GORDHAN DAS GILARA, Jaipur V. ACIT, Jaipur

ITA 894/JPR/2013

• Counselvise Citation: 89423114 RSA 2013
• Duration Of Justice: 2 year(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2005-2006
• Appeal Filed On: 25-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJ MEHRA JCIT LD DR DHK
• Keywords: Unexplained investment; Opportunity of being heard
• Section: 131; 27

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES (SMC), JAIPUR JH VKJ-IH-RKSYKUH] U;KF;D LNL; DS LE{K BEFORE: SHRI R.P. TOLANI, JUDICIAL MEMBER VK;DJ VIHY LA-@ ITA NO. 894/JP/2013 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2005-06 SHRI GORDHAN DAS GILARA 379, HANUMAN JI KA RASTA, JOHRI BAZAR,JAIPUR CUKE VS. THE ACIT LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: ACIPG 1770B VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI VIJAY GOYAL, CA JKTLO DH VKSJ LS@ REVENUE BY :SHRI RAJ MEHRA, JCIT-. LD. DR LQUOKBZ DH RKJH[K@ DATE OF HEARING : 24/11/2015 ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 30 /11/2015 VKNS'K@ ORDER PER R.P. TOLANI, JM THIS IS ASSESSEES APPEAL CHALLENGING IMPOSITION OF PENALTY OF RS. 1,85,500/- U/S 271(1)(C) ARISING OUT OF THE ORDER O F LD. CIT(A) I JAIPUR, DATED 09-10-2013 FOR AY 2005-06. 2.1 BRIEF FACTS ARE THAT ASSESSEE IS AN INDIVIDUAL DERIVING THE INCOME FROM BUSINESS AND PROFESSION AND OTHER SOURCES. THE ASSESSEE FILED RETURN ON 31.03.2006 DECLARING TOTAL INCOME OF RS. 6,79,84 0/- AND THE ITA NO. 984//JP/2013 SHRI GORDHAN DAS GILARA VS. ACIT, CIRCLE- 1, JAIPUR . 2 ASSESSMENT WAS FRAMED BY LD. AT TOTAL INCOME OF RS. 11,98,700/- BY DISALLOWING CLAIM OF CAPITAL LOSS IN SHARES AMOUNTI NG TO RS. 5,00,867/-. LD. AO INITIATED THE PENALTY PROCEEDINGS U/S 271(1) (C), ASSESSEE CLAIMED TO HAVE FILED DETAILED EXPLANATION ALONG WITH DEBIT NOTE ISSUED TO IT BY BROKER M/S MAHASAGAR SECURITIES PVT. LTD., MUMBAI. A REQUEST WAS MADE TO LD. AO TO ISSUE SUMMONS U/S 131 TO THIS PARTY WH ICH WAS NEVER DONE. ASSESSEE FILED A COPY OF THE LEGAL NOTICE SENT TO T HIS BROKER BY HIS ADVOCATE AGITATING THE ALLEGED TRANSACTION OF SHARE S. LD. AO HOWEVER DID NOT APPRECIATE THESE SUBMISSIONS AND SUMMARILY IMPO SED THE PENALTY OF RS. 1,85,500/- MERELY BECAUSE THE LOSS WAS OFFERED BY ASSESSEE IN ASSESSMENT AND SUMMARILY OBSERVED AS UNDER: IN COMPLIANCE TO THE NOTICE WRITTEN SUBMISSION W AS FILED VIDE LETTER DATED 16-03-2011 WHICH HAS BEEN PLACED ON RE CORD. ON PERUSAL OF ITS SUBMISSION, IT WAS FOUND THAT THE ASSESSEE HAD BASED ITS REPLY ON THE ADDITION CONFIRMED BY LD CIT(A) UNDER THE HEAD HOUSE PROPERTY AND THE ASSESSEE REMA INED SILENT OVER THE SHAM TRANSACTION OF SHARES WHICH WA S ACCEPTED BY THE ASSESSEE DURING THE ASSESSMENT PROC EEDINGS AND WHICH WAS OFFERED TO TAXATION BY THE ASSESSEE. 2.2 AGGRIEVED FROM THE PENALTY ORDER OF AO, THE ASS ESSEE FILED APPEAL BEFORE LD. CIT(A) WHO BY IMPUGNED ORDER CONFIRMED T HE PENALTY ORDER. ITA NO. 984//JP/2013 SHRI GORDHAN DAS GILARA VS. ACIT, CIRCLE- 1, JAIPUR . 3 2.3 AGGRIEVED FROM THE ORDER OF LD CIT(A), THE ASSE SSEE IS IN SECOND APPEAL BEFORE ITAT. 2.4 LD. COUNSEL FOR THE ASSESSEE ADVERTED TO DETAIL ED SUBMISSIONS FILED DURING PENALTY PROCEEDINGS AND REFERRED TO PAPER B OOK FILED WHICH CONTAINS FOLLOWING EVIDENCE AND DOCUMENTS:- S.NO PARTICULARS PB PG NO. (I) COPY OF NOTICE SENT TO THE BROKER 6A TO 9 (II) COPY OF CONFIRMATION OF ACCOUNT SIGNED BY THE BROKER 10 (III) COPY OF BANK STATEMENT OF BROKER 11 (IV) COPY OF RECEIPT SIGNED BY THE BROKER 12 (V) PRICE VOLUME DATA OF DWARKESH SUGAR INDUSTRIES TRADED IN NSE FOR THE PERIOD 01/04/2004 TO 31/03/2005 13-14 (VI) YEARLY HIGH LOW OF SHARE PRICE DATA OF THE COMPANY DWARKESH SUGAR INDUSTRIES LTD 15 (VII) FINANCIAL RESULT OF THE COMPANY FOR THE YEAR 04-05 PUBLISHED IN BSE. 16 ITA NO. 984//JP/2013 SHRI GORDHAN DAS GILARA VS. ACIT, CIRCLE- 1, JAIPUR . 4 (VIII) REQUEST WAS MADE TO SUMMON THE BROKER WITH HIS BOOKS OF ACCOUNT 4 THUS THE ASSESSEE DURING ASSESSMENT PROCEEDINGS SUB MITTED PROPER REPLY AND FURNISHED EVIDENCE FOR ALLOWING HIS LOSS CLAIM, THE SAME WAS GIVEN UP LOOKING AT THE UNRELENTING APPROACH OF THE LD. A O TO BRING THE ISSUE TO REST. PENALTY PROCEEDINGS ARE DISTINCT AND SEPARATE , THERE ALSO A DETAILED REPLY AND EVIDENCE WAS FILED QUESTIONING THE AOS F INDINGS ON HOLDING TRANSACTION AS SHAM AND PRODUCED SUFFICIENT EVIDENC E IN SUPPORT OF HIS CLAIM THAT THE CLAIM OF LOSS FROM ASSESSEES RECORD WAS BONA FIDE AND FOR BROKERS ALLEGED WRONG, ASSESSEE CANNOT BE PENALIZED WITHOUT APPRECIATING HIS REPLY AND EXAMINING THE BROKER WHICH WAS SPECIF ICALLY REQUESTED. IN FIRST APPEAL PROCEEDINGS ALSO, ASSESSEE SPECIFICALL Y MENTIONED THE FACTS THAT AO HAS FAILED TO EXAMINE THE BROKER DESPITE S PECIFIC REQUEST TO ISSUE SUMMONS U/S 131, HIS SUBMISSIONS AND FACT ABOUT LEG AL NOTICE SERVICE ON THE BROKER HAS NOT BEEN CONSIDERED. WITH THESE INFI RMITIES IN THE PROCEEDINGS, PENALTY U/S 271(1)(C) CANNOT BE IMPOSE D. LD. CIT(A) ALSO DID NOT APPRECIATE THE SAME AND WITHOUT ADVERTING T O EXPLANATION AND MATERIAL FURNISHED BY THE ASSESSEE SUMMARILY CONFIR MED AOS PENALTY ITA NO. 984//JP/2013 SHRI GORDHAN DAS GILARA VS. ACIT, CIRCLE- 1, JAIPUR . 5 ORDER. ASSESSEE HAS FILED DETAILED EXPLANATION SUPP ORTING HIS CONDUCT WITH THE EVIDENCE THAT CLAIM OF SHARE LOSS WAS BONAFIDE HIS RECORD. EVIDENCE THAT THE SHARES OF THE COMPANY IN QUESTION WERE REG ULARLY TRADED IN STOCK EXCHANGE, THE CLAIM WAS BASED ON THE INFORMATION P ROVIDED BY THE BROKER. ASSESSEE, AN AGED PERSON, GAVE UP THE LOSS CLAIM AND FILED REVISED COMPUTATION IN ORDER TO ACHIEVE PEACE AND A VOID LITIGATION. THE ALLEGED SHARE TRANSACTION IS BASED ON BROKERS CONT RACT NOTE, PAYMENT WAS MADE BY ACCOUNT PAYEE CHEQUE WHICH IS ENCASHED BY BROKER AND CREDITED IN ITS ACCOUNT. THUS LD AO IN ORDER TO IMPOSE PENAL TY TOTALLY GLOSSED OVER THE EXPLANATION, RECORD AND JUDICIAL PRECEDENTS CIT ED BY THE ASSESSEE AND AT THE SAME TIME EXCEPT A LETTER ABOUT BROKERS DOUB TFUL BONA FIDES NO MATERIAL IS BROUGHT ON RECORD EITHER TO CONTROVERT THE SUBMISSION OR SHOW THAT THIS MONEY WAS RECEIVED BACK BY THE ASSESSEE. THE PENALTY PROCEEDINGS ARE SEPARATE FROM ASSESSMENT PROCEEDING S AND A MERE FINDING WITHOUT APPRECIATING THE REPLY AND EVIDENCE ON RECO RD DOES NOT LEAD TO AUTOMATIC CONCLUSION THAT THE ASSESSEE HAS CONCEALE D THE INCOME. IT IS SETTLED PROPOSITION OF LAW THAT THE PENALTY U/S. 27 1(1)(C) ARE NOT AUTOMATIC. RELIANCE IS PLACED ON FOLLOWING DECISION S:- ITA NO. 984//JP/2013 SHRI GORDHAN DAS GILARA VS. ACIT, CIRCLE- 1, JAIPUR . 6 (I) PRICE WATERHOUSE COOPERS PVT. LTD. VS. COMMISSIONER OF INCOME TAX SUPREME COURT OF INDIA (2012) 348 ITR 306 (SC) WHEREIN IT HAS BEEN HELD THAT IMPOSITION OF PENALTY WOULD B E UNWARRANTED IN A CASE WHERE THE ASSESSEE HAD COMMITTED AN INADVERTENT AND BONA FIDE ERROR AND HAD NOT INTENDED TO OR ATTEMPTED TO EITHER CONCEAL ITS INCOME OR FURNISH INACCURATE PARTICULARS. (II) COMMISSIONER OF INCOME TAX VS. RELIANCE PETROPRODUCTS (P) LTD. SUPREME COURT OF INDIA (2010) 322 ITR 158 : HONBLE APEX COURT HAS HELD THAT READING THE WORDS 'INACCURATE' AND 'PARTICULARS' IN CONJUNCTION, THEY MUST MEAN THE DETAILS SUPPLIED IN THE RETURN, WHICH ARE NOT ACCURATE, NOT EXACT OR CORRECT, NOT ACCORDING T O TRUTH OR ERRONEOUS. IN THIS CASE, THERE IS NO FINDI NG THAT ANY DETAILS SUPPLIED BY THE ASSESSEE IN ITS RETURN WERE FOUND TO BE INCORRECT OR ERRONEOUS OR FALSE. SUCH N OT BEING THE CASE, THERE WOULD BE NO QUESTION OF INVIT ING THE PENALTY UNDER S. 271(1)(C). A MERE MAKING OF TH E CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. SUCH CLAIM MADE IN THE RETURN CANNOT AMOUNT TO THE INACCURATE PARTICULARS. THE ASSESSEE HAD FURNISHED ALL THE DET AILS OF ITS EXPENDITURE AS WELL AS INCOME IN ITS RETURN, WHICH DETAILS, IN THEMSELVES, WERE NOT FOUND TO BE INACCURATE NOR COULD BE VIEWED AS THE CONCEALMENT O F INCOME ON ITS PART. IT WAS UP TO THE AUTHORITIES TO ACCEPT ITS CLAIM IN THE RETURN OR NOT. MERELY BECAU SE THE ASSESSEE HAD CLAIMED THE EXPENDITURE, WHICH CLA IM WAS NOT ACCEPTED OR WAS NOT ACCEPTABLE TO THE REVENUE, THAT BY ITSELF WOULD NOT ATTRACT THE PENAL TY UNDER S. 271(1)(C). IF THE CONTENTION OF THE REVENU E IS ACCEPTED THEN IN CASE OF EVERY RETURN WHERE THE CLA IM MADE IS NOT ACCEPTED BY AO FOR ANY REASON, THE ITA NO. 984//JP/2013 SHRI GORDHAN DAS GILARA VS. ACIT, CIRCLE- 1, JAIPUR . 7 ASSESSEE WILL INVITE PENALTY UNDER S. 271(1)(C). TH AT IS CLEARLY NOT THE INTENDMENT OF THE LEGISLATURE. (III) COMMISSIONER OF INCOME TAX VS. TIKKA RAM THROUGH L/H SMT. MUNNI DEVI HIGH COURT OF PUNJAB & HARYANA (2008) 8 DTR (P&H) 174 : (2008) 174 TAXMAN 317 HELD THAT PENALTY UNDER S. 271(1)(C)CONCEALMENTVOLUNTARY DISCLOSURE OF UNEXPLAINED INVESTMENTHELD THAT THE DISCLOSURE MADE WAS BONA FIDE AND VOLUNTARY WITH A VIEW TO AVOID LITIGATION AND PENALTY UNDER S. 271(1 )(C) NOT LEVIABLE. (IV) HINDUSTAN STEELS LTD. VS. STATE OF ORISSA, 83 ITR 26 (SC). HONBLE APEX COURT HAS HELD THAT AN ORDER IMPOSING PENALTY FOR FAILURE TO CARRY OUT A STATUTORY OBLIGATION IS THE RESULT OF A QUASI-CRIMI NAL PROCEEDING AND PENALTY WILL NOT ORDINARILY BE IMPOS ED UNLESS THE PARTY OBLIGED, EITHER ACTED DELIBERATELY IN DEF IANCE OF LAW OR WAS GUILTY OF CONDUCT CONTUMACIOUS OR DISHONEST, OR ACTED IN CONSCIOUS DISREGARD OF ITS OBLIGATION. PENALTY W ILL NOT ALSO BE IMPOSED MERELY BECAUSE IT IS LAWFUL TO DO SO. WH ETHER PENALTY SHOULD BE IMPOSED FOR FAILURE TO PERFORM A STATUTORY OBLIGATION IS A MATTER OF DISCRETION OF THE AUTHORI TY TO BE EXERCISED JUDICIALLY AND ON A CONSIDERATION OF ALL THE RELEVANT CIRCUMSTANCES. EVEN IF A MINIMUM PENALTY I S PRESCRIBED, THE AUTHORITY COMPETENT TO IMPOSE THE P ENALTY WILL BE JUSTIFIED IN REFUSING TO IMPOSE PENALTY, WH EN THERE IS A TECHNICAL OR VENIAL BREACH OF THE PROVISIONS OF T HE ACT OR WHERE THE BREACH FLOWS FROM A BONA FIDE BELIEF THAT THE OFFENDER IS NOT LIABLE TO ACT IN THE MANNER PRESCRI BED BY THE STATUTE. (V) DURGA KAMAL RICE MILLS VS. CIT (2004) 265 ITR 2 5 (CAL.). FOR THE PROPOSITION THAT T HERE MUST EXIST INDEPENDENT ITA NO. 984//JP/2013 SHRI GORDHAN DAS GILARA VS. ACIT, CIRCLE- 1, JAIPUR . 8 FINDINGS IN PENALTY PROCEEDINGS TO JUSTIFY IMPOSITI ON OF PENALTY IN VIEW OF THE ABOVE SUBMISSIONS AND MATERIAL AVAIL ABLE ON RECORD LD. COUNSEL FOR ASSESSEE CONTENDS THAT THE IMPUGNED PE NALTY DESERVES TO BE DELETED. 2.5 LD. DR IN REPLY CONTENDS THAT THE EVIDENCE AND LEGAL NOTICE REFERRED TO BY ASSESSEE IS AN AFTERTHOUGHT TO COVER UP THE ALLEGED SHARE TRANSACTION. ORDERS OF AUTHORITIES BELOW ARE RELIED ON. 2.6 LD. COUNSEL FOR THE ASSESSEE IN REJOINDER CONTE NDS THAT IT WAS INCUMBENT FOR THE LOWER AUTHORITIES TO CONSIDER THE EXPLANATION, EVIDENCE, SUMMON THE BROKER AND APPRECIATE THE MATERIAL SO CO LLECTED AND ARRIVE AT A REASONED FINDING AS PROPOSED BY LD. DR. A CONCLUS ION OF TRANSACTION BEING SHAM CANNOT BE ARRIVED AT ON ASSUMPTIONS AND BY GLOSSING OVER THE COPIOUS MATERIAL ON RECORD SUBSTANTIATING ASSESSEE S STAND AND WITHOUT CONTROVERTING THE SAME. 2.7 I HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE COMPANY WHOSE SHARES WERE TRADED WAS A LISTED WITH REGULAR STOCK EXCHANGE TRADING AT THE RELEVANT TIME. ASSESSEE ITA NO. 984//JP/2013 SHRI GORDHAN DAS GILARA VS. ACIT, CIRCLE- 1, JAIPUR . 9 PRODUCED THE CONTRACT NOTE, PAYMENT WAS MADE AND EN CASHED BY BROKER ON BANKING CHANNELS; ASSESSEE SPECIFICALLY REQUESTE D THE AO TO SUMMON THE BROKER U/S 131 TO DISLODGE THE CONTENTS OF LETT ER RECEIVED BY LD. AO FROM STOCK EXCHANGE INTIMATING THAT BROKER WAS NOT REGISTERED. IT IS SETTLED LAW THAT PENALTY PROCEEDINGS ARE NOT AUTOMA TICALLY BASED ON A FINDING OF ASSESSMENT ORDER. IT IS ALSO SETTLED THA T IN PENALTY PROCEEDINGS ASSESSEE IS TO BE ACCORDED ADEQUATE OPPORTUNITY OF BEING HEARD AND HIS EXPLANATION AND EVIDENCE IN PENALTY PROCEEDINGS ARE TO BE INDEPENDENTLY CONSIDERED AND FINDING FOR SUBMISSION OF INACCURATE PARTICULARS OR CONCEALMENT OF INCOME MUST BE ARRIVED AT AFTER THIS EXERCISE. ANY PENALTY IMPOSED BY FOLLOWING A PROCEDURE WHICH IS NOT IN CONFORMITY WITH SETTLED PROPOSITIONS OF LAW IN THIS BEHALF BECOMES UNTENABLE. FROM RECORD IT CLEARLY EMERGES THAT AT EVERY STAGE ASSESSEE FIL ED DETAILED EXPLANATION IN SUPPORT OF HIS CLAIM WITH A REQUEST TO CALL THE BRO KER BY SERVING A STATUTORY SUMMON U/S 131 WHICH WOULD HAVE ENSURED A N EXAMINATION AND CROSS EXAMINATION. IN VIEW OF THE FORE GOINGS IT BE COMES CLEAR THAT AUTHORITIES BELOW FAILED TO CONSIDER THE EXPLANATIO N AND EVIDENCE AND DID NOT SUMMON THE BROKER AND IMPOSED THE PENALTY BY RE LYING ON A FINDING OF ASSESSMENT ORDER AND SE LETTER WHICH WAS NOT FUR THER EXAMINED. THESE ITA NO. 984//JP/2013 SHRI GORDHAN DAS GILARA VS. ACIT, CIRCLE- 1, JAIPUR . 10 INFIRMITIES MAKE THE IMPOSITION OF PENALTY UNTENABL E, THE JUDICIAL PRECEDENTS CITED ABOVE SUPPORT THE CONTENTIONS RAIS ED BY ASSESSEE. CONSIDERING THE ENTIRETY OF FACTS AND CIRCUMSTANCES THE IMPUGNED PENALTY IS DELETED. 3.0 IN THE RESULT ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 /11/ 2015 SD/- VKJ-IH-RKSYKUH (R.P.TOLANI) U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 30 /11/ 2015 *MISHRA VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- SHRI GORDHAN DAS GILARA 2. IZR;FKHZ@ THE RESPONDENT- THE ACIT, CIRCLE- 1, JAIPUR 3. VK;DJ VK;QDRVIHY@ CIT(A). 4. VK;DJ VK;QDR@ CIT, 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO. 894/JP/2013) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR