Ruchi Rathore, Agra V. ITO, Agra

ITA 97/AGR/2007

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 6963 (ITAT-AGRA)
• Duration Of Justice: 3 year(s) 1 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-04-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Next Hearing Date: 15-04-2010
• Assessment Year: 1998-1999
• Appeal Filed On: 28-02-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S R SAHU
• Assessee Lawyers: R C TOMAR I T P
• Keywords: Share purchase agreement; Revised return; Capital Gains
• Section: 271(1)(c); 139(5); 251; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AGRA BENCH, AGRA BEFORE SHRI R.K. GUPTA, JUDICIAL MEMBER AND SHRI P.K. BANSAL, ACCOUNTANT MEMBER ITA NO.97/AGR/2007 ASST. YEAR: 1998-99 KUM. RUCHI RATHORE, VS. INCOME TAX OFFICER, 16/108, LADLI KATRA, WARD 2(2), AGRA. SHAHGANJ, AGRA. (PAN : ABPPR 8909 K) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI R.C. TOMAR, I.T.P. RESPONDENT BY : SHRI S.R. SAHU, JR. D.R. ORDER PER P.K. BANSAL, A.M.: THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT(A) DATED 18.12.2006 IN AN APPEAL AGAINST THE ORDER LEVYING P ENALTY UNDER SECTION 271(1)(C) OF THE INCOME- TAX ACT, 1961 (THE ACT HEREINAFTER). 2. THE ASSESSEE FILED RETURN OF INCOME ON 30.03.19 99 DECLARING TOTAL INCOME OF RS.74,377/-. HE ALSO DECLARED LONG TERM CAPITAL GAIN OF RS.4,96, 122/- ARISING ON TRANSFER OF 7000 EQUITY SHARES OF M/S. ACE STONE CRAFT LTD. THE ASSESSING OFFICER ISSUED NOTICE U/S. 148 ON 29.03.2005. THE ASSESSEE VIDE LETTER DATED 14.06.2004, ADDRESSED TO DDIT (INV.), OFFERED THE TRANSACTION OF SHARE CAPITAL FOR TAXATION AT THE NORMAL RATE WITH THE FO LLOWING INFORMATION:- 2 THAT I HAVE COMPLETE DOCUMENTARY EVIDENCE OF SALE OF SHARES IN THE FORM OF SALE BILL OF THE SHARE BROKERS AND RELEVANT DOCU MENTS AND THE AMOUNT WAS RECEIVED THROUGH ACCOUNT PAYEE DRAFT/CHEQUE. HOWEVER, I AM WORRIED ABOUT MANIPULATIONS, IF ANY, MADE BY THE PARTIES INVOLVED IN THE SHARE TRANSACTION. THEREFORE, WITH OUT PREJUDICE TO MY DEFENCE, I AM AGREED TO DEPOSIT TAX ON THE NET SALE CONSIDERAT ION (SALE-COST) BY TREATING THE SAME AS NORMAL INCOME INSTEAD OF TREATING THE SAME AS INCOME FROM LONG TERM CAPITAL GAIN JUST FOR THE PURPOSE OF CALCULATION AN D TO AVOID HUGE TAX LIABILITIES IN FUTURE. THIS I AM DOING TO PURCHASE PEACE OF MIND AND UNDER PRESSURE FROM THE INCOME TAX DEPARTMENT. HERE IT IS CLARIFIED AND SU BMITTED THAT I AM NOT SURRENDERING THE INCOME EARNED ON SALE OF SHARES AS INCOME FROM OTHER SOURCES AND I HEREBY RESERVE MY RIGHT TO FILE APPEAL TO THE HIGHER AUTHORITIES AGAINST ANY ORDER TO BE PASSED BY INCOME TAX DEPARTMENT BY TREA TING THE SAID INCOME OF CAPITAL. THE ABOVE DECLARATION IS SUBJECT TO NON ISSUANCE OF ANY PENALTY NOTICE OF CONCEALMENT AND NON-LEVY OF ANY PENALTY U/S. 271(1) (C) AND NO IGNITION OF PROSECUTION PROCEEDINGS, IF APPLICABLE, AT ALL. 3. THE ASSESSEE THEREAFTER FILED REVISED RETURN ON 06.01.2006 DECLARING TOTAL INCOME OF RS.5,70,499/-. WHILE FILING THE REVISED RETURN, TH E ASSESSEE DECLARED THE INCOME, BEING SALE PROCEEDS RECEIVED ON SALE OF SHARES, AS INCOME FROM OTHER SOURCES INSTEAD OF CAPITAL GAIN AND PAID THE DIFFERENCE OF THE TAX. 4. THE ASSESSING OFFICER HELD THAT THE REVISED RETU RN WAS FILED WHEN IT BECAME CLEAR THAT THE ASSESSEE COULD NOT APPROVE AND JUSTIFY THE GENUINEN ESS OF LONG TERM CAPITAL GAINS. ACCORDINGLY, THE ENTIRE SALE PROCEEDS WERE TREATED AS INCOME FRO M OTHER SOURCES AND ASSESSED TO TAX ACCORDINGLY. IN THE PENALTY PROCEEDINGS, IT WAS CO NTENDED THAT THE ASSESSEE IS IN POSSESSION OF ALL THE EVIDENCE TO PROVE THAT THE AMOUNT RECEIVED WAS TOWARDS CAPITAL GAIN ON SALE OF SHARES. THERE IS NO DISPUTE ABOUT THE ACQUISITION OF SHARES. THE PURCHASE PRICE IS EVIDENCED BY THE BILL OF THE BROKER. THE SAME IS DULY CERTIFIED AS PER THE STOC K MARKET QUOTATIONS. SHARES WERE DULY REGISTERED IN THE NAME OF THE ASSESSEE AS PER LETTE R BY THE COMPANY TRANSFERRING THE SHARES IN THE 3 NAME OF THE ASSESSEE. THE DISTINCTIVE NUMBERS AND SHARE CERTIFICATES WERE FILED IN THIS REGARD. THE ASSESSEE IS ALSO IN POSSESSION OF VALID SALES N OTES ISSUE BY THE BROKER WHO IS MEMBER OF DELHI STOCK EXCHANGE. SALE PRICE IS ALSO CERTIFIED BY M.P. STOCK EXCHANGE AS PER OFFICIAL QUOTATION DATED 11.05.2001. THE ASSESSEE HAS OFFER ED THE INCOME PRIOR TO DETECTION BY THE ASSESSING OFFICER. THEREFORE, THE REVISED RETURN W AS A VOLUNTARY RETURN AND FILED IN GOOD FAITH. THE ASSESSING OFFICER HELD THAT THE RESULT OF ENQUI RY BY DDI, DELHI REVEALED THAT CERTAIN BROKERS WERE INDULGING IN GIVING BOGUS ENTRIES IN SHARE TRA NSACTIONS. THE BROKERS HAVE DEALT IN OFF- MARKET TRANSACTION. THE TRANSACTION IS NOT REPORTE D TO THE STOCK EXCHANGE. THE BROKERS HAVE NOT REPLIED TO THE NOTICES ISSUED BY THE ASSESSING OFFI CER. THE REVISED RETURN FILED BY THE ASSESSEE IS NOT VOLUNTARY AND, THEREFORE, PENALTY IS LEVIABLE. HE ACCORDINGLY LEVIED PENALTY IN RESPECT OF ADDITIONAL INCOME OFFERED. THE SAME WAS CONFIRMED BY THE LD. CIT(A) AND HENCE, THIS APPEAL. 5. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS BEFORE THE ASSESSING OFFICER MADE IN PENALTY PROCEEDINGS. HE SUBMITTED THAT PRI OR TO REVISED RETURN FILED, THERE WAS NO INFORMATION IN THE POSSESSION OF THE ASSESSING OFFI CER THAT THE TRANSACTION OF SALE OF SHARE IS BOGUS. SINCE THE ASSESSEE WAS NOT INTERESTED IN LI TIGATION, AS HE WAS NOT ABLE TO PRODUCE THE BROKER, THE INCOME WAS OFFERED VOLUNTARILY AND IN G OOD FAITH. THEREFORE, PENALTY U/S. 271(1)(C) IS NOT LEVIABLE. 6. THE LD. D.R., ON THE OTHER HAND, SUBMITTED THAT THE ACTION OF THE ASSESSEE WAS NEVER BONAFIDE. IN THE ORIGINAL RETURN, THE ASSESSEE HAD DECLARED LONG-TERM CAPITAL GAIN, BUT AFTER THE NOTICE U/S.143(2) WAS ISSUED, THE ASSESSEE CAME FOR WARD BY FILING THE REVISED RETURN BETRAYING THE CLAIM OF BENEFIT OF LONG TERM CAPITAL GAIN. THEREF ORE, PENALTY WAS RIGHTLY LEVIED. 4 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FI ND THAT WHEN THE ASSESSEE FILED ORIGINAL RETURN OF INCOME, HE WAS IN POSSESSION OF VALID DOC UMENTS SHOWING THAT THE AMOUNT RECEIVED BY THE ASSESSEE IS ARISING ON TRANSFER OF SHARES AND G IVING RISE TO LONG TERM CAPITAL GAIN. THE SAME WAS DULY OFFERED AS INCOME. THE ASSESSEE FILED REV ISED RETURN AFTER ISSUANCE OF NOTICE U/S.143(2), BUT PRIOR TO CONDUCTING ANY FURTHER ENQUIRY BY THE ASSESSING OFFICER. IT IS NOT THE CASE OF THE ASSESSING OFFICER THAT THE REVISED RETURN WAS FILED AFTER THE ASSESSEE WAS CORNERED AND HE COULD NOT EXPLAIN THE GENUINENESS OF CAPITAL GAINS IN VIE W OF THE EVIDENCE IN POSSESSION OF THE ASSESSING OFFICER. RATHER, THE ASSESSING OFFICER D ID NOT HAVE IN HIS POSSESSION ANY EVIDENCE TO HOLD THAT THE CAPITAL GAIN DECLARED BY THE ASSESSEE WAS BOGUS. UNDER SECTION 139(5) OF THE ACT, THE ASSESSEE CAN FILE A REVISED RETURN IF HE DISCOV ERS ANY OMISSION OR A WRONG STATEMENT THEREIN. PRIOR TO FILING OF REVISED RETURN, THE ASSESSING OF FICER HAD NOT MADE ANY ENQUIRY NOR WAS IN POSSESSION OF ANY INFORMATION THAT THE CLAIM OF ASS ESSEE FOR REALIZING LONG TERM CAPITAL GAIN IS BOGUS. EVEN THE ENQUIRY CONDUCTED BY THE DDI WAS A FTER FILING OF THE REVISED RETURN. THEREFORE, IT CAN BE SAID THAT THE REVISED RETURN WAS FILED VO LUNTARILY AND IN GOOD FAITH. THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. SURESH CHAND M ITTAL, 251 ITR 9 (SC) HELD THAT IN A CASE WHERE THE ASSESSEE ORIGINALLY FILED RETURN SHOWING MEAGER INCOME, BUT AFTER ACTION U/S.132 IN RESPONSE TO NOTICE U/S.148, THE ASSESSEE FILED REVI SED RETURN SHOWING HIGHER INCOME AND THE EVENTUAL ASSESSMENTS WERE BASED ON SUCH RETURN, PEN ALTY U/S.271(1)(C) IS NOT LEVIABLE WHERE THE ADDITIONAL INCOME IS OFFERED TO BUY PEACE OF MIND A ND TO AVOID LITIGATION. HONBLE SUPREME COURT HELD THAT WHERE THE CONCLUSION OF THE TRIBUNA L WAS THAT THE ACT OF SURRENDER WAS VOLUNTARILY DONE BY THE ASSESSEE IN GOOD FAITH, IN SUCH A SITUA TION, PENALTY IS NOT LEVIABLE. SINCE IN THE PRESENT CASE, THE FACTS ARE IDENTICAL, WE HOLD THAT THE PENALTY IS NOT LEVIABLE U/S.271(1)(C) OF THE ACT. 5 ITA NO.97/AGR/2007 ASST. YEAR: 1998-99 8. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS A LLOWED. (ORDER PRONOUNCED IN THE OPEN COURT ON 15.04.2010) . SD/- SD/- (R.K. GUPTA) (P.K. BANSAL) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: AGRA DATE: 15 TH APRIL, 2010. PBN/* COPY OF THE ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT BY ORDER 3. CIT CONCERNED 4. CIT (APPEALS) CONCERNED 5. DR, ITAT, AGRA BENCH, AGRA 6. GUARD FILE ASSIST ANT REGISTRAR INCOME-TAX APPELLATE TRIBUNAL, AGRA TRUE COPY