ACIT, CHENNAI V. Ms Sarita Jain, CHENNAI

ITA 728/CHNY/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 64207 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 4 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-08-2012
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 26-07-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 20-04-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ANIRUDH RAI IRS
• Assessee Lawyers: R VIJAYARAGHAVAN
• Keywords: Capital asset; Wrong claim; Difference of opinion; Change of opinion

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI BEFORE DR. O.K.NARAYANAN, VICE-PRESIDENT AND SHRI VIKAS AWASTHY, JUDICIAL MEMBER ITA NO.728(MDS)/2011 ASSESSMENT YEAR:2006-07 THE ASSISTANT COMMISSIONER OF INCOME-TAX, BUSINESS CIRCLE XV, CHENNAI. VS. MS. SARITA JAIN, 3, WALLACE GARDEN III STREET, CHENNAI-600 006. PAN AANPJ7465R. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ANIRUDH RA I, IRS, CIT RESPONDENT BY : SHRI R.VIJAYARAGHAV AN, ADVOCATE DATE OF HEARING : 26 TH JULY, 2012 DATE OF PRONOUNCEMENT : 21 ST AUGUST, 2012 O R D E R PER DR.O.K.NARAYANAN, VICE-PRESIDENT: THIS APPEAL IS FILED BY THE REVENUE. TH E RELEVANT ASSESSMENT YEAR IS 2006-07. THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS)-XI I AT - - ITA 728 OF 2011 2 CHENNAI, DATED 28-1-2011. THE APPEAL ARISES OUT OF THE PENALTY ORDER PASSED UNDER SECTION 271(1)(C) OF THE INCOME- TAX ACT, 1961. THE PENALTY AMOUNT IS ` 1,23,71,072/-. 2. THE ASSESSEE WAS HOLDING SHARES OF M/S. VISHON HEALTH SOURCES PVT. LTD. THE SHARES WERE SUBSEQUEN TLY SOLD TO M/S.PEROT SYSTEMS CORPORATION OF USA. THE SALE OF SHARES WAS MADE FOR A CONSIDERATION OF ` 5,51,29,555/-. IN THE RETURN FILED BY THE ASSESSEE SHE CLAIMED EXEMPTION OF THIS AMOUNT U NDER SECTION 10(36) OF THE INCOME-TAX ACT, 1961. SECTIO N 10(36) PROVIDES THAT ANY INCOME ARISING FROM THE TRANSFER OF A LONG-TERM CAPITAL ASSET, BEING AN ELIGIBLE EQUITY SHARE IN A COMPANY PURCHASED ON OR AFTER THE 1 ST DAY OF MARCH, 2003 AND BEFORE THE 1 ST DAY OF MARCH, 2004, AND HELD FOR A PERIOD OF TWELV E MONTHS OR MORE DOES NOT FORM PART OF THE TOTAL INCOME OF THE ASSESSEE PROVIDED THE TRANSACTION OF PURCHASE AND SALE OF TH E SHARES ARE ENTERED INTO ON A RECOGNIZED STOCK EXCHANGE IN INDI A. THE TRANSACTION OF PURCHASE AND SALE OF SHARES ON A REC OGNIZED STOCK EXCHANGE IN INDIA ATTRACTED SECURITIES TRANSA CTION TAX (STT). THEREFORE, THE IMPLICATION OF SECTION 10(36 ) IS THAT IF - - ITA 728 OF 2011 3 SHARES, HELD FOR A PERIOD OF TWELVE MONTHS OR MORE, IS SOLD ON THE FLOOR OF A STOCK EXCHANGE, ON WHICH STT HAS BEEN PA ID, THE RESULTANT CAPITAL GAINS DO NOT FORM PART OF TOTAL I NCOME. IT IS ON THAT BASIS THAT THE ASSESSEE HAS CLAIMED EXEMPTION UNDER SECTION 10(36) OF THE INCOME-TAX ACT, 1961. 3. IN THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER FOUND THAT THE ASSESSEE WAS NOT A LISTED CO MPANY AND THE ASSESSEE HAD NOT SUFFERED ANY STT AND, THEREFOR E, THE ASSESSEE WAS NOT ENTITLED FOR CLAIMING THE EXEMPTIO N UNDER SECTION 10(36) AGAINST THE SALE PROCEEDS OF THE SHA RES. THE ASSESSING OFFICER COMPUTED THE LONG-TERM CAPITAL GA INS ON THE SALE OF THE SHARES AND BROUGHT THE GAINS TO TAXATIO N. THE ADDITION WAS NOT CHALLENGED BY THE ASSESSEE. THE Q UANTUM PROCEEDINGS ENDED THERE ITSELF. 4. THEREAFTER, THE ASSESSING OFFICER INITIATED PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) ON THE GROUND T HAT THE ASSESSEE HAD CONCEALED THE PARTICULARS OF HER TAXAB LE INCOME BY MAKING A WRONG CLAIM OF EXEMPTION UNDER SECTION 10( 36) OF THE - - ITA 728 OF 2011 4 ACT. THE ASSESSEE CONTENDED BEFORE THE ASSESSING O FFICER THAT PARTICULARS REGARDING THE SALE TRANSACTION WERE FUR NISHED BEFORE THE ASSESSING OFFICER AND NO INACCURATE PARTICULARS WERE FURNISHED BY HER AND ALSO SHE HAD PAID ADVANCE TAX WELL IN TIME, EVEN THOUGH EXEMPTION WAS CLAIMED UNDER SECTION 10( 36). IT WAS, THEREFORE, CONTENDED THAT THERE WAS NEITHER CO NCEALMENT OF INCOME, NOR FURNISHING OF INACCURATE PARTICULARS OF INCOME. 5. BUT, THE ASSESSING OFFICER HELD THAT THE ASSES SEE HAD CLAIMED EXEMPTION UNDER SECTION 10(36) WITHOUT QUALIFYING FOR MAKING ANY SUCH CLAIM, WHICH FACTS WERE KNOWN T O THE ASSESSEE VERY WELL. THE ASSESSING OFFICER FURTHER HELD THAT PAYMENT OF ADVANCE TAX DOES NOT ABSOLVE THE ASSESSE E FROM HER ATTEMPT MADE TO CONCEAL INCOME FROM TAXATION. HE A LSO FOUND THAT THE ASSESSEE HAD MADE A CLAIM FOR REFUND, WHIC H SHOWED THAT THE ASSESSEE HAD PURPOSELY MADE THE CLAIM FOR EXEMPTION UNDER SECTION 10(36). ACCORDINGLY, THE ASSESSING O FFICER LEVIED PENALTY AT 100% OF THE TAX SOUGHT TO BE EVADED, AMO UNTING TO ` 1,23,71,072/-. - - ITA 728 OF 2011 5 6. THE PENALTY ORDER WAS TAKEN IN FIRST APPEAL BEF ORE THE COMMISSIONER OF INCOME-TAX(APPEALS). THE COMMI SSIONER OF INCOME-TAX(APPEALS) AGREED WITH THE ASSESSING OF FICER THAT THE GAINS ON TRANSFER OF SHARES, BEING A LONG-TERM CAPITAL ASSET, WERE NOT EXEMPT FROM TAXATION AS THE CONDITIONS LAI D DOWN UNDER SECTION 10(36) WERE NOT SATISFIED BY THE ASSESSEE. BUT, THE COMMISSIONER OF INCOME-TAX(APPEALS) HELD THAT A DIF FERENT VIEW TAKEN BY THE ASSESSEE BY CLAIMING EXEMPTION AND ANO THER VIEW TAKEN BY THE ASSESSING AUTHORITY, BY NOT ACCEPTING THE CLAIM OF EXEMPTION, WOULD NOT LEAD TO A LOGICAL CONCLUSION T HAT THERE WAS ANY CONCEALMENT OF PARTICULARS MADE BY THE ASSESSEE . THE COMMISSIONER OF INCOME-TAX(APPEALS) RELIED UPON THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCTS PVT. LTD., 322 ITR 158 AND THE DECIS ION OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. SA RADHA TEXTILE PROCESSORS P. LTD, 286 ITR 499 AND HELD THA T A MERE MAKING OF THE CLAIM, WHICH IS NOT SUSTAINABLE IN LA W, BY ITSELF WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REG ARDING THE INCOME OF AN ASSESSEE AND SUCH CLAIM MADE IN THE RE TURN - - ITA 728 OF 2011 6 CANNOT BE TREATED AS FURNISHING OF INACCURATE PARTI CULARS. FINALLY HE DELETED THE PENALTY LEVIED ON THE ASSESSEE. 7. THE REVENUE IS AGGRIEVED AND, THEREFORE, THE SECOND APPEAL BEFORE US. 8. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS IN ITS APPEAL FILED BEFORE US:- 1. THE LEARNED CIT(A) ERRED IN DELETING THE PENALT Y OF ` 1,23,71,072/- LEVIED U/S 271(1)(C) OF THE IT ACT. 2. THE LEARNED CIT(A) ERRED IN NOT CONSIDERING THE FACT THAT THE ASSESSEE HAS NOT DISCLOSED IN HER RETURN THAT THE SHARES OF M/S. VISION HEALTH SOURCE PVT. LTD. WERE NOT LISTED IN ANY STOCK EXCHANGE. 3. THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED THE FACT THAT THE ASSESSEE HAS NOT DISCLOSED IN HER RETURN THAT NO SECURITIES TRANSACTION TAX WAS PAID - - ITA 728 OF 2011 7 ON TRANSFER OF THESE SHARES WHICH IS AN ESSENTIAL CONDITION TO CLAIM EXEMPTION U/S 10(38) OF THE IT ACT. 4. THE LD. CIT(A) OUGHT TO HAVE APPRECIATED THE FAC T THAT THE ASSESSEE PAID THE ADVANCE TAX IN RESPECT O F THE CAPITAL GAIN ON SALE OF SHARES, THEREBY CONFIRMING THE FACT THAT THE ASSESSEE WAS NOT IGNORANT OF THE PROVISIONS OF THE ACT. 5. THE LD CIT(A) OUGHT TO HAVE APPRECIATED THE FACT THAT BUT FOR THE SCRUTINY ASSESSMENT, THE INCOME LIABLE FOR TAX WOULD HAVE ESCAPED ASSESSMENT. 9. IN FACT, THIS APPEAL WAS CALLED ON FOR HEARING ON 13-7-2011 BEFORE THE TRIBUNAL. THERE WAS NOBODY PR ESENT TO PROSECUTE THE APPEAL, INSPITE OF SERVICE OF NOTICE. THEREFORE, THE APPEAL WAS DISPOSED OF QUA THE ASSESSEE. AFTER CON SIDERING THE FACTS OF THE CASE AND THE OTHER CIRCUMSTANCES, THE TRIBUNAL HELD THAT THE ASSESSING OFFICER WAS JUSTIFIED IN LEVYING PENALTY ON THE - - ITA 728 OF 2011 8 ASSESSEE. ACCORDINGLY, THE ORDER OF THE COMMISSION ER OF INCOME-TAX(APPEALS) WAS SET ASIDE AND THE PENALTY W AS RESTORED BY THE TRIBUNAL. THE ORDER WAS PASSED BY THE TRIBU NAL ON 5-10-2011. 10. THEREAFTER, THE ASSESSEE FILED A RECTIFICATION PETITION BEFORE THE TRIBUNAL IN M.P. NO.52(MDS)/2012, PRAYIN G FOR RECALL OF THE ORDER OF THE TRIBUNAL DATED 5-10-2011 AND DI SPOSAL OF THE APPEAL AFRESH AFTER HEARING THE ASSESSEE. THE REAS ON FOR NON APPEARANCE AT THE TIME OF HEARING OF THE APPEAL WAS EXPLAINED BEFORE THE TRIBUNAL. THE TRIBUNAL ACCEPTED THE REA SON EXPLAINED BY THE ASSESSEE AND ALLOWED HER PRAYER. ACCORDINGL Y, THE EX- PARTE ORDER OF THE TRIBUNAL DATED 5-10-2011 WAS REC ALLED AND THE APPEAL WAS RESTORED ON THE ROLLS OF THE TRIBUNAL FO R FRESH HEARING AND DISPOSAL. IT IS HOW THIS MATTER IS COMING UP B EFORE THE TRIBUNAL FOR THE SECOND TIME. 11. WE HEARD SHRI ANIRUDH RAI, THE LEARNED COMMISSIONER OF INCOME-TAX APPEARING FOR THE REVENU E AND - - ITA 728 OF 2011 9 SHRI R.VIJAYARAGHAVAN, THE LEARNED COUNSEL APPEARIN G FOR THE RESPONDENT-ASSESSEE. 12. THE ASSESSEE HAD SOLD SHARES FOR A CONSIDERATI ON OF ` 5,51,29,555/-. THE SHARES DID NOT BELONG TO ANY L ISTED COMPANY. SO ALSO, THE ASSESSEE HAD NOT SUFFERED AN Y SECURITIES TRANSACTION TAX AT THE TIME OF SALE. THE LAW RELAT ING TO EXEMPTION UNDER SECTION 10(36) PROVIDES THAT IN ORDER TO CLAI M EXEMPTION UNDER THAT SECTION, THE SHARES SHOULD BE THAT OF A LISTED COMPANY, AS A RESULT OF WHICH THE PARTIES MUST SUFF ER SECURITIES TRANSACTION TAX. AS THE ASSESSEE HAS NOT COMPLIED WITH THE STATUTORY CONDITIONS, IT WAS NOT POSSIBLE FOR THE A SSESSING OFFICER TO ACCEPT THE CLAIM OF EXEMPTION MADE BY THE ASSESS EE. 13. THE CLAIM OF EXEMPTION MADE BY THE ASSESSEE CANNOT BE TREATED AS AN OPINION OF THE ASSESSEE DIF FERENT FROM THE OPINION OF THE ASSESSING OFFICER. IT IS NOT AN INSTANCE OF DIFFERENT OPINIONS. THE CONDITIONS LAID DOWN UNDER SECTION 10(36) ARE MANDATORY. THEY ARE WELL WRITTEN IN THE STATUTE. THE ASSESSEE WAS HELPED BY A QUALIFIED CHARTERED ACCOUN TANT IN - - ITA 728 OF 2011 10 PREPARING THE STATEMENT OF TAXABLE INCOME AND FILIN G THE RETURN OF INCOME. IT IS NOT POSSIBLE TO HOLD THAT THE CHARTE RED ACCOUNTANT WAS NOT AWARE OF THE PROVISIONS OF LAW STATED IN SE CTION 10(36). THE ASSESSEE, HAVING KNOWLEDGE THAT SHE HAS NOT COM PLIED WITH THE STATUTORY CONDITIONS, OUGHT NOT HAVE MADE A CL AIM OF SUCH AN EXEMPTION. IT IS A CLEAR-CUT CASE OF A CLAIM MA DE BY THE ASSESSEE FOR AN INELIGIBLE EXEMPTION. 14. THE JUDGMENT OF THE HONBLE SUPREME COURT IN T HE CASE OF CIT VS. RELIANCE PETROPRODUCTS PVT. LTD., 3 22 ITR 158, IS NOT APPLICABLE TO THE PRESENT CASE. IN THAT CASE C ONSIDERED BY THE HONBLE SUPREME COURT, THE GENUINENESS OF THE C LAIM MADE BY THE ASSESSEE WAS THE SUBJECT MATTER. IN THE PRE SENT CASE, THE GENUINENESS IS NOT THE LONE QUESTION. ON THE OTHER HAND, THE ELIGIBILITY ITSELF IS IN QUESTION. IT IS NOT A CAS E OF INCORRECT CLAIM CONSIDERED BY THE HONBLE SUPREME COURT IN THE ABOV E STATED CASE. IN THAT CASE THE HONBLE APEX COURT HAS HELD THAT MAKING INCORRECT CLAIM DOES NOT AMOUNT TO CONCEALMENT OF P ARTICULARS. HERE IT IS NOT THE CASE OF CONCEALMENT OF PARTICULA RS BY WAY OF MAKING AN INCORRECT CLAIM. THE HONBLE MADRAS HIGH COURT IN - - ITA 728 OF 2011 11 THE CASE OF CIT VS. SRI SARADHA TEXTILE PROCESSORS P. LTD., 286 ITR 499, STILL CONSIDERED ANOTHER DIFFERENT CASE WH ERE THE CLAIM MADE BY THE ASSESSEE WAS ERRONEOUS, WHICH ACCORDING TO THE HONBLE COURT, DID NOT AMOUNT TO CONCEALMENT. 15. IN THE PRESENT CASE, THE ASSESSEE HAS CLAIMED THE EXEMPTION WITHOUT SATISFYING THE STATUTORY CONDITIO NS. THE DISPUTE IS NOT WITH REFERENCE TO THE PARTICULARS OR EVIDENCES. THE DISPUTE IS WITH REFERENCE TO THE ELIGIBILITY ITSELF . IT IS A CASE OF FALSE CLAIM MADE BY THE ASSESSEE. THEREFORE, THE DECISIONS RELIED ON BY THE COMMISSIONER OF INCOME-TAX(APPEALS ) WILL NOT BE APPLICABLE TO THE PRESENT CASE. THE FACT THAT T HE ASSESSEE HAD ALREADY PAID ADVANCE TAX EVEN AGAINST THE SURPL US ARISING OUT OF THE SALE OF SHARES, DOES NOT ABSOLVE THE ASS ESSEE FROM HER OBLIGATION. THIS IS CLEAR FROM THE VERY FACT T HE ASSESSEE HAS MADE AN EQUAL CLAIM FOR REFUND, WHICH WOULD HAVE BE EN ACCEPTED UNDER SECTION 143(1). BUT, THE ENTIRE CAS E CAME TO THE LIGHT ONLY FOR THE REASON THAT THE ASSESSEES CASE WAS SELECTED FOR SCRUTINY ASSESSMENT, WHICH SHOWS THAT THE ASSES SEE WAS TAKING A CHANCE TO EVADE PAYMENT OF TAX BY MAKING A FALSE CLAIM - - ITA 728 OF 2011 12 FOR EXEMPTION WITH A HOPE THAT HER RETURN MIGHT BE PROCESSED UNDER SECTION 143(1). BUT, TO THE MISFORTUNE OF TH E ASSESSEE, THE CASE WAS SELECTED FOR THE SCRUTINY AND THE PANDORA S BOX WAS ENTIRELY OPENED. 16. IN THE ABOVE CIRCUMSTANCES, WE DO NOT AGREE WI TH THE COMMISSIONER OF INCOME-TAX(APPEALS) THAT THE PR ESENT CASE IS A SIMPLE CASE OF CHANGE OF OPINION. 17. THE ASSESSEE HAS FILED COPIES OF THE COMPUTATI ON OF INCOME AND THE OTHER PAPERS FILED BEFORE THE ASSESS ING OFFICER ALONGWITH HER RETURN OF INCOME. WE HAVE GONE THROU GH THE COMPUTATION OF INCOME. THE ASSESSEE HAS GIVEN A NO TE ON INCOME FROM CAPITAL GAINS. WHAT IS STATED IN THE N OTE IS THAT SHE HAS RECEIVED AN AMOUNT OF ` 5,51,29,555/- ON SALE OF SHARES. NOWHERE IT IS MENTIONED THAT THE SHARES DO NOT BELO NG TO LISTED COMPANIES OR THE TRANSACTION DID NOT SUFFER SECURIT IES TRANSACTION TAX. IT IS VERY CLEAR, THEREFORE, THAT THE ASSESSE E HAS NOT FURNISHED THE NECESSARY PARTICULARS. IT IS A CLEAR CASE OF FURNISHING OF INACCURATE PARTICULARS INSOFAR AS THE ASSESSEE HAS - - ITA 728 OF 2011 13 NOT STATED FULL FACTS OF THE CASE. INSTEAD, THE AS SESSEE HAS TRIED TO MISLEAD THE ASSESSING OFFICER BY FURNISHING HALF TRUTH. IN THE RETURN PROPER ALSO THERE IS NO POINTER TOWARDS THE RELEVANT DETAILS OF THE ISSUE. SHE HAS ALSO FILED A CERTIFICATE FRO M HER CHARTERED ACCOUNTANTS FROM WHICH IT IS CLEAR THAT THEIR CLIEN T WAS UNDER THE IMPRESSION THAT THE TRANSACTION RELATING TO CAPITAL GAINS WAS EXEMPT FROM TAX. THERE IS NO MENTION REGARDING THE ROLE OF THE CHARTERED ACCOUNTANT, WHO HAS EVEN ISSUED A CERTIFI CATE IN FAVOUR OF THE ASSESSEE. 18. THE COMMISSIONER OF INCOME-TAX(APPEALS) HAS MENTIONED IN HIS ORDER THAT THE VIEW TAKEN BY THE A SSESSEE WAS UPHELD BY DIFFERENT ORDERS OF THE TRIBUNAL. BUT HE HAS NOT DISCUSSED ANY SUCH ORDER OF THE TRIBUNAL IN HIS ORD ER. IN FACT, HE HAS NOT REFERRED TO ANY CASE LAW WHICH WOULD LEAD U S TO GIVE A FINDING THAT THE VIEW TAKEN BY THE ASSESSEE WAS ALS O A POSSIBLE VIEW. 19. BUT, AT THE COST OF REPETITION, WE MAKE IT CLE AR THAT THIS IS NOT A CASE OF CHANGE OF OPINION AT ALL. TH IS IS A CASE OF - - ITA 728 OF 2011 14 FALSE CLAIM. THE ASSESSEE IS NOT EVEN ENTITLED FOR THE EXEMPTION. THEREFORE, NO QUESTION OF OPINION ARISES. 20. THIS IS A CLEAR CASE OF FURNISHING OF INACCURA TE PARTICULARS AND A CASE OF ATTEMPT OF CONCEALMENT OF INCOME. THE ASSESSEE WAS HOPING THAT HER RETURN WOULD BE PROCES SED UNDER SECTION 143(1) AND HER CLAIM WOULD GO UNNOTICED. I T IS ONLY BECAUSE OF SCRUTINY ASSESSMENT COMPLETED IN THE CAS E THAT THE ENTIRE MATTER WAS BROUGHT OUT. 21. IN THE FACTS AND CIRCUMSTANCES OF THE CASE WE FIND THAT THE ASSESSING AUTHORITY IS JUSTIFIED IN LEVYIN G PENALTY IN THIS CASE UNDER SECTION 271(1)(C) OF THE ACT. THE ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS) IS NOT SUSTAINA BLE IN LAW9. IT IS SET ASIDE. THE PENALTY ORDER IS RESTORED. 22. IN RESULT, THIS APPEAL FILED BY THE REVENUE IS ALLOWED. - - ITA 728 OF 2011 15 ORDER PRONOUNCED ON TUESDAY, THE 21 ST OF AUGUST, 2012 AT CHENNAI. SD/- SD/- (VIKAS AWASTHY) (DR. O.K.NARAYANAN) JUDICIAL MEMBER VICE-PRESIDENT CHENNAI, DATED THE 21 ST AUGUST, 2012. V.A.P. COPY TO: (1) APPELLANT (2) RESPONDENT (3) CIT (4) CIT(A) (5) D.R. (6) G.F.