Sh. Gulzar Singh, Kharar V. ITO, Mohali

ITA 613/CHANDI/2015

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 95672 (ITAT-CHANDIGARH)
• Duration Of Justice: 5 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-11-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 04-06-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D S SIDHU
• Keywords: Salary income; Bonafide mistake
• Section: 143(3); 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI H.L. KARWA, HONBLE VICE PRESIDENT AND MRS. ANNAPURNA MEHROTRA, ACCOUNTANT MEMBER ITA NOS.613/CHD/2015 ASSESSMENT YEARS:2008-09 SH. GULZAR SINGH VS. THE ITO H.NO. 1552E WARD 6(5) KHARAR MOHALI PAN NO. AAJPT8275D (APPELLANT) (RESPONDENT) APPELLANT BY : SH. PARIKSHIT AGGARWAL RESPONDENT BY : SH. D.S. SIDHU DATE OF HEARING : 15/09/2015 DATE OF PRONOUNCEMENT : 16/11/2015 ORDER PER ANNAPURNA MEHROTRA A.M. THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A)-2 CHANDIGARH DATED 21.04.2015. 2. IN THIS APPEAL THE ASSESSEE HAS RAISED THE FOLLO WING GROUNDS: 1. THAT ON FACTS, CIRCUMSTANCES AND LEGAL POSITION OF THE CASE. WORTHY CIT(A) HAS ERRED IN CONFIRMING THE LEVY OF PENALTY U/S 271 (L)(C) ON ADDITION OF RS. 2,12,793/- ON ACCOUNT OF INCOME FROM TRANSACTIONS I N MUTUAL FUNDS. 2. THAT ON FACTS, CIRCUMSTANCES AND LEGAL POSITION OF THE CASE. WORTHY CIT(A) HAS ERRED IN CONFIRMING THE LEVY OF PENALTY U/S 271 (1)(C) ON ADDITION OF RS. 4,04,140/- ON ACCOUNT OF INTEREST EARNED FROM BANKS . 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FI LED HIS RETURN OF INCOME FOR THE IMPUGNED ASSESSMENT YEAR ON 10-11-2009 DECLARIN G NIL INCOME. ASSESSMENT U/S 143(3) WAS FRAMED ON THE ASSESSEE VIDE ORDER DA TED 30/12/2011 AND INCOME WAS ASSESSED AT RS. 1,84,23,510/- AFTER MAKING ADDI TIONS ON ACCOUNT OF INCOME FROM LONG TERM CAPITAL GAINS AMOUNTING TO RS. 1,79, 06,579/- INTEREST EARNED FROM BANKS RS. 4,04,140/- AND GAIN ON SALE OF MUTUAL FUN DS OF RS. 2,12,793/- THEREAFTER 2 PENALTY PROCEEDINGS WERE INITIATED U/S 271(1)(C) AN D VIDE ORDER DATED 10.11.2014 PENALTY AMOUNTING TO RS. 33,86,882/- WAS LEVIED FOR CONCEALING PARTICULARS OF INCOME TO THE TUNE OF RS. 1,84,23,51 0/- 4. DURING THE COURSE OF APPELLATE PROCEEDINGS THE A SSESSEES REPLY VIS--VIS ADDITION MADE ON ACCOUNT OF CAPITAL GAINS OF RS. 1, 79,06,579/- WAS CONSIDERED BY THE LD. CIT (A) AND THE PENALTY LEVIED THEREON W AS CANCELLED. FURTHER WITH RESPECT TO THE PENALTY LEVIED ON ADDITIONS MADE ON ACCOUNT OF INTEREST EARNED FROM BANKS AND GAIN ON SALE OF MUTUAL FUNDS, THE AS SESSEE DID NOT FILE ANY REPLY AND IN VIEW THEREOF THE LD. CIT(A) CONFIRMED THE PE NALTY LEVIED RELYING ON THE JUDGMENT OF THE HONBLE HIGH COURT IN THE CASE OF M /S ZOOM COMMUNICATIONS P. LTD. 327 ITR 510. 5. AGGRIEVED BY THE SAME, THE ASSESSEE FILED THE PR ESENT APPEAL BEFORE US. 6. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRES ENTATIVES OF BOTH THE PARTIES AND PERUSED THE ORDERS OF AUTHORITIES BELOW AS ALSO THE DOCUMENTS PLACED BEFORE US. THE ONLY ISSUE IN THE PRESENT APPEAL IS THE LEVY OF PENALTY FOR CONCEALING PARTICULARS OF INCOME RELATING TO GAINS EARNED FROM TRANSACTIONS IN MUTUAL FUNDS AMOUNTING TO RS. 212793/- AND INTEREST EARNED FROM BANKS AMOUNTING TO RS. 4,04,140/- 7. BEFORE US THE LD. AR PLEADED THAT THE ASSESSEE H AD INADVERTENTLY FAILED TO DISCLOSE THE INCOME FROM THE TRANSACTIONS IN MUTUAL FUND. LD. AR STATED THAT THE ASSESSEE ON BECOMING AWARE OF HIS MISTAKE, HAD VOLU NTARILY DISCLOSED THE SAME DURING ASSESSMENT PROCEEDINGS LD. AR DREW OUR ATTEN TION TO PARA 27 OF THE ASSESSMENT ORDER, WHEREIN IT WAS STATED THAT THE AS SESSEE BROUGHT ON RECORD THAT THERE WAS A NET GAIN OF RS. 212,793/- FROM THE TRANSACTIONS OF MUTUAL FUND 3 AND WHICH HAD BEEN OFFERED FOR TAXATION. LD. AR STA TED THAT THIS FINDING IN THE ASSESSMENT ORDER PROVED THAT THE ASSESSEE HAD VOLUN TARILY DISCLOSED THE AMOUNT FOR TAXATION. LD. AR THEREFORE PLEADED THAT THERE W AS NO CASE FOR LEVY OF PENALTY UNDER SUCH CIRCUMSTANCES VIS--VIS THE INCOME OF RS . 2,12,793/- EARNED ON ACCOUNT OF GAINS FROM MUTUAL FUNDS. 8. LD. DR ON THE OTHER HAND STATED THAT THE IMPUGNE D AMOUNTS HAD BEEN OFFERED TO TAXATION BY THE ASSESSEE ONLY WHEN IT WA S DISCOVERED AND CONFRONTED TO THE ASSESSEE BY THE AO DURING ASSESSMENT PROCEED INGS. LD. DR ARGUED THAT THE SURRENDER MADE WAS NOT VOLUNTARY AND THE ASSESS EE HAS CONCEALED PARTICULARS OF HIS INCOME. RELYING ON THE JUDGMENT OF HON'BLE SUPREME COURT IN THE CASE OF MAK DATA, LD. DR STATED THAT IT WAS A F IT CASE FOR LEVY OF PENALTY. 9. WE FIND THAT THE ADDITION MADE ON ACCOUNT OF GAI NS IN MUTUAL FUNDS HAS BEEN DEALT WITH IN PARA 27 OF THE ASSESSMENT ORDER, WHICH IS BEING REPRODUCED HEREUNDER FOR CLARITY. ' 27. AS PER THE ITS PARTICULARS, ASSESSEE HAS MADE INVESTMENT O F RS. 150,00,780/- IN THE PURCHASE OF MUTUAL FUNDS DURING THE F.Y. 2007-0 8. THE MATTER WAS DULY DISCUSSED WITH THE ASSESSEE DURING THE COURSE OF PR OCEEDINGS AND IT WAS BROUGHT ON RECORD THAT THE INVESTMENT OF RS. 1.5 CRORES WAS MADE AFTER MAKING WITHDRAWALS FROM THE HDFC BANK, WHICH HAS BEEN EXAM INED. IT IS SEEN THAT THERE WAS A OPENING BALANCE OF RS. 1,99,47,000/- IN THE B ANK AS ON 01/04/2007 AND IT WAS OUT OF THE SAME AMOUNT THAT THE INVESTMENT WAS MADE IN THE PURCHASE OF MUTUAL FUNDS. HOWEVER, ASSESSEE BROUGHT ON RECORD T HAT THERE WAS A NET GAIN OF RS. 2.12,793/- FROM THE TRANSACTIONS OF MUTUAL FUND S WHICH HAVE BEEN OFFERED FOR TAXATION. ACCORDINGLY THE AMOUNT OF RS. 2,12,793/- IS ADDED BACK IN THE TAXABLE INCOME OF THE ASSESSE. ALONGWITH PENALTY PROCEEDINGS U/S 271( L)(C) ARE BEING INITIATED SEPARATELY AGAINST THE ASSESSEE FOR CONCE ALING THE PARTICULARS OF INCOME OF RS. 2,12,793/-. 10. A BARE PERUSAL OF THE ABOVE SHOWS THAT IT WAS T HE ASSESSEEE WHO BROUGHT ON RECORD THE FACT THAT THERE WAS A NET GAIN OF RS. 2,12,793/- FROM THE SALE OF MUTUAL FUNDS AND THEREAFTER HE OFFERED THE SAME TO TAX. CLEARLY IT IS NOT A CASE WHERE THE IMPUGNED INCOME WAS DISCOVERED BY THE AO WHO THEN CONFRONTED IT 4 TO THE ASSESSEE, WHO IN TURN THEREAFTER SURRENDERED THE SAME. IN THE PRESENT CASE, IT WAS WHILE DEALING WITH ISSUE OF INVESTMENT S MADE IN MUTUAL FUNDS DURING THE YEAR AMOUNTING TO RS. 1,50,00,780/- THAT IT CAM E TO THE NOTICE OF THE ASSESSEE THAT THERE WAS A GAIN OF RS. 2,12,793/- WH ICH HAD NOT BEEN OFFERED FOR TAX IN THE RETURN OF INCOME. THE ASSESSEE THEREFORE OFFERED THE SAME TO TAX WHICH IS EVIDENT FROM THE FINDING OF AO AT PARA 27 OF ASSESSMENT ORDER WHEREIN HE HAD STATED AS FOLLOWS 'HOWEVER, ASSESSEE BROUGHT ON RECORD THAT THERE WAS O NET GAIN OF RS. 2,12,7931-FROM THE TRANSACTIONS OF MUTUAL FUNDS WHICH HAVE BEEN OF FERED FOR TAXATION.' THIS IS A CLEAR CASE OF VOLUNTARY DISCLOSURE OF INC OME BY THE ASSESSEE EVEN BEFORE BEING DISCOVERED BY THE A.O. SUCH CIRCUMSTA NCES DO NOT WARRANT THE LEVY OF PENALTY U/S 271 (1)(C). THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. TEK RAM 174 TAXMAN 311 HAS HELD THA T WHERE DISCLOSURE MADE IS BONAFIDE AND VOLUNTARY NO PENALTY IS LEVIABLE. SIMI LARLY THE BOMBAY HIGH COURT IN THE CASE OF CIT VS. ASK ENTERPRISES(1998) 230 IT R 0048 HAS HELD INADVERTENT AND BONAFIDE MISTAKES TO BE NOT SUBJECTED TO PENALTY. WE THEREFORE, HOLD THAT THE NON DISCLOSURE OF INCOME, BEING GAINS ON MUTUAL FUN DS AMOUNTING TO RS. 2,12,793/- WAS AN INADVERTENT ERROR ON THE PART OF THE ASSESSEE AND BEING VOLUNTARILY OFFERED TO TAX BY THE ASSESSEE ON BECOM ING AWARE OF THE SAME, NO PENALTY U/S 271(1)(C) IS LEVIABLE. ON THE ISSUE OF LEVY OF PENALTY ON THE ADDITION MAD E ON ACCOUNT OF INTEREST EARNED FROM BANKS, LD. A.R. ARGUED THAT THE NON-DIS CLOSURE OF INTEREST INCOME WAS A MERE MISTAKE AND INADVERTENT ERROR ON THE PAR T OF THE ASSESSEE. LD. AR ARGUED THAT THE ASSESSEE HAD DISCLOSED INCOME FROM SALARY AMOUNTING TO RS. 33,13,547/- THOUGH AT THE SAME TIME HAD CLAIMED THE SAME AS EXEMPT FROM TAX. LD. AR ALSO DREW OUR ATTENTION TO THE FACT THAT THE ASSESSEE HAD ALSO DISCLOSED LONG TERM CAPITAL GAIN FROM SALE OF PLOT OF LAND AM OUNTING TO RS. 2391579/- AND CLAIMED DEDUCTION U/S 54 OF THE SAME. LD. AR STATED THAT HAVING DISCLOSED 5 INCOME OF RS. 58,05,126/ IN THE RETURN OF INCOME, T HE NON DISCLOSURE OF INTEREST FROM BANK OF RS. 4,04,140/- BEING A SMALL AMOUNT, W AS A MERE MISTAKE. LD. AR STATED THAT DURING THE IMPUGNED