOUND AVAILABLE ON THE ADDRESSES PRINTED IN THE CONTRACT NOTE. LEARNED ASSESSING OFFICER ALSO OBSERVED THAT HE HAS COLLECTED INFORMA TION FROM ADI, CALCUTTA THAT THESE SHARES BROKERS WERE ENGAGED IN SUCH A WA Y WHICH GIVES HUGE JUMP IN THE PRICE OF THE SCRIP, MOREOVER, THE SCRIP PRIC ES WERE ARTIFICIALLY JACKED UP. THUS, ACCORDING TO THE ASSESSING OFFICER, THERE WAS NO GENUINE TRANSACTION IN THE SALE AND PURCHASE OF THE SHARES. 9. THE NEXT COMMON ITEM WHICH IS AVAILABLE IN THE C ASES OF THREE RESPONDENTS, NAMELY, SMT. KAMLESH PAL, NEHA PAL AND MEERA PAL IS IN 11 RESPECT OF GIFTS RECEIVED FROM SH. RAHUL PRAKASH, W HO HAS BEEN ALLEGED AS A FAMILY FRIENDS AND RESIDENT OF 113/4, SWAARUP NAGAR , KANPUR. THESE PERSONS HAVE RECEIVED GIFTS OF RS. 5 LACS EACH. LEARNED ASS ESSING OFFICER HELD THAT THE GIFT WAS NOT GENUINE AND HE MADE THE ADDITION. 10. THE THIRD COMMON ISSUE IS IN RESPECT OF AGRICUL TURAL INCOME. IT IS AVAILABLE IN THE CASES OF ASHOK PAL ITA NO.3026/E L/2011, RACHANA PAL ITA NO.3030/DEL/2011, RAMESH PAL ITA NO.3031/DEL/ 2011, SURESH PAL ITA NO. 3033/DEL/2011, VINOD PAL ITA NO.3035/DEL/ 2011 AND SMT. MEENU PAL ITA NO.3041/DE/2011. ASHOK PAL HAS CLAI MED AGRICULTURAL INCOME OF RS. 12,000, OUT OF THIS CLAIM, AN ADDITIO N OF RS.3,000 WAS DELETED. RACHANA PAL HAS CLAIMED RS. 24,000. IT IS ACCEPTED, EXCEPT RS. 5,000. RAMESH PAL CLAIMED RS.82,000 AND HIS CLAIM UP TO RS .57,000 WAS ACCEPTED. SIMILARLY, VINOD PAL CLAIMED RS.24,000 AS AGRICULTU RAL INCOME. THE ADDITION TO THE EXTENT OF RS. 16,000 HAS BEEN DELETED. IN A WAY, ALL THESE RESPONDENTS HAVE CLAIMED AGRICULTURAL INCOME RANGING IN BETWEEN RS.12,000 TO RS. 82,000. THEIR CLAIM HAS BEEN ACCEPTED PARTLY. ESTIM ATED DISALLOWANCE HAS BEEN MADE. 11. LEARNED FIRST APPELLATE AUTHORITY HAS DELETED T HE PENALTY IMPOSED BY THE LEARNED ASSESSING OFFICER. LEARNED DR WHILE IMP UGNING THE ORDER OF 12 LEARNED CIT(APPEALS) SUBMITTED THAT LEARNED FIRST A PPELLATE AUTHORITY HAS DELETED THE PENALTY FOR DENIAL OF THE ASSESSEES CL AIM IN RESPECT OF LONG TERM CAPITAL GAIN, ON THE GROUND THAT ASSESSEES HAVE BAS ICALLY DISCLOSED ALL THE MATERIAL FACTS. THEY FAILED TO SUBSTANTIATE THEIR T RANSACTIONS BEFORE THE ASSESSING OFFICER. ACCORDING TO THE LEARNED FIRST A PPELLATE AUTHORITY, THE ASSESSING OFFICER HAS NOT PROVED THAT ASSESSEES HAV E NOT PURCHASED THE SHARES IN THE IMMEDIATELY PRECEDING YEAR ETC. WHICH ARE CLAIMED TO HAVE BEEN SOLD IN THE PRESENT YEAR. THE PURCHASE AMOUNTS WERE DULY SHOWN IN THE BALANCE SHEET AND THEY WERE NOT TREATED AS BOGUS. T HE ASSESSMENTS HAVE NOT BEEN REOPENED IN THE EARLIER YEARS. THUS, ACCORDING TO THE LEARNED CIT(APPEALS), IF PURCHASES ARE GENUINE THEN THEIR S ALES CANNOT BE DOUBTED. LEARNED DR SUBMITTED THAT THERE WAS NO SCRUTINY ASS ESSMENT IN EARLIER ASSESSMENT YEARS. THE INVESTIGATION HAS BEEN CONDUC TED IN THE PRESENT YEAR AND IT HAS BEEN DEMONSTRATED ON THE RECORD THAT AL LEGED TRANSACTION WAS BOGUS. LEARNED ASSESSING OFFICER WAS ABLE TO LAY HI S HANDS ON SUFFICIENT MATERIAL WHICH SUGGESTS THAT INFORMATION SUBMITTED BY THE ASSESSEE ALONG WITH THE RETURN WAS FALSE. THEREFORE, LEARNED CIT(A PPEALS) OUGHT TO HAVE NOT DELETED THE PENALTY. SIMILARLY, HE POINTED OUT THAT THE CLAIM OF GIFT WAS BOGUS AND, THEREFORE, THE ASSESSEES DESERVE TO BE V ISITED WITH PENALTY. 13 12. ON THE OTHER HAND, LEARNED COUNSEL FOR THE ASSE SSEES RELIED UPON THE ORDER OF LEARNED CIT(APPEALS). HE SUBMITTED THAT ME RELY MAKING OF THE CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISH OF INACCURATE CLAIM OF FURNISHING INACCURATE PARTICULA RS. HE EMPHASIZED THAT THE MERE ADDITION ON ACCOUNT OF DISBELIEVING THE LONG T ERM CAPITAL GAIN CLAIMED BY THE ASSESSEE SHOULD NOT BE CONSIDERED AS SUFFICI ENT FOR IMPOSING THE PENALTY ALSO. THE ASSESSEES HAVE SHOWN PURCHASES OF THE SHARES IN THEIR BALANCE SHEET IN THE LAST ASSESSMENT YEAR. THE SHAR ES WERE RETAINED FOR MORE THAN 12 MONTHS. DETAILS OF PAYMENTS OF PURCHASE PRI CE AS WELL AS DETAILS OF RECEIPTS OF SALE PRICE WERE SUBMITTED BEFORE THE AS SESSING OFFICER. COPIES OF CONTRACT NOTES WERE SUBMITTED. DETAILS OF SHARE BRO KERS WERE SUBMITTED. HOW THE SHARE BROKERS WERE CONDUCTED THEIR BUSINESS IS NOT IN THE HANDS OF THE ASSESSEES. THEY WERE OPERATING IN THE STOCK EXCHANG E OF CALCUTTA AND NOT DEBARRED FROM CONDUCTING THE BUSINESS. THUS, ASSESS EES HAVE SUBMITTED ALL THE BASIC DETAILS IN SUPPORT OF THEIR CLAIMS. WITH REGARD TO THE GIFTS, IT WAS CONTENDED BY THE ASSESSEE THAT CONFIRMATION FROM TH E DONORS, DETAILS OF PAYMENT, IDENTITY OF THE DONORS ETC. WERE PRODUCED BEFORE THE ASSESSING OFFICER. THE CLAIM OF THE GIFTS WAS DISBELIEVED ON THE GROUND THAT IT IS AGAINST THE HUMAN PROBABILITY. THE GIFT WAS CLAIMED ONLY IN THE HANDS OF THREE OR FOUR ASSESSEES. WITH REGARD TO THE THIRD ADDITION, HE SUBMITTED THAT 14 AGRICULTURAL INCOME WAS NOT ACCEPTED IN TOTO. ON AN ESTIMATE BASIS, ASSESSING OFFICER HAS PARTLY ACCEPTED THE AGRICULTU RAL INCOME. THEREFORE, THERE CANNOT BE ANY PENALTY FOR PART DISALLOWANCE O F AGRICULTURAL INCOME. FOR BUTTRESSING HIS CONTENTIONS, HE RELIED UPON THE FOL LOWING DECISIONS: 1) CIT VS. BHARTESH JAIN REPORTED IN 323 ITR 358 ( DEL.); 2) RELIANCE PETROPRODUCTS REPORTED IN 322 ITR 158 S.C.; & 3) PUNEET SEHGAL VS. ITO REPORTED IN 123 TTJ 566 ( DEL-ITAT). 13. WE HAVE DULY CONSIDERED THE RIVAL CONTENTIONS A ND GONE THROUGH THE RECORD CAREFULLY. SECTION 271(1)(C) OF THE ACT HAS A DIRECT BEARING ON THE CONTROVERSY AND, THEREFORE, IT IS SALUTARY UPON US TO TAKE NOTE OF THE RELEVANT PROVISIONS OF SECTION 271(1)(C) ALONG WITH EXPLANAT ION 1 WHICH READ AS UNDER: 271. FAILURE TO FURNISH RETURNS, COMPLY WITH NOTIC ES, CONCEALMENT OF INCOME, ETC. (1). IF THE ASSESSING OFFICER OR THE COMMISSIONER ( APPEALS) OR THE CIT IN THE COURSE OF ANY PROCEEDINGS UNDER THIS ACT , IS SATISFIED THAT ANY PERSON (A) AND (B)******** (C) HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. HE MAY DIRECT THAT SUCH PERSON SHALL PAY BY WAY OF PENALTY. 15 (I) AND (INCOME-TAX OFFICER,)******** (III) IN THE CASES REFERRED TO IN CLAUSE (C) OR CLA USE (D), IN ADDITION TO TAX, IF ANY, PAYABLE BY HIM, A SUM WHICH SHALL NOT BE LESS THAN, BUT WHICH SHALL NOT EXCEED THREE TIMES, THE AMOUNT OF T AX SOUGHT TO BE EVADED BY REASON OF THE CONCEALMENT OF PARTICULARS OF HIS INCOME OR FRINGE BENEFIT THE FURNISHING OF INACCURATE PARTICU LARS OF SUCH INCOME OR FRINGE BENEFITS: EXPLANATION 1.- WHERE IN RESPECT OF ANY FACTS MATER IAL TO THE COMPUTATION OF THE TOTAL INCOME OF ANY PERSON UNDER THIS ACT, (A) SUCH PERSON FAILS TO OFFER AN EXPLANATION OR OF FERS AN EXPLANATION WHICH IS FOUND BY THE ASSESSING OFFICER OR THE COMMISSIONER(APPEALS) OR THE CIT TO BE FALSE, OR (B) SUCH PERSON OFFERS AN EXPLANATION WHICH HE IS N OT ABLE TO SUBSTANTIATE AND FAILS TO PROVE THAT SUCH EXPLANATI ON IS BONA FIDE AND THAT ALL THE FACTS RELATING TO THE SAME AND MATERIA L TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM, THE N, THE AMOUNT ADDED OR DISALLOWED IN COMPUTING THE TOTAL INCOME O F SUCH PERSON AS A RESULT THEREOF SHALL, FOR THE PURPOSES OF CLAUSE (C ) OF THIS SUB-SECTION, BE DEEMED TO REPRESENT THE INCOME IN RESPECT OF WHI CH PARTICULARS HAVE BEEN CONCEALED. 14. A BARE PERUSAL OF THIS SECTION WOULD REVEAL THA T FOR VISITING ANY ASSESSEE WITH THE PENALTY, THE ASSESSING OFFICER OR THE LEARNED CIT(APPEALS) DURING THE COURSE OF ANY PROCEEDINGS B EFORE THEM SHOULD BE SATISFIED, THAT THE ASSESSEE HAS; (I) CONCEALED HIS INCOME OR FURNISHED 16 INACCURATE PARTICULARS OF INCOME. AS FAR AS THE QUA NTIFICATION OF THE PENALTY IS CONCERNED, THE PENALTY IMPOSED UNDER THIS SECTION C AN RANGE IN BETWEEN 100% TO 300% OF THE TAX SOUGHT TO BE EVADED BY THE ASSESSEE, AS A RESULT OF SUCH CONCEALMENT OF INCOME OR FURNISHING INACCURATE PARTICULARS. THE OTHER MOST IMPORTANT FEATURES OF THIS SECTION IS DEEMING PROVISIONS REGARDING CONCEALMENT OF INCOME. THE SECTION NOT ONLY COVERED THE SITUATION IN WHICH THE ASSESSEE HAS CONCEALED THE INCOME OR FURNISHED INACCURATE PARTICULARS, IN CERTAIN SITUATION, EVEN WITHOUT THERE BEING ANYTHIN G TO INDICATE SO, STATUTORY DEEMING FICTION FOR CONCEALMENT OF INCOME COMES INT O PLAY. THIS DEEMING FICTION, BY WAY OF EXPLANATION I TO SECTION 271(1)( C) POSTULATES TWO SITUATIONS; (A) FIRST WHETHER IN RESPECT OF ANY FAC TS MATERIAL TO THE COMPUTATION OF THE TOTAL INCOME UNDER THE PROVISION S OF THE ACT, THE ASSESSEE FAILS TO OFFER AN EXPLANATION OR THE EXPLANATION OF FERED BY THE ASSESSEE IS FOUND TO BE FALSE BY THE ASSESSING OFFICER OR LEARN ED CIT(APPEALS); AND, (B) WHERE IN RESPECT OF ANY FACT, MATERIAL TO THE COMPU TATION OF TOTAL INCOME UNDER THE PROVISIONS OF THE ACT, THE ASSESSEE IS NO T ABLE TO SUBSTANTIATE THE EXPLANATION AND THE ASSESSEE FAILS TO PROVE THAT SU CH EXPLANATION IS BONA FIDE AND THAT THE ASSESSEE HAD DISCLOSED ALL THE FACTS R ELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF THE TOTAL INCOME. UN DER FIRST SITUATION, THE DEEMING FICTION WOULD COME TO PLAYA IF THE ASSESSEE FAILED TO GIVE ANY 17 EXPLANATION WITH RESPECT TO ANY FACT MATERIAL TO TH E COMPUTATION OF TOTAL INCOME OR BY ACTION OF THE ASSESSING OFFICER OR THE LEARNED CIT(APPEALS) BY GIVING A CATEGORICAL FINDING TO THE EFFECT THAT EXPLANATION GIVEN BY THE ASSESSEE IS FALSE. IN THE SECOND SITUATION, THE DEE MING FICTION WOULD COME TO PLAY BY THE FAILURE OF THE ASSESSEE TO SUBSTANTIATE HIS EXPLANATION IN RESPECT OF ANY FACT MATERIAL TO THE COMPUTATION OF TOTAL IN COME AND IN ADDITION TO THIS THE ASSESSEE IS NOT ABLE TO PROVE THAT SUCH EXPLANA TION WAS GIVEN BONA FIDE AND ALL THE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF THE TOTAL INCOME HAVE BEEN DISCLOSED BY THE ASSESSEE. T HESE TWO SITUATIONS PROVIDED IN EXPLANATION 1 APPENDED TO SECTION 271(1 )(C) MAKES IT CLEAR THAT THAT WHEN THIS DEEMING FICTION COMES INTO PLAY IN T HE ABOVE TWO SITUATIONS THEN THE RELATED ADDITION OR DISALLOWANCE IN COMPUT ING THE TOTAL INCOME OF THE ASSESSEE, FOR THE PURPOSE OF SECTION 271(1)(C) WOULD BE DEEMED TO BE REPRESENTING THE INCOME IN RESPECT OF WHICH INACCUR ATE PARTICULARS HAVE BEEN FURNISHED. 15. IN THE LIGHT OF ABOVE PROPOSITION, LET US EXAMI NE THE FACTS OF THE RESPONDENTS CASE. BASICALLY, PENALTY IS SOUGHT TO BE IMPOSED UPON THE ASSESSEES, WITH THE HELP OF EXPLANATION 1. LEARNED CIT(APPEALS), WHILE DELETING THE PENALTY ON THE ADDITION OF LONG TERM C APITAL GAIN HAS OBSERVED 18 THAT LEARNED ASSESSING OFFICER HAS NOT DISBELIEVED THE INVESTMENT IN THE SHARES IN THE EARLIER YEARS. THE INVESTMENT WAS DUL Y DISCLOSED IN THE BALANCE SHEET. ONCE THE INVESTMENT WAS ACCEPTED, IT WILL AM OUNT TO ACCEPTANCE OF GENUINENESS OF THE TRANSACTION PARTLY. THE SECOND R EASON ASSIGNED BY THE LEARNED CIT(APPEALS) IS THAT ASSESSING OFFICER HAS OBSERVED THAT THERE WAS NO AVAILABILITY OF CASH FOR THE PURCHASES OF SHARES , WHEREAS ACCORDING TO THE LEARNED CIT(APPEALS), THE SHARES WERE PURCHASED THR OUGH ACCOUNT PAYEE CHEQUES WHICH INDICATE THAT FUNDS WERE AVAILABLE IN THE ACCOUNTS OF THE ASSESSEE. THE NEXT REASON ASSIGNED BY THE LEARNED C IT(APPEALS) IS THAT IN THE REPORT SUBMITTED BY THE LEARNED ASSESSING OFFIC ER TO THE LEARNED CIT DURING THE PROCEEDINGS UNDER SEC. 264 OF THE ACT, I T HAS BEEN STATED THAT THE CLAIMED TRANSACTIONS IN SHARES WERE NOT ROUTED THRO UGH STOCK EXCHANGE AND, THEREFORE, THE PAYMENT OF STT IS OUT OF QUESTION AN D NO EXEMPTION CAN BE CLAIMED UNDER SEC. 10(38) OF THE ACT. IT WAS ALSO S UBMITTED IN THE SAID REPORT THAT STT WAS NOT PAID AND THIS FACT WAS PROVED THAT NOTHING WAS COLLECTED BY THE STOCK EXCHANGE. CONTRARY TO THIS STAND, THE AS SESSEE BEFORE THE LEARNED CIT(APPEALS) SUBMITTED THAT LEARNED ASSESSING OFFIC ER HIMSELF ACCEPTED IN HIS REPORT THAT THE TRANSACTIONS IN SHARES WERE CON DUCTED THROUGH THE BROKER AGAINST WHOM EITHER INQUIRY PROCEEDINGS WERE IN PRO GRESS OR WHO WERE SUSPENDED BY THE SEBI. IT WAS EMPHASIZED THAT ASSES SING OFFICER HAS CLEARLY 19 RECOGNIZED THE EXISTENCE OF THE BROKER AND IF BROKE RS WERE DUPING THEIR CLIENTS OR THE BROKERS WERE NOT PASSING THE TAX COL LECTED FROM THE CLIENTS TO THE GOVERNMENT THEN HOW THE ASSESSEE CAN BE PENALIZ ED. THUS, ACCORDING TO THE ASSESSEE, THE ASSESSING OFFICER HAS ADOPTED TWO CONTRADICTORY VERSIONS. HE TREATED THE TRANSACTION AS BOGUS AND YET ALSO RE PORTED THAT THE TRANSACTIONS WERE CONDUCTED THROUGH THE BROKERS. IT WAS ALSO CON TENDED THAT IF STT WAS NOT PAID THEN EXEMPTION UNDER SEC. 10(38) CAN BE DE NIED TO THE ASSESSEE BUT ASSESSING OFFICER CANNOT CHANGE THE HEAD OF INCOME I.E. FROM LONG TERM CAPITAL GAIN TO UNEXPLAINED RECEIPTS. LEARNED CIT( APPEALS) ON AN ANALYSIS OF ALL THESE MATERIAL ARRIVED AT A CONCLUSION THAT ASSESSEE HAS GIVEN AN EXPLANATION WHICH, THEY MIGHT HAVE FAILED TO SUBSTA NTIATE BUT THEIR EXPLANATION WAS NOT PROVED TO BE FALSE. SIMILARLY, WITH REGARD TO THE GIFTS THE ASSESSEE HAS SUBMITTED ALL NECESSARY DOCUMENTS I.E. DISCLOSING THE IDENTITY OF THE DONOR, DISCLOSING THE MANNER HOW GIFTS HAVE BEE N RECEIVED. THE ADDITION WAS MADE ON THE GROUND THAT IT IS AGAINST THE HUMAN PROBABILITY. ON DUE CONSIDERATION OF ALL THESE FACTS, WE ARE OF THE OPI NION THAT ADDITION QUA LONG TERM CAPITAL GAIN WAS PRIMARILY MADE ON THE BASIS O F THE CONDUCT OF THE BROKERS. BUT TO OUR MIND THAT CONDUCT WOULD NOT SUG GEST THAT EXPLANATION GIVEN BY THE ASSESSEE DURING THE ASSESSMENT PROCEED INGS ABOUT THEIR INVESTMENT WAS FALSE. LEARNED FIRST APPELLATE AUTHO RITY HAS CONSIDERED ALL 20 THESE ASPECTS BEFORE DELETING THE PENALTY. AS FAR A S THE PENALTY ON ADDITIONS QUA AGRICULTURAL INCOME IS CONCERNED, WE FIND THAT THESE ADDITIONS HAVE BEEN MADE ON ESTIMATE BASIS BY DISBELIEVING THE AGRICULT URAL INCOME PARTLY. THESE AMOUNTS DO NOT QUALIFY FOR VISITING THE ASSESSEE WI TH THE PENALTY BECAUSE LEARNED ASSESSING OFFICER HAS NOT PROVED THAT CLAIM MADE BY THE ASSESSEE WAS FALSE. TAKING INTO CONSIDERATION WELL REASONED ORDERS OF THE LEARNED FIRST APPELLATE AUTHORITY, WE DO NOT SEE ANY REASON TO INTERFERE IN THEM. THEREFORE, ALL THE APPEALS ARE DISMISSED. DECISION PRONOUNCED IN THE OPEN COURT ON 30 .04.20 13 SD/- SD/- ( G.D. AGRAWAL ) ( RAJPAL YADAV ) VICE-PRESIDENT JUDICIAL MEMBER DATED: 30/04/2013 MOHAN LAL COPY FORWARDED TO: 1) APPELLANT 2) RESPONDENT 3) CIT 4) CIT(APPEALS) 5) DR:ITAT ASSISTANT REGISTRAR