SAMEER KELA, MUMBAI V. ITO WD 26(2)-(2), MUMBAI

ITA 4695/MUM/2008

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 2586 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-12-2009
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 16-12-2009
• Assessment Year: 2004-2005
• Appeal Filed On: 14-07-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NAVEEN GUPTA
• Assessee Lawyers: LALCHAND CHOUDHARY
• Keywords: Bonafide belief; Cost of acquisition; Revised return; Set aside; Capital Gains
• Section: 271(1)(c); 143(1); 143(2); 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE SHRI D. MANMOHAN, VP & SHRI R.K. PANDA, AM I.T.A. NO. 4695/MUM/2008 (ASSESSMENT YEAR 2004-05) MR. SAMEER KELA C/O. M/S. CHOUDHARY & PANSARI, CAS, 102, GAURESH APARTMENTS, OLD POLICE LINES, ANDHERI (EAST), MUMBAI-400 069 PAN: ABVPK 7596 D VS. THE INCOME-TAX OFFICER WARD 26(2)-(2), 6 TH FLOOR, SMT. K.G. MITTAL AYURVED HOSPITAL BUILDING, CHARNI ROAD, MUMBAI-400 002 APPELLANT RESPONDENT APPELLANT BY: SHRI LALCHAND CHOUDHARY RESPONDENT BY: SHRI NAVEEN GUPTA O R D E R DATE OF HEARING: 16.12.2009 DATE OF ORDER: 18.12.2009 PER R.K. PANDA, AM: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER DATED 9 TH JUNE, 2008 OF THE CIT(A)-XXIX, MUMBAI RELATING TO ASSESSMENT YEAR 2004-05. 2. THE ASSESSEE IN HIS GROUNDS OF APPEAL HAS CHALLENGE D THE ORDER OF THE CIT(A) IN CONFIRMING THE PENALTY OF RS.3,64,560 LEVIED BY THE ASSESSING OFFICER U/S. 271(1)(C) OF THE INCOME-TAX ACT, 1961 (THE ACT). 3. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE FILED HIS RETURN OF INCOME DECLARING INCOME OF RS.29,50,029 ON 26 TH JULY, 2004 WHICH WAS PROCESSED U/S. 143(1) OF THE ACT ON 5 TH MAY, 2005. THEREAFTER THE CASE WAS SELECT ED FOR SCRUTINY AND NOTICE U/S. 143(2) W AS ISSUED ON 20 TH JULY, 2005 WHICH WAS SERVED ON THE ASSESSEE ON 30 TH JULY, 2005. SUBSEQUENTLY THE ASSESSEE FILED A REVISED RETURN OF INCOME DECLA RING TOTAL INCOME OF RS.46,02,026 WHICH INCLUDES LONG TERM CAPITAL GAIN OF RS.16,41,791 AND INCOME FROM OTHER SOURCES OF RS.22,200. IN THE R EASONS FOR FILING OF REVISED RETURN, IT WAS STATED THAT THE ASSESSEE WAS UNDER THE IMPRESSION THAT THE INCOME RECEIVED ABROAD ON ACCOUNT OF SALE OF ESOPS WAS NOT I.T.A. NO. 4695/MUM/2008 MR. SAMEER KELA =================== 2 TAXABLE AND HENCE LONG TERM CAPITAL GAIN WAS NOT OF FERED FOR TAXATION IN THE ORIGINAL RETURN. AS REGARDS INCOME FROM OTHER SOURCES SUCH AS BANK INTEREST, IT WAS MENTIONED THAT THE ASSESSEE ANTICI PATED THAT SUCH INTEREST WAS WITHIN THE LIMIT OF DEDUCTION U/S. 80L AND HENC E NOT INCLUDED IN THE ORIGINAL RETURN. THE INCOME DECLARED IN THE REVISE D RETURN WAS ACCEPTED BY THE ASSESSING OFFICER WITHOUT DISTURBING THE SAM E. 4. SUBSEQUENTLY THE ASSESSING OFFICER INITIATED PENALT Y PROCEEDINGS U/S. 271(1)(C) OF THE ACT. DURING THE COURSE OF PE NALTY HEARING, IT WAS EXPLAINED BY THE ASSESSEE THAT HE WAS UNDER THE BON AFIDE IMPRESSION THAT THE CAPITAL GAINS WHICH AROSE TO HIM OUTSIDE INDIA WAS NOT TAXABLE IN INDIA AND THEREFORE, WAS NOT DECLARED IN THE ORIGINAL RET URN. SIMILARLY, THE BANK INTEREST WAS NOT CONSIDERED ON THE GROUND THAT THE SAME WAS ENTIRELY EXEMPT U/S. 80L OF THE ACT. IT WAS SUBMITTED THAT IMMEDIATELY AFTER DETECTION OF THE SAME BY THE ASSESSEE, THE ASSESSEE FILED HIS REVISED RETURN FOR THE A.YS. 2004-05 AND 2005-06. IT WAS FURTHER SUBMITTED THAT THE MISTAKE WAS DETECTED BY THE ASSESSEE HIMSELF AND FI LED THE REVISED RETURN WHICH SHOWS THAT HIS CONSCIENCE WAS CLEAR AND HAD G OOD MOTIVE TO ABIDE BY THE PROVISIONS OF INCOME-TAX ACT. VARIOUS JUDIC IAL DECISIONS WERE ALSO CITED TO THE PROPOSITION THAT PENALTY U/S. 271(1)(C ) CANNOT BE SUSTAINED EVEN WHERE THE ASSESSEE HAS FILED REVISED RETURN AN D DECLARED A HIGHER INCOME AFTER SEARCH AND NOTICE FOR REOPENING OF ASS ESSMENT U/S. 148 OF THE ACT. 5. HOWEVER, THE VARIOUS ARGUMENTS ADVANCED BY THE ASSE SSEE DID NOT SATISFY THE ASSESSING OFFICER. HE OBSERVED THAT TH E ASSESSEE FILED THE REVISED RETURN DECLARING THE LONG TERM CAPITAL GAIN ONLY AF TER THE CASE WAS SELECTED FOR SCRUTINY AND STATUTORY NOTICE U/S. 143(2) WAS ISSUE D. RELYING ON A NUMBER OF DECISIONS, HE HELD THAT THIS IS A FIT CASE FOR IMPO SING PENALTY U/S. 271(1)(C) OF THE ACT. HE ACCORDINGLY LEVIED THE PENALTY OF RS.3 ,64,560 BEING THE MINIMUM PENALTY @ 100% ON TAX SOUGHT TO BE EVADED. 6. IN APPEAL, THE LEARNED CIT(A) UPHELD THE ACTION OF THE ASSESSING OFFICER. WHILE DOING SO HE HELD THAT THE EXPLANATI ON GIVEN BY THE ASSESSEE IS NOT BONAFIDE. THERE WAS NO REASON FOR THE ASSES SEE TO BELIEVE THAT THE I.T.A. NO. 4695/MUM/2008 MR. SAMEER KELA =================== 3 INCOME ON CAPITAL GAIN IS NOT TAXABLE IN INDIA. FU RTHER IF ACCORDING TO THE ASSESSEE THE INCOME IS NOT TAXABLE IN INDIA THEN TA X WOULD HAVE BEEN PAID IN USA WHICH THE ASSESSEE HAS NOT PAID. FURTHER IF THE ASSESSEE WAS OF THE OPINION THAT THE INCOME WAS NOT TAXABLE IN INDIA AT THE TIME OF FILING OF RETURN WHY WAS THERE A CHANGE OF HEART ON RECEIPT O F NOTICE U/S. 143(2) OF THE ACT. HE OBSERVED THAT THE ARGUMENTS OF THE ASS ESSEE THAT ON RECEIPT OF NOTICE, HE HAS CONSULTED A CHARTERED ACCOUNTANT IS SELF-SERVING ARGUMENT SINCE THE ASSESSEE HAS NOT EXPLAINED AS TO WHY HE H AS NOT CONSULTED THE CHARTERED ACCOUNTANT AT THE TIME OF FILING OF THE R ETURN. 7. AGGRIEVED WITH SUCH ORDER OF THE CIT(A), THE ASSESS EE IS IN APPEAL BEFORE US. 8. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE AFTER RECEIPT OF NOTICE U/S. 143(2) VOLUNTARILY AND BEFORE DETECTION BY THE ASSESSING OFFICER FILED THE REVISED RETURN DISCLOSI NG LONG TERM CAPITAL GAIN OF RS.16,41,797 AND INCOME FROM OTHER SOURCES AT RS.22,200. HE SUBMITTED THAT THE LONG TERM CAPITAL GAIN OF RS.16. 42 LAKHS WAS ON ACCOUNT OF SALE OF ESOPS WHICH WERE SOLD IN USA. REFERRING TO PAPER BOOK PAGE 6, HE SUBMITTED THAT THE STOCK OPTIONS WERE GRANTED AN D PURCHASED IN THE YEARS 1997-98 AND 2001-01 WHEN THE ASSESSEE WAS NRI . THE ESOPS WERE SOLD DURING THE IMPUGNED ASSESSMENT YEAR AND FOREIG N REMITTANCES RECEIVED FOR SALE OF STOCK OPTIONS. HE SUBMITTED T HAT THERE WAS NO COST OF ACQUISITION ON ACCOUNT OF GRANT OF ESOPS. THE ASSE SSEE IS A SALARIED EMPLOYEE WHO WAS A NRI IN THE PAST AND WAS A RESIDE NT DURING THE IMPUGNED ASSESSMENT YEAR. THERE WAS GENERAL CONFUS ION IN THE MIND OF THE ASSESSEE AS TO WHETHER THE CAPITAL GAIN ARISING IN USA IS TAXABLE IN INDIA. REFERRING TO A FEW DECISIONS, HE SUBMITTED THAT WHEN AN ASSESSEE FILES A REVISED RETURN DECLARING HIGHER INCOME WHIC H HAS BEEN ACCEPTED BY THE DEPARTMENT, NO PENALTY U/S. 271(1)(C) IS LEVIAB LE. REFERRING TO THE DECISION OF THE TRIBUNAL IN THE CASE OF MR. BOMI S. BILLMORIA VS. ACIT VIDE I.T.A. NO. 2120/MUM/98 DATED 30 TH JUNE, 2009 FOR THE A.Y. 1993-94, HE SUBMITTED THAT THE TRIBUNAL IN THE SAID DECISION HA S DELETED THE SHORT TERM CAPITAL GAIN BROUGHT TO TAX ON ACCOUNT OF SALE OF ESOPS BY THE I.T.A. NO. 4695/MUM/2008 MR. SAMEER KELA =================== 4 ASSESSING OFFICER AND UPHELD BY THE CIT(A). HE ACC ORDINGLY SUBMITTED THAT DIFFERENT VIEWS WERE POSSIBLE AT THE TIME OF F ILING OF THE RETURN ON ACCOUNT OF SALE OF ESOPS. FURTHER THE ASSESSEE HAS PAID FULL TAX ALONG WITH INTEREST THEREON WHICH SHOWS THE BONAFIDES OF THE A SSESSEE. HE ACCORDINGLY SUBMITTED THAT THE PENALTY LEVIED BY TH E ASSESSING OFFICER AND UPHELD BY THE CIT(A) SHOULD BE DELETED. 9. THE LEARNED DR, ON THE OTHER HAND, SUPPORTED THE OR DER OF THE CIT(A). HE SUBMITTED THAT THE ASSESSEE HAS GIVEN O NLY THE DATE OF PURCHASES AND DATE OF SALES OF THE SHARES BEFORE TH E CIT(A). HOWEVER, THE DATE OF EXERCISE OF OPTIONS OF THE ESOPS HAS NOT BE EN GIVEN TILL NOW. HE SUBMITTED THAT THE ASSESSEE IS ARGUING THE CASE ONL Y AFTER THE ORDER OF THE TRIBUNAL IN THE CASE OF BOME BILLMORIA (SUPRA). HE ACCORDINGLY SUBMITTED THAT EITHER THE ORDER OF THE CIT(A) BE UPHELD OR TH E MATTER MAY BE RESTORED TO THE FILE OF THE CIT(A) TO VERIFY THE FA CTS OF THE IMPUGNED CASE WITH THAT OF THE DECISION IN THE CASE OF BOMI S. BI LLMORIA (SUPRA). 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS MADE BY BO TH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. THERE IS NO DISPUTE TO THE FACT THAT THE ASSESSEE IN HIS ORIGINAL RETURN OF INCOME HAS NOT DISCLOSED THE LONG TERM CAPITAL GAIN OF RS.16,41,797 AND THE INTEREST ON BANK DEPOS ITS AMOUNTING TO RS.22,200. THERE IS ALSO NO DISPUTE TO THE FACT TH AT AFTER RECEIPT OF THE NOTICE U/S. 143(2), THE ASSESSEE FILED THE REVISED RETURN OFFERING THE ABOVE TWO AMOUNTS AND PAID TAX AND INTEREST DUE THEREON. IT IS ALSO A FACT THAT THE ASSESSEE DISCLOSED THE ABOVE TWO AMOUNTS VOLUNT ARILY AND BEFORE BEING DETECTED BY THE DEPARTMENT ALTHOUGH THE ASSES SEE DISCLOSED THE ABOVE TWO AMOUNTS IN THE REVISED RETURN AFTER RECEI PT OF NOTICE U/S. 143(2) OF THE ACT. IT IS THE CASE OF THE ASSESSEE THAT HE WAS UNDER THE IMPRESSION THAT THE LONG TERM CAPITAL GAIN ON ACCOU NT OF SALE OF ESOPS IN USA IS NOT TAXABLE IN INDIA AND THE INTEREST ON BAN K DEPOSITS WAS WITHIN THE EXEMPTION LIMIT U/S. 80L OF THE ACT. FURTHER S INCE THE AMOUNT HAS BEEN OFFERED TO TAX BEFORE BEING DETECTED BY THE RE VENUE AND FULL TAX AND I.T.A. NO. 4695/MUM/2008 MR. SAMEER KELA =================== 5 INTEREST THEREON HAS BEEN PAID, THEREFORE, NO PENAL TY IS LEVIABLE. HOWEVER, IT IS THE CASE OF THE REVENUE THAT SINCE THE ASSESS EE DID NOT DISCLOSE THE LONG TERM CAPITAL GAIN AND BANK INTEREST IN THE ORI GINAL RETURN AND THE AMOUNTS WERE OFFERED TO TAX AFTER THE NOTICE WAS IS SUED U/S. 143(2) THEREFORE, THE BONAFIDES OF THE ASSESSEE ARE DOUBTF UL. WE FIND MERIT IN THE SUBMISSION OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE ASSESSEE WAS UNDER BONAFIDE BELIEF THAT PROFIT ON SALE OF LONG T ERM CAPITAL GAIN WAS NOT TAXABLE UNDER THE HEAD SHORT TERM CAPITAL GAIN. THE ABOVE SUBMISSION OF THE LEARNED COUNSEL FOR THE ASSESSEE FINDS SUPPO RT FROM THE DECISION OF THE TRIBUNAL IN THE CASE OF BOMI S. BILLMORIA (SUPR A) WHERE THE TRIBUNAL DELETED THE SHORT TERM CAPITAL GAIN BROUGHT TO TAX BY THE ASSESSING OFFICER AND CONFIRMED BY THE CIT(A) ON ACCOUNT OF SALE OF E SOPS. IT IS THE SETTLED PROPOSITION OF LAW THAT WHEN TWO VIEWS ARE POSSIBLE AND THE ASSESSEE HAS ADOPTED ONE POSSIBLE VIEW WHICH IS NOT ACCEPTED BY THE ASSESSING OFFICER AND WHO TAKES A DIFFERENT VIEW AND BRINGS THE AMOUN T TO TAX, PENALTY U/S. 271(1)(C) ON ACCOUNT OF SUCH ADDITION IS NOT SUSTAI NABLE AND THE BONAFIDES OF THE ASSESSEE SHOULD NOT BE DOUBTED. SINCE IN TH E INSTANT CASE THE ASSESSEE WAS UNDER THE BONAFIDE BELIEF THAT PROFIT ON SALE OF ESOPS IN USA IS NOT TAXABLE IN INDIA, THEREFORE, IN OUR OPINION THE EXPLANATION OF THE ASSESSEE CANNOT BE SIMPLY BRUSHED ASIDE. FURTHER T HE ASSESSEE HAS PAID FULL TAX ALONG WITH INTEREST THEREON ON THE AMOUNT OF LONG TERM CAPITAL GAIN AND THE BANK INTEREST IN THE REVISED RETURN BE FORE BEING DETECTED BY THE REVENUE. UNDER THESE CIRCUMSTANCES, WE ARE OF THE CONSIDERED OPINION THAT PENALTY U/S. 271(1)(C) OF THE ACT IS N OT LEVIABLE. ACCORDINGLY WE SET ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE ASSESSING OFFICER TO CANCEL THE PENALTY. THE GROUNDS RAISED BY THE ASSE SSEE ARE ACCORDINGLY ALLOWED. 11. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON 18 TH DECEMBER, 2009. SD/- (D. MANMOHAN) VICE PRESIDENT SD/- (R.K. PANDA) ACCOUNTANT MEMBER MUMBAI, DATED 18 TH DECEMBER, 2009 I.T.A. NO. 4695/MUM/2008 MR. SAMEER KELA =================== 6 COPY TO: (1) THE APPELLANT, (2) THE RESPONDENT, (3) THE CIT(A)-XXIX, MUMBAI, (4) THE CIT-26, MUMBAI, (5) THE DR, E BENCH, ITAT, MUMBAI. //TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI TPRAO