ASSESSMENT YEAR THE ASSESSEE HAD ENTERED INTO LARGE VOLUME OF MONETARY TRANSACTIONS RELATING TO S ALE OF PLOT OF LAND TO TATA HOUSING AND SALE AND PURCHASE OF MUTUAL FUNDS. LD. AR STATED THAT ALL THESE TRANSACTIONS WERE ROUTED THROUGH THE BANK ACCOUNT O F THE ASSESSEE. LD. AR DREW OUR ATTENTION TO THE COPY OF BANK ACCOUNT AT P APER BOOK PAGE NO. 4 -12 REVEALING THE AFOREMENTIONED TRANSACTIONS. LD. AR C ONTENDED THAT WHILE THE ASSESSEE DISCLOSED INCOMES RELATING TO SUCH TRANSAC TIONS, THE INTEREST INCOME EARNED FROM BANK ON ROUTING THESE TRANSACTIONS GOT OVERLOOKED. THE LD. AR THEREFORE PLEADED THAT NO PENALTY BE LEVIED ON THE SAME. LD. DR ON THE OTHER HAND ARGUED THAT THE ASSESSEE HAD DISCLOSED THE INT EREST INCOME ONLY WHEN CONFRONTED BY THE A.O. LD. DR STATED THAT THE ASSES SEE HAD NOTHING TO SAY ON THE MATTER BEFORE THE LD. CIT(A). LD. DR VEHEMENTLY ARGUED THAT IT WAS A CLEAR CASE OF CONCEALMENT OF INCOME. 11. WE FIND THAT IT IS NOT IN DISPUTE THAT THE ASSE SSEE HAD DISCLOSED AN INCOME OF RS. 58,05,126/- IN ITS RETURN OF INCOME, THOUGH HE HAD CLAIMED THE SAME EITHER TO BE EXEMPT OR HAD CLAIMED DEDUCTION OF THE SAME U /S 54 OF THE INCOME TAX ACT, 1961. IT IS ALSO NOT IN DISPUTE THAT THE ASSES SEE HAD ENTERED INTO TRANSACTIONS OF PURCHASE AND SALE OF MUTUAL FUNDS AMOUNTING TO R S. 2,50,00,000/- AND RS. 3,02,12,790/- RESPECTIVELY. THAT ALL THE TRANSACTIO NS WERE ROUTED THROUGH BANKS IS ALSO AN ESTABLISHED FACT. THE SALE CONSIDERATION RE CEIVED FROM SALE OF PLOT TO TATA HOUSING WAS ALSO DEPOSITED IN THE BANK. IT WAS ON THESE HUGE DEPOSITS THAT INTEREST WAS EARNED BY THE ASSESSEE. WHILE THE ASSE SSEE DISCLOSED THE SUBSTANTIAL INCOMES EARNED BY HIM IT FROM SALARY AND CAPITAL GA INS, HE FAILED TO DISCLOSE THE INTEREST INCOME EARNED FROM THE DEPOSITS MADE IN BA NK. WE FIND THAT THE EXPLANATION OFFERED BY THE ASSESSEE, THAT IT WAS A MERE INADVERTENT MISTAKE CANNOT BE SAID TO BE A FALSE EXPLANATION. THE ASSES SEE HAVING DISCLOSED THE 6 SUBSTANTIAL AMOUNTS OF HIS INCOME, IT IS QUITE REAS ONABLE AND LOGICAL THAT HE MAY HAVE INADVERTENTLY FAILED TO DISCLOSE HIS INTEREST INCOME. THE ASSESSEE HAVING OFFERED AN EXPLANATION FOR THE NON DISCLOSURE OF IN TEREST INCOME, WHICH HAS NOT BEEN FOUND TO BE FALSE, WE FIND THAT THERE IS NO CO NCEALMENT OF INCOME AND THEREFORE, NO PENALTY IS LEVIABLE ON THE SAME. 12. WE THEREFORE, HOLD THAT THE PENALTY LEVIED U/S 271(1)(C). ON THE INTEREST EARNED FROM BANK AMOUNTING TO RS. 404140/- BE DELET ED. 13. THE APPEAL OF THE ASSESSE IS THEREFORE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 16/11/2015. SD/- SD/- (H.L. KARWA) (ANNAPURNA MEHROTRA) VICE PRESIDENT ACCOUNTANT MEMBER DATED : 16/11/2015 AG COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT, TH E CIT(A), THE DR