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INCOME TAX APPELLATE TRIBUNAL, “ C” BENCH, KOLKATA
ITA No. 1700/Kol/2012 A.Y 2008-09
D.C.I.T (Appellant) vs. Ram Chandra Agarwal (Respondent)
Date of Order: 17-02-2016
ORDER
SHRI M.BALAGANESH, AM
This appeal of the revenue arise out of the order of the Learned CIT(A)-I, Kolkata in Appeal No. 63/CC-VIII/CIT(A)C-I/Kol/11-12 dated 25th September, 2012 for the assessment year 2008-09 against the order of penalty levied by the Learned AO u/s. 271(1)( c) of the Income Tax Act 1961 (hereinafter referred to as the ‘Act’).
2. The only issue to be decided in this appeal of the revenue is as to whether the penalty u/s. 271(1)(c) of the Act could be levied in the facts and circumstances of the case.
3. The brief facts of this issue are that the assessee being individual has filed his original return of income for the assessment year 2008-09 on 24-07-2009, which is belated. The return was selected for scrutiny by issuing notice u/s.143(2) of the Act on 31- 08-2010. The assessee had sold 7,48,000 equity shares of M/s. Vishal Retail Ltd in offmarket and made a profit of Rs.8,30,00,000/-. The assessee was under the bonafide belief that since the shares of listed company i.e. M/s. Vishal Retail Ltd were traded on off market, no capital gains is to be returned thereon.U/s. 10(38) of the Act, any income from the transfer of a long term capital asset (LTC Asset) being an equity share in a company is exempt from taxation. The condition for exemption is that STT in respect of the transaction ought to have been charged. Since the shares were sold by the assessee offmarket i.e. not through Stock Exchange no STT was paid. During the course of assessment proceedings, the assessee filed a revised computation of his total income by including long term capital gains on sale of said shares of M/s. Vishal Retail Ltd on off market as the STT(Securities Transaction Tax) was not suffered on said transaction. The ld.AO felt that this offer of long term capital gain was not voluntarily made by the assessee and it was made only when the assessee was confronted by the ld.AO during the course of assessment proceedings. Hence in the opinion of the ld.AO, it was detected by the department warranting initiation of penalty proceedings. The assessee tried to explain that offer in the revised computation was voluntarily made by the assessee before any detection by the department. However, the ld.AO proceeded to levy of penalty u/s. 271(1)( c) amounting to Rs.94,03,900/-. On 1st appeal, the ld.CIT(A) appreciating the contentions of the assessee and by relying on various decisions deleted the levy of impugned penalty. Aggrieved, the revenue is in appeal before us on the following ground:-
“That on the facts and circumstances of the case and in law, ld. CIT(A) erred in deleting the penalty of rs.94,03,900/- under section 271(1)( c) of the income Tax Act, 1961.”
4. The ld.DR reiterated the findings of the ld.AO in imposing the impugned penalty. He further argued that the ld. AO could only go step by step and initially details of purchase and sale of shares and mutual funds were called for by the ld.AO in the course of assessment proceedings for explanation. He argued that when the case got selected for scrutiny, the assessee disclosed long term capital gain in his revised computation of income. The ld.DR further argued that the assessee was in complete knowledge that STT (Securities Transaction Tax ) was not suffered on such sale of share transaction as it was done on off market. Thus, the assessee ought to have disclosed the same in his original return of income. He also argued that the assessee has merely filed revised computation of his total income and did not bother to file revised return of income. Thus, the ld.AO was justified in imposing the penalty. The ld.DR in support of his arguments has relied on the following case laws:-
* 61 Taxmann.com 363 (Chandigarh Tribunal)
*64 Taxmann.com 91 (Calcutta High Court)
4.1 In response to this, the ld.AR argued that since the original return of income was filed belatedly, the assessee could not file any revised return of income and instead of it assessee filed a revised computation of total income before completion of assessment proceedings, wherein long term capital gain on sale of shares was duly reflected. The ld. AR argued that the taxes for the same were also paid by the assessee. The assessee was under bonafide belief that since the shares traded were of listed company, the STT was not suffered due to off market share sale transaction, thereby capital gains, if any, could be eligible for exemption u/s. 10(38) of the Act. The ld.AR of the assessee has also filed the copy of order-sheets that were recorded in the course of assessment proceedings. He drew our attention to the proceedings dated 29-10-2010, wherein the ld.AR was merely asked for submission of details of purchase and sale of shares and mutual funds among others. In response to the same, the assessee filed a revised computation on 8-11-2010, wherein long-term capital gain was offered to tax on sale of shares of M/s. Vishal Retail Ltd and consequently, exemption claimed thereon was withdrawn by the assessee. This is very evident from the fact that offer of disclosure of long term capital gain was made voluntarily by the assessee before detection by the department. More so, the belief of the assessee is bonafide in view of listed company’s shares traded by the assessee which cannot be doubted. In support of his arguments, the ld.AR of the assessee has placed his reliance on various judgments.
5. We have heard the rival submissions and perused the material available on record including the paper book and the case laws as relied upon by both the parties on the impugned issue before us. We find from the order sheet entry of the assessment proceedings that the ld.AO had merely called for submission of details of purchase and sale of shares and mutual funds on 29-10-2010. The assessee while collecting the details for the same, understood a mistake committed by him in the original return of income by not offering the long term capital gains on sale of shares of M/s. Vishal Retail Ltd (a listed company) and STT was not suffered in view of off market share sale transaction carried out by the assessee. We also find that the assessee was under bonafide belief that since subject mentioned share was a listed company, resultant capital gain thereon could be exempted from tax. However, immediately on noticing the mistake committed by him, the assessee came forward to file a revised computation by disclosing the long-term capital gains on such sale of shares of M/s. Vishal Retail Ltd before the ld.AO together with the reasons for not disclosing the same in the original return of income. We also find that the assessee was duly prevented from filing the revised return of income for the same. The original return filed by him was belated, which prevented the assessee from filing of revised return. We also find from the order sheet entry that the assessee was not confronted with the issue of wrong claim of exemption towards long term capital gains on sale of shares of M/s. Vishal Retail Ltd as pointed out by the ld.AO in his penalty order vide page 2. The plea of the assessee that the claim for exemption u/s. 10(38) of the Act was a bonafide mistake made by the assessee has to be accepted. There is no material on record to show that the claim was not made under bonafide mistake. We find that the case laws as relied on by the ld. DR were in respect of search and survey cases and addition was made pursuant to materials found during the survey and search and after detection by the department in the course of search and survey. Hence, the case laws as relied on by the ld. DR before us are not applicable and squarely distinguishable to the facts and circumstances of the present case. We find that the case before us is a regular assessment and the assessee has duly disclosed the claim of exemption u/s. 10(38) of the Act in the original return of income. Hence, it can be safely concluded that the assessee has disclosed the transaction of shares completely before the Income-tax department in the return of income. We find that following case laws support the facts of the assessee:-
5.1.1. Hon’ble High Court of Punjab and Haryana in the case of CIT vs. Shahabad Coop. Sugar Mills Ltd (2010) 322 ITR 73 (P&H), wherein it has been held that:
“From the order of the Tribunal, we do not find any such point having been raised by the Revenue. In any case, reasoning which has been applied for setting aside penalty in respect of wrong claim under section 80P of the Act will also apply to wrong claim under the head of depreciation. Making of wrong claim is not at par with concealment or giving of inaccurate information, which may call for levy of penalty under section 271(1)(c) of the Act.”
5.1.2. Hon’ble High Court of Punjab and Haryana in the case of CIT vs. Sidhartha Enterprises (2010) 322 ITR 80 (P&H), wherein it has been held that:
“We are unable to accept the submission. The judgment of the Hon’ble Supreme Court in Dharmendra Textiles Processors’case (supra) cannot be read as laying down that in every case where particulars of income are inaccurate, penalty must follow. What has been laid down is that qualitative difference between criminal liability under section 276C and penalty under section 271(1)( c) had to be kept in mind and approach adopted to the trial of a criminal case need not be adopted while considering the levy of penalty. Even so, concept of penalty has not undergone change by virtue of the said judgment. Penalty is imposed only when there is some element of deliberate default and not a mere mistake. This being the position, the finding having been recorded on facts that the furnishing of inaccurate particulars was simply a mistake and not a deliberate attempt to evade tax, the view taken by the Tribunal cannot be held to be perverse.
5.1.3. In the case of CIT vs. Brahmaputra Consortium Ltd, the Hon’ble High Court at New Delhi [ ITA no. 1582 of 2010] has held that :
“13. The Assessing Officer was not correct in holding that submitting inaccurate claim would amount to giving inaccurate particulars. Such a contention of the Department is specifically rejected by the Supreme Court in a recent judgment in the case of CIT Vs. Reliance Petroproducts Pvt. Ltd (2010) 322 ITR 158.
