LAXMILAL J JAIN HUF, MUMBAI V. ITO WD 21(3)(3), MUMBAI

ITA 6000/MUM/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 1055 (ITAT-MUMBAI)
• Duration Of Justice: 8 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-07-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2005-2006
• Appeal Filed On: 12-11-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUM EET KUMAR
• Assessee Lawyers: SANJUKTA CHOW DHURY
• Keywords: Revised return

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, D, MUMBAI BEFORE SHRI R V EASWAR, PRESIDENT AND SHRI R K PANDA, ACCOUNTANT MEMBER I T A NO: 6000/MUM/2009 (ASSESSMENT YEAR: 2005-06) SHRI LAXMILAL J JAIN (HUF), MUMBAI APPELLANT (PAN: AAAHL0075L) VS INCOME TAX OFFICER 21(3)(3), MUMBAI RESPONDENT APPELLANT BY: MS SANJUKTA CHOWDHURY RESPONDENT BY: MR SUMEET KUMAR O R D E R R V EASWAR, PRESIDENT: THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E LEVY OF PENALTY OF RS.12,083/- UNDER SECTION 271(1)(C) OF T HE INCOME TAX ACT, 1961, FOR THE ASSESSMENT YEAR 2005-06. 2. THE ASSESSEE IS A HUF. IN THE ASSESSMENT MADE U NDER SECTION 143(3), THE ASSESSING OFFICER INCLUDED CAPI TAL GAINS OF RS.1,16,437/- TO THE TOTAL INCOME. THE CAPITAL GAI NS WERE NOT SHOWN BY THE ASSESSEE IN THE RETURN OF INCOME. THE ASSESSEE HOWEVER ACCEPTED THE ASSESSMENT ORDER. SUBSEQUENTL Y PENALTY PROCEEDINGS WERE INITIATED BY THE AO ON THE GROUND THAT THE ASSESSEE CONCEALED ITS INCOME BY NOT DISCLOSING THE CAPITAL GAINS. THE ASSESSEE SUBMITTED THAT IT WAS AN OMISSION BY T HE ACCOUNTANT DUE TO OVERSIGHT AND THAT AS SOON AS THE SAME WAS P OINTED OUT BY THE AO IN THE COURSE OF THE ASSESSMENT PROCEEDINGS, THE ASSESSEE HAD OFFERED THE CAPITAL GAINS BY WRITING A LETTER T O THE AO AND THAT IN THESE CIRCUMSTANCES NO PENALTY FOR CONCEALMENT WAS LEVIABLE. IT ITA NO: 6000/MUM/2009 2 WAS FURTHER POINTED OUT THAT THE ACCOUNTANT OMITTED TO INCLUDE THE CAPITAL GAINS WHICH AROSE ON THE SALE OF MUTUAL FUN D INVESTMENTS AS HE WAS UNDER THE IMPRESSION THAT LONG TERM CAPITAL GAINS WERE EXEMPT FROM TAX. THESE SUBMISSIONS WERE NOT ACCEPT ED BY THE AO, WHO PROCEEDED TO HOLD THAT THE ASSESSEE OFFERED TO INCLUDE THE CAPITAL GAINS ONLY WHEN IT WAS POINTED OUT BY THE A O AND THAT EVEN THEN NO REVISED RETURN WAS FILED. HE DID NOT ACCEP T THE ASSESSEES PLEA THAT THE OMISSION TO INCLUDE THE CAPITAL GAINS IN THE RETURN WAS DUE TO THE ACCOUNTANTS OVERSIGHT. HE IMPOSED A PE NALTY OF RS.12,083/-. THE SAME HAVING BEEN CONFIRMED BY THE CIT(A), THE ASSESSEE IS IN FURTHER APPEAL BEFORE THE TRIBUNAL. 3. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIO NS. FROM THE PENALTY ORDER, IT IS SEEN THAT THE AO CALLED UP ON THE ASSESSEE TO FURNISH THE DETAILS OF MUTUAL FUND INVESTMENTS ON 0 7.06.2007. IN RESPONSE THERETO THE ASSESSEE FILED A LETTER ON 31. 08.2007 DISCLOSING THE CAPITAL GAINS WHICH AROSE ON SALE OF THE MUTUAL FUND UNITS. IN THE SAID LETTER THE ASSESSEE ALSO EXPLAI NED THAT IT WAS AN ACCIDENTAL OMISSION BY THE ASSESSEES ACCOUNTANT AN D THE SAME WAS BEING OFFERED VOLUNTARILY. THE AO ACCEPTED THE CAPITAL GAINS OFFERED AND PASSED THE ASSESSMENT ORDER ON THE SAME DAY, WHICH WAS ACCEPTED BY THE ASSESSEE. ON THESE FACTS THE Q UESTION IS WHETHER THE ASSESSEE VOLUNTARILY OFFERED THE CAPITA L GAINS FOR TAXATION. GOING BY THE OBSERVATIONS IN PARA 2 OF T HE PENALTY ORDER, IT IS SEEN THAT THE AO HAD MERELY CALLED UPON THE ASSE SSEE TO FURNISH THE DETAILS OF THE MUTUAL FUND INVESTMENTS. NOTHIN G HAPPENED THEREAFTER TILL 31.08.2007 WHEN THE ASSESSEE OFFERE D THE CAPITAL ITA NO: 6000/MUM/2009 3 GAINS FOR TAXATION. BY MERELY ASKING FOR THE DETAI LS OF THE MUTUAL FUND INVESTMENTS, THE AO CANNOT BE SAID TO HAVE UNE ARTHED SOME FACT WHICH CLEARLY POINTED OUT THAT THE ASSESSEE HA D CONCEALED ITS INCOME. APPARENTLY WHILE COLLECTING THE DETAILS OF THE MUTUAL FUND INVESTMENTS THE ASSESSEE MUST HAVE REALIZED THAT TH E CAPITAL GAINS ON THE SALE OF THE INVESTMENTS WERE NOT INCLUDED IN THE RETURN AND THAT THIS WAS DUE TO THE OVERSIGHT OF THE ACCOUNTAN T, WHO THOUGHT, THOUGH MISTAKENLY, THAT THE LONG TERM CAPITAL GAINS WERE EXEMPT. THUS THE ASSESSEE CANNOT BE SAID TO HAVE OFFERED TH E CAPITAL GAINS FOR TAXATION ONLY AFTER THEY WERE DETECTED BY THE A O. AS ALREADY NOTED, THE AO HAD MERELY CALLED FOR THE DETAILS OF THE MUTUAL FUND INVESTMENTS. AT THAT TIME OR TILL 31.08.2007, WHEN HE COMPLETED THE ASSESSMENT, HE HAD NO MATERIAL BEFORE HIM TO SHOW T HAT THE ASSESSEE HAD OMITTED TO INCLUDE THE CAPITAL GAINS I N THE RETURN. THE ACCOUNTANT NO DOUBT WAS SOMEWHAT CARELESS IN NOT IN CLUDING THE CAPITAL GAINS IN THE RETURN BUT HE HAS EXPLAINED TH E SAME BY SAYING THAT HE WAS UNDER THE IMPRESSION THAT LONG TERM CAP ITAL GAINS WAS EXEMPT FROM TAX. THIS WAS CLEARLY A WRONG NOTION B UT NEVERTHELESS WAS NOT A DISHONEST IMPRESSION. THE MOMENT THE ASS ESSEE CAME TO KNOW THAT IT WAS LIABLE FOR CAPITAL GAINS ON THE SALE OF THE MUTUAL FUND UNITS, IT WROTE A LETTER TO THE AO ASKING HIM TO INCLUDE THE GAINS IN THE ASSESSMENT. IN THE SAID LETTER, A COPY OF W HICH IS ON RECORD, THE ASSESSEE ALSO REQUESTED THE AO NOT TO IMPOSE AN Y PENALTY. TAKING ALL THE FACTS AND CIRCUMSTANCES OF THE CASE INTO ACCOUNT WE HOLD THAT THIS IS NOT A FIT CASE FOR IMPOSING THE P ENALTY FOR ITA NO: 6000/MUM/2009 4 CONCEALMENT OF INCOME. WE CANCEL THE SAME AND ALLO W THE APPEAL OF THE ASSESSEE WITH NO ORDER AS TO COSTS. ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD JULY 2010. SD/- SD/- (R K PANDA) (R V EASWAR) ACCOUNTANT MEMBER PRESIDENT MUMBAI, DATED 23 RD JULY 2010 SALDANHA COPY TO: 1. SHRI LAXMILAL J JAIN (HUF) 75/4, ABUBAKAR BUILDING, OLD AGRA ROAD KURLA (WEST), MUMBAI 400 070 2. ITO 21(3)(3) 3. CIT-21 4. CIT(A)-XXI 5. DR D BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI