ASST CIT 23(2), MUMBAI V. LANCELOT NORMAN DSOUSA, MUMBAI

ITA 4318/MUM/2015

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 6329 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 6 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-01-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2008-2009
• Appeal Filed On: 10-07-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B JAYA KUMAR
• Assessee Lawyers: DR K SHIVARAM
• Keywords: Business income; Earning of tax free income; Set aside; Capital Gains
• Section: 271(1)(c); 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A MUMBAI BEFORE SHRI C.N. PRASAD (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 4318/MUM/2015 ASSESSMENT YEAR: 2008 - 09 ASSTT. CIT - 23(2), MATRU MANDIR, ROOM NO. 122, 1 ST F LOOR, TARDEO ROAD, MUMBAI - 400007 VS. MR. LANCELOT NORMAN DSOUSA (LEGAL HEIR MR. KENNETH DSOUSA) NO. 4, 56, HILL ROAD, BANDRA (WEST) MUMBAI - 400050. PAN NO. AAAPD5070H APPELLANT RESPONDENT REVENUE BY : MR. B. JAYA KUMAR , CIT - DR ASSESSEE BY : MR. DR. K. SHIVARAM & MR. RAHUL HAKANI , AR DATE OF HEARING : 01 /1 1 /2018 DATE OF PRONOUNCEMENT : 28/01/2019 ORDER PER N.K. PRADHAN, AM THIS IS AN APPEAL FILED BY THE REVENUE . THE RELEVANT ASSESSMENT YEAR IS 2008 - 09. THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) - 3 3 , MUMBAI [IN SHORT CIT(A)] AND ARISES OUT OF THE ASSESSMENT COMPLETED U/S 143(3) OF THE INCOME TAX ACT 1961, (THE ACT). MR. LANCELOT NORMAN ITA NO. 4318/MUM/2015 2 2. THE GROUNDS OF APPEAL READ AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE PENALTY OF RS.4,87,90,000/ - LEVIED BY THE ASSESSING OFFICER U/S 271(1)(C) OF THE I.T. ACT, 1961 FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DIRECTING TH E AO TO DELETE PENALTY WHERE THE ASSESSEE HAS CONSCIOUSLY FURNISHED INACCURATE PARTICULARS OF INCOME BY SHOWING SHARE TRADING INCOME UNDER THE HEAD INCOME FROM CAPITAL GAIN INSTEAD OF BUSINESS INCOME . 3. THE RELIANCE PLACED BY THE LD. CIT(A) ON THE CASE O F RELIANCE PETROPRODUCTS PVT. LTD., 322, ITR 158 (SC) AND OTHER CASES IN MISPLACED. 4. THE APPELLANT PRAYS THAT THE PENALTY ORDER OF THE LD. CIT(A) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE AO BE RESTORED. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE FILED HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR (AY) 2008 - 09 ON 25.02.2009 DECLARING T OTAL INCOME OF RS.2,85,46,065/ - . DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD EARNED INCOME FROM SALE OF SHARES AND OFFERED IT FOR TAXATION UNDER HEAD CAPITAL GAINS. THE ASSESSING OFFICER (AO) VIDE ASSESSMENT ORDER DATED 24.12.2010 TREATED THE GAINS ARISING FROM SALE OF SHARES AS BUSINESS INCOME. THE REASON GIVEN BY THE AO IS THAT THE ASSESSEES TRANSACTIONS IN SHARES IS TO BE TREATED AS BU SINESS INCOME CONSISTENT WITH THE METHOD ADOPTED BY THE ASSESSEE IN EARLIER YEAR. THEREAFTER, THE AO VIDE ORDER DATED 31.03.2013 LEVIED A PENALTY OF RS.4,87,87,084/ - U/S 271(1)(C) ON ADDITION OF INCOME OF RS.13,07,44,505/ - . MR. LANCELOT NORMAN ITA NO. 4318/MUM/2015 3 4. AGGRIEVED BY THE ORDER OF T HE AO, THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT(A). IN THE APPELLATE ORDER DATED 17.04.2015, THE LD. CIT(A) HELD THAT : FROM THE FACTS STATED IN THE PRECEDING PARAS, IT IS CLEAR THAT THE APPELLANT HAD MADE A CLAIM OF CAPITAL GAINS AND SHOWED THE S AME IN THE RETURN OF INCOME FILED UNDER A BONA FIDE BELIEF THAT THIS IS THE CORRECT COMPUTATION OF CAPITAL GAINS AND THE ASSESSING OFFICER ASSESSED THE SAME INCOME AS BUSINESS INCOME. SUCH A VIEW OF THE MATTER TAKEN BY THE ASSESSING OFFICER IS JUST LIKE HA VING A DIFFERENT OPINION ON THE SAME SET OF FACTS AND IT DOES NOT AMOUNT TO FILING OF INACCURATE PARTICULARS OF INCOME OR CONCEALMENT OF INCOME. MERELY BECAUSE THE APPELLANT HAD MADE A CLAIM IN THE RETURN OF INCOME FILED UNDER A BONA FIDE BELIEF OF SAME BE ING THE CORRECT CLAIM AND IF SUCH CLAIM WAS NOT ACCEPTED OR WAS NOT ACCEPTABLE TO THE REVENUE, THAT BY ITSELF WOULD NOT ATTRACT THE PENALTY UNDER SECTION 271(1)(C). THE DISALLOWANCES OF A CLAIM WOULD NOT MAKE THE APPELLANT LIABLE FOR PENALTY U/S 271(1)(C) AS HELD BY THE APEX COURT IN THE CASE OF CIT V. RELIANCE PETROPRODUCTS (P) LTD. 5. BEFORE US, THE LD. DR SUBMITS THAT THOUGH THE ASSESSEE HAD SHOWN ITS TRANSACTION IN SHARES IN EARLIER YEAR AS BUSINESS INCOME, IT DELIBERATELY FILED THE RETURN OF INCOME F OR THE IMPUGNED ASSESSMENT YEAR SHOWING THE SAME INCOME AS SHORT TERM CAPITAL GAIN AND LONG TERM CAPITAL GAIN. SO, IT IS ARGUED BY HIM THAT THE ASSESSEE DELIBERATELY FURNISHED INACCURATE PARTICULARS OF SUCH INCOME AND THEREFORE, PENALTY U/S 271(1)(C) HAS B EEN RIGHTLY LEVIED BY THE AO. 6. ON THE OTHER HAND, THE LD. COUNSEL OF THE ASSESSEE SUBMITS THAT DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE EARNED CAPITAL GAINS FROM SALE O F SHARES AMOUNTING TO RS.18,85,7 1,756/ - . OUT OF THIS, SHORT TERM CAPITAL GAINS OF RS.1,91,83,705/ - W AS OFFERED TO T AX AND LONG TERM MR. LANCELOT NORMAN ITA NO. 4318/MUM/2015 4 CAPITAL GAINS OF RS.16,93,88,051/ - WAS CLAIMED AS EXEMPT INCOME AS PER PROVISIONS OF SECTION 10(38) OF THE ACT. HOWEVER, THE AO TREATED THE CAPITAL GAINS AS BUSINESS INCOME AND BROUGHT THE EN TIRE CAPITA L GAINS OF RS.18,85,7 1,756/ - TO TAX. IT IS STATED BY HIM THAT IT IS ONLY A CHANGE OF HEAD OF INCOME AND THEREFORE, PENALTY U/S 271(1)(C) IS NOT LEVIABLE. IN THIS REGARD, RELIANCE IS PLACED BY HIM ON THE DECISION IN CIT V. BENNETT COLEMAN & CO. LTD. (2013) 259 CTR 383 (BOM); CIT V. AMIT JAIN (2013) 258 CTR 88 (DEL) AND O THERS. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. THE REASONS FOR OUR DECISIONS ARE GIVEN BELOW. THERE IS NO DISPUTE THAT THE ASSESSEE HAS OFFERED TO TAX SHORT TERM CAPITAL GAINS OF RS.1,91,83,705/ - . ALSO IT CLAIMED LONG TERM CAPITAL GAINS OF RS.16,93,88,051/ - AS EXEMPT INCOME AS PER PROVISIONS OF SECTION 10(38) OF THE ACT. HOWEVER, THE AO BROUGHT TO TAX THE ENTIRE CAPIT AL GAINS OF RS.18,85,7 1,756/ - AS BUSINESS INCOME. IN THE CASE OF BENNETT COLEMAN & CO. LTD. (SUPRA), THE HONBLE DELHI HIGH COURT HAS HELD THAT WHEN INCOME RECEIVED HAS BEEN DISCLOSED IN COMPUTATION OF INCOME AND THERE IS ONLY A CHANGE OF HEAD OF INCOME ; IN THE ABSENCE OF ANY FACTS THAT THE CLAIM OF THE ASSESSEE WAS NOT BONA FIDE, THE PENALTY CANNOT BE IMPOSED U/S 271(1)(C). IN AMIT JAIN (SUPRA), THE ASSESSEE DECLARED INCOME OF RS.2,60,73,558/ - FROM SHORT TERM CAPITAL GAINS. THE AO, HAVING REGARD TO THE NATURE OF TRANSACTION, ASSE S SED IT AS INCOME FROM BUSINESS. THEREAFTER, HE LEVIED A PENALTY OF RS.58,45,899/ - ON THE GROUND THAT THE MR. LANCELOT NORMAN ITA NO. 4318/MUM/2015 5 ASSESSEE HAD PRODUCED INACCURATE PARTICULARS. THE CIT(A) CANCELLED THE PENALTY. THE ITAT AGREED WITH THE ORDER OF THE CIT(A). ON FURTHER APPEAL, THE HO NBLE DELHI HIGH COURT HELD THAT MERELY BECAUSE THE ASSESSEE HAS SHOWN INCOME IN RETURN AS SHORT TERM CAPITAL GAIN, WHICH WAS ASSESSED BY AO AS BUSINESS INCOME, CANNOT AMOUNT TO FURNISHING OF INACCURATE PARTICULARS FOR PURPOSE OF LEVY OF PENALTY U/S 271(1 )(C). IN THE CASE OF CIT V. RELIANCE PETROPRODUCTS (P.) LTD. (2010) 189 TAXMAN 322 (SC), IT IS HELD THAT A MERE MAKING OF CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REGARDING INCOME OF THE AS SESSEE. 7.1 FACTS BEING IDENTICAL, WE FOLLOW THE RATIO LAID DOWN IN THE ABOVE DECISIONS AND UPHOLD THE ORDER OF THE LD. CIT(A). 8. IN THE RESULT, THE APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 28/01/2019. SD/ - SD/ - (C.N. PRASAD) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED: 28/01/2019 RAHUL SHARMA, SR. P.S. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE . BY ORDER, //TRUE COPY// (SR. PRIVATE SECRETARY) ITAT, MUMBAI