ACIT 25(2), MUMBAI V. PRAKASH KHETANI, MUMBAI

ITA 6227/MUM/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9393 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-11-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 01-11-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 08-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJARSHI DWIVEDI
• Assessee Lawyers: JAS SANGHAVI
• Keywords: Business income; Difference of opinion

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH C, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTAT MEMBER AND SHRI VIVEK VARMA, JUDICIAL MEMBER I.T.A. NO. 6227/M/2011 ASSESSMENT YEAR: 2005-2005 THE ACIT (25(2), BLDG. NO.C-11, 1 ST FLOOR, R.NO.108, PRATYAKSHAKAR BHAVAN, BANDRA-KURLA COMPLEX, BANDRA (E), MUMBAI 400 051. VS. SHRI PRAKASH KHETANI, A-303, SIDHIVINAYAKPLAZA, CHIKUWADI,SIMPOLI VILLAGE, BRIVALI (W), MUMBAI 400 092. PAN:AFJPK9964P (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI RAJARSHI DWIVEDI, DR RESPONDENT BY : SHRI JAS SANGHAVI DATE OF HEARING: 5.11.2012 DATE OF ORDER: 21.11 .2012 O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE REVENUE ON 8.9.2011 AGAINS T THE ORDER OF CIT (A)-35, MUMBAI DATED 22.6.2011 FOR THE ASSESSMENT YEAR 2005 -2006. 2. IN THIS APPEAL, REVENUE HAS RAISED THE FOLLOWING EFFECTIVE GROUNDS. 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, AND IN LAW, THE LD CIT (A) ERRED IN DELETING THE PENALTY UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961, WITHOUT APPRECIATING THE FACT THAT T HE ASSESSEES APPEAL AGAINST THE ADDITION WAS DISMISSED BY THE LD CIT (A ), WHICH CLEARLY INDICATES THE FACT THAT THE ASSESSEES CASE IS A FIT CASE FOR LEVYING PENALTY UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD CIT (A) ERRED IN DELETING THE PENALTY UNDER SECTION 271(1)(C) OF THE ACT WITHOUT APPRECIATING THE FACT THAT SHOWING INCOME UNDER WRONG HEAD TO REDUCE THE TAX LIABILITY ALSO CONSTITUTES FURNISHING INACCURATE PARTICULARS OF INCOME. 3. RELEVANT FACTS IN CONNECTION WITH LEVY OF PENALT Y U/S 271(1)(C) OF THE ACT ARE THAT ASSESSEE FILED RETURN OF INCOME ADMITTING THE TOTAL INCOME OF RS. 25,44,349/-. IT INCLUDES SHORT TERM CAPITAL GAINS. ON FINDING THAT THE NUMBER OF TRANSACTIONS OF SALE AND PURCHASE OF THE SHARES IS HIGH, VOLUME IS HIGH AND THE SCRIPS INVOLVED ARE 2 NEARLY 100 AND CONSIDERING THE OTHER PARAMETERS, AO TREATED THE SAID SHORT TERM CAPITAL GAINS AS BUSINESS INCOME OF THE ASSESSEE. THUS, AO CHANGED THE HEAD OF INCOME AND FURTHER, AO INVOKED THE PROVISIONS OF SE CTION 271(1)(C) FOR FURNISHING OF INACCURATE PARTICULARS AND IMPOSED PENALTY OF RS. 6 ,67,658/-. DURING THE FIRST APPELLATE PROCEEDINGS, ASSESSEE SUBMITTED THAT THE ASSESSEE