SHEHZEEN Z SIDDIQUE, MUMBAI V. ACIT 23(3), MUMBAI

ITA 6275/MUM/2016

• Counselvise Citation: [2018] 124 COUNSELVISE.COM (IT) 9732 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-09-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: J
• Assessment Year: 2004-2005
• Appeal Filed On: 24-10-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AARJU GARODIA
• Assessee Lawyers: RAJESH SANGHAVI
• Keywords: Question of law
• Section: 27

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL J BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA, AM AND SHRI SANDEEP GOSAIN, JM I.T.A. NO. 6275/MUM/2016 ( ASSESSMENT YEAR: 2004 - 05 ) MRS. SHEHZEEN Z. SIDDIQUE C/O. R. SANGHVI & CO. 104, RIZVI CHAMBERS - 2, JAIN MANDIR MAR G, OFF HILL ROAD, BANDRA (W), MUMBAI - 400 050 VS. ACIT - 23(3), (ERSTWHILE ACIT - 19(3)) 104, 1 ST FLOOR, MATRU MANDIR, TARDEO ROAD, MUMBAI - 400 007 PAN/GIR NO. AIPPS 8400 D ( APPELLANT ) : ( RESPONDENT ) APPELLANT BY : SHRI RAJESH SANGHAVI RESPONDENT BY : MS. AARJU GARODIA DATE OF HEARING : 31.08.2018 DATE OF PRONOUNCEMENT : 19.09 .2018 O R D E R PER S HAMIM YAHYA, A. M.: THIS A PPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE O RDER OF THE LEAR N ED COMMISSIONER OF INCOME TAX (APPEALS) - 34, MUMBAI (LD .CIT(A) FOR SHORT) DATED 29.07.2016 AND PERTAINS TO THE A SSESSMENT YEAR (A.Y.) 2004 - 05. 2. IN THE GROUNDS OF APPEAL, THE ASSESSEE IS AGGRIEVED THAT THE LD. CIT(A) HAS ERRED IN CONFIRMING THE LEVY OF PENALTY U/S. 271(1)(C) OF THE INCOME TAX ACT, 1961 (THE ACT' FOR SHORT) AMOUNTING TO RS.35,00,000/ - . 3. THE GROUNDS OF APPEAL RAISED IN THIS REGARD READS AS UNDER: 2 ITA NO. 6275/MUM/2016 MRS. SHEHZEEN Z. SIDDIQUE 1. IN THE FACTS & CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN UPHOLDING THE PENALTY BY NOT APPRECIATING THE LEGAL INFIRMITIE S WHEREIN THE AO, DID NOT CLEARLY SPECIFY, IN THE NOTICE U/S 274 AND SHOW CAUSE NOTICE, THE EXACT LIMB ON WHICH PENALTY PROCEEDING WAS INITIATED. 2. IN THE FACTS & CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED BY IGNORING THAT THE LONG TE RM CAPITAL GAINS OF RS. 1,16,59,967 / - WAS SHOWN IN THE RETURN FILED AND TAXED AT SPECIAL RATE OF 10% WHEREAS THE AO TAXED THE SAME @ 30% AS UNDISCLOSED, HENCE NO CHANGE IN INCOME WAS FOUND AND IT WAS ONLY AN INTERPRETATIONAL ISSUE OR AT BEST ,CHANGE OF HEA D OF INCOME. 3. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE C1T(A) ERRED IN CONFIRMING THE IMPUGNED PENALTY , IGNORING THE OBSERVATION OF ITAT ON PAGE # 14 (OF ITS ORDER DT: 25 - 4 - 2014) NAMELY '...IN OUR VIEW, THE GENUINENESS OF THE TRANSACT ION IS FAR FROM PROVED IF NOT DISPROVED.. - ..' AND IGNORING THE RATIOS OF JUDGMENT ESP UPENDRA MITHANI (BOMBAY HIGH COURT - ITA 1860/09 ) CITED BY THE APPELLANT. 4. IN THE FACTS & CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CLT(A) HAS ERRED IN UPHOLDING THE PENALTY, BY NOT APPRECIATING NOR DIFFERENTIATING ON THE VARIOUS HIGH COURT JUDGMENTS AND VARIOUS ITAT JUDGMENTS (INCLUDING MUMBAI ITAT) RELEVAN T TO THE APPELLANT'S CA SE HEREIN. 