BHARATI SURESH SHAH, MUMBAI V. ACIT 19(2), MUMBAI

ITA 6185/MUM/2010

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 84616 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 4 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-12-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 08-12-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 12-08-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: VIVEK BATRA
• Keywords: Business income; Bonafide belief; Reasonable cause; Revised return

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL B BE NCH, MUMBAI , !' $ $ $ $ % & ' , !' ( BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER ./I .T.A. NO.6185 & 6186/MUM/2010 ( ) ) ) ) / ASSESSMENT YEAR : 2006-07 MRS. BHARATI SURESH SHAH, FLAT NO. 101, PARAS, DATTATRAY ROAD, SANTACRUZ (W), MUMBAI-400 012 / VS. THE ACIT-19(2), PIRAMAL CHAMBERS, LALBAUG, MUMBAI-400 012 '* ./ +, ./ PAN/GIR NO. : ALOPS 0162J ( *- / APPELLANT ) .. ( ./*- / RESPONDENT ) *- 0 / APPELLANT BY: SHRI SANJAY PARIKH ./*- 1 0 / RESPONDENT BY: SHRI VIVEK BATRA 1 %2 / DATE OF HEARING :08.12.2014 34) 1 %2 / DATE OF PRONOUNCEMENT :22.12.2014 !& / O R D E R PER N.K. BILLAIYA, AM: THESE TWO APPEALS BY THE ASSESSEE ARE DIRECTED AGA INST TWO SEPARATE ORDERS OF THE LD. CIT(A)-30, MUMBAI DT.7. 6.2010 PERTAINING TO A.Y.2006-07. 2. ITA NO. 6186/M/2010 IS AGAINST THE LEVY OF PENAL TY U/S. 271(1)(C) OF THE ACT AND ITA NO. 6185/M/10 IS AGAINST THE LEV Y OF PENALTY U/S. ITA NOS. 6185 & 6186/M/2010 2 271B OF THE ACT. BOTH THESE APPEALS WERE HEARD TOG ETHER AND ARE DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CO NVENIENCE. ITA NO. 6186/M/2010 3. THE RETURN FOR THE YEAR WAS FILED ON 27.10.2006. THE RETURNED INCOME WAS AT RS. 13,84,005/-. THE RETURN WAS SELE CTED FOR SCRUTINY ASSESSMENT AND ACCORDINGLY STATUTORY NOTICES WERE I SSUED AND SERVED UPON THE ASSESSEE. THE RETURN OF INCOME WAS ACCOMP ANIED BY THE STATEMENT OF COMPUTATION OF INCOME, BALANCE SHEET, CAPITAL ACCOUNT OF THE ASSESSEE, STATEMENT OF SHORT TERM CAPITAL GAINS AND LIST OF SHARES AS ON 31.3.2006. 3.1. DURING THE COURSE OF THE ASSESSMENT PROCEEDING S, THE ASSESSEE WAS ASKED TO EXPLAIN WHY THE SHORT TERM CAPITAL GAIN SH OWN IN THE RETURN OF INCOME SHOULD NOT BE TREATED AS BUSINESS INCOME. T HE ASSESSEE FILED A REVISED COMPUTATION OF INCOME ALONG WITH PROFIT & L OSS ACCOUNT AND OFFERED ENTIRE SHORT TERM CAPITAL GAIN UNDER THE HE AD PROFIT & GAIN OF BUSINESS AND PROFESSION. THE TOTAL BUSINESS INCOME WAS WORKS OUT TO RS. 17,58,083/-. 