DISCLOSED THE GAIN ON SALE OF SHARES AS SHORT TERM CAPITAL GAINS AND PER CONTRA, THE AO TAXED THE SAME UNDER THE HEAD PROFITS AND GAINS FROM BUSINESS OR PROFESSION AND THIS ISSUE IS HIGHLY DEBATABLE ONE AND THERE IS NO EXPRE SS LAW AND IT VARY FROM ONE CASE TO OTHER. FURTHER, THE ASSESSEE SUBMITTED THAT HE H AS MADE FULL AND TRUE DISCLOSURE OF RELEVANT FACTS NECESSARY FOR MAKING ASSESSMENT. FURTHER, HE MENTIONED THAT THE ISSUE IS DEBATABLE ONE AND THE VIEW TAKEN BY THE AO IS ONE OF THE POSSIBLE VIEWS. IN SUCH ISSUES OF DEBATABLE NATURE, THE PENALTY PROVIS IONS SHOULD NOT BE INVOKED. HE STRONGLY CONTESTED THAT THERE IS NO CONCEALMENT OF ANY INCOME OR FURNISHING OF INACCURATE PARTICULARS IN THIS CASE. ON HEARING TH E ASSESSEE, CIT (A) OPINED THAT THIS IS NOT A FIT CASE OF INVOKING THE PROVISIONS OF SECTION 271(1)(C) AN D THE CIT(A) PROVIDED DETAILED REASONING WHILE GIVING RELIEF TO THE ASSESSEE AND PARA 4 OF THE IMPUGNED ORDER IS RELEVANT. 4. DURING THE PROCEEDINGS BEFORE US, LD DR FOR THE REVENUE RELIED ON THE ARGUMENTATIVE GROUNDS RAISED IN THE APPEAL MEMO AND DUTIFULLY PRAYED FOR REVERSING THE ORDER OF THE CIT(A) AND CONFIRMING THE PENALTY LEVIED BY THE AO. 5. PER CONTRA, SHRI JAS SANGHAVI, LD COUNSEL FOR THE ASSESSEE REIT ERATED THE ARGUMENTS MADE BEFORE THE LOWER AUTHORITIES. IN THE PROCESS, HE BROUGHT OUR ATTENTION TO THE FACT OF GIVING FULL AND TRUE PARTI CULARS AND FULL DISCLOSURE ABOUT THE TRANSACTIONS AND THE OFFER OF INCOME UNDER THE HEAD SHORT TERM CAPITAL GAINS. FURTHER, HE MENTIONED THAT THE ISSUE IN QUESTION IS HIGHLY DEBATABLE ONE AND WHILE THE ASSESSEE HAS TAKEN A VIEW AND THE AO HAS TAKEN ANOTHER POSSIBLE VIEW. IN SUCH CIRCUMSTANCES, AS PER LD COUNSEL, THE PENALTY PROVI SIONS U/S 271(1)(C) SHOULD NOT BE INVOKED. 3 6. WE HAVE PERUSED THE RELEVANT DISCUSSION GIVEN BY THE CIT (A) IN PARA 4 WHICH IS RELEVANT AND, THEREFORE, THE SAME IS REPRODUCED AS UNDER: 4. AFTER CONSIDERING THE SUBMISSIONS OF THE REPRESENTA TIVE AND THE STAND TAKEN BY THE AO, I FIND THAT THE APPELLANT ADMITTED THAT THE PROFIT ON SALE OF SHARES UNDER THE HEAD CAPITAL GAINS WHEREAS THE A O ASSESSED THE SAME UNDER THE HEAD BUSINESS BASED ON VARIOUS DECISION S CITED IN THE ASSESSMENT ORDER. THE AO ONLY CHANGED THE HEAD OF INCOME . THE APPELLANT HAD ADMITTED THE SHARES AS INVESTMENT IN THE BALANCE SHEET AND ALL THE SHARES WERE TAKEN DELIVERY BY THE APPELLANT BEF ORE THE SALE. THUS, THE APPELLANT WAS UNDER THE BONA FIDE BELIEF THAT THE P ROFIT ON SALE OF SHARES WAS ASSESSABLE UNDER THE HEAD CAPITAL GAINS AND ADMIT TED THE SAME ACCORDINGLY. THE AO HAS NOT POINTED OUT THAT THE APPELLANT DID NOT DISCLOSE ALL THE RELEVANT FACTS FULLY AND CORRECTLY . AS CONTENDED BY THE REPRESENTATIVE MERELY BECAUSE THE CIT (A) CONFIRMED THE ADDITION IN THE QUANTUM APPEAL, THE CONCEALMENT PENALTY COULD NOT B E AUTOMATICALLY LEVIED. FURTHER, THE AO IS NOT CORRECT IN LEVYING CONCEALME NT PENALTY MERELY / BECAUSE THE TURNOVER OF THE APPELLANT IN SHARE TRAD ING WAS VERY HIGH. ADMITTEDLY, THE APPELLANT HAS DISCLOSED THE ENTIRE TURNOVER AND TRANSACTIONS IN THE BOOKS OF ACCOUNT AND THERE WAS HONEST AND BONAFIDE DIFFERENCE OF OPINION REGARDING THE HEAD OF INCOME IN WHICH THE PROFIT ON SALE OF SHARES IS TO BE ASSESSED. AS CONTENDED BY THE REPRESENTATIVE, THE APPELLANT HAS NOT RECORDED ANY BOGUS TRANSACTIONS O R MANIPULATED HIS ACCOUNT BOOKS OR CLAIMED FALSE OR FRAUDULENT DEDUCT IONS AND CONSEQUENTLY NO CONCEALMENT PENALTY COULD BE IMPOSED IN THIS CASE. THE WORD CONCEAL MEANS TO HIDE SOMETHING AND THE AO HAS NOT POINTE D OUT THAT THE APPELLANT HAS HIDDEN SOMETHING FROM THE KNOWLEDGE OF THE AO A ND CONSEQUENTLY I ACCEPT THE PLEA OF THE REPRESENTATIVE THAT MERE HON EST DIFFERENCE OF OPINION IS NOT SUFFICIENT TO LEVY THE CONCEALMENT PENALTY. IN THE CIRCUMSTANCES, I CONCEAL THE PENALTY IMPOSED BY THE AO. 7. FROM THE ABOVE, THE CORE ISSUE FOR ADJUDICATION IN THE APPEAL RELATES TO IF CHANGE OF HEAD OF INCOME MUST ATTRACT THE PENALTY P ROVISIONS OR NOT. OTHERWISE THERE IS NO DISPUTE THAT THE ASSESSEE IS NOT DEFAUL TER IN MATTERS OF DISCLOSURE OF FULL PARTICULARS. IT IS A FACT THAT THE ASSESSEE OFFERED THE IMPUGNED INCOME UNDER THE HEAD SHORT TERM CAPITAL GAINS UNDER THE BONA FIDE BELIEF. AO HAS NOT MADE OUT A CLAIM THAT THE SAID BELIEF IS NOT BONA FIDE. THE ASSESSEE HAS FURNISHED REASONABLE EXPLANATION IN SUPPORT OF HIS CLAIM. ON THE CONTRAR Y, THE AO HAS TAKEN DIFFERENT VIEW BASED ON HIS BELIEF. THEREFORE, THE ISSUE IS CERTA INLY DEBATABLE ONE. WHEN THERE IS NO EXPRESS LAW PREVENTING THE ASSESSEE FROM OFFERIN G THE IMPUGNED GAINS UNDER THE HEAD SHORT TERM CAPITAL GAINS, ASSESSEE CANNOT BE GUILTY OF CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS. IT MAY BE A CASE OF CONFIRMING OF ADDITIONS IN THE QUANTUM APPEAL BUT CERTAINLY IT IS NOT A FIT CASE FOR LEVY OF PENALTY 4 UNDER SECTION 271(1)(C) OF THE ACT. THEREFORE, THE ORDER OF THE CIT(A) DOES NOT CALL FOR INTERFERENCE. ACCORDINGLY, GROUNDS RAISED BY TH E REVENUE ARE DISMISSED . 8. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 21 ST DAY OF NOVEMBER, 2012. SD/- SD/- (VIVEK VARMA) (D. KAR UNAKARA RAO) JUDICIAL MEMBER A CCOUNTANT MEMBER DATE : 21.11.2012 AT :MUMBAI OKK COPY TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (A), CONCERNED. 4. THE CIT CONCERNED. 5. THE DR C, BENCH, ITAT, MUMBAI. 6. GUARD FILE. // TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI