Jagdish Uddav Kulkarni, Nashik V. Income-tax Officer, Nashik

ITA 798/PUN/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 0964 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 4 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-09-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 23-05-2019
• Assessment Year: 2011-2012
• Appeal Filed On: 04-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: C H NANIVADEKAR
• Keywords: Bonafide belief; Capital Gains
• Section: 148; 271(1)(c); 143(3); 143(1)

Judgement Text

] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM . / ITA NO.798/PUN/2017 / ASSESSMENT YEAR : 2011-12 JAGADISH UDDAV KULKARNI, ANUGRAH, T. A. KULKARNI COLONY, SADH WASWANI ROAD, NASHIK. PAN : ABRPK1388H. . / APPELLANT. V/S THE INCOME TAX OFFICER, WARD 1(4), NASHIK. . / RESPONDENT ASSESSEE BY : SHRI C.H. NANIVADEKAR REVENUE BY : SHRI PANKAJ GARG. / ORDER PER ANIL CHATURVEDI, AM : 1. THIS APPEAL FILED BY THE ASSESSEE IS EMANATING OUT OF THE ORDER OF COMMISSIONER OF INCOME TAX (A) 1, NASHIK DATED 16.01.2017 FOR THE ASSESSMENT YEAR 2011-12. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON R ECORD ARE AS UNDER :- ASSESSEE IS AN INDIVIDUAL HAVING INCOME FROM PROFIT FROM PARTNERSHIP FIRMS, INCOME FROM BUSINESS AND OTHER SOURCES . ASSESSEE FILED HIS RETURN OF INCOME FOR A.Y. 2011-12 ON 18.10.2011 DEC LARING TOTAL INCOME OF RS.21,65,565/-. THE CASE WAS INITIALLY PROCESSED U /S 143(1) OF / DATE OF HEARING : 15.07.2019 / DATE OF PRONOUNCEMENT: 03.09.2019 2 THE ACT AND THEREAFTER, THE CASE WAS RE-OPENED AFTER ISSUING NOT ICE U/S 148 OF THE ACT WHICH WAS ALSO SERVED ON THE ASSESSEE. THER EAFTER, THE CASE WAS TAKEN UP FOR SCRUTINY AND SUBSEQUENTLY ASSESSMENT WAS FRAMED U/S 143(3) R.W.S. 147 OF THE ACT VIDE ORDER DT.11.09.2015 AND THE TOTAL INCOME WAS DETERMINED AT RS.30,05,925/- INTER-ALIA BY MAKING ADDITIO N OF RS.8,24,455/- ON ACCOUNT OF LONG TERM CAPITAL GAINS. ON THE AFORESAID ADDITION OF LONG TERM CAPITAL GAINS, AO VIDE PENALTY ORDER D ATED 08.03.2016 PASSED U/S 271(1)(C) OF THE ACT LEVIED PENALTY OF RS.1,05,942/- FOR CONCEALING THE INCOME. AGGRIEVED BY THE ORDER OF AO, A SSESSEE CARRIED THE MATTER BEFORE LD.CIT(A), WHO VIDE ORDER DATED 16.01.201 7 (IN APPEAL NO.NSK/CIT(A)-1/714/2015-16) UPHELD THE PENALTY LEVIED B Y THE AO AND DISMISSED THE APPEAL OF THE ASSESSEE. AGGRIEVED BY THE O RDER OF LD.CIT(A), ASSESSEE IS NOW IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWING GROUN DS : 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) ERRED ON FACTS AND IN LAW IN CONFIRMING PENALTY U/S 271(1)(C) FOR ALLEGED CONCEALMENT OF INCOME IN RESPECT OF LONG TERM CAPITAL GAINS AMOUNTING TO RS. 8,24,455/-. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED ON FACTS AND IN LAW IN CONFIRMING PENALTY U/S 271(1)(C) FOR ALLEGED CONCEALMENT OF INCOME IN RESPECT OF DIVIDENDS SHOWN AS EXEMPT AMOUNTING TORS .5,060/-. 3. BOTH THE GROUNDS BEING INTER-CONNECTED ARE CONSIDERED TOG ETHER. 4. IN THE ORIGINAL RETURN OF INCOME ASSESSEE HAD CLAIMED E XEMPTION OF RS.8,24,455/- U/S 10(38) OF THE ACT ON TRANSFER OF SHARES. IT WAS NOTICED BY THE AO THAT THE SHARES WERE SOLD IN OPEN OFFER AND A SSESSEE HAD NOT PAID ANY SECURITY TRANSACTION TAX AND THEREFORE THE CAPITAL GAIN E ARNED ON TRANSFER OF SUCH SHARES WAS NOT EXEMPT FROM TAX. TO B RING THE AFORESAID LONG TERM CAPITAL GAINS TO TAX, THE CASE WAS RE-OPENED U /S 148 OF THE ACT. IN THE RETURN OF INCOME FILED PURSUANT TO NOTICE U/S 148 OF THE ACT, ASSESSEE HAD OFFERED AFORESAID LONG TERM CAPITAL GAINS TO T AX AND HAD ALSO PAID THE TAX. AO WAS OF THE VIEW THAT ONLY DUE TO THE ISSUANCE OF NOTICE 3 U/S 148 OF THE ACT, ASSESSEE HAD REVISED THE RETURN OF INCOME AND OFFERED THE LONG TERM CAPITAL GAINS TO TAX. HE WAS OF THE VIEW TH AT HAD THE CASE NOT BEEN RE-OPENED, THE AMOUNT OF LONG TERM CAPITAL GAIN S WOULD HAVE ESCAPED ASSESSMENT AND THUS THERE WAS CONCEALMENT OF INCOME. ON THE AMOUNT OF CAPITAL GAINS BROUGHT TO TAX, HE LEVIED PENALTY O F RS.1,05,942/- U/S 271(1)(C) OF THE ACT. AGGRIEVED BY THE PENALTY ORDER O F AO, ASSESSEE CARRIED THE MATTER BEFORE LD.CIT(A) WHO DISMISSED THE APP EAL OF THE ASSESSEE. AGGRIEVED BY THE ORDER OF LD.CIT(A), ASSESSEE IS NOW IN APPEAL BEFORE US. 5. BEFORE US, LD.A.R. REITERATED THE SUBMISSIONS MADE BEFOR E AO AND LD.CIT(A) AND FURTHER SUBMITTED THAT ASSESSEE WAS UNDER BONAFIDE BELIEF THAT THE PROFITS ON SALE OF SHARES WERE EXEMPT FROM TAX. SUBSEQUENTLY, WHEN IT CAME TO HIS KNOWLEDGE THAT AS ASSESSEE HAD N OT PAID SECURITY TRANSACTION TAX, THE AMOUNT OF CAPITAL GAIN TAX WAS NOT EXEMPT, HE PAID THE TAX. HE SUBMITTED THAT NON-OFFERING OF CAPITAL GAINS INIT IALLY WAS NOT WITH ANY MALAFIDE INTENTION AND WAS DUE TO THE BONAFIDE BELIE F THAT THE CAPITAL GAINS WAS EXEMPT FROM TAX. LATER ON, COMING TO KN OW THE CORRECT POSITION OF LAW, ASSESSEE OFFERED THE CAPITAL GAINS AND ALSO PAID THE TAXES. HE THEREFORE SUBMITTED THAT THE CASE OF ASSESSEE CAN NOT BE CONSIDERED TO BE ONE FOR WHICH PENALTY U/S 271(1)(C) OF THE ACT BE LEVIED. IN SUPPORT OF HIS CONTENTION, HE ALSO PLACED RELIANCE ON THE DECISION IN TH E CASE OF NSE IT LTD., VS. DCIT REPORTED IN (2018) 193 TTJ 813 (MUMBAI). HE ALSO PLACED ON RECORD THE COPY OF THE AFORESAID DECISION. HE THEREFORE SUBMITTED THAT THE PENALTY LEVIED U/S 271(1)(C) OF THE ACT B E DELETED. LD.DR ON THE OTHER HAND, SUPPORTED THE ORDERS OF AO AND LD.CIT(A). 4 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT GROUND IS WITH RESPECT TO LEVY OF PENALTY U/S 271(1)(C) OF THE ACT. 7. THE NECESSARY INGREDIENTS FOR ATTRACTING EXPLANATION-1 TO SECTION 271(1)(C) ARE THAT: (I) THE PERSON FAILS TO OFFER THE EXPLANATION , OR (II) HE OFFERS THE EXPLANATION WHICH IS FOUND BY THE AO OR THE LD .CIT(A) OR THE LD.CIT TO BE FALSE, OR (III) THE PERSON OFFERS EXPLANATION WHICH H E IS NOT ABLE TO SUBSTANTIATE AND FAILS TO PROVE THAT SUCH EXPLANATION IS BONA FIDE AND THAT ALL THE FACTS RELATING TO THE SAME HAVE BEEN DISCLO SED BY HIM. IF THE CASE OF ANY ASSESSEE FALLS IN ANY OF THESE THREE CATEGORIE S, THEN ACCORDING TO THE DEEMING PROVISION PROVIDED IN EXPLANATION-1 TO SEC TION 271(1)(C) THE AMOUNT ADDED OR DISALLOWED IN COMPUTING THE TOTAL INCOME S HALL BE CONSIDERED AS THE INCOME IN RESPECT OF WHICH PARTICULARS H AVE BEEN CONCEALED, FOR THE PURPOSES OF CLAUSE (C) OF SECTION 271(1), AND THE PENALTY FOLLOWS. ON THE OTHER HAND, IF THE ASSESSEE IS ABLE TO OFFER A N EXPLANATION, WHICH IS NOT FOUND BY THE AUTHORITIES TO BE FALSE, AND ASS ESSEE HAS BEEN ABLE TO PROVE THAT SUCH EXPLANATION IS BONA FIDE AND THAT ALL THE FACTS RELATING TO THE SAME HAVE BEEN DISCLOSED BY HIM, THEN IN T HAT CASE PENALTY SHALL NOT BE IMPOSED. 8. A CASE FOR LEVY OF PENALTY FOR CONCEALMENT OF INCOME HAS TO BE EVALUATED IN TERMS OF PROVISIONS OF EXPLANATION 1 TO SECTION 271(1)(C), AS PER WHICH IF IN RELATION TO ANY ADDITION IN THE ASSESSMENT, T HE ASSESSEE OFFERS NO EXPLANATION OR OFFERS EXPLANATION WHICH IS FOUND TO BE FALSE OR IS NOT ABLE TO SUBSTITUTE THE EXPLANATION AND IS ALSO NOT ABLE TO PROVE THAT THE EXPLANATION IS BONAFIDE, THE ADDITION MADE WOULD AMOUNT TO CONCEALMENT OF PARTICULARS, OF INCOME. IT IS WELL SETTLED THAT THE PARAMET ERS OF JUDGING THE JUSTIFICATION FOR ADDITION MADE IN THE ASSESSMENT CASE OF THE ASSESSEE 5 IS DIFFERENT FROM THE PENALTY IMPOSED ON ACCOUNT OF CONCEALM ENT OF INCOME OR FILING INACCURATE PARTICULARS OF INCOME AND THAT CERTAIN DISALLOWANCE/ADDITION COULD LEGALLY BE MADE IN THE ASSESSMEN T PROCEEDINGS ON THE PREPONDERANCE OF PROBABILITIES BUT NO PENALTY COULD BE IMPOSED U/S. 271(1)(C) OF THE ACT ON THE PREPONDERANCE OF P ROBABILITIES AND REVENUE HAS TO PROVE THAT THE CLAIM OF EXPENSES B Y THE ASSESSEE WAS NOT GENUINE OR WAS INFLATED TO REDUCE ITS TAX LIABILITY. BEFOR E US, LD.A.R. HAS GIVEN THE REASONS FOR NOT OFFERING THE CAPITAL GAINS TO TAX INITIALLY BUT WAS OFFERED SUBSEQUENTLY IN THE RETURN OF INCOME FILED IN RE SPONSE TO NOTICE U/S 148 OF THE ACT. THE SUBMISSIONS HAVE NOT BE EN CONTROVERTED BY THE REVENUE NOR HAVE THEY BEEN FOUND TO BE UNTRUE. F URTHER, THERE IS NOTHING ON RECORD TO DEMONSTRATE THAT ASSESSEE HAD C ONCEALED THE PARTICULARS OF INCOME. CONSIDERING THE TOTALITY OF THE AFORESA ID FACTS AND ALSO RELYING ON THE DECISION OF BOMBAY ITAT IN THE CASE OF NSE IT LTD., VS. DCIT (SUPRA), WE ARE OF THE VIEW THAT IN THE PRESENT CASE NO CASE FOR LEVY OF PENALTY U/S. 271(1)(C) OF THE ACT HAS BEEN MADE OUT. WE TH US DIRECT THE DELETION OF PENALTY U/S. 271(1)(C) OF THE ACT. THUS, THE GROUNDS OF ASSESSEE ARE ALLOWED. 9. IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON 3 RD DAY OF SEPTEMBER, 2019. SD/- SD/- ( SUSHMA CHOWLA ) ( ANIL CHATURVEDI ) ! / JUDICIAL MEMBER '! / ACCOUNTANT MEMBER PUNE; DATED : 3 RD SEPTEMBER, 2019. YAMINI 6 #$%&'('% / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. 4. 5 6. CIT(A)-1, NASHIK. PR. CIT-1, NASHIK. '#$ %%&',) &', / DR, ITAT, B PUNE; $*+,/ GUARD FILE. / BY ORDER // TRUE COPY // -./%0&1 / SR. PRIVATE SECRETARY ) &', / ITAT, PUNE.