3.2. THE AO INITIATED PENALTY PROCEEDINGS U/S. 271( 1)(C) OF THE ACT FOR FURNISHING INACCURATE PARTICULARS OF INCOME. PENAL TY NOTICE WAS ISSUED AND SERVED ON THE ASSESSEE. IN RESPONSE TO THE NOT ICE, THE ASSESSEE EXPLAINED THAT THE RETURN OF INCOME WAS FILED DECLA RING SHORT TERM CAPITAL GAIN OF RS. 14,45,424/- ALONG WITH DETAILS OF WORKI NG OF CAPITAL GAIN. IT WAS EXPLAINED THAT WHILE FILING THE RETURN, THE ASS ESSEE WAS ADVISED TO SHOW THE PURCHASE AND SALE OF SHARES UNDER THE HEAD CAPITAL GAIN. HOWEVER, DURING THE COURSE OF THE ASSESSMENT PROCEE DINGS, THE ASSESSEE ITA NOS. 6185 & 6186/M/2010 3 WAS ADVISED THAT THE TRANSACTIONS OF PURCHASE AND S ALES ARE SUBSTANTIAL AND THE PERIOD OF HOLDING IS SHORT THEREFORE THE GAIN S HOULD BE OFFERED UNDER THE HEAD BUSINESS INCOME. IT WAS FURTHER STATED THAT IT WAS DONE IN ORDER TO AVOID ANY LITIGATION AND TO BUY PEACE WITH THE I NCOME TAX DEPARTMENT. IT WAS CLAIMED THAT THE ASSESSEE HAS NEITHER CONCEA LED THE INCOME NOR HAS FILED INACCURATE PARTICULARS OF INCOME. 3.3. THE SUBMISSIONS MADE BY THE ASSESSEE DID NOT F IND FAVOUR WITH THE AO. DRAWING SUPPORT FROM THE PROVISIONS OF SEC./ 271(1)(C) OF THE ACT, THE AO WAS CONVINCED THAT THE ASSESSEE HAS CONCEALE D THE PARTICULARS OF INCOME BY SHOWING BUSINESS INCOME UNDER THE HEAD SH ORT TERM CAPITAL GAIN IN ORDER TO CLAIM THE BENEFIT OF CONCESSIONAL RATE OF TAX. THE AO PROCEEDED BY LEVYING OF PENALTY AT RS. 3,27,097/-. 4. THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. C IT(A) BUT WITHOUT ANY SUCCESS. 5. AGGRIEVED BY THIS, THE ASSESSEE IS BEFORE US. 6. THE LD. COUNSEL FOR THE ASSESSEE REITERATED WHAT HAS BEEN SUBMITTED BEFORE THE LOWER AUTHORITIES. IT IS THE SAY OF THE LD. COUNSEL THAT THE ASSESSEE HAD NOT CONCEALED ANY PARTICULARS OF INCOME BUT HAS SIMPLY CHANGED THE HEAD OF INCOME FROM SHORT TERM C APITAL GAIN TO PROFIT AND GAINS OF BUSINESS OR PROFESSION. IN SUP PORT, THE LD. COUNSEL RELIED UPON THE FOLLOWING DECISIONS: 1) ITO VS ROBORANT INVESTMENTS (P) LTD. 7 SOT 181 (MUM ) 2) SRJ SECURITIES LTD. VS ITO IN ITA NO. 1348/DEL/200 4 ITA NOS. 6185 & 6186/M/2010 4 3) BSEL INFRASTRUCTURE REALTY LTD. VS ACIT IT APPEAL NO. 6559/M/2011 4) CIT VS PRAVEEN B. GADA (MP HIGH COURT) IT APPEAL NO . 57 OF 2010 5) CIT VS AMIT JAIN 351 ITR 74 (DEL) 7. THE LD. DEPARTMENTAL REPRESENTATIVE STRONGLY SUP PORTED THE ORDER OF THE LD. CIT(A). 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULL Y PERUSED THE ORDERS OF THE LOWER AUTHORITIES. IT IS AN UNDISPUT ED FACT THAT IN THE RETURN OF INCOME FILED ON 27.10.2006, THE ASSESSEE HAS COM PUTED THE INCOME AND HAS CLAIMED SHORT TERM CAPITAL GAIN UNDER SPECIAL RATES OF TAX AS PER THE PROVISIONS OF SEC. 111 OF THE ACT. LET US CONSIDER THE CONDUCT OF THE ASSESSEE. AFTER FILING THE RETURN OF INCOME, THE A SSESSEE NEVER FILED ANY REVISED RETURN OF INCOME. THE CLAIM OF THE ASSESSE E IS THAT HE WAS ADVISED TO SHOW THE GAINS UNDER THE HEAD SHORT TE RM CAPITAL GAINS. WHEN THE RETURN OF INCOME WAS SELECTED FOR SCRUTINY ASSESSMENT AND WHEN A SPECIFIC QUERY WAS RAISED BY THE AO, IMMEDIA TELY THE ASSESSEE FILED A REVISED COMPUTATION OF INCOME ALONGWITH PRO FIT AND LOSS ACCOUNT SHOWING THE SHORT TERM CAPITAL GAIN AS BUSINESS INC OME. IF THE RETURN OF INCOME WAS NOT SELECTED FOR SCRUTINY ASSESSMENT, TH E ASSESSEE WOULD NEVER HAVE REVISED HER COMPUTATION OF INCOME. THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS ZOOM COMMUNICATION (P) LTD. 327 ITR 510 HAS MADE THE FOLLOWING OBSERVATION: THE COURT CANNOT OVERLOOK THE FACT THAT ONLY A SMA LL PERCENTAGE OF THE INCOME-TAX RETURNS ARE PICKED UP FOR SCRUTINY. IF THE ASSESSEE MAKES A CLAIM WHICH IS NOT ONLY INCOR RECT IN LAW BUT IS ALSO WHOLLY WITHOUT ANY BASIS AND THE EXPLANATI ON FURNISHED BY ITA NOS. 6185 & 6186/M/2010 5 HIM FOR MAKING SUCH A CLAIM IS NOT FOUND TO BE BON A FIDE, IT WOULD BE DIFFICULT TO SAY THAT HE WOULD STILL NOT BE LIAB LE TO PENALTY UNDER SECTION 271(1)(C) OF THE ACT. IF WE TAKE THE VIEW T HAT A CLAIM WHICH IS WHOLLY UNTENABLE IN LAW AND HAS ABSOLUTELY NO FO UNDATION ON WHICH IT COULD BE MADE, THE ASSESSEE WOULD NOT BE L IABLE TO IMPOSITION OF PENALTY, EVEN IF HE WAS NOT ACTING B ONA FIDE WHILE MAKING A CLAIM OF THIS NATURE, THAT WOULD GIVE A L ICENCE TO UNSCRUPULOUS ASSESSEES TO MAKE WHOLLY UNTENABLE AN D UNSUSTAINABLE CLAIMS WITHOUT THERE BEING ANY BASIS FOR MAKING THEM, IN THE HOPE THAT THEIR RETURN WOULD NOT BE PI CKED UP FOR SCRUTINY AND THEY WOULD BE ASSESSED ON THE BASIS O F SELF- ASSESSMENT UNDER SECTION 143(1) OF THE ACT AND EVE N IF THEIR CASE IS SELECTED FOR SCRUTINY, THEY CAN GET AWAY MERELY BY PAYING THE TAX, WHICH IN ANY CASE, WAS PAYABLE BY THEM. THE CONSEQ UENCE WOULD BE THAT THE PERSONS WHO MAKE CLAIMS OF THIS NATURE , ACTUATED BY A MALA FIDE INTENTION TO EVADE TAX OTHERWISE PAYABLE BY THEM WOULD GET AWAY WITHOUT PAYING THE TAX LEGALLY PAYABLE BY 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 TAX LEGALLY PAYABLE BY THEM, THE CONSEQUENCE WOULD BE THAT THE PERSONS WHO MAKE CLAIMS OF THIS NATURE, ACTUATED BY A MALA FID E INTENTION TO EVADE TAX OTHERWISE PAYABLE BY THEM WOULD GET AWAY WITHOUT PAYING THE TAX LEGALLY PAYABLE BY THEM, IF THEIR CA SES ARE NOT PICKED UP FOR SCRUTINY. THIS WOULD TAKE AWAY THE DETERRENT EFFECT, WHICH THESE PENALTY PROVISIONS IN THE ACT HAVE. 9. THE STATEMENT OF SHORT TERM CAPITAL GAIN WHICH W AS FILED WITH THE ORIGINAL RETURN OF INCOME IS PLACED IN THE PAPER BO OK AT PAGES 5 TO 21. A PERUSAL OF THESE DETAILS SHOW THAT THE TRANSACTIONS CLAIMED AS RESULTING INTO SHORT TERM CAPITAL GAIN RUN INTO 16 PAGES WITH CHURNING OF SHARES, THEREFORE IT CANNOT BE SAID THAT AT THE TIME OF FIL ING OF RETURN AND COMPUTING THE TAXABLE INCOME, THE ASSESSEE WAS NOT AWARE OF THE FACT THAT HER TRANSACTIONS ARE NOTHING SHORT OF TRADING IN SH ARES. IMMEDIATELY AFTER RECEIVING THE NOTICE, FILING OF REVISED COMPUTATION OF INCOME CLEARLY SHOWS THE INTENTION OF THE ASSESSEE. IF THE ASSESS EE WAS ACTING ON A BONAFIDE BELIEF ON THE ADVISE OF SOME PROFESSIONAL, NOTHING PREVENTED THE ASSESSEE TO FILE A REVISED RETURN OF INCOME. A LL THE DECISIONS RELIED ITA NOS. 6185 & 6186/M/2010 6 UPON BY THE ASSESSEE ARE MISPLACED AND TOTALLY DIFF ERENT SET OF FACTS. IN ALL THESE CASES, THE AO CHANGED THE HEAD OF INCOME WHILE COMPLETING THE ASSESSMENT BUT THAT IS NOT THE CASE IN HAND BEFORE US. CONSIDERING ALL THE FACTS IN TOTALITY AND DRAWING SUPPORT FROM THE OBSE RVATIONS OF THE HONBLE DELHI HIGH COURT (SUPRA), WE DO NOT FIND ANY REASON TO INTERFERE WITH THE FINDINGS OF THE LD. CIT(A). LEVY OF PENALTY IS UPH ELD. APPEAL FILED BY THE ASSESSEE IS DISMISSED. ITA 6185/M/2010 10. PENALTY U/S. 271B OF THE ACT HAS BEEN LEVIED BE CAUSE THE SALE OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION WAS TO TH E TUNE OF RS. 16,25,76,780/- AND SINCE THE ASSESSEE HAS NOT GOT T HE BOOKS OF ACCOUNT AUDITED AS PER THE PROVISIONS OF SEC. 44AB, THE ASS ESSEE WAS ASKED TO EXPLAIN WHY PENALTY SHOULD NOT BE LEVIED U/S. 271B OF THE ACT. IT WAS EXPLAINED BY THE ASSESSEE THAT SHE HAS DECLARED SHO RT TERM CAPITAL GAIN IN THE RETURN OF INCOME. IT WAS ONLY DURING THE CO URSE OF THE ASSESSMENT PROCEEDINGS THE INCOME WAS OFFERED UNDER THE HEAD BUSINESS INCOME. IT WAS FURTHER STATED THAT THE ASSESSEE HAD DECLARED I NCOME UNDER THE HEAD SHORT TERM CAPITAL GAIN AND THEREFORE AUDIT U/S. 4 4AB WAS NOT REQUIRED TO BE DONE. HOWEVER, ON THE ADVISE RECEIVED BY THE ASSESSEE, THE ASSESSEE HAS OFFERED THE SAME AS BUSINESS INCOME AND THEREFO RE THE SALE HAS CROSSED THE THRESHOLD LIMIT OF RS. 40 LAKHS AS PROV IDED U/S. 44AB OF THE ACT. THE ASSESSEE CLAIMED THAT PENALTY IS NOT LEVI ABLE ON THE FACTS OF THE CASE. 11. THE AO DID NOT ACCEPT THE SUBMISSIONS MADE BY T HE ASSESSEE. THE AO WAS OF THE FIRM BELIEF THAT THE ASSESSEE VERY WE LL KNEW AT THE TIME OF FILING THE RETURN ITSELF THAT THE SHARE TRADING ACT IVITY OF THE ASSESSEE ITA NOS. 6185 & 6186/M/2010 7 CONSTITUTED BUSINESS ACTIVITY AND THAT THE INCOME F ROM THE SAME SHOULD HAVE BEEN OFFERED UNDER THE HEAD BUSINESS INCOME. THE AO CONCLUDED BY HOLDING THAT THE ASSESSEE WAS NOT PREVENTED BY R EASONABLE AND SUFFICIENT CAUSE AND WENT ON TO LEVY PENALTY OF RS. 1,00,000/- U/S. 271B OF THE ACT. 12. AGGRIEVED, ASSESSEE CARRIED THE MATTER BEFORE T HE LD. CIT(A) AND REITERATED WHAT HAS BEEN STATED BEFORE THE AO. AFT ER CONSIDERING THE FACTS AND THE SUBMISSIONS, THE LD. CIT(A) OBSERVED THAT O NCE THE INCOME HAS BEEN ADMITTEDLY SHOWN UNDER THE HEAD BUSINESS AND T HE TURNOVER EXCEEDS RS. 40 LAKHS, THE ASSESSEE IS BOUND