RAVINDRAKUMAR TOSHNIWAL, MUMBAI V. ASST CIT 14(3), MUMBAI

ITA 4618/MUM/2012

• Counselvise Citation: 461819914 RSA 2012
• Duration Of Justice: 1 year(s) 4 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-11-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2006-2007
• Appeal Filed On: 09-07-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: J K GARG
• Assessee Lawyers: V K TULSIAN
• Keywords: Bonafide belief; Wrong claim; Difference of opinion; Accommodation entries; Sham transactions
• Section: 133(6); 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'D' BENCH, MUMBAI BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI RAJENDRA, ACCOUNTANT MEMBER ITA NO. 4618/MUM/2012 (ASSESSMENT YEAR: 2006-07) SHRI RAVINDRAKUMAR TOSHNIWAL ACIT, RANGE 14(3) GOPAL BHAVAN, 5TH FLOOR EARNEST HOUSE, 6TH FLOOR 199, PRINCESS STREET VS. NARIMAN POINT, MUMBAI 400021 MUMBAI 400002 PAN - AAAPT1909P APPELLANT RESPONDENT ITA NO. 4780/MUM/2012 (ASSESSMENT YEAR: 2005-06) SMT. RADHIKA R. TOSHNIWAL INCOME TAX OFFICER-14(3)( 1) GOPAL BHAVAN, 5TH FLOOR EARNEST HOUSE, 6TH FLOOR 199, PRINCESS STREET VS. NARIMAN POINT, MUMBAI 400021 MUMBAI 400002 PAN - AACPT1438K APPELLANT RESPONDENT APPELLANT BY: SHRI V.K. TULSIAN RESPONDENT BY: SHRI J.K. GARG DATE OF HEARING: 29.08.2013 DATE OF PRONOUNCEMENT: 13.11.2013 O R D E R PER D. MANMOHAN, V.P. THESE APPEALS ARE FILED BY THE RESPECTIVE ASSESSEES AGAINST THE ORDERS PASSED BY THE CIT(A)-25, MUMBAI WHEREIN PENALTY LEV IED UNDER SECTION 271(1)(C) OF THE ACT FOR ASSESSMENT YEARS 2007-06 A ND 2005-06 RESPECTIVELY WERE CONFIRMED BY THE LEARNED CIT(A). SHRI RAVINDRAKUMAR TOSHNIWAL (ITA NO. 4618/MUM/2012) 2. THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF EXPORT OF TEXTILES AND YARNS. FOR THE YEAR UNDER CONSIDERATION HE HAS CRED ITED A SUM OF ` 36,19,831/- REFERABLE TO SALE OF SHARES OF M/S. SHR EE SHALEEN TEXTILES LTD., ITA NO. 4618/MUM/2012 SMT. & SHRI TOSHNIWALS 2 M/S. BUNIYAD CHEMICALS LTD., M/S. TALENT INFOWAY LT D. AND M/S. R.R. TOSHNIWAL & CO. P. LTD. THE ABOVE LONG TERM CAPITAL GAINS WAS CLAIMED UNDER SECTION 10(38) OF THE I.T. ACT CLAIMING THAT STT IS PAID ON THE TRANSACTIONS. IT MAY BE NOTICED THAT IN RESPECT OF A.Y. 2005-06 THE AO MADE DETAILED ENQUIRIES WITH AHMEDABAD STOCK EXCHANGE FO R COMING TO THE CONCLUSION THAT THE TRANSACTIONS IN RESPECT OF M/S. BUNIYAD CHEMICALS AND M/S. TALENT INFOWAY LTD. ARE MAINLY ACCOMMODATION E NTRIES AND THEY ARE NOT GENUINE; THE ASSESSEE HAS CONVERTED HIS UNACCOUNTED MONEY IN THE GRAB OF LONG TERM CAPITAL GAINS. THEREFORE, THE SAME WAS SO UGHT TO BE TAXED AS INCOME FROM OTHER SOURCES. DURING THE COURSE OF A SSESSMENT PROCEEDINGS FOR A.Y. 2006-07 THE ASSESSEE EXPLAINED, IN RESPONSE TO THE SHOW CAUSE NOTICE DATED 11.12.2008, THAT THEY ARE NOT ACCOMMODATION E NTRIES AND EACH YEAR IS A SEPARATE YEAR AND FOR THE YEAR UNDER CONSIDERATIO N THE ASSESSEE HAVING SUBMITTED PROOF AND EVIDENCE OF PURCHASE AND SALE O F SHARES IT CANNOT BE CONCLUDED THAT THEY ARE SHAM TRANSACTIONS AND, AT B EST, THE AO CAN DISALLOW THE EXEMPTION UNDER SECTION 10(38) OF THE ACT AS ST T IS NOT PAID. 3. THOUGH THE ASSESSEE SUBMITTED CONFIRMATION FROM THE BROKER STATING THAT THE IMPUGNED SHARES WERE SOLD OFF MARKET AND NO STT IS PAID, THE FACT REMAINS THAT THE ASSESSEE CLAIMED EXEMPTION UNDER S ECTION 10(38) OF THE ACT EVENTHOUGH THE ASSESSEE KNOWS VERY WELL THAT THE TR ANSACTIONS ARE OFF MARKET TRANSACTIONS. ELABORATE DISCUSSION WAS MADE IN THE ASSESSMENT ORDER FOR A.Y. 2005-06. THE SALE CONSIDERATION IN R ESPECT OF SALE OF SHARES OF M/S. BUNIYAD CHEMICALS AND M/S. TALENT INFOWAY LTD. WAS ADDED TO THE INCOME OF ASSESSEE AS INCOME FROM OTHER SOURCES. FURTHER, THE TRANSACTIONS IN THE SCRIP OF M/S. SHREE SHALEEN TEXTILES LTD. AN D M/S. R.R. TOSHNIWAL & CO. P. LTD. WERE ALSO HELD TO BE SIMILAR IN NATURE, WHICH WERE NOT ROUTED THROUGH STOCK EXCHANGE AND NO STT HAVING BEEN PAID, THESE TRANSACTIONS WERE ALSO TREATED AS BOGUS TRANSACTIONS AND THE ENT IRE SALE CONSIDERATION WAS ASSESSED AS INCOME FROM OTHER SOURCES. PENALT Y PROCEEDINGS WERE INITIATED SEPARATELY. 4. ON AN APPEAL FILED BY THE ASSESSEE THE LEARNED CIT( A) DIRECTED THE AO TO TREAT THE INCOME ON SALE OF SHARES AS CAPITAL GA INS INSTEAD OF TREATING IT AS ITA NO. 4618/MUM/2012 SMT. & SHRI TOSHNIWALS 3 INCOME FROM OTHER SOURCES. IN OTHER WORDS, THE GENU INENESS OF SALE OF SHARES IS NOT DOUBTED BY THE CIT(A) AND THE SAME WAS UPHEL D BY THE TRIBUNAL. HOWEVER, SINCE NO STT WAS PAID THE SAME WAS BROUGHT TO TAX UNDER THE HEAD CAPITAL GAINS. THE ORDER GIVING EFFECT TO CI T(A)S ORDER WAS PASSED ON 16.02.2010. CONSEQUENTLY PENALTY PROCEEDINGS WERE I NITIATED ON THE GROUND THAT THE INTENTION OF CLAIMING FALSE EXEMPTION OF T AX ASSESSABLE UNDER LTCG WOULD PROVE THAT THE ASSESSEE HAS WILFULLY FURNISHE D INACCURATE PARTICULARS OF INCOME, NOTWITHSTANDING THE MAIN CLAIM OF REVENU E THAT THEY ARE ACCOMMODATION ENTRIES. IN RESPONSE THERETO THE ASSE SSEE SUBMITTED THAT IT WAS ONLY DURING THE SCRUTINY ASSESSMENT PROCEEDINGS THE ASSESSEE CAME TO KNOW THROUGH THE BROKERS THAT STT HAS NOT BEEN PAID ON THE SAID TRANSACTIONS. IT WAS ALSO CONTENDED THAT THE TRANSA CTIONS WERE CARRIED OUT THROUGH A BROKER AND GENUINENESS OF THE TRANSACTION S CANNOT BE DISPUTED. 5. THE AO OBSERVED THAT THE ASSESSEE CANNOT PLEAD IGNO RANCE OF THE FACTUM OF NON PAYMENT OF STT AND THE CONSEQUENT NON -TAXABILITY OF THE INCOME THEREFROM UNDER THE HEAD CAPITAL GAINS. AS PER STATUTE STT IS PAYABLE ONLY ON TRANSACTIONS ENTERED THROUGH A RECO GNISED STOCK EXCHANGE WHEREAS THE IMPUGNED TRANSACTIONS WERE OFF MARKET T RANSACTIONS AND HENCE THE QUESTION OF PAYMENT OF STT DOES NOT ARISE WHICH CATEGORICALLY SHOWS THAT THE ASSESSEE DELIBERATELY TRIED TO MISLEAD THE DEPARTMENT BY SHOWING THAT THE IMPUGNED TRANSACTIONS WERE CARRIED OUT THR OUGH AHMEDABAD STOCK EXCHANGE. THE PROOF OF PAYMENT OF STT IS PROVIDED O N BORKER/CONTRACT NOTE AND THE ASSESSEE CANNOT CLAIM THAT HE WAS NOT AWARE OF THE SAME. BY CLAIMING TO HAVE PAID STT, WHEN THE SAME WAS NOT AC TUALLY PAID, THE ASSESSEE HAS WILFULLY FURNISHED INACCURATE PARTICUL ARS OF INCOME BEFORE THE DEPARTMENT IN ORDER TO AVOID TAX BY CLAIMING FALSE EXEMPTION UNDER SECTION 10(38) AND THUS PROVISIONS OF SECTION 271(1)(C) ARE ATTRACTED. THE AO LEVIED PENALTY ON THE LIMITED GROUND THAT THE ASSESSEE WIL FULLY TRIED TO MAKE FALSE EXEMPTION UNDER SECTION 10(38) OF THE ACT, WHICH WO ULD AMOUNT TO FURNISHING OF INACCURATE PARTICULARS OF INCOME. CON SEQUENT THERETO PENALTY IS LEVIED UNDER SECTION 271(1)(C) OF THE ACT. ITA NO. 4618/MUM/2012 SMT. & SHRI TOSHNIWALS 4 6. AGGRIEVED, ASSESSEE CONTENDED BEFORE THE FIRST APPE LLATE AUTHORITY THAT ALL RELEVANT PARTICULARS RELATING TO THE TRANSACTIO NS WERE PRODUCED BEFORE THE AO AND HENCE IT CANNOT BE STATED THAT THE ASSESSEE FURNISHED INACCURATE PARTICULARS. IT IS THE ACTION OF THE BROKER, WHO HA S NOT PAID STT, WHICH RESULTED IN ASSESSEE LOOSING EXEMPTION UNDER SECTI ON 10(38) OF THE I.T. ACT. RELIANCE WAS PLACED UPON THE DECISION OF THE APEX C OURT IN THE CASE OF RELIANCE PETRO PRODUCTS LTD. 322 ITR 156 TO SUBMIT THAT SO LONG AS THE ASSESSEE FURNISHES PARTICULARS, MERELY BECAUSE ADDI TION HAS TO BE MADE, PENALTY SHOULD NOT BE LEVIED. THE LEARNED CIT(A) CO NSIDERED THE ISSUE IN DETAIL IN HIS ORDER DATED 09.05.2012. THE LEARNED C IT(A) TRIED TO TRACE THE BACKGROUND FACTS TO HIGHLIGHT THAT THE ASSESSEE FUR NISHED INACCURATE PARTICULARS OF INCOME WILFULLY AND, THEREFORE, IT I S A FIT CASE FOR LEVY OF PENALTY. HE OBSERVED THAT THE ASSESSEE IS CHAIRMAN & MANAGING DIRECTOR OF A LISTED COMPANY VIZ., BANSWARA SYNTEX LTD. IN THIS BACKDROP IT CANNOT BE ASSUMED THAT THE CHAIRMAN & MANAGING DIRECTOR OF A LISTED COMPANY, WHOSE SHARES ARE LISTED ON STOCK EXCHANGE, PREFERS TO ENGAGE IN PURCHASE AND SALE OF TWO COMPANIES WHICH ARE NOT LISTED IN T HE STOCK EXCHANGE PARTICULARLY WHEN THE ASSESSEE IS COMPLETELY IGNORA NT ABOUT THESE COMPANIES AND WAS NOT EVEN AWARE OF THE PERSONS WHO ADVISED HIM TO PURCHASE SHARES OF THESE COMPANIES. HE HAS ALSO TAK EN INTO CONSIDERATION THE FACT THAT THESE COMPANIES ARE FOUND NOT TRACEAB LE ON TRADING LIST OF THE STOCK EXCHANGE. 7. OUT OF CURIOSITY THE LEARNED CIT(A) TRIED TO LOCATE THE STATUS OF M/S. BUNIYAD CHEMICALS LTD. AND M/S. TALENT INFOWAYS LTD . HE NOTICED THAT THE COMPANIES ARE NOT FOUND TRACEABLE ON TRADING LIST O F THE EXCHANGE AND EVEN DIFFERENT WEBSITES COULD NOT FURNISH THE COMPANIES HISTORY, QUOTATIONS, PRICE, ETC. THE ASSESSEE CLAIMED THAT THE FACTUM OF NON-PAYMENT OF STT WAS NOT KNOWN TO THE ASSESSEE WHICH MADE HIM TO CLAIM E XEMPTION UNDER SECTION 10(38) OF THE ACT. LOOKING AT THE BACKGROUN D OF THE ASSESSEE, THE LEARNED CIT(A) OBSERVED THAT SUCH CLAIM IS NOT BELI EVABLE. PERUSAL OF THE SALE BILLS AND PURCHASE BILLS SHOWS THAT THE TRANSACTION S WERE NOT CARRIED OUT THROUGH STOCK EXCHANGE WHICH IMPLIES THAT NO STT WA S PAYABLE BY THE BROKER SINCE THE TRANSACTIONS WERE OFF MARKET TRANS ACTIONS. ORDINARILY THE ITA NO. 4618/MUM/2012 SMT. & SHRI TOSHNIWALS 5 PARTICULARS OF PAYMENT OF STT ARE MENTIONED IN THE BILLS WHERE TRANSACTIONS ARE CARRIED OUT EITHER ON BSE OR NSE. UNDER THESE P ECULIAR FACTS THERE IS NO FORCE IN THE ARGUMENT OF THE ASSESSEE THAT HE WAS N OT AWARE OF THE FACT THAT STT WAS PAID/PAYABLE BY THE BROKER. ASSESSEE BEING CHAIRMAN & MANAGING DIRECTOR OF LISTED COMPANY IT IS DIFFICULT TO ACCEP T THAT HE WAS NOT AWARE OF THE PLAIN STATUTORY PROVISION WITH REGARD TO NON-PA YMENT OF STT IN RESPECT OF OFF MARKET TRANSACTIONS. IN FACT, IN THE INITIAL STAGES OF A.Y. 2005-06 THERE WAS AN ATTEMPT TO MISLEAD THAT THE TRANSACTIONS WER E CARRIED OUT AT AHMEDABAD STOCK EXCNAGE AND THE DIRECTOR OF THE BRO KER COMPANY IS SHOWN AS THE CONTACT PERSON OF THESE TWO COMPANIES. THIS ALSO HIGHLIGHTS THAT THE ASSESSEE HAS INTENTION TO CLAIM FALSE EXEMPTION OF LTCG, PARTICULARLY WHEN THE NATURE OF TRANSACTIONS WERE FOUND TO BE BOGUS B Y THE AO AND STT WAS NOT PAYABLE ON OFF MARKET TRANSACTIONS. THE DEPARTM ENT ORDINARILY SELECTS LESS THAN TWO PERCENT CASES FOR SCRUTINY AND THERE ARE 98 PERCENT CHANCES OF ESCAPING FROM TAXATION OF REAL INCOME CHARGEABLE TO TAX, IF A PERSON DECIDES TO MAKE FALSE CLAIM. UNDER THESE CIRCUMSTANCES IF P ENALTY IS NOT LEVIED IN A CASE WHERE ASSESSEE MAKES