Manpreet Singh, Chandigarh V. ACIT, Chandigarh

ITA 467/CHANDI/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 81011 (ITAT-CHANDIGARH)
• Duration Of Justice: 6 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-11-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 17-11-2014
• Assessment Year: 2010-2011
• Appeal Filed On: 30-04-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: J S NAGAR
• Assessee Lawyers: R R THAKUR
• Keywords: Fair market value; Revised return
• Section: 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES A CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI T.R. SOOD, ACCOUNTANT MEMBER ITA NO. 467/CHD/2014 ASSESSMENT YEAR: 2010-11 SH. MANPREET SINGH VS. THE ACIT H.NO. 1532, SECTOR 36 CIRCLE 4(1) CHANDIGARH CHANDIGARH PAN NO.AMCPS8915J (APPELLANT) (RESPONDENT) APPELLANT BY : SH. R.R. THAKUR RESPONDENT BY : SHRI. J.S. NAGAR DATE OF HEARING : 17/11/2014 DATE OF PRONOUNCEMENT : 20/11/2014 ORDER PER BHAVNESH SAINI, JM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LD. CIT(A) CHANDIGARH DT. 03.02.2014 FOR ASSESSMENT YEAR 2010- 11, CHALLENGING THE LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE INCOME TA X ACT. 2. FACTS OF THE CASE ARE THAT ASSESSEE WAS AN EMPLO YEE OF HDFC BANK. THE EMPLOYER HAD GRANTED AN OPTION TO EXERCISE ESOPS AS PER THE RULES AND THE ASSESSEE PURCHASED 2,500 SHARES FOR RS. 27,46,750/ - WHOSE FAIR MARKET VALUE WAS OF RS. 36,55,950/-. THE ASSESSEE HAD NOT DECLAR ED THE PERQUISITE VALUE OF RS. 9,09,188 (36,55,950-27,46,750) ON THE ESOPS IN THE ORIGINAL RETURN OF INCOME. NOTICE U/S 148 WAS ISSUED FOR TAXING THIS A MOUNT AND ASSESSEE DECLARED THIS PERQUISITE IN THE REVISED RETURN. ASSESSING OF FICER ASSESSED THE INCOME DECLARED IN THE REVISED RETURN AND INITIATED PENALT Y PROCEEDINGS UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT. 2.1 IN THE PENALTY PROCEEDINGS, ASSESSEE HAD SUBMIT TED THAT DIFFERENCE BETWEEN THE FAIR MARKET VALUE AND GRANT PRICE WAS CHARGED AS FBT IN THE EARLIER YEARS AND FBT WAS ABOLISHED W.E.F 01.04.2009, BUT T HE ASSESSEE WAS NOT AWARE OF THE AMENDMENT. AS PER THE ASSESSEE, HE HAD ATTAC HED ORIGINAL TDS CERTIFICATE 2 IN WHICH TAX DEDUCTED ON THE AMOUNT OF DIFFERENCE B ETWEEN FAIR MARKET VALUE AND GRANT PRICE HAD BEEN REFLECTED. THE ASSESSEE H AD SUBMITTED THAT THE VALUE OF ESOPS COULD HAVE BEEN TAXED ON THE BASIS OF FORM NO . 16 WITHOUT ISSUING NOTICE U/S 148. ACCORDING TO THE ASSESSEE, HE HAD N O INTENTION TO CONCEAL THE INCOME, WHICH WAS ALREADY DECLARED IN FORM NO.16. T HE ASSESSING OFFICER WAS NOT SATISFIED WITH THE EXPLANATION OF THE ASSESSEE AND LEVIED THE PENALTY VIDE SEPARATE ORDER. 3. THE ASSESSEE REITERATED THE SAME SUBMISSION BEFO RE LD. CIT(A), HOWEVER LD. CIT(A) DID NOT ACCEPT THE CONTENTION OF THE ASS ESSEE AND DISMISS THE APPEAL OF THE ASSESSEE. AS FINDING IN PARA 5 TO 6 OF THE A PPELLATE ORDER ARE REPRODUCED AS UNDER. 5. I HAVE CONSIDERED THE FACTS OF THE CASE. AS PER THE PROVISIONS OF SECTION 271(1)(C), PENALTY CAN BE LEVIED, IF THE AS SESSEE HAS CONCEALED PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE P ARTICULARS OF SUCH INCOME. FOR THE SAKE OF READY REFERENCE, EXPLANATIO N-1 BELOW SECTION 271(1) IS REPRODUCED BELOW: EXPLANATION 1. WHERE IN RESPECT OF ANY FACTS MATE RIAL 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 COMMISSIONER TO BE FA LSE, OR (B) SUCH PERSON OFFERS AN EXPLANATION WHICH HE IS N OT ABLE TO SUBSTANTIATE AND FAILS TO PROVE THAT SUCH EXPLANATI ON IS BONAFIDE AND THAT ALL THE FACTS RELATING TO THE SAME AND MAT ERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM, THEN, THE AMOUNT ADDED OR DISALLOWED IN COMPUTING T HE TOTAL INCOME OF SUCH PERSON AS A RESULT THEREOF SHALL, FOR THE PURP OSES OF CLAUSE (C) OF THIS SUB-SECTION, BE DEEMED TO REPRESENT THE INCOME IN R ESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED. 5.1 THUS, WHEN THE ASSESSEE HAS CONCEALED PARTICULA RS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS, CONDITIONS LAID D OWN IN EXPLANATION-1 (SUPRA) HAVE TO BE EXAMINED. IN THE INSTANT CASE, T HE EMPLOYER NAMELY, HDFC BANK HAD CLEARLY COMMUNICATED TO THE APPELLANT ON 18.06.2010 THAT THE DIFFERENCE BETWEEN THE OFFER PRICE AND MARKET V ALUE OF SHARES ALLOTTED UNDER ESOPS WAS TO BE TREATED AS PERQUISITE BY THE APPELLANT, BUT THE APPELLANT FAILED TO INCLUDE THE VALUE OF THE SAID P ERQUISITE IN HIS RETURN OF INCOME FILED SUBSEQUENTLY ON 26.07.2010 AND ALSO QU IETLY CLAIMED THE TAX DEDUCTED AT SOURCE OF RS. 2,80,939/- ON THIS PERQUI SITE VALUE. THE ARGUMENT OF THE LD. COUNSEL THAT THE ASSESSING OFFI CER COULD HAVE ASSESSED THE INCOME ON THE BASIS OF THE TDS CERTIFI CATE WITHOUT ISSUING NOTICE U/S 148 IS NOT RELEVANT AND IN ANY CASE, THA T COULD NOT HAVE BEEN DONE AS PER LAW, SINCE INCOME OF THE ASSESSEE CANNO T BE ENHANCED SIMPLY ON THE BASIS OF A TDS CERTIFICATE. IN FACT, THE APP ELLANT HAS NO REASON FOR NOT DECLARING THE PERQUISITE VALUE OF ESOPS IN HIS RETURN OF INCOME. 5.2 THE RATIO OF JUDGMENT OF HONBLE DELHI HIGH COU RT IN THE CASE OF M/S ZOOM COMMUNICATION (P) LTD. (327 ITR 510) IS SQ UARELY APPLICABLE TO THE FACTS OF THE INSTANT CASE, IN WHICH IT WAS HELD : 3 IT IS TRUE THAT MERE SUBMITTING A CLAIM WHICH IS INCORRECT IN LAW WOULD NOT AMOUNT TO GIVING INACCURATE PARTICULARS O F THE INCOME OF THE ASSESSEE, BUT IT CANNOT BE DISPUTED THAT THE CL AIM MADE BY THE ASSESSEE NEEDS TO BE BONAFIDE. IF THE CLAIM BESIDE S BEING INCORRECT IN LAW IS MALA FIDE, EXPLANATION 1 TO SECTION 271(1 ) WOULD COME INTO PLAY AND WORK TO THE DISADVANTAGE OF THE ASSES SEE. 20. THE COURT CANNOT OVERLOOK THE FACT THAT ONLY A SMALL PERCENTAGE OF THE INCOME-TAX RETURNS ARE PICKED UP FOR SCRUTIN Y. IF THE ASSESSEE MAKES A CLAIM WHICH IS NOT INCORRECT IN LAW BUT IS ALSO WHOLLY WITHOUT ANY BASIS AND THE EXPLANATION FURNISHED BY HIM FOR MAKING SUCH A CLAIM IS NOT FOUND TO BE BONA FIDE, IT WOULD BE DIFFICULT TO SAY THAT HE WOULD STILL NOT BE LIABLE TO PENALTY-UN DER SECTION 271(1)(C) OF THE ACT. IF WE TAKE THE VIEW THAT A CL AIM WHICH IS WHOLLY UNTENABLE IN LAW AND HAS ABSOLUTELY NO FOUND ATION ON WHICH IT COULD BE MADE, THE ASSESSEE WOULD NOT BE LIABLE TO IMPOSITION OF PENALTY, EVEN IF HE WAS NOT ACTING BONA FIDE WHILE MAKING A CLAIM OF THIS NATURE, THAT WOULD GIVE A LICENSE TO UNSCRUPUL OUS ASSESSEES TO MAKE WHOLLY UNTENABLE AND UNSUSTAINABLE CLAIMS WITH OUT THERE BEING ANY BASIS FOR MAKING THEM, IN THE HOPE THAT T HEIR RETURN WOULD NOT BE PICKED UP FOR SCRUTINY AND THEY WOULD BE ASSESSED ON THE BASIS OF SELF-ASSESSMENT UNDER SECTION 143(1) O F THE ACT AND EVEN IF THEIR CASE IS SELECTED FOR SCRUTINY, THEY C AN GET AWAY MERELY BY PAYING THE TAX, WHICH IN ANY CASE, WAS PAYABLE B Y THEM. THE CONSEQUENCE WOULD BE THAT THE PERSONS WHO MAKE CLAI MS OF THIS NATURE, ACTUATED BY A MALA FIDE INTENTION TO EVADE TAX OTHERWISE PAYABLE BY THEM WOULD GET AWAY WITHOUT PAYING THE T AX LEGALLY PAYABLE BY THEM, IF THEIR CASES ARE NOT PICKED UP F OR SCRUTINY. THIS WOULD TAKE AWAY THE DETERRENT EFFECT, WHICH THESE P ENALTY PROVISIONS IN THE ACT HAVE. 5.3 IT IS ALSO NOTEWORTHY THAT APPELLANT IS A QUAL IFIED PERSON, AN EMPLOYEE OF THE BANK, WELL VERSED WITH THE TAXABILI TY OF PERQUISITE VALUE OF ESOPS AND MOREOVER, THERE WAS A CLEAR COMMUNICAT ION FROM HIS EMPLOYER REGARDING TAXABILITY OF PERQUISITE VALUE O F THE ESOPS AND SO THE ARGUMENT TAKEN BY THE APPELLANT THAT HE WAS NOT AWA RE OF THE AMENDMENT IN THE ACT W.E.F. 01.04.2009 IS NOT TENABLE. THE CL AIM MADE BY THE APPELLANT WAS NOT CORRECT AS PER LAW AND WAS WITHOU T ANY BASIS. THE APPELLANT HAS DELIBERATELY NOT DECLARED THE IMPUGNE D AMOUNT OF PERQUISITE VALUE IN HIS RETURN OF INCOME AND HE HAS NOT BEEN A BLE TO SUBSTANTIATE THAT HIS EXPLANATION IS BONA FIDE. THE PENALTY FOR CONCE ALMENT LEVIED BY THE ASSESSING OFFICER IS ACCORDINGLY CONFIRMED. GROUNDS OF APPEAL TAKEN BY THE APPELLANT ARE DISMISSED. 6. IN THE RESULT, THE APPEAL IS DISMISSED. 4. LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBM ISSION MADE BEFORE LD. CIT(A) AND REFERRED TO FORM NO. 16 (AT PAGE 2 OF PA PER BOOK ), FORM NO. 12BA (AT PAGE 7 OF PAPER BOOK) AND SUBMITTED THAT THE DI FFERENCE IN THE VALUATION HAS ALREADY BEEN SHOWN IN THIS FORM ISSUED BY THE EMPLO YER THEREFORE, ASSESSEE HAS NO INTENTION TO CONCEAL THE PARTICULARS OF INCOME A ND WHEN ASSESSEE IS VOLUNTARILY DISCLOSED THE SAID INCOME IN THE RETURN FILED IN RESPONSE TO NOTICE UNDER SECTION 148 OF THE INCOME TAX ACT, THEREFORE, PENALTY MAY NOT BE LEVIED. 4 5. ON THE OTHER HAND LD. DR RELIED UPON THE ORDER O F THE AUTHORITIES BELOW. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND DO NOT FIND ANY JUSTIFICATION TO CANCEL THE PENALTY IN THE MATTER. THE ASSESSEE HAS PRODUCED FORM NO. 16 AND FORM NO. 12BA IN THE PAPER BOOK IN WHICH THE VALUE OF PERQUISITE ON ACCOUNT OF DIFFERENCE IN VALUATION OF PURCHASE O F SHARES IN A SUM OF RS. 9,09,188/- HAVE BEEN SPECIFICALLY MENTIONED. THE AS SESSEE WAS THEREFORE AWARE OF THE FACT THAT THE AMOUNT IN QUESTION IS INCOME I N THE HANDS OF THE ASSESSEE ON WHICH TDS HAS ALSO BEEN DEDUCTED THEREFORE, THERE W ERE NO REASON FOR THE ASSESSEE TO TREAT THE SAME INCOME AS NON TAXABLE. O NCE THE EMPLOYER HAS ISSUED A STATUTORY FORM IN FAVOUR OF THE ASSESSEE COMMUNIC ATING THAT THE DIFFERENCE BETWEEN OFFER PRICE AND MARKET VALUE OF SHARES IS I NCOME OF THE ASSESSEE ON WHICH TAX HAS ALREADY BEEN DEDUCTED, THE ASSESSEE W AS REQUIRED TO DECLARE THE SAME AMOUNT AS INCOME IN THE ORIGINAL RETURN OF INC OME. HOWEVER, THE ASSESSEE DELIBERATELY DID NOT SHOW THE AMOUNT IN QUESTION IN THE ORIGINAL RETURN OF INCOME. 7. THE AO HAS SPECIFICALLY NOTED IN THE ASSESSMENT ORDER THAT ASSESSEE HAS RECEIVED PERQUISITE IN THE FORM OF ESOPS WHICH HAS NOT BEEN SHOWN IN THE ORIGINAL RETURN OF INCOME THEREFORE NOTICE UNDER SE CTION 148 HAS BEEN ISSUED AFTER RECORDING THE REASONS FOR ESCAPEMENT OF INCOM E. THE ASSESSEE THEREAFTER FILED REVISED RETURN DECLARING SHARE INCOME WHICH W AS ACCEPTED IN THE PROCEEDING UNDER SECTION 143(3)/ 148 OF THE INCOME TAX ACT. 8. THE CONDUCT OF THE ASSESSEE CLEARLY SHOWS THAT A SSESSEE HAD DELIBERATELY DID NOT SHOW THE AMOUNT IN QUESTION AS INCOME IN TH E ORIGINAL RETURN OF INCOME THEREFORE ASSESSEE HAS CONCEALED THE PARTICULARS OF INCOME IN THE ORIGINAL RETURN OF INCOME. THE ASSESSEE HAS FILED THE REVISED RETUR N ONLY WHEN THE CONCEALMENT WAS DEDUCTED BY THE ASSESSING OFFICER. 9. THERE IS NO CONCEPT OF VOLUNTARY SURRENDER OF IN COME IS APPLICABLE AND PENALTY HAS TO BE LEVIED AS PER THE RECENT DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF MAK DATA (P). LTD. VS. CIT 358 ITR 5 93. THE LD. CIT (A) 5 THEREFORE, CORRECTLY APPLIED EXPLANATION-1 OF SECTI ON 271(1) OF THE INCOME TAX ACT AGAINST THE ASSESSEE BECAUSE ASSESSEE HAS NO EX PLANATION. 10. AFTER CONSIDERING THE RECORDS AND DISCUSSIONS, WE DO NOT FIND ANY MERIT IN THE APPEAL OF THE ASSESSEE AND THE SAME IS ACCORDIN GLY DISMISSED. 11. IN THE RESULT APPEAL OF THE ASSESSEE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON 20/11/2014 SD/- SD/- (T.R. SOOD) (BHAVNESH SAINI ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 20/11/2014 AG COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT, TH E CIT(A), THE DR