TO GET THE ACCO UNTS AUDITED U/S. 44AB OF THE ACT. FAILURE TO DO SO WITHOUT A REASONABLE CAUSE ATTRACTS PENALTY U/S. 271B OF THE ACT AND THE ASSESSEE HAS NO REASON ABLE CAUSE. THE LD. CIT(A) CONFIRMED THE PENALTY LEVIED BY THE AO. 13. AGGRIEVED BY THIS, THE ASSESSEE IS BEFORE US. 14. THE LD. COUNSEL FOR THE ASSESSEE ONCE AGAIN CLA IMED THAT THE RETURN WAS FILED OFFERING SHORT TERM CAPITAL GAINS AND THE HEAD OF INCOME WAS REVISED DURING THE COURSE OF THE ASSESSMENT PROCEED INGS. THEREFORE, IT CANNOT BE SAID THAT THE TURNOVER OF THE ASSESSEE EX CEEDED RS. 40 LAKHS. THE ASSESSEE WAS UNDER A BONAFIDE BELIEF THAT THE I NCOME IS TO BE OFFERED UNDER THE HEAD SHORT TERM CAPITAL GAIN, THEREFORE T HERE WAS NO OCCASION TO GET THE BOOKS OF ACCOUNT AUDITED. IT IS THE SAY OF THE LD. COUNSEL THAT THE ASSESSEE WAS PREVENTED BY REASONABLE AND SUFFIC IENT CAUSE. 15. THE LD. DEPARTMENTAL REPRESENTATIVE SUPPORTED T HE FINDINGS OF THE LD. CIT(A). ITA NOS. 6185 & 6186/M/2010 8 16. HAVING HEARD THE RIVAL SUBMISSIONS, WE HAVE CAR EFULLY PERUSED THE ORDERS OF THE LOWER AUTHORITIES. IT IS AN ADMITTED FACT THAT THE INCOME WAS OFFERED UNDER THE HEAD SHORT TERM CAPITAL GAIN. IT IS ALSO AN ADMITTED FACT THAT THE ASSESSEE WAS MAINTAINING PROPER BOOKS OF ACCOUNT IN RESPECT OF HER SHARE TRANSACTION. THE ASSESSEE WAS WELL AW ARE WITH THE NATURE OF TRANSACTION AND THEREFORE PROPER BOOKS OF ACCOUNTS WERE MAINTAINED. ONCE THE ASSESSEE WAS WELL AWARE OF THE NATURE OF T RANSACTION SUPPORTED BY PROPER BOOKS OF ACCOUNT, NOTHING PREVENTED THE A SSESSEE TO GET THE BOOKS OF ACCOUNT AUDITED AS PER THE PROVISIONS OF S EC. 44AB OF THE ACT. THE ASSESSEE REVISED THE COMPUTATION OF INCOME AND OFFERED THE INCOME AS BUSINESS INCOME EVEN AT THAT STAGE THE ASSESSEE COULD HAVE GOT THE BOOKS OF ACCOUNT AUDITED U/S. 44AB OF THE ACT. BY NOT DOING SO, THE ASSESSEE HAS NOT DEMONSTRATED ANY REASONABLE OR SUF FICIENT CAUSE FOR NOT FULFILLING THE MANDATE OF SEC. 44AB OF THE ACT. IN OUR CONSIDERED OPINION, THE PENALTY LEVIED BY THE AO AND CONFIRMED BY THE LD. CIT(A) IS CORRECT. WE, THEREFORE DISMISS THE APPEAL FILED BY THE ASSESSEE. 17. IN THE RESULT, THE APPEALS FILED BY THE ASSESSE E ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 22.12.2014 SD/- SD/- (AMIT SHUKLA ) (N.K. BILLAIYA) !' /JUDICIAL MEMBER !' / ACCOUNTANT MEMBER MUMBAI; 5! DATED : 22 ND DECEMBER, 2014 . . ./ RJ , SR. PS ITA NOS. 6185 & 6186/M/2010 9 !& !& !& !& 1 11 1 .% .% .% .% 6)% 6)% 6)% 6)% / COPY OF THE ORDER FORWARDED TO : 1. *- / THE APPELLANT 2. ./*- / THE RESPONDENT. 3. 7 ( ) / THE CIT(A)- 4. 7 / CIT 5. 89 .% , , / DR, ITAT, MUMBAI 6. 9: ; / GUARD FILE. !& !& !& !& / BY ORDER, /% .% //TRUE COPY// < << < / = = = = + + + + (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI