ACIT CIR 18(1), MUMBAI V. AMIT BAJAJ, MUMBAI

ITA 7707/MUM/2010

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8223 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-08-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 10-11-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANU KRISHNA
• Assessee Lawyers: N H DUTIA
• Keywords: Bonafide mistake

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI . . , . . , . . BEFORE SHRI P.M.JAGTAP, AM & SHRI AMIT SHUKLA, JM ./ ITA NO.7707/MUM/2010 ( / ASSESSMENT YEAR :2006-2007) THE ACIT, 18(1), MUMBAI VS. SHRI AMIT BAJAJ, 13/14, ADARSH NAGAR, WORLI, MUMBAI-400 025. ./ ./PAN NO.AAHPB 0 258 J ( /APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : MS. ANU KRISHNA / RESPONDENT BY : MR. N.H.DUTIA / DATE OF HEARING : 31 ST JULY, 2012 / DATE OF PRONOUNCEMENT : 3 RD AUGUST, 2012 / O R D E R PER AMIT SHUKLA (J.M.) : THIS APPEAL HAS BEEN FILED BY THE DEPARTMENT AGAINST THE ORDER DATED 18-8-2010, PASSED BY THE CIT(A)- 29, MUMBAI IN RELATION TO THE PROCEEDING UNDER SECTION 271(1)(C) ON THE FOLLOWING GROUNDS OF APPEAL :- 1. THE ORDER OF THE CIT(A) IS OPPOSED TO LAW AND FACTS OF THE CASE. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN ACCEPTING THE EXPLANATION OF THE ASSESSEE AS REGARDS TO LOWER TAX RATE OF 10% FOR CAPITAL GAIN AS AGAINST HIGHER TAX RATE OF 20% AS BONAFIDE AND ITA NO : 7707/M/10 2 CONSEQUENTLY ERRED IN DELETI NG THE PENALTY LEVIED U/S 271(1)(C) OF THE I.T.ACT 1961 OF ` .12,19,488/-. 2 . BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HAS DECLARED LONG TERM CAPITAL GAINS OF ` .1,28,258,902/- OUT OF WHICH LONG TERM CAPITAL GAIN, OF ` .3,75,902/- PERTAINED TO LISTED SHARES. THE ENTIRE LTCG WAS CLAIMED AS EXEMPT UNDER SECTION 10(38) INCLUDING THE CAPITAL GAIN OF ` .1,24,50,000/- PERTAINING TO SALE OF UNLISTED SHARES. THE ASSESSEE HAD ACCORDINGLY OFFERED TAX AT THE RATE OF 10% WITHOUT TAKING THE BENEFIT OF INDEXATION. DURING T HE COURSE OF THE ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS REQUIR ED BY THE ASSESSING OFFICER AS TO WHY THE LONG TERM CAPITAL GAIN SHOU LD NOT BE TAXED AT THE RATE OF 20% INSTEAD OF 10% AS MOST OF T HE SHARES WERE UNLISTED. THE ASSESSEE THEREAFTER REVISED THE COM PUTATION OF LONG TERM CAPITAL GAIN AT ` .1,22,65,695/- AFTER TAKING THE BENEFIT OF INDEXATION AND ADMITTED THAT DUE TO THE BONAFIDE MISTAKE, THE TAX WAS PAID AT THE RATE OF 10% INSTEAD OF 20%. THE RELEVANT EXPLANATION BEFORE THE ASSESSING OFFICER AT THE TIME OF ASSESSMENT PROCEEDINGS WERE AS UNDER :- THE ASSESSEE HAS EARNED A LONG TERM CAPITAL GAIN OF ` .1,24,50,000/- ON SALE OF SHARES OF A PRIVATE LTD. CO. THE ASSESSEE HAD DISCLOSED THIS INCOME UNDER THE HEAD OF INCOME FROM LONG TERM CAPITAL GAIN IN THE RETURN OF INCOME FILED. THE ASSESSEE WAS UNDER THE IMPRESSION THAT IF COST OF INFLATION IS NOT TAKEN INTO CONSIDERATION THE RA TE OF TAX PAYABLE IS 10% AS AGAINST 20% IF THE COST OF INFLATION IS TAKEN INTO CONSIDERATION, AND ACCORDING THE ASSESSEE HAS CALCULATED INCOME TAX AND PAID THE SAME BEFORE FILING OF RETURN OF INCOME. AS THE RATES OF INCOME ITA NO : 7707/M/10 3 TAX ON LONG TERM CAPITAL AGAINST ARE CHANGE FREQUENTLY. IT WAS A CASE OF BONA FIDE MISTAKE RAT HER THAN A DELIBERATE MISTAKE ON THE PART OF THE ASSESSEE. 2.1 ACCORDINGLY, THE REVISED COMPUT ATION OF INCOME WAS ACCEPTED BY THE ASSESSING OFFICER. HOWEVE R, IN THE PENALTY PROCEEDINGS, THE ASSESSING OFFICER OBSERVED THAT T HE ASSESSEE WAS IN CLEAR KNOWLEDGE OF DIFFERENT TAX TREATMENT OF LISTED AS WELL AS UNLISTED SHARES FOR THE PURPOSE OF SECTION 112, AND THEREFOR E ASSESSEE IS LIABLE FOR PENALTY UNDER SECTION 271(1)(C) AND IMPOSED THE PENALTY OF ` .12,08,139/-. HE ALSO IMPOSED PENALTY ON THE DISALLOWANCE OF SHORT TERM CAPITAL LOSS OF ` .1,13,486/- ON THE SALE OF SHARES OF TORRENT PHARMA LTD. AS THE ASSESSEE HAS SOLD THESE SHARES WITH IN A MONTH, WHEREIN THE COMPANY HAS ISSUED BONUS SHARES ON THESE SHARES, AND THER EFORE, THE LOSS OF ` .1,13,486/- HAS TO BE ADJUSTED UNDER SECTION 94(8). ACCORDINGLY, PENALTY WAS LEVIED ON THIS WR ONG CLAIM OF LOSS. 3. IN THE FIRST APPEAL, LEARNED CIT(A) DELETED THE PENALTY ON THE GROUND THAT THERE IS NEITHER A CONCEAL MENT OF INCOME NOR FURNISHING OF ANY INACCURATE PARTICULARS AS THE ASSESSEE HAS DISCLOSED ALL THE PARTICULARS OF INCOME. THE ONLY DISPUT E RELATES TO LEVY OF TAX AT THE RATE OF 20%, WHICH CANNOT BE THE REASON FOR LEVYING PENALTY UNDER SECTION 271(1)(C). THE RELEVANT OBSERVATION OF THE CIT(A) ARE REPRODUCED HEREUNDER :- ITA NO : 7707/M/10 4 6. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE, ARGUMENTS OF THE ASSESSING OFFICER AND THE WRITTEN SUBMISSIONS OF THE AUTHORISED REPRESENTATIVE OF THE APPELLANT. THE APPELLANT HAS FURNISHED ALL PARTICULARS OF TRANSACTION IN SHARES WHICH HAS RESULTED IN LONG TERM CAPITAL GAIN. IT HAS CATEGORICALLY DISCLOSED IN THE COMPUTATION OF INCOME THAT LONG TERM CAPITAL GAIN AMOUNTING TO ` .1,24,50,000/- IS ON SALE OF UNLISTED SHARES. THERE IS NEITHER CONCEALMENT NOR FURNISHING OF INACCURATE PARTICULARS. ONLY THING THAT APPELLANT HAS CLAIMED IN THE COMPUTATION IS THAT TAX PAYABLE ON THE LONG TERM CAPITAL GAIN OF UN LISTED SHARES AT 10%. EVEN AT THE TAX PAYABLE PART IT HAS B EEN CLEARLY MENTIONED THAT 10 IS CALCULATED ON THE GAINS RELATING TO UNLISTED SHARES. THE MISTAKE OF THE APPELLANT IS ONLY CALCULATION OF TAX. THE MISTAKE IN CALCULATION OF TAX WOULD NOT ATTRACT PENALTY U/S. 271(1)(C). THE APPELLANT HAS STATED THAT HE WAS UNDER THE IMPRESSION THAT IF THE COST INFLATION INDEX IS NOT TAKEN INTO CONSIDERATION THE TAX RATE APPLICABLE WOULD BE 10%. I FIND THAT THERE IS NO CONCEALMENT OF INCOME OR GAIN AND NOR EVEN FILING OF INACCURATE PARTICULARS. IN THE CASE OF RELIANCE PETROPRODUCTS PVT. LTD.(2010) 322 ITR 158 (SC) THE APEX COURT HAS HELD THAT MAKING AN INCORRECT CLAIM WOULD NOT AMOUNT TO FURNISHING OF INACCURATE PARTICULARS AND INACCURATE CLAIM HAS TO BE ON T HE BASIS OF INCOME DISCLOSED IN THE RETURN OF INCOME. IN THIS CASE THE INCOME DISCLOSED HAS NOT BEEN CHANGED. MERE MAKING A CLAIM WHICH IS NOT SUSTAINABLE IN LAW WILL NOT AMOUNT TO FURNISHING OF INACCURATE PARTICULARS OF INCOME. THE APEX COURT HAS CONSIDERED THE DECISION OF DILIP N SHROFF 291 ITR 519 (SC) AND THE DHARMENDRA TEXTILE PROCESSORS 306 ITR 277 (SC) BEFORE DECIDING THE ISSUE. 4 . LEARNED SENIOR DR SUBMITTED THAT THE ASSESSEE WAS FULLY AWARE OF THE PROVISIONS OF SECTION 112, WH ICH CLEARLY PROVIDES THAT RATE OF 10% SHALL BE ALLOWED ON THE LONG TERM CAPITAL GAIN IN RESPECT OF LISTED ITA NO : 7707/M/10 5 SHARES ONLY. THE ACTION OF THE ASSE SSEE IS IN VIOLATION OF STATUTORY PROVISIONS, HENCE, SAME AMOUNTS TO FURNISHING OF INACCURATE PARTICULARS OF INCOME. SHE SUBMITTED THAT DETAILS IN RETURN OF INCOME HAS NO RELEVANCE AS THE CLAIM OF 10% ITSELF WAS FALSE. THEREFORE, PENALTY HAS RIGHTLY BEEN LEVIED BY THE A SSESSING OFFICER. FURTHER, WITH REGARD TO DISALLOWANCE OF LOSS OF S HORT TERM CAPITAL GAIN SHE SUBMITTED THAT, IT WAS AGAIN IN VIOLATION OF SECTION 94(8), WHICH IS A VERY SPECIFIC PROVISION. 4.1 ON THE OTHER HAND, LEARNED COUNS EL FOR THE ASSESSEE SUBMITTED THAT THERE IS NO CONCEALMENT OF INCOME AS THE ASSESSEE HAS DULY SHOWN THE LONG TERM CAPITAL GAIN IN THE RETURN OF INCOME AND HAS ALSO PAID THE TAXES. HOWEVER, IT WAS PURELY DUE TO BONAFIDE MISTAKE THAT RATE OF TAX AT 10% WAS PAID ON UNLI STED SHARES. THUS, IT CANNOT BE A CASE OF CONCEALMENT OF INCOME. SIMILARLY, HE SUBMITTED THAT CLAIM OF SHORT TERM CAPITAL LOSS WAS ALSO MADE DUE TO BONAFIDE MISTAKE. THE EXPLANATION BEFORE THE CIT(A) ON THIS SCORE (I.E. CLAIM OF SHORT TERM CAPITAL LOSS) WAS UNDER :- THE LEARNED DEPUTY COMMISSIONER OF INCOME TAX HAS DISALLOWED THE SHORT TERM CAPITAL LOSS ON SALE OF SHARES OF TORRENT PHARMA LTD. U/S.94(8) OF THE I.T.ACT, 1961. THE APPELLANT HAS PURCHASED 400 SHARES OF TORRENT PHARMA LTD. ON 07-02- 2006 @ ` .492.20 PER SHARE AND SOLD THE SAME ON 07-03-2006 WHEREBY INCURRED A SHORT TERM CAPITAL LOSS OF ` .1,13,486/-. THIS LOSS WAS SHOWN BY THE APPELLANT IN COMPUTATION OF INCOME. THE SAID COMPANY HAS ISSUED 200 BONUS SHARES ON 20-02-2006. THE ITA NO : 7707/M/10 6 SAME WERE SHOWN IN THE STATEM ENT OF INVESTM ENT AND VALUED AT NIL VALUE. THE PROVISION OF SEC.55(2)(AA)(IIA) OF THE INCOME TAX ACT, 1961 CLEARLY STATE THAT THE B ONUS SHARES ARE TO BE VALUED AT NIL PRICE FOR THE PURPOSE OF INVESTMENT. THE POLICY OF THE APPELLANT IS TO VALUE THE INVESTMENT ON FIFO BASIS. ACCORDINGLY THE APPELLANT HAS VALUED THE SHARES AT NIL VALUE AND SHOWN THE SHORT TERM CAPITAL LOSS ON THE SA LE OF ORIGINAL SHARES WHILE COMPUTING THE INCOME. THERE WAS NO INTENTION ON THE PART OF THE APPELLANT TO HIRE OR SHOW INACCURATE PARTICULARS OF INCOME. 5. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS AND ALSO PERUSED THE MATERIAL ON RECORD. FROM THE FACTS, IT IS FAIRLY BORNE OUT THAT THE ASSESSEE HAS FURNISHED ALL THE PARTICULARS OF TRANSACTION IN SHARES INCLUDING THAT OF LISTED AND UN LISTED SHARES, WHICH WERE SUBJECT MATTER OF LONG TERM CAPITAL GAINS. T HUS, PRIMA FACIE, THERE IS NEITHER CONCEALMENT OF INCOME NOR FURNISHING OF ANY INACCURATE PARTICULARS OF INCOME. THE ONLY ISSUE IS WITH REGARD TO PAYMENT OF TAX AS PER SECTION 112. SUCH A MISTAKE OF CA LCULATION ON FACTS CANNOT AMOUNT TO FURNISHING OF INACCURATE PARTICULARS OR INCORRECT CLAIM. SIMILARLY, IN THE CASE OF DISALLOWANCE OF SHORT TERM CAPITAL LOSS, THE ENTIRE PARTICULARS AND DETAILS HAVE BEEN FURNISHED IN THE RETURN OF INCOME. THE ASSESSEE HAS ACTUALLY INCURRED THE SHORT TERM CAPITAL LOSS SINCE THE COMPANY HAD ISSUED 200 BONUS SHARES ON 20-02-2006. THE SAME WAS SHOWN IN THE STATEMENT OF INVESTMENT VALUED AT NIL VALUE AS PER THE PROVISION OF SECTION 55(2)(AA)(IIA). SINCE IN VIEW OF THE PROVISIONS OF SECTION 94(8), WHICH PROVIDES THAT IN CASE OF BONUS SHARES, THE LOSS, IF ANY ARISING, ON ITA NO : 7707/M/10 7 ACCOUNT OF SUCH PURCHASE OF SALE S OF BONUS SHARES, SHALL BE IGNORED. HERE IN THIS CASE THE CLAIM OF LOSS WAS WHOLLY DUE TO THE BONAFIDE MISTAKE, WHICH IS EVIDENT FROM THE EXPLANATION GIVEN BY THE ASSESSEE. MERE MAKING OF ANY INCORRECT CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, WILL NOT AMOUNT TO FURNISHING OF INACCU RATE PARTICULARS OF INCOME. THIS VIEW HAS NOW BEEN UPHELD BY THE HONBLE SUPREME COURT IN THE CASE OF M/S RELIANCE PETRO PRODUCTS PV T. LTD., REPORTED IN (2010) 322 ITR 158 (SC) , WHEREIN THEIR LORDSHIPS HAVE OBSERVED AND HELD AS UNDER :- A GLANCE AT THE PROVISIONS OF SE CTION 271(1)(C) OF THE INCOME-TAX ACT, 1961, SUGGESTS THAT IN ORDER TO BE COVERED BY IT, THERE HAS TO BE CONCEALMENT OF THE PARTICULARS OF THE INCOME OF THE ASSESSEE. SECONDLY, THE ASSESSEE MUST HAVE FURNISHED INACCURATE PARTICULARS OF HIS INCOME. THE M EANING OF THE WORD PARTICULARS USED IN SECTION 271(1)(C) WOULD EM BRACE THE DETAILS OF THE CLAIM MADE. WHERE NO INFORMATION GIVEN IN THE RETURN IS FOUND TO BE INCORRECT OR INACCURATE, THE ASSESSEE CANNOT BE HELD GUILTY OF FURNISHING INACCURATE PARTICULARS. IN ORDER TO EXPOSE THE ASSESSEE TO PENALTY, UNLESS THE CASE IS STRICTLY COVERED BY THE PROVISION, THE PENALTY PROVISION CANNOT BE INVOKED. BY NO STRETCH OF IMAGINATION CAN MAKING AN INCORRECT CLAIM TANTAMOUNT TO FURNISHING INACCURATE PARTICULARS. THERE CAN BE NO DISPUTE THAT EVERYTHING WOULD DEPEND UPON THE RE TURN FILED BY THE ASSESSEE, BECAUSE THAT IS THE ONLY DOCUMENT WHERE THE ASSESSEE CAN FURNISH THE PARTICULARS OF HIS IN COME. WHEN SUCH PARTICULARS ARE FOUND TO BE INACCURATE, THE LIABILITY WOULD ARISE. TO ATTRACT PENALTY, THE DETAILS SUPPLIED IN THE RETURN MUST NOT BE ACCURATE, NO EXACT OR CORRECT, NOT ACCORDING TO THE TRUTH OR ERRONEOUS. ITA NO : 7707/M/10 8 WHERE THERE IS NO FINDING THAT ANY DETAILS SUPPLIED BY THE ASSESSEE IN ITS RETURN ARE FOUND TO BE INCORRECT OR ERRONEOUS OR FALSE THERE IS NO QUESTION OF IN VITING THE PENALTY UNDER SECTION 271(1)(C). A MERE MAKING OF A CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REGARDING THE INCOME OF THE ASSE SSEE. SUCH A CLAIM MADE IN THE RETURN CANNOT AMOUNT TO FURNISHING INACCURATE PARTICULARS. 6 . IN VIEW OF THE AFORESAID DECISION OF THE HONBLE APEX COURT AND THE FACTS OF THE CASE, WE DO NOT FI ND ANY REASON TO DEVIATE FROM THE FINDING GIVEN BY THE CIT(A) AND ACCO RDINGLY THE PENALTY DELETED BY THE CIT(A) IS AFFIRMED AND THE GROUNDS RAISED BY THE DEPARTMENT IS DISMISSED. 7 . IN THE RESULT, THE APPEAL OF THE DEPARTMENT IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 3 RD AUGUST, 2012 . 3 RD AUGUST, 2012 SD/- SD/- ( . . ) ( ) ( P.M.JAGTAP) ( AMIT SHUKLA) /ACCOUNTANT MEMBER /JUDICIAL MEMBER MUMBAI; DATED 3 RD / AUGUST/2012 . . / PKM. . ./PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A)- ITA NO : 7707/M/10 9 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI