SUDHA DAMANI, MUMBAI V. ACIT 25(2), MUMBAI

ITA 6285/MUM/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 5143 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-12-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2005-2006
• Appeal Filed On: 12-10-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHOK SURI
• Keywords: Business income; Bonafide belief
• Section: 143(3)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL E B ENCH, MUMBAI . . , , , ! ' BEFORE SHRI I.P. BANSAL, JM AND SHRI SANJAY AROR A, AM ./ I.T.A. NO.6285/MUM/2012 ( # # # # $ $ $ $ / ASSESSMENT YEAR :2005-06 MS. SUDHA DAMANI, A-73. SJRODJAR S,RITO. DEVIDAS EXTN ROAD, BORIVALI (W), MUMBAI-400 103 THE ACIT 25(2), C-11, PRATKSHAR BHAVAN, BANDRA KURLA COMPLEX, BANDRA EAST, MUMBAI-400 051 % ! ./ & ./PAN/GIR NO. : AAAPD 5203G ( %' /APPELLANT ) .. ( ()%' / RESPONDENT ) %' * / APPELLANT BY : ` NONE ()%' + * /RESPONDENT BY : SHRI ASHOK SURI # + ,-! / DATE OF HEARING :12.12.2013 .$ + ,-! / DATE OF PRONOUNCEMENT : 12.12.2013 / / O R D E R PER I.P BANSAL, JM: THE APPEAL IS FILED BY THE ASSESSEE. IT IS DIRECTE D AGAINST THE ORDER OF THE LD. CIT(A)-35, MUMBAI DT. 16.7.2012 FOR A.Y. 2005-06. 2. THE GROUNDS OF APPEAL READ AS UNDER: THE LD. CIT(A) HAS ERRED IN LEVYING THE PENALTY U/ S. 271(1)(C) OF RS. 4,75,450/- ON THE GROUND THAT ASSE SSEE HAS CONCEALED THE INCOME BY WAY SHOWING PROFIT ON SALE OF SHARES AS A CAPITAL GAIN AS AGAINST BUSINESS INCOME . FOR ITA NO.6285/M/12 2 LEVYING PENALTY ON CONCEALMENT OF INCOME U/S. 271(1 )(C), THERE SHOULD BE ATLEAST ON CRITERIA OF THE FOLLOWIN G NEEDS TO BE MET (I) CONCEALMENT OF PARTICULARS OF INCOME OR (II) FURNISHING INACCURATE PARTICULARS OF SUCH INCOME. THE CIT- APPEALS ERRED IN UNDERSTANDING THE BOTH THE BASIC F ACT THAT ASSESSEE HAS NEITHER CONCEALED ANY PARTICULARS OF H ER INCOME NOR FURNISH IN ANY INACCURATE PARTICULARS OF SUCH INCOME. ASSESSEE HAS DECLARED HER ENTIRE INCOME UN DER THE HEAD CAPITAL GAIN IN THE INCOME TAX RETURN. MERE D IFFERENCE OF INTERPRETATION OF LAW BY ITSELF DOES NOT LEAD TO CONCEALMENT. HENCE LEVY OF PENALTY IS NOT JUSTIFIA BLE. VARIOUS CASE LAWS IN RELATION TO ABOVE ARE CITED BELOW: 1) MAJORJIT SINGH VS ACIT (2012) 17 ITR 13 (CHANDIGARH TRIB) 2) BSEL INFRASTRUCTURE REALTY LTD. VS ACIT (2012) 137 ITD 61 (MUM. TRIB.) 3. THE ASSESSMENT IN THE PRESENT CASE WAS COMPLETED U/S. 143(3) ON 17.12.2007 WHEREIN THE TOTAL INCOME OF THE ASSESSEE WAS DETERMINED AT RS. 36,29,940/- AS AGAINST RETURNED INCOME OF RS. 24,34,182/-. IN THE RETURN OF INCOME, THE ASSESSEE HAD SHOWN SHORT TERM CAPITAL GAIN AND LONG TERM CAPITAL GAINS ON SALE OF SHARES AT RS. 2 1,29,497/- AND RS. 14,51,540/- RESPECTIVELY. LONG TERM CAPITAL GAIN WA S CLAIMED AS EXEMPT. CONSIDERING THE FREQUENCY, VOLUME AND CONSISTENCY O F THE TRANSACTIONS, RELYING UPON THE CBDT CIRCULAR 4/2007 DT. 15.6.2007 , THE AFOREMENTIONED CAPITAL GAINS SHOWN BY