NOORJAHAN T. MUJAHID, MUMBAI V. ASST CIT 17(3), MUMBAI

ITA 6556/MUM/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 83978 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-10-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 06-01-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 30-10-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SU JIT BANGAR
• Assessee Lawyers: RAJIV; NEELKANTHA KHANDELWAL
• Keywords: Principle of natural justice

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL B , BENCH MUMBAI , BEFORE : SHRI R.C.SHARMA , A M & SHRI AMIT SHUKLA , J M ITA NO. 6556 / MUM/20 1 2 ( ASSESSMENT YEAR : 200 6 - 07 ) MS NOORJAHAN T. MUJAHID, PLOT NO. 131, YOUTH QURESHI APTS., 1 ST FLOOR, CATER ROAD, OPP. JOGGERS PARK, BANDRA (W), MUMBAI VS. ACIT - 17(3), MUMBAI - 400 012 PAN /GIR NO. : A IAPM 6446 N ( APPELLANT ) .. ( RESPONDENT ) /ASSESSEE BY : SHRI RAJIV & SHRI NEELKANTHA KHANDELWAL /REVENUE BY : SHRI SUJIT BANGAR DATE OF HEARING : 1 1 TH SEPT. 201 4 DATE OF PRONOUNCEMENT : 29 TH OCT , 201 4 O R D E R PER R.C.SHARMA ( A .M.) : TH IS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER CIT(A ) , FOR ASSESSMENT YEAR 200 6 - 07 , IN THE MATTER OF IMPOSITION OF PENALTY U/S. 271(1)(C) OF THE I.T. ACT ON THE FOLLOWING GROUNDS : - THE FOLLOWING GROUNDS OF APPEAL ARE INDEPENDENT OF, AND WITHOUT PREJUDICE TO, ONE ANOTHER: 1. THE COMMISSIONER OF INCOME - TAX (APPEALS) - 29 , MUMBAI (HEREINAFTER REFERRED TO AS THE CI T(A ERRED IN UPHOLDING THE ACTION OF THE ASSISTANT COMMISSIONER OF INCOME- TAX, 17(3), MUMBAI (HEREINAFTER REFERRED TO AS THE ASSESSING OFFICER) IN CONFIRMING THE LEVY OF PENALTY OF RS 22,93,735 UNDER SECTION 271 (1)(C) OF THE ACT. THE APPELLANT CONTEND S THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) OUGHT NOT TO HAVE CONFIRMED THE LEVY OF THE IMPUGNED PENALTY UNDER SECTION 271(1)(C) OF THE ACT. ITA NO. 6556 /1 2 2 THE APPELLANT FURTHER CONTENDS THAT THE PRINCIPLES OF NATURAL JUSTICE HAS BEE N VIOLATED INASMUCH AS REASONABLE OPPORTUNITY OF HEARING HAS NOT BEEN GRANTED TO THE APPELLANT AS ON THE DATE OF HEARING ON 4TH JULY, 2012 A REQUEST FOR ADJOURNMENT HAS BEEN MADE WHICH IS EVIDENT BY LETTER DATED 11TH SEPTEMBER, 2012 OF TAX CONSULTANTS. 2 . THE APPELLANT FURTHER CONTENDS THAT THE IMPUGNED ORDER OF PENALTY IS BAD IN LAW AND REQUIRES TO BE QUASHED. 2. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. FACTS IN BRIEF ARE THAT THE ASSESSEE EARNED SHORT TERM CAPITAL GAIN OF RS. 1,12,44,40 3/ - OUT OF WHICH THE AO DISALLOWED CAPITAL GAIN OF RS. 44,66,911/ - IN RESPECT OF TRANSACTION MADE UNDER SCRIP T NAMED AS KARUNA CABLES LTD.. IN THE COURSE OF SCRUTINY ASSESSMENT UNDER SECTION 143(3), THE AO TREATED THE SAME AS S H AME TRANSACTION AND ASSESSED THE SAME AS INCOME FROM OTHER SOURCES. THE ACTION OF THE AO WAS CONFIRMED BY THE CIT(A) AGAINST WHICH THE ASSESSEE FILED APPEAL BEFORE THE TRIBUNAL VIDE ITA NO. 960/MUM/2011. 3. LEARNED AR PLACED ON RECORD THE ORDER OF THE TRIBUNAL AGAINST THE QUANTUM ADDIT ION , DATED 30 - 4 - 2014, WHEREIN THE ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE AFTER HAVING THE FOLLOWING OBSERVATION AT PAGE 9 PARA 8 : - ' 8. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS, PERUSED THE RELEVANT FINDINGS OF THE AUTHORITIES BELOW AN D THE MATERIAL AVAILABLE ON RECORD. IN THE PRESENT CASE, THE ASSESSEE HAD SHOWN NET SHORT TERM CAPITAL GAIN AT RS. 1,12,44,403, OUT OF WHICH THE NET SHORT TERM CAPITAL GAIN OF RS. 44,66,911 ON THE TRANSACTIONS MADE IN THE SHARES OF KARUNA CABLES, HAS BEEN H ELD TO BE BOGUS AND THE SAME HAS BEEN ADDED UNDER THE HEAD INCOME FROM OTHER SOURCES. FROM THE RECORDS, IT APPEARS THAT THE ASSESSEE HAS PURCHASED 40,000 SHARES OF KARUNA CABLES ON VARIOUS DATES RANGING BETWEEN 5TH APRIL TO 7TH MAY 2005, FOR SUMS AGGREGA TING TO `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` 22.40 PER SHARE TO ` 159 PER SHARE DURING THE PERIOD FROM 10 TH FEBRUARY 2005 AND 16TH SEPTEMBER 2005. IF UNDER SUCH PERIOD, ANY TRANSACTION HAS BEEN UNDERTAKEN BY ANY PERSON IN THE OPEN MARKET, THEN IT CANNOT BE HELD THAT SUCH PERSON WAS IN CONNIVANCE WITH THE SAID COMPANY. LASTLY, THE FINAL ORDER OF THE ITA NO. 6556 /1 2 4 SEBI, IS MUCH AFTER THE TRANSACTION UNDERTAKEN BY THE ASSESSEE, HENCE, NO ADVERSE INFERENCE CAN BE DRAWN SANS ANY INVESTIGATION OR ENQUIRY DONE BY THE ASSESSING OFFICER IN THE ASSESSEES CASE IN PARTICULAR. IN THE ENTIRE ASSESSMENT ORDER, THE ASSESSING OFFICER HAS ONLY SPOKEN ABOUT GENERAL MODUS OPERANDI AND THE ORDER OF THE SEBI WITHOUT CARRYING OUT ANY INDEPENDENT ENQUIRY TO PROVE THAT THE ASSESSEE HAS NOT MADE ANY SALES OR ANY UNACCOUNTED MONEY HAS BEEN ROUTED THROUGH THIS CHANNEL. WHAT IS APPARENT HAS TO BE TAKEN AS REAL, UNLESS ANY MATERIAL OR EVIDENCE HAS BEEN BROUGHT ON THE RECORD TO PROVE THE CONTRARY. ON THE PRESENT FACTS OF THE CASE, THE SHORT TERM CAPITA L GAIN SHOWN BY THE ASSESSEE CANNOT BE HELD TO BE NON GENUINE SO AS TO BE TAXED UNDER THE HEAD INCOME FROM OTHER SOURCES. THUS, IN VIEW OF THE FINDINGS AND OBSERVATIONS GIVEN ABOVE, GROUND NO.1, AS RAISED BY THE ASSESSEE IS ALLOWED. 10. IN GROUND NO.2, THE ASSESSEE HAS CHALLENGED THE ADDITION OF RS. 2,23,345 ON ACCOUNT OF ALLEGED COMMISSION WHICH MUST HAVE BEEN PAID BY THE ASSESSEE FOR OBTAINING SHORT TERM CAPITAL GAIN OF RS. 44,66,911. 11. SINCE WE HAVE ALREADY HELD THAT THE SHORT TERM CAPITAL GAIN SHOW N BY THE ASSESSEE IS ON ACCOUNT OF GENUINE PURCHASE AND SALE OF SHARES, HENCE, SUCH A HYPOTHETICAL ADDITION BASED ON PRESUMPTION CANNOT BE SUSTAINED. THUS, IN VIEW OF THE FINDINGS GIVEN IN GROUND NO.1, THIS GROUND IS ALSO TREATED AS ALLOWED. 4 . IT IS CLE AR FROM THE ORDER OF THE TRIBUNAL THAT THE QUANTUM ADDITION MADE BY DECLINING ASSESSEES CLAIM OF SHORT TERM CAPITAL GAIN WAS ACCEPTED BY THE TRIBUNAL. SINCE THE ADDITION ITSELF HAS BEEN DELETED BY THE TRIBUNAL, THE PENALTY LEVIED WITH RESPECT TO SUCH ADDI TION HAS NO LEGS TO STAND. ACCORDINGLY, WE SET ASIDE THE ORDER OF THE LOWER AUTHORITIES AND DELETE THE PENALTY IMPOSED WITH RESPECT TO SHORT TERM CAPITAL GAIN IN RESPECT OF SHARES OF KARUNA CABLES LTD. 5 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED F OR STATISTICAL PURPOSES . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 29/10 / 201 4 . 29/10 / 2014 SD/ - SD/ - ( ) ( AMIT SHUKLA ) ( ) ( R.C.SHARMA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED 29/10 /2014 /PKM , PS ITA NO. 6556 /1 2 5 COPY OF THE ORDER FORWARDED TO : / BY ORDER, ( ASSTT. REGISTRAR) / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / THE CIT(A), MUMBAI. 4. / CIT 5. / DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//