Varren Financial Services Limited V. Commissioner of Income Tax, Patiala

ITA/94/2012

AI Insights

The case involves Varren Financial Services Limited, the appellant, who appealed against the penalty imposed for claiming excessive losses on the sale of shares. The shares were sold at a price lower than the stock exchange rate to a firm closely connected with the appellant. The Income Tax Commissioner and the Tribunal found this transaction to be a deliberate attempt to claim false losses. The High Court dismissed the appeal, agreeing with the lower authorities that the appellant's actions constituted a false claim of excessive loss, thus justifying the penalty under Section 271(1)(c)(iii) of the Income Tax Act.

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 807991 (HC-CHANDIGARH)
• Appeal Type: Others
• Pronouncement Date: 24-01-2013
• Assessment Year: misc
• Other Referred Cases: Anantharam Veerasinghaiah & Co. Vs. CIT 123 ITR 457 (SC), CIT Vs. Sangrur Vanspati Mills Limited 303 ITR 53
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: SAVITA SAXENA
• Assessee Lawyers: RAVISHANKAR
• Keywords: Concealment of income; Excessive loss; Notional Basis; Penalty; False loss
• Section: 260-A; 271(1)(c)(iii)

Judgement Text

"IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH **** I.T.A. No.94 of 2012 (O&M) Date of Decision:24.01.2013 Varren Financial Services Limited .....Appellant Vs. Commissioner of Income Tax, Patiala .....Respondent CORAM:- HON'BLE MR. JUSTICE HEMANT GUPTA HON'BLE MS. JUSTICE RITU BAHRI Present:- Mr. Ravi Shankar, Advocate for the appellant. Ms. Savita Saxena, Advocate for the respondent. HEMANT GUPTA, J.(Oral) The present appeal under Section 260-A of the Income Tax Act, 1961 arises out of an order passed by the Income Tax Appellate Tribunal, Chandigarh Bench `B', Chandigarh (for short “the Tribunal”) on 31.10.2011, whereby an appeal of the assessee imposing penalty under Section 271(1) (C)(iii) was dismissed. The assessee has raised the following substantial questions of law:- “A. Whether in the facts and circumstances of the case, the Tribunal was justified in upholding the penalty without appreciating the fact that addition had been made on notional basis by presuming the sale as per rate quoted on the date of sale ignoring the actual sale consideration received by the assessee and paid by the purchaser, which presumption may be valid for making addition but not for penalty ignoring the well settled law that penalty proceedings are different from quantum and quantum addition cannot be the basis of imposing penalty as held by the Hon'ble SC in Anantharam Veerasinghaiah & Co. Vs. CIT 123 ITR 457 (SC)? B. Whether the impugned order passed by ITAT upholding order I.T.A. No.94 of 2012 (O&M) -2- of AO and CIT(A) confirming penalty, under the facts and circumstances of the case, is perverse being based on no evidence and influenced with extraneous considerations?” We have heard learned counsel for the parties and find no merit in the present appeal. The appellant has transferred majority of his shares to a firm, which is closely connected with the appellant at a lower rate vis-a- vis rate prevalent in the stock exchange on the relevant date. The Commissioner of Income Tax has held that the loss emanating from such deliberately chosen transaction of sale of shares is a false loss. The finding recorded by the Commissioner of Income Tax stands affirmed by the Tribunal. The learned Tribunal recorded the following findings:- “The assessee filed false and spurious explanation by stating that the sale of bulk shares is attributable to the lower rate and consequent loss. Such explanation of the assessee appears not only to be specious but also an example of falsity. The assessee intentionally choose to sell such shares at lower rate to the connected concern, with a purpose to claim false excessive loss. The conduct of the assessee is discernible clearly from the irrefutable facts of the said transaction. It is not a mere case of innocent and bonafide claim of loss made by the assessee. It is also not a case of mere disallowance of loss by the AO. It is a case of false claim of excessive loss made by the assessee, though supported specious and spurious contentions. In view of the false claim, the present case squarely falls within the purview of Section 271(1)(c)(iii) & Explanation I thereto.” Since the transaction of sale of the shares by the appellant and purchased by the connected firm of the appellant has been made at a price which is lower than the prevalent price at the stock exchange, the finding recorded by the Tribunal that it is a deliberate loss shown by the appellant is a finding of fact. Such finding cannot be said to be suffering from any illegality or raising any question of law. I.T.A. No.94 of 2012 (O&M) -3- Learned counsel for the appellant has referred to a judgment of this Court reported as CIT Vs. Sangrur Vanspati Mills Limited 303 ITR 53 to contend that for levy of penalty, there should be conclusive evidence that the assessee has concealed the particulars of income. We find that in fact the tests specified therein are wholly satisfied in the present case. It is proved that the appellant has concealed the particulars of his income by giving inflated losses. Such finding of fact does not give rise to any substantial question of law. Dismissed. ( HEMANT GUPTA ) JUDGE January 24, 2013 ( RITU BAHRI ) renu/Vimal JUDGE "