THE ASSESSEE WAS TREATED AS BUSINESS INCOME OF THE ASSESSEE AND IN THIS MANNER THE BUSINESS INCOME OF THE ASSESSEE WAS COMPUTED AT RS. 35,46,136/- BY GRANTING THE SET OFF OF EXPENSES WHICH WERE COMPUTED TO A SUM OF RS. 24,060 /- BY THE AO. IN NUTSHELL, AFTER AGGREGATING THE LONG TERM CAPITAL GAIN AND SH ORT TERM CAPITAL GAIN WHICH WAS CONSIDERED TO BE BUSINESS IN COME A SET OFF ON ACCOUNT OF EXPENSES AMOUNTING TO RS. 24,060 IS GIVE N AND NET INCOME ITA NO.6285/M/12 3 FROM BUSINESS HAS BEEN ASSESSED AT RS. 35,46,136/-. ON SUCH ASSESSMENT, CONCEALMENT PENALTY WAS INITIATED BY THE AO WHICH H AS BEEN LEVIED BY IMPUGNED ORDER DT. 30.3.2011. 4. THE TREATMENT OF THE AO TO THE INCOME ARISING OU T OF SALE OF SHARES HAVE BEEN CONFIRMED BY THE TRIBUNAL VIDE ITS ORDER DT. 13 TH AUGUST, 2010 PASSED IN ITA NO. 2647/M/09 IN DEPARTMENTAL APPEAL AS LD. CIT(A) HAD HELD THAT THE INCOME OF THE ASSESSEE FROM SALE OF SHARES COULD NOT BE ASSESSED UNDER THE HEAD BUSINESS INCOME. THE SA ID ORDER OF THE LD. CIT(A) WAS CHALLENGED BY THE REVENUE IN AN APPEAL F ILED BEFORE THE TRIBUNAL AND TRIBUNAL HAD SET ASIDE THE ORDER OF TH E LD. CIT(A) AND HAD UPHELD THE ACTION OF THE AO. IN THE SAID ORDER OF THE TRIBUNAL, IT HAS BEEN RECORDED IN PARA-8 THAT IT WAS THE SUBMISSION OF TH E ASSESSEE THAT SHE IS ENGAGED IN THE ACTIVITIES OF INVESTMENT IN SHARES A ND SECURITIES SINCE MANY YEARS AND WAS FILING HER RETURN IN THE CAPACIT Y OF AN INVESTOR. THE INCOME OF THE ASSESSEE WAS ASSESSED BY THE SAME AO AS INCOME FROM CAPITAL GAIN IN THE PRECEDING ASSESSMENT YEAR BY WA Y OF AN ASSESSMENT ORDER PASSED U/S. 143(3) OF THE ACT AND ASSESSEE WA S TREATED AS AN INVESTOR. IT WAS ALSO THE CASE OF THE ASSESSEE THA T SHE HAS SOLD MOST OF THE STOCK DURING THE YEAR WHICH WAS HELD AS INVESTMENT IN THE PRECEDING YEAR. THEREFORE, IT WAS PLEADED THAT AO WAS NOT JUSTIFIED IN TREATING THE PROFITS FROM SALE OF SUCH INVESTMENT AS BUSINESS INCOME. F OR THE SAKE OF COMPLETENESS, PARA-8 OF THE AFOREMENTIONED ORDER OF THE TRIBUNAL IS REPRODUCED BELOW TO GIVE THE HISTORY OF THE CASE. BEFORE CIT(A) IT WAS SUBMITTED THAT THE ASSESSEE I S A HOUSE WIFE AND ENGAGED IN THE ACTIVITIES OF INVESTM ENT IN SHARES AND SECURITIES SINCE MANY YEARS AND WAS FILI NG HER RETURN OF INCOME IN THE CAPACITY OF AN INVESTOR. T HE INCOME OF THE ASSESSEE WAS ASSESSED BY THE SAME AO AS INCO ME FROM ITA NO.6285/M/12 4 CAPITAL GAIN IN THE PRECEDING ASSESSMENT YEAR IN 14 3(3) ASSESSMENT AND THE ASSESSEE WAS ALSO HELD TO BE AN INVESTOR. IT WAS SUBMITTED THAT THE ASSESSEE HAS SOLD MOST OF THE STOCK DURING THE YEAR WHICH WAS HELD AS INVESTMENT IN THE PRECEDING YEAR. THEREFORE, THE ASSESSING OFFICER WA S NOT JUSTIFIED IN TREATING THE PROFITS FROM SALE OF SUCH INVESTMENT AS BUSINESS INCOME. IT WAS SUBMITTED THAT THE TOTAL NUMBER OF SCRIPS/ SHARES TRANSACTED DURING THE YEAR ARE ONLY 93, PURCHASES OF SECURITIES ARE OF RS.2.88 CRORES AND S ALE OF SHARES WAS RS.3.15 CRORES WHICH INCLUDES OPENING ST OCK OF SHARES SHOWN AS INVESTMENT AND RS.1.46 CRORES AND C LOSING STOCK OF SHARES OF RS.5.55 CRORES. IT WAS SUBMITTED THAT OUT OF 93 TRANSACTIONS RELATING TO ALL SCRIPS 8 TRANSACTIO NS ARE RELATING TO LONG TERM SCRIPS WHICH ARE AUTOMATICALL Y GIVEN FROM CLOSING STOCK OF THE EARLIER YEAR WHICH WAS HE LD AS INVESTMENT. IT WAS SUBMITTED THAT OUT OF THE TOTAL LOAN OF RS.89 LAKHS SHOWN IN THE BALANCE SHEET AS ON 31ST M ARCH, 2005, AN AMOUNT OF RS.54 LAKHS WAS OBTAINED DURING THE FINANCIAL YEAR 2003-04 WHICH WAS INVESTED IN PURCHA SE OF SECURITIES AND WHICH WAS SHOWN AS INVESTMENT IN BAL ANCE SHEET OF THE ASSESSEE AND WHICH WAS ACCEPTED BY THE DEPARTMENT IN THE ORDER PASSED U/S. 143(3) OF THE A CT. IT WAS FURTHER SUBMITTED THAT THE LOANS WERE OBTAINED FROM THE VARIOUS FAMILY MEMBERS FREE OF INTEREST. THE ASSESS EE ALSO CHALLENGED THE ORDER OF THE ASSESSING OFFICER ON AC COUNT OF MAGNITUDE OF TRANSACTIONS AT RS.6 CRORES AND IT WAS SUBMITTED THAT INVESTMENT OF RS.2.88 CRORES WAS MAD E DURING THE YEAR. THE ASSESSEE ALSO FILED THE YEAR-WISE COM PARISON OF THE INVESTMENT AND CLOSING STOCK VALUE OF INVESTMEN T WHICH IS AS UNDER: AT THE END OF F.Y. 2003-04 - RS.142.23 LAKHS AT THE END OF F.Y, 2004-05 (UNDER APPEAL) - RS.155.54 LAKHS AT THE END OF F.Y. 2005-06 RS.219.24 LAKHS 5. THE LD. CIT(A) HAS UPHELD THE LEVY OF PENALTY MA INLY ON THE GROUND THAT THE ADDITIONS HAVE BEEN UPHELD BY THE T RIBUNAL; THE ASSESSEE WAS FOUND TO BE ENGAGED IN THE BUSINESS OF SHARE TR ADING; HER MAIN ACTIVITY WAS PURCHASE AND SALE OF SHARES. UNDER TH E PROVISIONS OF SEC. ITA NO.6285/M/12 5 271(1)(C), PENAL PROVISIONS WILL ATTRACT WHEN THER E IS A FAILURE OF DUTY TO DISCLOSE FULLY AND TRULY PARTICULARS OF INCOME. DI SCLOSURE OF INCOME WOULD BE DISCLOSURE OF PARTICULARS OF INCOME, WHICH A PERSON IS DUTY BOUND TO DISCLOSE IN FULFILLMENT OF HIS STATUTORY O BLIGATIONS TO PAY TAX ON THE INCOME CHARGEABLE TO TAX. THE OBLIGATION IS NO T ONLY TO DISCLOSE PARTICULARS OF INCOME BUT TO DISCLOSE THEM CORRECTL Y AND COMPLETELY. THEREFORE, THE LD. CIT(A) HAS COME TO A CONCLUSION THAT ACCORDING TO THE FACTS OF THE CASE, THE ASSESSEE WAS LIABLE FOR CONC EALMENT PENALTY AS ASSESSEE HAS FAILED TO PROVE THAT THE EXPLANATION O F THE ASSESSEE WAS BONAFIDE AND ALL THE FACTS AND MATERIAL TO THE COMP UTATION OF INCOME WERE DISCLOSED. 6. ASSESSEE IS AGGRIEVED, HENCE HAS FILED THE AFORE MENTIONED GROUNDS. 7. THIS APPEAL OF THE ASSESSEE WAS FIXED FOR HEARIN G ON 12 TH DECEMBER, 2013. ON THE FIXED DATE OF HEARING, NONE WAS PRESENT ON BEHALF OF THE ASSESSEE. THEREFORE, WE PROCEED TO DECIDE THE PRESENT APPEAL EX PARTE QUA THE ASSESSEE AFTER HEARING LD . DEPARTMENTAL REPRESENTATIVE. 8. THE LD. DR RELYING UPON THE PENALTY ORDER AND OR DER PASSED BY LD. CIT(A) PLEADED THAT IT IS A FIT CASE WHERE LD. CIT( A) HAS UPHELD THE LEVY OF CONCEALMENT PENALTY. LD. DR SUBMITTED THAT TRIB UNAL HAS ALREADY CONFIRMED THE ADDITION. THE ASSESSEE DID NOT FURNI SH ACCURATE PARTICULARS OF HER INCOME. THEREFORE, LD. DR PLEADED THAT THE O RDER PASSED BY LD. CIT(A) SHOULD BE CONFIRMED AND APPEAL FILED BY THE ASSESSEE SHOULD BE DISMISSED. 9. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE LD. DR. WE HAVE ALSO CAREFULLY GONE THROUGH THE ASSESSMENT ORD ER, PENALTY ORDER, ITA NO.6285/M/12 6 ORDER PASSED BY LD. CIT(A) AND QUANTUM ORDER OF THE TRIBUNAL. THE LD. CIT(A) HAS DELETED THE ACTION OF THE AO IN ASSESSME NT ORDER ON THE SUBMISSIONS OF THE ASSESSEE THAT SHE HAS BEEN DOING SUCH ACTIVITY SINCE LONG AND IN THE IMMEDIATE PRECEDING YEAR BY WAY OF AN ORDER PASSED U/S. 143(3) OF THE ACT, THE AO HIMSELF HAS ACCEPTED SUC H CLAIM OF THE ASSESSEE AND HAS TREATED THE ASSESSEE AS AN INVESTO R AND THE INCOME FROM SUCH ACTIVITY WAS ALSO HELD TO BE ASSESSABLE AS AN INCOME GIVING RISE TO CAPITAL GAIN. THE FIGURES WERE ALSO GIVEN AND ARE MENTIONED IN PARA-8 OF THE ORDER OF THE TRIBUNAL IN QUANTUM. THE IMPUGNED FINANCIAL YEAR IS 2004-05 AND IT CAN BE SEEN THAT CLOSING STOCK VALUE OF THE INVESTMENT FOR THE IMMEDIATE PRECEDING YEAR WAS IN THE VICINITY OF CLOSING STOCK IN THE IMPUGNED FINANCIAL YEAR. THERE WAS NO MUCH DIFFERE NCE IN THE ACTIVITY OF THE ASSESSEE AS COMPARED TO EARLIER YEAR. FOR THE YEAR UNDER CONSIDERATION, THE AO TOOK DIFFERENT VIEW AND HAS A SSESSED SUCH INCOME AS BUSINESS INCOME. THEREFORE, IT CANNOT BE SAID THAT ASSESSEE WAS NOT UNDER A BONAFIDE BELIEF TO DECLARE SUCH INCOME UND ER THE HEAD CAPITAL GAIN. THE ACTION OF THE ASSESSEE WAS BASED ON THE TREATMENT GIVEN BY THE DEPARTMENT TO SUCH ACTIVITY IN THE IMMEDIATE PRECED ING YEAR. THESE SUBMISSIONS OF THE ASSESSEE HAVE NOT BEEN SHOWN TO BE INCORRECT. THEREFORE, IN THESE CIRCUMSTANCES, WE ARE OF THE OP INION THAT IT IS NOT A FIT CASE WHERE LEVY OF CONCEALMENT PENALTY CAN BE HELD TO BE JUSTIFIED. 10. THE ASSESSEE BASED ON THE TREATMENT GIVEN IN TH E PRECEDING YEAR BY THE DEPARTMENT HAD SUBMITTED HER RETURN AND ASSESSE E COULD NOT IMAGINE THAT SUDDENLY DEPARTMENT WILL TAKE U-TURN ON THE TR EATMENT BEING CONSISTENTLY FOLLOWED BY THE ASSESSEE. IN OUR OPIN ION, UNDER THESE CIRCUMSTANCES, THE PENALTY IS LIABLE TO BE DELETED AND IS DIRECTED TO BE DELETED. ITA NO.6285/M/12 7 11. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 12.12.2013 . / + $ ! 0 1#2 12.12.2013 + 3 SD/- SD/- (SANJAY ARORA) (I.P. BANSAL ) ! / ACCOUNTANT MEMBER /JUDICIAL MEMBER MUMBAI; 1# DATED 12/12 /2013 . # . ./ RJ , SR. PS / / / / + ++ + (,4 (,4 (,4 (,4 5 4$, 5 4$, 5 4$, 5 4$, / COPY OF THE ORDER FORWARDED TO : 1. %' / THE APPELLANT 2. ()%' / THE RESPONDENT. 3. 6 ( ) / THE CIT(A)- 4. 6 / CIT 5. 473 (,# , , / DR, ITAT, MUMBAI 6. 38 9 / GUARD FILE. /# /# /# /# / BY ORDER, )4, (, //TRUE COPY// : :: : / ; ; ; ; (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI