ITO 14(2)(2), MUMBAI V. PARASMAL NAHATA, MUMBAI

ITA 3744/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 48535 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2003-2004
• Appeal Filed On: 10-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SU RENDRA KUMAR
• Keywords: Income from undisclosed sources; Opportunity of being heard
• Section: 143(3); 54F; 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES C, MUMBAI BEFORE SHRI D.K. AGARWAL (J.M.) AND SHRI T.R. SOOD ( A.M.) ITA NO. 3744/MUM /2010 ASSESSMENT YEAR 2003-04 INCOME TAX OFFICER - 14 (2) - 2, EARNEST HOUSE, 3 RD FLOOR, NARIMAN POINT, MUMBAI 400 021. VS. SHRI PARASMAL NAHATA, 4 TH FLOOR, JOHRI MANSION, 259, KALBADEVI ROAD, MUMBAI. 400 002. PAN : ABXPN4269N (APPELLANT) (RESPONDENT) APPELLANT BY : MR. SURENDRA KUMAR RESPONDENT BY : SHRI SATISH MODY O R D E R PER D.K. AGARWAL, J.M. THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED A GAINST THE ORDER DATED 16.2.2010 PASSED BY THE LD. CIT (A) FOR THE A .Y. 2003-04 TAKING FOLLOWING GROUNDS OF APPEAL:- 1. THE ORDER OF THE CIT(A) IS OPPOSED TO LAW AND FA CTS OF THE CASE. 2. THE LD. CIT(A) ERRED IN DELETING THE PENALTY IG NORING THE FACT THAT THE AO HAS CLEARLY BROUGHT OUT BOTH IN THE ASSESSME NT ORDER AND IN THE PENALTY ORDER THAT THE ALLEGED TRANSACTIONS RESULTI NG IN LONG TERM CAPITAL GAINS HAVE BEEN ENGINEERED WITH THE MOTIVE OF TAX AVOIDANCE AND THEY ARE ALL BOGUS TRANSACTIONS. 3. THE CIT(A) ERRED IN DELETING THE PENALTY IGNORI NG THE FACT THAT THE CIT(A) HAS CONFIRMED THE QUANTUM ADDITIONS MADE BY THE A.O. 4. THE LD. CIT(A) ERRED IN DELETING THE PENALTY ON THE GROUND THAT THE QUANTUM ADDITION HAS BEEN DELETED BY ITAT IGNORING THAT THE DEPARTMENT HAS PREFERRED APPEAL TO HIGH COURT WHEREIN THE ORDE R OF THE ITAT IS LIKELY TO BE REVERSED. ITA 3744/M/2010 SHRI PAR ASMAL NAHATA 2 2. AT THE TIME OF HEARING, THE LD. D.R. SUPPORTS TH E ORDER OF THE A.O. 3. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSES SEE SUBMITS THAT SINCE THE ADDITION ON WHICH THE A.O. HAS IMPOSED PE NALTY HAS BEEN DELETED BY THE TRIBUNAL IN THE QUANTUM APPEAL, THER EFORE, THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE PENALTY IMPOSED BY TH E A.O. AND, THEREFORE, THE ORDER PASSED BY HIM BE UPHELD. 4. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS O F THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE F IND THAT THE ASSESSEE, AN INDIVIDUAL DERIVES INCOME FROM TRADING IN KNITTE D & FABRICS. IN THE RETURN, THE ASSESSEE HAS SHOWN LONG TERM CAPITAL GA IN ON THE SALE OF SHARES OF THE SCRIPT OF M/S MANTRA ON LINE OF ` 22,77,601/- AND HAS CLAIMED DEDUCTION U/S 54EC AND 54F AGAINST THE SAME . HOWEVER, THE A.O. WAS OF THE VIEW THAT THE PURCHASE OF TRANSACTI ON OF SHARES CLAIMED BY THE ASSESSEE ON THE DATE NEVER TOOK PLACE. THES E COLLUSIVE OFF MARKET TRANSACTIONS WERE MADE ON PAPER, CLOSE TO THE CLAIM ED DATE OF SALE OF SHARES AND BACK DATED AND ACCORDINGLY HE ASSESSED T HE AMOUNT OF CAPITAL GAIN OF ` 22,77,601/- AS INCOME FROM UNDISCLOSED SOURCES AND DENIED EXEMPTION CLAIMED U/S 54EC AND 54F AND THERE BY COMPLETED THE ASSESSMENT AT AN INCOME OF ` 24,51,220/- VIDE ORDER DATED 29.3.2006 PASSED U/S 143(3) OF THE INCOME TAX ACT, 1961 (THE ACT). ON APPEAL, THE LD. CIT(A) UPHELD THE ADDITION MADE BY THE A.O. ON FURTHER APPEAL BEFORE THE TRIBUNAL, THE TRIBUNAL IN ITA NO. 73/MUM/08 FOR A.Y. 2003-04 DATED 9.9.2009 HELD THAT THE TRANSACTIONS WERE GENUINE AN D THE A.O. AND LD. CIT(A) WERE NOT JUSTIFIED IN HOLDING THAT THE TRANS ACTIONS ARE NOT GENUINE, DIRECTED THE A.O. TO ACCEPT THE TRANSACTION AS GENU INE AND THEREAFTER ALLOW THE BENEFIT OF SECTION 54EC AND 54F AS PER LA W. IN THE MEANTIME, THE A.O. IN THE IMPUGNED PENALTY PROCEEDING U/S 271 (1(C) AFTER PROVIDING AN OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AND I N THE ABSENCE OF ANY EXPLANATION OF THE ASSESSEE HAS HELD THAT SINCE IN THE ASSESSMENT THE ITA 3744/M/2010 SHRI PAR ASMAL NAHATA 3 LONG TERM CAPITAL GAIN OF ` 22,77,601/- CLAIMED BY THE ASSESSEE WAS ASSESSED AS NON-GENUINE, THEREFORE, THE ASSESSEE HA S CONCEALED PARTICULARS OF INCOME BY FURNISHING INACCURATE PART ICULARS AND ACCORDINGLY IMPOSED PENALTY OF ` 717444/- VIDE ORDER DATED 30.3.2009 PASSED U/S 271(1)(C) OF THE ACT. ON APPEAL, THE LD . CIT(A) FOLLOWING THE TRIBUNALS ORDER IN THE QUANTUM APPEAL AND THE DECI SION OF HONBLE SUPREME COURT IN ACIT VS. K.C. BUILDERS 265 ITR 56 2, HOWEVER, DELETED THE PENALTY IMPOSED BY THE A.O. 5. IN THIS VIEW OF THE MATTER AND KEEPING IN VIEW T HAT SINCE IN THE QUANTUM APPEAL THE TRIBUNAL HAS DELETED THE ADDITIO N ON WHICH THE A.O. HAS IMPOSED PENALTY VIRTUALLY THE BASIS FOR IMPOSIT ION AND LEVY OF PENALTY U/S 271(1)(C) IS NOT AVAILABLE. WHEN SUCH IS THE P OSITION, THE IMPOSITION OF PENALTY IS NOT ACCORDANCE WITH LAW AND ACCORDING LY WE ARE INCLINED TO UPHOLD THE ORDER OF THE LD. CIT(A) IN DELETING THE PENALTY IMPOSED BY THE A.O. THE GROUNDS TAKEN BY THE REVENUE ARE, THEREFO RE, REJECTED. 6. IN THE RESULT, REVENUES APPEAL STANDS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 29.04.20 11. SD/ - (T.R. SOOD) ACCOUNTANT MEMBER SD/ - (D.K. AGARWAL) JUDICIAL MEMBER MUMBAI, DATED 29.04.2011. RK ITA 3744/M/2010 SHRI PAR ASMAL NAHATA 4 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS)- 25, MUMBA I 4. COMMISSIONER OF INCOME TAX, 14, MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, BENCH C, MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI ITA 3744/M/2010 SHRI PAR ASMAL NAHATA 5 1 DRAFT DICTATED ON 2 1 .4.11 SR PS 2 DRAFT PLACED BEFORE AUTHOR ON 2 5 .4.11 SR PS 3 DRAFT PROPOSED & PLACE BEFORE THE 2 ND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY 2 ND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR PS SR.PS 6 KEPT FOR PRONOUNCEMENT ON SR PS 7 FILE SENT TO THE BENCH CLERK SR PS 8 DATE ON WHICH FILE G OES TO THE HEAD CLERK 9 DATE ON WHICH FILE GOES TO THE AR 10 DATE OF DESPATCH SR PS