5. IN THE FACTS & CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN UPHOLDING THE PENALTY OF RS. 35 LAKHS DUE TO 'INACCURATE PARTICULARS' - (A) BY NOT PASSING A SPEAKING WELL REASONED ORDER. (B) BY NOT APPRECIATING THAT THE BONAFIDE EXPLANATION WITH VOLUMINOUS EVIDENCES FILED IN RESPONSE TO THE PENALTY PROCEED ING WERE NEITHER DISPROVED NOR NEGATED BY THE AO & (C) BY SOLELY RELYING ON THE FINDINGS IN THE ITAT ORDER. 4. BRIEF FACTS OF THE CASE ARE AS UNDER: IN THIS CASE , THE ASSESSING OFFICER FOUND THAT IN THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD SHOWN INCOME OF RS.89,57,677 / - UNDER THE HEAD INCOME FROM CAPITAL GAINS AND PAID TAXES AT RS.8,95,768/ - @ 10% ON THIS INCOME. THE ASSESSING OFFICER HAS FURTHER NOTED THAT ON THE BASIS OF DETAILED ENQUIRIES CONDUCTED AT THE TIME OF ASSESSM ENT PROCEEDINGS, IT WAS ESTABLISHED THAT SHARES RELATED TO M/S ELTROL LTD. WAS A PENNY STOCK AND THE PRICE OF THE PENNY STOCK WAS RAMPED UP BY CIRCULAR TRADING INVOLVING OPERATORS FOR PRICE RAGING. TH AT TH ERE WAS A MANIPULATION OF PURCHASE 3 ITA NO. 6275/MUM/2016 MRS. SHEHZEEN Z. SIDDIQUE DATE FOR COMPLET ION OF 12 MONTHS FOR MAKING TRANSACTIONS ELIGIBLE FOR LONG TERM CAPITAL GAINS. THE ASSESSING OFFICER HAS FURTHER OBSERVED THAT THE FINDINGS GIVEN IN THE ASSESSMENT ORD ER HAS BEEN CONFIRMED BY THE ITAT. ACCORDINGLY, THE ASSESSING OFFICER FOUND THAT THE ASSE SSEE HAD FURNISHED INACCURATE PARTICULARS OF HER INCOME IN THE RETURN. UPON BEING SATISFIED THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF HER INCOME OF RS.1,16,59,967 / - FOR WHICH SHE WAS LIABLE FOR PENALTY U/S.271(L)(C). ACCORDINGLY, PENALTY OF RS.35,00,000 / - WAS IMPOSED U/S.271(L)(C) OF THE ACT. 5. UPON THE ASSESSEES APPEAL IN THIS REGARD, THE LD. CIT(A) REFERRED TO THE I TAT S FINDING IN THE CASE OF THE QUANTUM ADDITION WHEREIN THE ITAT HAD CONFIRMED THE ADDITION. REFERRING TO THE ITAT ORDER, THE LD. CIT(A) OBSERVED THAT THE ASSESSEE COULD NOT EXPLAIN THE MO VE MENT OF SHARE PRICE IN TERMS OF ECONOMIC AND COMPANY S SPECIFI C PARAMETERS. HENCE, HE FOUND HIMSELF IN AGREEMENT WITH THE ASSESSING OFFICER (A.O. FOR SHORT) THAT THIS WAS A CASE OF FURNIS HING OF INACCURATE PARTICULARS OF INCOME. THE LD. CIT(A) DISTINGUISHED THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. RELIANCE PETROPRODUCTS (P.) LTD. [2010] 322 ITR 158 (SC) RELIED UPON BY THE ASSESSEE AND ALSO THE DECISION OF HONBL E KARNATAKA HIGH COURT IN THE CASE OF MANJUNATHA COTTON & GINNING FACTORY [2013] 3 5 9 ITR 565 (KAR) AND OTHER DECISIONS AND CONFIRMED THE PENALTY. 6. AGAINST THE ABOVE ORDER, THE ASSESSEE IS IN APPEAL BEFORE US. 7. WE HAVE HEARD BOTH THE LD. COUNSEL OF THE ASSESSEE AND PERUSED THE RECORDS. THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THE ASSESSEE IS ENG AGED INTO THE SHARE TRANSACTION. 4 ITA NO. 6275/MUM/2016 MRS. SHEHZEEN Z. SIDDIQUE ALL THE DOCUMENTS PERTAINING TO PURCHASE AND SALE WERE PRODUCED. HENCE, NO DEFECT HAS BEEN POINTED OUT IN THE SAID DOCUMENTS . HE SUBMITTED THAT IT IS ONLY ON ACCOUNT OF PREPONDERANCE OF THE PRO BABILITY THAT THE ASSESSEES CLAIM HAS BEEN REJECTED. HENCE, THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT THERE IS NO CASE OF THE ASSESSEE FURNISHING INACCURATE PARTICULARS OF INCOME OR THE CONCEALMENT OF INCOME. I N THIS REGARD, HE REFERRED TO THE ITAT DECISION IN THE QUANTUM ADDITION WHERE THE ITAT HAD OBSERVED THAT IN OUR VIEW, THE GENUINENESS OF THE TRANSACTION S IS FAR FROM PROVED , IF NOT ACTUALLY DISPROVED. REFERRING TO THIS FINDI NG OF THE ITAT, THE LD. COUNSEL OF THE ASSESSEE REFERRED TO THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. UPENDRA VS. MITHANI (IN A PPEAL NO .1860 OF 2009 VIDE ORDER DATED 05.08.2009 ) , THE HON'BLE JURISDICTIONAL HIGH COURT HAS HELD THA T IF THE ASSESSEE GIVES AN EXPLANATION WHICH IS UNPROVED BUT NOT DISPROVED, I.E., IT IS NOT ACCEPTED BUT CIRCUMSTANCES D O NOT LEAD TO THE REASONABLE AND POSITIVE INFERENCE THAT THE ASSESSEES CASE IS FALS E . IN SUCH SITUATION, THE HONBLE HIGH COURT HAS UPH ELD THE PROPOSITION THAT NO PENALTY CAN BE IMPOSED. FURTHER, THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF QUANTUM ADDITION HAS ALREADY ACCEPTED THE SUBSTANTIAL QU ESTION OF LAW VIDE ORDER DATED 11.12.20 17. BY WAY OF THIS ORDER, THE HON'BLE JURISDICTIONAL HIGH COURT HAS ADMITTED THE SUBSTANTIAL QUESTION OF LAW ON THE ADDITION MADE IN THIS CASE. 8. BY SUBMITTING THAT THIS ISSUE IS DEBATABLE AND SUBSTANTIAL QUESTION OF LAW HAS BEEN ADMITTED BY THE HON'BLE JURISDICTIONAL HIGH COURT, THE LD. COUNSEL OF THE ASSESSEE REFERRED TO THE DECISION OF THE HON'BLE BOMBAY HIGH COURT DECISION IN THE CASE OF CIT VS. NAYAN 5 ITA NO. 6275/MUM/2016 MRS. SHEHZEEN Z. SIDDIQUE BUILDERS & DEVELOPERS [2014] 368 ITR 722 (BOM) F OR THE PROPOSITION THAT WHEN SUBS T ANTIAL QUESTION OF LAW IS ADMITTED BY THE HONBLE HIGH COURT THE ISSUE BECOMES DEBATABLE . I N SUCH CIRCUMSTANCES , T HE LEVY OF PENALTY U/S. 271(1)(C) IS NOT SUSTAINABLE. FURTHERMORE, THE LD. COUNSEL OF THE ASSESSEE STATED THAT THE ASSESSEE HAS OFFERED THE INCOME UNDER THE HEA D LONG TERM CAPITAL GAIN TO BE TAXED @ 10%. HOWEVER, THE A.O. HAS TAXED THE SAME AS INCOME FROM OTHER SOURCES @ 30%. THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT WHEN THERE IS MERELY A CHANGE OF HEAD OF INCOME FROM CAPITAL GAINS, THE INCOME FROM OTHER SO URCES, PENALTY U/S. 271(1)(C) IS NOT LEVIABLE. FURTHERMORE, THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT THE ASSUMPTION OF JURISDICTION FOR THE LEVY OF PENALTY BY THE A.O. IN THIS CASE IS ALSO BAD IN LAW INASMUCH AS THE A.O. DID NOT CLEARLY SPECIFY IN TH E NOTICE U/S. 274 AND SHOW CAUSE NOTICE THE EXACT LIMB ON WHICH THE PENALTY PROCEEDING WAS INITIATED. IN THIS REGARD, THE LD. COUNSEL OF THE ASSESSEE PLACED RELIANCE UPON THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF M/S. SSAS EMERALD ME ADOWS (IN ITA NO. 380 OF 2015 VIDE ORDER DATED 23.11.2015) WHEREIN THE DECISION OF THE SAME COURT IN THE CASE OF CIT VS. MANJUNATHA COTTON AND GINNING FACTORY [2013] 359 ITR 565 W AS REFERRED AND THE PENALTY LEVIED U/S. 271(1)(C) WAS FOUND TO BE BAD IN LAW AS IT DID NOT SPECIFY WHICH LIM B OF SECTION 27 1 (1)(A) OF THE ACT, THE PENALTY PROCEEDING HAS BEEN INITIATED, I.E., WHE THER F OR CONCEALMENT OF PARTICULAR OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. T HE LD. COUNSEL OF THE ASSESSEE FURTHER RE FERRED THAT THIS ORDER OF THE HONBLE HIGH COURT HAS UPHELD BY THE HONBLE APEX COURT IN THE CASE OF CIT VS. M/S. SSAS EMERALD MEADOWS (IN SPECIAL LEAVE TO APPEAL (C) (CC NO.11485/2016) VIDE ORDER DATED 05.08.2016 ) , WHEREIN THE HONBLE APEX COURT HAD 6 ITA NO. 6275/MUM/2016 MRS. SHEHZEEN Z. SIDDIQUE COND ONED THE DELAY IN FILING THE APPEAL AND HAD HELD THAT THEY DID NOT FIND ANY MERIT IN THIS PETITION. HENCE, THE SPECIAL LEAVE PETITION WAS DISMISSED. REFERRING TO THE ABOVE CASE LAWS, THE LD. COUNSEL OF THE ASSESSEE STATED THAT THE PENALTY U/S. 271(1)(C) IN THIS CASE IS NOT LEVIABLE AND OBSERVES TO BE DELETED. 9. PER CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE (LD.DR' FOR SHORT) RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 10. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS AND PERUSED THE RECORDS. WE F IND TH AT THE ASSESSEE IN THIS CASE IS ENGAGED INTO THE PURCHASE AND SALE OF SHARES. THE ASSESSEE HAS OFFERED THE GAIN AS LONG TERM CAPITAL GAIN CHARGEABLE @ 10%. THE A.O., ON THE OTHER HAND, MADE CERTAIN ENQUIRIES AND CAME TO THE CONCLUSION THAT ON THE ECO NOMIC AND FINANCIAL PARAMETER , THE HUGE GAIN WAS NOT JUSTIFIED. HENCE, QUOTING THE CASE LAWS ON THE SUBJECT OF PREPONDERANCE OF PROBABILITY, THE A.O. REJECTED THE CLAIM OF THE LONG TERM CAPITAL GAIN AND CHARGED THE SAME @ 30% AS INCOME FROM OTHER SOURCES A S UNDISCLOSED INCOME. IN THIS REGARD, THE SUBMISSION OF THE ASSESSEE IS THAT ALL THE DOCUMENTS IN SUPPORT OF THE GENUINENESS OF THE TRANSACTIONS WERE SUBMITTED. THE ASSESSEE HAS DULY OFFERED THE GAIN TO TAX. HENCE, IT IS THE ASSESSEES SUBMISSION THAT THER E IS NO CONCEALMENT OF INCOME O R FURNISHING OF INACCURATE PARTICULARS OF INCOME. IN THIS REGARD, WE FIND IT GAINFUL TO REFER TO THE DECISION OF THE ITAT IN THE QUANTUM ADDITION WHEREIN WHILE CONFIRMING , THE ITAT HAD HELD THAT THE GENUINENESS OF THE TRANSAC TION WAS NOT PROVED IF NOT ACTUALLY DISPROVED. 11. FROM THE ABOVE, IT IS CLEAR THAT NO DEFECT WAS FOUND IN THE DOCUMENTATION SUPPORTING THE TRANSACTION AND THE ITAT HAD GAVE A FINDING THAT THE ASSESSEES 7 ITA NO. 6275/MUM/2016 MRS. SHEHZEEN Z. SIDDIQUE EXPLANATION WAS UNPROVED BUT NOT DISPROVED. IN IDE NTICAL SITUATION, THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF UPENDRA VS. MITHANI (SUPRA) HAS HELD THAT IN THESE CIRCUMSTANCES, THE PENALTY U/S. 271(1)(C) CANNOT BE IMPOSED. 12. WE FURTHER NOTE THAT THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF B ENNETT COLEMAN & CO. LTD. (IN ITA NO. 2117/2012, VIDE ORDER DATED 26.02.2013) HAS HELD THAT NO PENALTY IS LEVIABLE W HERE THERE IS ONLY A CHANGE OF HEAD OF INCOME. T HE ASSESSEE DESERVES TO SUCCEED ON THE TOUCH STONE OF THIS CASE LAW ALSO. ANOTHER PLEA OF TH E LD. COUNSEL OF THE ASSESSEE IS THAT SUBSTANTIAL QUESTION OF LAW HAS BEEN ADMITTED BY THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF THE QUANTUM ADDITION PURSUANT TO THE ORDER OF THE ITAT. HENCE, THE ASSESSEES COUNSEL HAS PLACED RELIANCE UPON THE H ON'BLE BOMBAY HIGH COURT DECISION IN THE CASE OF NAYAN BUILDERS (SUPRA) FOR THE PROPOSITION THAT WHEN SUBSTANTIAL QUESTION OF LAW IS ADMITTED , THE ISSUE BECOME DEBATABLE AND PENALTY U/S. 271(1)(C) CANNOT BE LEVIED. IN OUR CONSIDERED OPINION, THIS CASE LAW ALSO SUPPORTS THE PLEA OF THE LD. COUNSEL OF THE ASSESSEE THAT TH E SUBSTANTIAL QUESTION OF LAW HAVING BEEN ALREADY ADMITTED BY THE HON'BLE JURISDICTIONAL HIGH COURT. 1 3 . IN THE BACKGROUND OF THE ABOVE DISCUSSION AND PRECEDENT, WE FIND THAT IN THIS CASE THE PENALTY U/S. 271(1)(C) CANNOT BE SUSTAINED AS FIRSTLY THE ADDITION IS BASED UPON THE THEORY OF PREPONDERANCE OF PROBABILITY AND DEFECT IN THE DOCUMENTA TION FOR CLAIM OF LONG TERM CAPITAL GAIN, PER SE HAVE NOT BEEN FOUND TO BE DEFECTIVE. THE ITAT IN FAC T IN THE QUANTUM ADDITION HAS HELD THAT THE GENUINENESS OF THE TRANSACTION IS FAR FROM PROVED IF NOT ACTUALLY DISPROVED. HENCE, ON THE TOUCH STONE OF THE HON'BLE JURISDICTIONAL HIGH COURT 8 ITA NO. 6275/MUM/2016 MRS. SHEHZEEN Z. SIDDIQUE DECISION IN THE CASE OF UPENDRA VS. MITHANI (SUPRA) PENALTY U/S. 271 (1)(C) IS NOT LEVIABLE. FURTHERMORE, AS HELD BY THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF BENNETT COLEMAN & CO. LTD. (SUPRA) MERE CHANGE OF HEAD OF INCOME FROM CAPITAL GAINS, INCOME FROM OTHER SOURCES CANNOT LEAD TO LEVY OF PENALTY U/S. 271(1)(C) . SIMIL ARLY AS HELD BY THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF NAYAN BUILDERS (SUPRA) WHEN SUBSTANTIAL QUESTION OF LAW IS ADMITTED IN THE QUANTUM APPEAL BY THE HON'BLE BOMBAY HIGH COURT, THE ISSUE BECOMES DEBATABLE AND PENALTY U/S. 271(1)(C) CANNOT BE LEVIED . 1 4 . HENCE IN THE BACKGROUND OF THE AFORESAID DISCUSSION AND PRECEDENT WE SET ASIDE THE ORDER OF THE AUTHORITIES BELOW, THE PENALTY LEVIED IN THIS CASE IS DIRECTED TO BE DELETED. 1 5 . IN VIEW OF OUR ADJUDICATION ON THE ISSUE OF LEVY OF PENALTY IN FAVOU R OF THE ASSESSEE, THE ADJUDICATION ON OTHER ASPECT OF THE CHALLENGE SUBMITTED BY THE LD. COUNSEL OF THE ASSESSEE REGARDING NON SPECIFICATION OF THE CHARGE IN THE NOTICE U/S. 274 IS NOW OF ACADEMIC INTEREST. HENCE, WE ARE NOT ENGAGING INTO THE SAME. 1 6 . IN THE RESULT, THE ASSESSEES APPEAL STAND ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 19.09.2018 SD/ - SD/ - ( SANDEEP GOSAIN ) (S HAMIM YAHYA) J UDICIAL MEMBER A CCOUN TANT MEMBER MUMBAI ; DATED : 19.09.2018 ROSHANI , SR. PS 9 ITA NO. 6275/MUM/2016 MRS. SHEHZEEN Z. SIDDIQUE COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT - CONCERNED 5. DR, ITAT, MUMBAI 6. GUARD F ILE BY ORDER, (DY./ASSTT. REGISTRAR) ITAT, MUMBAI