FALSE CLAIMS OF EXEMPTION THEN THERE CANNOT BE ANY CASE WHERE PENALTY CAN BE LEVIED AND EVERY TAX PAYER WOULD TAKE A CHANCE BY MAKING FALSE CLAIM AS THERE IS NOTHING FO R HIM TO LOOSE. THE LEARNED CIT(A) HAD ALSO TAKEN INTO CONSIDERATION TH AT IN THE PRECEDING YEAR, I.E. A.Y. 2005-06 THE ASSESSEE HAS CLAIMED EXEMPTIO N UNDER SECTION 10(38) ON LTCG, THEREFORE REPETITIVE CLAIM WOULD NOT PROVE THE BONAFIDE, PARTICULARLY IN THE SECOND YEAR. IN OTHER WORDS, TH E ASSESSEE CANNOT PLEAD IGNORANCE OF NON-PAYMENT OF STT. ON THE CONTRARY IT HIGHLIGHTS THAT THE ASSESSEE WILFULLY INTENDED TO EVADE TAX. THEREFORE THE DECISION IN THE CASE OF RELIANCE PETRO PRODUCTS (SUPRA) IS NOT APPLICABLE T O THE FACTS OF THE INSTANT CASE. ON THE OTHER HAND, EXPLANATION TO SECTION 271 (1)(C) GETS ATTRACTED IN THE LIGHT OF THE DECISION OF THE APEX COURT IN THE CASE OF DHARMENDRA TEXTILE PROCESSORS 295 ITR 244. 8. THE LEARNED CIT(A) ALSO TAKEN INTO CONSIDERATION TH E DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF ZOOM COMMUN ICATIONS P. LTD. 191 TAXMAN 179 WHEREIN THE COURT OBSERVED THAT IF AN AS SESSEE MAKES A CLAIM WHICH IS NOT ONLY INCORRECT IN LAW, BUT IS ALSO WHO LLY WITHOUT ANY BASIS AND ITA NO. 4618/MUM/2012 SMT. & SHRI TOSHNIWALS 6 THE EXPLANATION FURNISHED BY HIM FOR MAKING SUCH A CLAIM IS NOT FOUND TO BE BONA FIDE, EXPLANATION TO SECTION 271(1)(C) WOULD A UTOMATICALLY COME INTO PLAY AND SUCH ASSESSEE WOULD BE LIABLE TO PENALTY U NDER SECTION 271(1)(C) OF THE ACT. THE HON'BLE DELHI HIGH COURT REFERRED TO T HE DECISION OF THE APEX COURT IN THE CASE OF RELIANCE PETRO PRODUCTS AND DI STINGUISHED THE SAME WITH REGARD TO THE CIRCUMSTANCE UNDER WHICH BONAFID ES OF A CLAIM CAN BE ACCEPTED. THE HON'BLE DELHI HIGH COURT OBSERVED, IN THIS REGARD, AS UNDER: - IT IS TRUE THAT MERE SUBMITTING A CLAIM WHICH IS I NCORRECT, IN LAW, WOULD NOT AMOUNT TO GIVING INACCURATE PARTICULARS OF THE INCOME OF THE ASSESSEE, BUT IT CANNOT BE DISPUTED THAT THE CLAIM MADE BY THE ASSESSEE NEED TO BE BONA FIDE. IF THE CLAIM, BESIDE S BEING INCORRECT, IN LAW, IS MALA FIDE THE EXPLANATION 1 TO SECTION 271( 1) WOULD COME INTO PLAY AND WORK TO THE DISADVANTAGE OF THE ASSESSEE. HAVING REGARD TO THE PARTICULAR CIRCUMSTANCE OF THE CASE THE LEARNED CIT(A) CONFIRMED THE PENALTY LEVIED ON THE GROUND THAT THE ASSESSEE CLAIMED EXEMPTION OF LTCG UNDER SECTION 10(38) OF THE ACT W RONGLY, WITH A VIEW TO CONCEAL INCOME ASSESSABLE TO TAX, BY FURNISHING INA CCURATE PARTICULARS OF INCOME AND HENCE IT IS A FIT CASE FOR LEVY OF PENAL TY. AGGRIEVED, ASSESSEE IS IN APPEAL BEFORE US. SMT. RADHIKA R. TOSHNIWAL (ITA 4780/MUM/2012) 9. THIS APPEAL PERTAINS TO A.Y. 2005-06. THE ASSESSEE, IN HER INDIVIDUAL STATUS, DECLARED INCOME OF ` 5,99,510/-, WHICH WAS PROCESSED UNDER SECTION 143(1) OF THE ACT AND THEREAFTER IT WAS REOPENED BY ISSUING NOTICE UNDER SECTION 148 OF THE ACT, SINCE IT WAS NOTICED THAT T HE ASSESSEE SOLD SHARES OF M/S. TALENT INFORWAY LTD. AND CLAIMED EXEMPTION UND ER THE HEAD LONG TERM CAPITAL GAINS ON THE SALE PROCEEDS. IT WAS SUBMITT ED THAT THE ASSESSEE SOLD SHARES THROUGH SHARE BROKERS, I.E. M/S. ALLIANCE IN TERMEDIARIES & NETWORK P. LTD. AND THE SHARES WERE PURCHASED THROUGH M/S. MAH ASAGAR SECURITIES P. LTD., BOTH LOCATED AT THE SAME ADDRESS. IN RESPONSE TO NOTICE UNDER SECTION 133(6) OF THE ACT, SENT TO THE SHARE BROKERS, IT WA S STATED THAT THE SHARES WERE LISTED IN THE AHEMADABAD STOCK EXCHANGE BUT THE TRA NSACTION WAS OFF MARKET ONE. A FURTHER SCRUTINY REVEALS THAT THE TRANSACTIO N HAD NOT TAKEN PLACE ON THE FLOOR OF THE AHMEDABAD STOCK EXCHANGE BUT IT WA S AN OFF MARKET TRANSACTION ON WHICH NO STT WAS PAID/PAYABLE. ASSES SEE CLAIMED EXEMPTION ITA NO. 4618/MUM/2012 SMT. & SHRI TOSHNIWALS 7 FROM PAYMENT OF TAX UNDER SECTION 10(38) OF THE ACT . SINCE THE FACTS AND CIRCUMSTANCES IN THE CASE OF SHRI RAVINDRAKUMAR TOS HNIWAL, HUSBAND OF THE ASSESSEE, WERE IDENTICAL WHEREIN DETAILED ENQUIRY W AS MADE AND THE MODUS OPERANDI WAS ALSO IDENTICAL NOT ONLY IN THE CASE OF THE ASSESSEE BUT ALSO IN THE CASE OF OTHER FAMILY MEMBERS. THEREFORE THE AO CONC LUDED THAT THE TRANSACTIONS WERE BOGUS AND BROUGHT TO TAX THE SAME UNDER THE HEAD INCOME FROM OTHER SOURCES. PENALTY PROCEEDINGS WERE INITI ATED SEPARATELY. 10. AGGRIEVED BY THE SAID ORDER THE ASSESSEE PREFERRED APPEAL BEFORE THE FIRST APPELLATE AUTHORITY WHO AGREED WITH THE CONTE NTION OF THE ASSESSEE PARTLY BY HOLDING THAT THE TRANSACTIONS OF PURCHASE AND SALE OF SHARES IS NOT BOGUS BUT THE CLAIM OF EXEMPTION UNDER SECTION 10(3 8) OF THE ACT IS NOT IN ACCORDANCE WITH LAW. ACCORDINGLY CONSEQUENTIAL ORDE R WAS PASSED BY THE AO WHEREIN HE BROUGHT TO TAX THE LONG TERM CAPITAL GAI NS REFERABLE TO THE ABOVE MENTIONED TRANSACTIONS. 11. CONSEQUENT THERETO THE AO INITIATED PENALTY PROCEED INGS WHEREIN HE OBSERVED THAT THE CLAIM OF EXEMPTION UNDER SECTION 10(38) OF THE ACT AMOUNTS TO FURNISHING INCORRECT PARTICULARS OF INCOME WITH A VIEW TO AVOID PAYMENT OF TAX AND HENCE PROVISIONS OF EXPLANATION 1 TO SECTIO N 271(1)(C) ARE ATTRACTED. THE ASSESSEE CONTENDED THAT THE BROKER HAS NOT PAID STT SINCE IT WAS AN OFF MARKET TRANSACTION AND THE SAID FACT WAS NOT KNOWN TO THE ASSESSEE AND HENCE SHE CANNOT BE FOUND FAULT WITH REGARD TO THE CLAIM OF EXEMPTION UNDER SECTION 10(38) OF THE ACT. IT WAS FURTHER SUBMITTED THAT NO CASE WAS MADE OUT WITH REGARD TO FURNISHING OF INACCURATE PARTICULARS OR NON-SUBMISSION OF PARTICULARS WITH ANY MALA FIDE INTENTION. THE AO OB SERVED THAT THE ASSESSEE FURNISHED INCORRECT PARTICULARS OF INCOME BY CLAIMI NG WRONG EXEMPTION UNDER SECTION 10(38) OF THE ACT. IN THIS REGARD HE OBSERV ED THAT THOUGH THE ASSESSEE HAS CONTENDED THAT SHE WAS NOT AWARE OF THE TRANSAC TION BEING OFF MARKET ONE BUT THE ASSESSEE CANNOT BE ASSUMED TO BE INNOCENT S INCE NOT ONLY THE ASSESSEE BUT HER HUSBAND AND OTHER FAMILY MEMBERS H AVE CLAIMED SIMILAR EXEMPTION AND IT IS DIFFICULT TO ASSUME THAT THEY W ERE NOT AWARE OF NON- PAYMENT OF STT. SINCE PENALTY WAS LEVIED IN THE CAS E OF ASSESSEES HUSBAND ALSO THE AO LEVIED PENALTY @ 100% OF TAX SOUGHT TO BE EVADED. ITA NO. 4618/MUM/2012 SMT. & SHRI TOSHNIWALS 8 12. AGGRIEVED, ASSESSEE CONTENDED BEFORE THE CIT(A) THA T NON-PAYMENT OF SECURITIES TRANSACTION TAX BY THE BROKER IS NOT UND ER THE CONTROL OF THE ASSESSEE AND THE ASSESSEE HAVING FURNISHED ALL PART ICULARS SEPARATELY, AS PER AVAILABLE MATERIAL ON THE GENUINE BELIEF OF ITS COR RECTNESS, MERELY BECAUSE THERE IS A DIFFERENCE OF OPINION ABOUT THE CLAIM WI TH REGARD TO EXEMPTION OF CAPITAL GAINS, THE CLAIM CANNOT BE TREATED AS NON-G ENUINE OR IT CANNOT BE CONSIDERED AS FURNISHING OF INACCURATE PARTICULARS SO AS TO LEVY PENALTY UNDER SECTION 271(1)(C). 13. THE LEARNED CIT(A) OBSERVED THAT IN RESPONSE TO THE NOTICE ISSUE UNDER SECTION 133(6) OF THE ACT THE BROKER INITIALLY STAT ED THAT THE IMPUGNED TRANSACTIONS WERE THROUGH STOCK EXCHANGE BUT LATER ON ADMITTED THAT THESE TRANSACTIONS WERE OFF MARKET. HOWEVER, WITH REGAR D TO THE CONTENTION OF THE ASSESSEE THAT SHE WAS UNDER THE BONAFIDE BELIEF THA T STT IS BEING PAID, THE LEARNED CIT(A) HIGHLIGHTED THAT ASSESSEES HUSBAND IS CHAIRMAN & MANAGING DIRECTOR OF A LISTED COMPANY AND IT CANNOT BE SAID THAT THEY WOULD HAVE PURCHASED SHARES OF AN UNKNOWN AND UNLISTED COMPANY WHICH, ON VERIFICATION, WAS PRESENTLY NOT TRACEABLE AND THUS CONCLUDED, IN THE SAME LINES IN WHICH HE HAS REFERRED TO IN THE CASE OF HE R HUSBAND, THAT SHE OUGHT TO KNOW THAT ON AN OFF MARKET TRANSACTION NO STT IS PAYABLE AND THUS THE CLAIM OF BONAFIDE BELIEF IS NOT CORRECT. HE HAS ALS O TAKEN INTO CONSIDERATION THE FACT THAT NOT ONLY SHE BUT HER HUSBAND AND DIFF ERENT FAMILY MEMBERS HAVE MADE SIMILAR CLAIMS FOR MORE THAN ONE YEAR WHI CH COULD ONLY PROVE THAT THE INTENTION WAS ONLY TO AVOID PAYMENT OF TAX UNDER THE GARB OF EXEMPTION UNDER SECTION 10(38) OF THE ACT AND IN TH E PECULIAR CIRCUMSTANCES OF THE CASE THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF ZOOM COMMUNICATIONS P. LTD. IS APPLICABLE AND THE FACTS OF THE PRESENT CASE IS DISTINGUISHABLE FROM THE DECISION OF THE HON'BLE AP EX COURT IN THE CASE OF RELIANCE PETRO PRODUCTS (SUPRA). HE ACCORDINGLY CON FIRMED THE PENALTY LEVIED BY THE AO. FURTHER AGGRIEVED, ASSESSEE IS IN APPEAL BEFORE US. 14. ON BEHALF OF BOTH THE ASSESSEES SHRI V.K. TULSIAN A PPEARED AND FILED A PAPER BOOK CONSISTING 19 PAGES WHEREIN HE RELIED UP ON THE FOLLOWING ORDERS OF THE TRIBUNAL TO SUBMIT THAT IN RESPECT OF A.Y. 2 006-07 THE REVENUE ITA NO. 4618/MUM/2012 SMT. & SHRI TOSHNIWALS 9 PREFERRED AND APPEAL BEFORE THE ITAT D BENCH, MUM BAI IN THE CASE OF SHRI RAVINDRAKUMAR TOSHNIWAL BY CONTENDING THAT THE ADDI TION MADE BY THE AO AS INCOME FROM OTHER SOURCES OUGHT TO HAVE BEEN CON FIRMED BUT THE SAME WAS NOT ACCEPTED BY THE TRIBUNAL ON THE GROUND THAT THE ASSESSEE FILED RELEVANT DOCUMENTS AND EVIDENCE TO PROVE GENUINENES S OF THE SALE OF SHARES AND HENCE THE SALE PROCEEDINGS THEREOF ARE LIABLE T O BE TAXED UNDER THE HEAD CAPITAL GAINS; SIMILAR ORDER WAS PASSED FOR A.Y. 2005-06 IN THE CASE OF SHRI RAVINDRAKUMAR TOSHNIWAL WHEREIN THE BENCH HELD THAT MERELY BECAUSE THE TRANSACTIONS WERE OFF MARKET TRANSACTIONS IT CANNOT BE STATED THAT THEY ARE BOGUS TRANSACTIONS; FOR A.Y. 2005-06 THE ITAT D B ENCH, MUMBAI CANCELLED THE PENALTY LEVIED BY THE AO BY OBSERVING THAT THE ISSUE OF CLAIM OF EXEMPTION WAS NOT EXAMINED BY THE AO AND HAS BEEN C RYSTALLISED BY THE ORDER OF THE CIT(A) AND HENCE PENALTY PROCEEDINGS U NDER SECTION 271(1)(C) CANNOT BE DECIDED BY THE AO AS NO SUCH FINDING OR S ATISFACTION OR EVEN EXAMINATION WAS DONE BY THE AO: - I. ITA NO. 1356/MUM/2010 DATED 13.03.2013 II. ITA NO. 7536/MUM/2010 DATED 13.03.2013 III. ITA NO. 5302/MUM/2008 DATED 24.02.2010 IN THE CASE OF SMT. RADHIKA R. TOSHNIWAL THE LEARNE D COUNSEL FILED A COPY OF THE ORDER OF THE ITAT IN THE QUANTUM APPEAL TO SHOW THAT THE TRANSACTIONS OF SALE OF SHARES ARE GENUINE. 15. ON THE OTHER HAND, THE LEARNED D.R. SUBMITTED THAT THE DECISION OF THE HON'BLE APEX COURT IN THE CASE OF RELIANCE PETRO PR ODUCTS IS DISTINGUISHABLE ON FACTS. HE RELIED UPON THE DECISION OF THE HON'BL E DELHI HIGH COURT IN THE CASE OF ZOOM COMMUNICATION P. LTD. (SUPRA) TO SUBMI T THAT PENALTY WAS LEVIED ON THE GROUND THAT THE ASSESSEES HAVE FURNIS HED INACCURATE PARTICULARS OF INCOME BY CLAIMING WRONG EXEMPTION U NDER SECTION 10(38) OF THE ACT NOT ONLY IN THE FIRST YEAR BUT ALSO IN THE SUBSEQUENT YEAR AND ALSO IN THE CASE OF OTHER FAMILY MEMBERS AND IT CANNOT BE A SSUMED THAT THE ASSESSEES WERE NOT AWARE OF THE FACT THAT THERE IS NO LIABILITY TO PAY STT WITH REGARD TO OFF MARKET TRANSACTIONS. IT WAS, THEREFOR E, EMPHATICALLY SUBMITTED THAT THE EARLIER DECISIONS OF THE TRIBUNAL WERE REN DERED ON THE LIMITED ITA NO. 4618/MUM/2012 SMT. & SHRI TOSHNIWALS 10 GROUND OF GENUINENESS OF TRANSACTIONS IS NOT IN DIS PUTE AND NONE OF THE DECISIONS HAVE REFERRED TO THE ISSUE AS TO WHETHER THE CLAIM OF EXEMPTION UNDER SECTION 10(38) IS BONAFIDE. IN BOTH THE CASES THE ASSESSEES HAVE NOT RAISED THE ISSUE THAT THE NOTICE ISSUED BY THE AO U NDER SECTION 271(1)(C) OR THE SUBSEQUENT PROCEEDINGS THERETO WERE NOT WITH RE FERENCE TO THE CLAIM OF WRONG EXEMPTION UNDER SECTION 10(38). ON THE CONTRA RY, PENALTY WAS LEVIED SPECIFICALLY ON THE ISSUE THAT EXEMPTION WAS WRONGL Y CLAIMED BY FURNISHING INACCURATE PARTICULARS OF INCOME. THEREFORE PROVISO TO SECTION 271(1)(C) WOULD AUTOMATICALLY GETS ATTRACTED AND IN THE LIGHT OF THE DECISION OF THE HON'BLE DELHI HIGH COURT (SUPRA) PENALTY LEVIED BY THE AO IS IN ACCORDANCE WITH LAW. HE, THEREFORE, RELIED UPON THE ORDERS PAS SED BY THE LEARNED CIT(A). 16. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE RECORD. WE HAVE ALSO CAREFULLY GONE THROUGH THE ORD ERS PASSED BY THE ITAT IN THE CASE OF BOTH THE ASSESSEES. IT DESERVES TO B E NOTICED THAT THE ORDERS PASSED BY THE ITAT IN RESPECT OF QUANTUM APPEALS AR E LIMITED TO THE ISSUE AS TO WHETHER OFF MARKET TRANSACTIONS WOULD INDICATE T HAT THE TRANSACTIONS WERE BOGUS OR NOT. HAVING REGARD TO THE STATEMENTS OF TH E PARTIES, STATEMENT OF THE BROKER, ETC. THE TRIBUNAL OBSERVED THAT FURTHER VERIFICATION HAS NOT BEEN MADE BY THE AO FROM THE REGISTRAR OF COMPANIES AS T O WHETHER THE SHARES HAVE BEEN TRANSFERRED OR NOT. MERELY BECAUSE THEY A RE OFF MARKET TRANSACTIONS IT CANNOT BE CONCLUDED THAT THEY ARE N ON-GENUINE TRANSACTIONS. THEREFORE THE TRIBUNAL CONCLUDED THAT THE TRANSACTI ONS ARE GENUINE. ONCE THE TRANSACTIONS ARE GENUINE AND ASSESSABLE TO TAX UNDER THE HEAD CAPITAL GAINS, IN ORDER TO CLAIM EXEMPTION UNDER SECTION 1 0(38) OF THE ACT, THE INITIAL BURDEN IS UPON THE ASSESSEE TO PROVE THAT T HEY WERE TRADED IN STOCK EXCHANGE AND STT IS PAID. IT IS NOT IN DISPUTE THAT THE ASSESSEES MISERABLY FAILED TO PROVE THAT THEY HAVE BEEN TRADED IN STOCK EXCHANGE. ON THE CONTRARY, IT IS PROVED BEYOND DOUBT THAT THEY HAVE NOT BEEN TRADED IN STOCK EXCHANGE BUT THEY WERE OFF MARKET TRANSACTIONS ON W HICH NO STT IS PAYABLE. SHRI RAVINDRAKUMAR TOSHNIWAL CLAIMED IGNORANCE OF T HE FACT THAT STT IS NOT PAID BUT HAVING REGARD TO THE FACT THAT HE WAS MANA GING DIRECTOR OF A LISTED COMPANY IT CANNOT BE ASSUMED THAT HE WAS NOT EVEN A WARE OF THE NATURE OF TRANSACTIONS, PARTICULARLY WHEN THEY INVOLVED SUBST ANTIAL AMOUNT. UNDER ITA NO. 4618/MUM/2012 SMT. & SHRI TOSHNIWALS 11 THESE PECULIAR CIRCUMSTANCES THE INITIAL BURDEN IS UPON THE ASSESSEES TO PROVE THAT THE ASSESSEES BONAFIDELY BELIEVED THAT T HEY WERE ENTITLED TO EXEMPTION UNDER SECTION 10(38) OF THE ACT. IN THE C ASE OF SHRI RAVINDRAKUMAR TOSHNIWAL THE ITAT D BENCH CONSIDER ED THE ISSUE OF LEVIABILITY OF PENALTY FOR A.Y. 2005-06 WHEREIN THE ASSESSEE CONTENDED THAT THE PROCEEDINGS UNDER SECTION 271(1)(C) WERE INITIA TED ON AN ALTOGETHER DIFFERENT ISSUE AND THE ISSUE OF SECTION 10(38) WAS NOT PART OF THE ASSESSMENT ORDER AND BASED ON SUCH CLAIM THE TRIBUN AL, IN PARA 7, OBSERVED THAT PENALTY CANNOT BE LEVIED BY THE AO ON A DIFFER ENT ISSUE, WHICH WAS NOT EVEN EXAMINED BY THE AO, SINCE PENALTY WAS LEVIED S UBSEQUENT TO THE DIRECTION OF THE CIT(A) IN THE APPELLATE ORDER. IT WAS ALSO OBSERVED THAT THE CLAIM WAS MADE BONAFIDE. 17. WE HAVE GIVEN CAREFUL CONSIDERATION TO THE VIEW TAK EN BY THE ITAT D BENCH (SUPRA). WE ARE NOT ABLE TO CONVINCE OURSELVE S WITH REGARD TO THE FINDINGS GIVEN THEREIN, PARTICULARLY HAVING REGARD TO THE FACTUAL MATRIX OF THE CASE WHICH WAS PLACED BEFORE US. IT IS NOTICED THAT THE ASSESSEES WERE GIVEN SUFFICIENT OPPORTUNITY BEFORE LEVYING PENALTY WHERE IN THE ASSESSEES WERE SHOW CAUSED AS TO WHY PENALTY SHOULD NOT BE LEVIED FOR FURNISHING INACCURATE PARTICULARS IN CLAIMING A WRONG EXEMPTIO N UNDER SECTION 10(38) OF THE ACT. THEREFORE IT CANNOT BE STATED THAT THE ASSESSEES WERE NOT GIVEN AN OPPORTUNITY BEFORE LEVYING PENALTY. IN FACT THE AO HAS APPLIED HIS MIND TO THE ISSUE OF LEVYING OF PENALTY, FOR FURNISHING INA CCURATE PARTICULARS BY THE ASSESSEES HEREIN, FOR MAKING A CLAIM OF EXEMPTION U NDER SECTION 10(38) OF THE ACT. THE LEARNED CIT(A) ALSO HAS CONSIDERED THE ISSUE IN DETAIL TO HIGHLIGHT THAT THE CLAIM LACKS BONAFIDES AND IT IS A CLEAR CASE WHERE THE ASSESSEES HEREIN HAD TAKEN A CHANCE BY MAKING A WRO NG CLAIM FROM YEAR TO YEAR AND SIMILAR CLAIMS WERE MADE BY ALL THE FAMILY MEMBERS, WHICH WOULD FURTHER ESTABLISH THE FACT THAT THE CLAIM LACKS BON AFIDES. ON THE CONTRARY, THE TRIBUNAL PROCEEDED ON THE ASSUMPTION, IN THE CA SE OF SHRI RAVINDRAKUMAR TOSHNIWAL, THAT THE AO HAS NOT EXAMIN ED THIS ISSUE WHILE LEVYING PENALTY. THE TRIBUNAL HAD ALSO NOT TAKEN IN TO CONSIDERATION THE FACT THAT IT IS NOT ONE SOLITARY TRANSACTION BUT THE TRA NSACTIONS OF SEVERAL INDIVIDUAL FAMILY MEMBERS AND IT IS DIFFICULT TO BE LIEVE THAT NONE OF THEM ITA NO. 4618/MUM/2012 SMT. & SHRI TOSHNIWALS 12 HAVE EVER THOUGHT OF VERIFYING AS TO WHETHER STT WA S PAID OR NOT AND IN PARTICULAR A MANAGING DIRECTOR OF A LISTED COMPANY CAN BE ASSUMED TO KNOW THAT TRANSACTIONS NOT CARRIED OUT IN STOCK EXCHANGE ARE LIABLE TO TAX UNDER THE HEAD CAPITAL GAINS SINCE NO STT IS PAYABLE AN D THE ASSESSEES CANNOT PLEAD IGNORANCE YEAR AFTER YEAR. SINCE THESE FACTOR S WERE NOT TAKEN INTO CONSIDERATION BY THE ITAT IN THE EARLIER YEAR, APAR T FROM THE FACT THAT EACH YEAR IS INDEPENDENT, WE VERIFIED THE FACTS OF THE C ASE OF THESE ASSESSEES INDEPENDENTLY AND HAVING REGARD TO THE CIRCUMSTANCE S OF THE CASE WE ARE OF THE CONSIDERED OPINION THAT THE ASSESSEES HEREIN HA VE NOT PROVED THE BONAFIDES OF MAKING A WRONG CLAIM WHICH AMOUNTS TO FURNISHING OF INACCURATE PARTICULARS OF INCOME AND THUS, IN THE L IGHT OF THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF ZOOM COMMUN ICATION P. LTD. (SUPRA), THE ORDERS PASSED BY THE LEARNED CIT(A) DE SERVE TO BE CONFIRMED. WE ORDER ACCORDINGLY. 18. IN THE RESULT, THE APPEALS FILED BY THE ASSESSEES A RE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH NOVEMBER, 2013. SD/- SD/- (RAJENDRA) (D. MANMOHAN) ACCOUNTANT MEMBER VICE PRESIDENT MUMBAI, DATED: 13 TH NOVEMBER, 2013 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 25, MUMBAI 4. THE CIT 14, MUMBAI CITY 5. THE DR, D BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.