5.1.4. In the landmark judgment of the Hon’ble Apex Court in the case of Hindustan Steel vs. State of Orissa 83 ITR 26, wherein it was held that-
“An order imposing penalty for failure to carry out a statutory obligation is the result of a quasi-criminal proceedings, and penalty will not ordinarily be imposed unless the party obliged either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation. Penalty will not also be imposed merely because it is lawful to do so. Whether penalty should be imposed for failure to perform a statutory obligation is matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances. Even if a minimum penalty is prescribed, the authority competent to impose the penalty will be justified in refusing to impose penalty, when there is a technical or venial breach of the provisions of the Act, or where the breach flows from a bona fide belief that the offender is not liable to act in the manner prescribed by the statute. “
5.1.5. In the decision of the Hon’ble Supreme Court in the case of Price Waterhouse Coopers P.Ltd vs. CIT reported in (2012) 25 taxmann.com 400/211 Taxman 40/348 ITR 306, wherein it has been held that:-
“17. Having heard learned counsel for the parties, we are of the view that the facts of the case are rather peculiar and somewhat unique. The assessee is undoubtedly a reputed firm and has great expertise available with it. Notwithstanding this, it is possible that even the assessee could make a "silly" mistake and, indeed this has been acknowledged both by the Tribunal as well as by the High Court.
18. The fact that the Tax Audit Report was filed along with the return and that it unequivocally stated that the provision for payment was not allowable under section 40A(7) of the Act indicates that the assessee made a computation error in its return of income. Apart from the fact that the assessee did not notice the error, it was not even noticed even by the Assessing Officer who framed the assessment order. In that sense, even the Assessing Officer seems to have made a mistake in overlooking the contents of the Tax Audit Report.
19. The contents of the Tax Audit Report suggest that there is no question of the assessee concealing its income. There is also no question of the assessee furnishing any inaccurate particulars. It appears to us that all that has happened in the present case is that through a bona fide and inadvertent error, the assessee while submitting its return, failed to add the provision for gratuity to its total income. This can only be described as a human error which we are all prone to make. The calibre and expertise of the assessee has little or nothing to do with the inadvertent error. That the assessee should have been careful cannot be doubted, but the absence of due care, in a case such as the present does not mean that the assessed is guilty of either furnishing inaccurate particulars or attempting to conceal its income.
20. We are of the opinion, given the peculiar facts of this case, that the imposition of penalty on the assessee is not justified. We are satisfied that 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.?
5.1.6 We place reliance on the Third Member decision of the co-ordinate bench of Delhi Tribunal in the case of Addl CIT vs Prem Chand Garg reported in (2009) 31 SOT 97 (Delhi) (TM ) dated 11.5.2009, wherein it was held that :-
19. The fact , whether there is concealment of income or whether inaccurate particulars thereof have been furnished is essentially a question of fact. To find out that or to decide which, all the attending circumstances have to be taken into account. The question is at what point of time this material fact is to be found out. Generally it is with reference to the return of income and at that time it is to be seen whether there was concealment of income from or furnishing of inaccurate particulars thereof in the return of income chargeable to tax. But there may be cases, where an income is not declared in the return or the particulars of income shown inaccurately in the return but assessee on realization of mistake, omission or misdeed rectifies that and correct himself and cleans his breast, can he still be accused of concealment though in the return there has been the omission? By the time the Assessing Officer takes up the issue and comes across the information in his possession, if the assessee makes up the deficiency and offers the income or furnishes accurate particulars he, in our opinion, cannot be held guilty of concealment of income or furnishing of inaccurate particulars of his income. Any action rectified relates back to original act and to the date and time of filing the return. When the Assessing Officer starts scrutiny of the return and initiate assessment proceedings there is nothing concealed and the inaccuracy, if any, disappeared. Therefore the assessee cannot be held guilty of concealment.
20. A perusal of the provision of Section 271(1)(c ) read with Explanation 1 clearly show that it is in the course of any proceedings under the Act, assessment proceedings in this case, that the Assessing Officer is to be satisfied that the assessee has concealed the particulars of his income or furnished inaccurate particulars of such income . It is thus to be judged at this stage and if at this stage he has declared the correct income and / or furnished accurate particulars of his income then there is no scope, in our opinion, to arrive at the satisfaction by the Assessing Officer because at that stage there is no such concealment. It disappeared by an action of the Assessing Officer. In this case the assessee has no doubt did not show the amounts received as alleged gifts as his income,but no details of loans are given in the return nor any other particulars thereof given by the assessee at that stage, not to speak of inaccurate one. When the assessment was taken up and a general enquiry was made by the Assessing Officer requiring him to furnish details of any loans / gifts, if any, the assessee offered the amounts received as alleged gifts as his income and before it could be detection by the Assessing Officer. There was thus no concealment of the particulars of his income nor there remained furnishing of any inaccurate particulars of his income. It vanished before it could be detected.
21. The correct and accurate disclosure may be by filing the revised return or by furnishing the particulars of such income before the detection by the Assessing Officer. The mere fact that the assessee had not revised the returns or that the offer was by letter to avoid harassment to the assessee and the donors who were non-resident persons, it cannot convert an offer to tax as concealment of income. Therefore, in my opinion the assessee has not furnished inaccurate particulars of the income in the returns.
22. Therefore, mere omission of the surrendered income from the return of an item of receipt does neither amount to concealment nor furnishing of inaccurate particulars of income unless and until there is some evidence to show exist or some circumstances found from which it can be gathered that the omission was attributable to an intention or a desire on the part of the assessee to hide or conceal the income so as to avoid the imposition of tax thereon. Apart from the surrender there was nothing more on record to hold the assessee guilty of offering the said amount on detection of the concealment. Even in assessment order there is nothing of that sort. In the assessment proceedings the Assessing Officer has raised some specific question not based upon information in the possession of the revenue. These are :
“Sr.No. 4 – Bank statement of all bank accounts maintained by you individually or Jointly with any other person during the financial year along with narration of each debit / credit entry.
Sr.No. 9 – Cash flow statement for the financial year under consideration.
Sr.No.10-Had you taken / given any loan / gift during the financial year under consideration ? If yes, please furnish details.”
23. On a perusal of the questionnaire, it is evident is general in nature without specifying the names of the donor or any other such details on the basis which it could be presumed that the Assessing Officer had information to call for specific information. The query “Had you taken / given any loan / gift during the financial year under consideration ?” itself suggests that the revenue was not sure enough whether any gift was there.
Mere asking of a question or simply raising of an enquiry without anything further does not tantamount to detection of concealment. There was neither any detection, nor any information in the possession of the revenue, nor the manner of its communication to the assessee which might lead to a detection of concealment.
24. There was no specific provocation or an apprehension of detection prevailing at the time when the offer was made and in the absence of any such imminent fear from the side of the revenue, if the assessee came forward and paid the tax thereon by adding the same in the returned income, it has to be taken as a voluntary offer to tax. On the face of the evidence in the shape of confirmation letters, bank accounts, passport etc., in the hands of the assessee, it might be valid gift that would have convinced a reasonably minded person, specially a person exercising a judicial function. The accepted position of law is that merely because an assessee had agreed to the assessment that cannot bring in automatic levy of penalty.
25. The facts and circumstances and the merits of the case and the cogent evidences placed on record are such as to exonerate the assessee from concealment penalty. The CIT(A) in my opinion is right in deleting the penalty, his order is affirmed and the appeals of the revenue are dismissed.
5.1.7. We find that this Delhi Tribunal decision (i.e Prem Chand Garg case) has been considered and approved by the Jurisdictional High Court in the case of CIT vs Ramesh Chand Goyal in G.A.No. 2347 of 2010 in ITAT No. 181 of 2010 dated 11.8.2010 while adjudicating the impugned issue.
We have heard Mr.Sinha extensively and gone through the impugned judgement and order of the Learned Tribunal. The Learned Tribunal has recorded the fact that the record does not show that the Assessing Officer had detected the additional income in the assessment proceedings. It further recorded upon perusal of the records that small variation in income was due to bona fide mistakes and difficulties in working out the undisclosed income. It is further recorded that the voluntary action on the part of the assessee to settle the tax issues for peace of mind appears from the conduct of the assessee. While recording the aforesaid fact, the Learned Tribunal ultimately relied on a decision of the Tribunal rendered in the case of Additional CIT vs Prem Chand Garg. Mr. Sinha, however, is unable to say whether the earlier decision of the Tribunal in the case of Prem Chand Garg has been challenged or not. Moreover, the learned Tribunal has also relied on a large number of decisions of the various court on the same point. Hence when the point is covered, we do not find any merit in this appeal for admission. Accordingly, the same is dismissed.
5.2 We find that the assessee was under bonafide belief that on off market share transaction of trading in listed company share, no capital gains would arise. We hold that this bonafide belief cannot be doubted in the facts of the case. We also hold that the assessee had duly come forward to rectify the mistake in not mentioning the long term capital on sale of listed company’s shares on off market in his original return of income, and on noticing the same the assessee immediately filed revised computation of income during assessment proceedings and as entered in the order sheets by the ld.AO. Thus, the assessee offered the same voluntarily before detection by the department. We also find that the version of the ld.AO in his penalty order that assessee was confronted with the specific issue on taxability of long term capital gain on sale of shares of M/s. Vishal Retail Ltd is factually incorrect. It is relevant to reproduce herein below the Explanation 1 to section 271(1) of the Act.
Explanation 1 to section 271(1)(c):
“Where in respect of any facts material to the computation of the total income of any person under this Act-
(A)such person fails to offer an explanation or offers an explanation which is found by the assessing Officer or the Commissioner (Appeals) or the Commissioner to be false, or
(B) Such person offers an explanation which he is not able to substantiate and fails to prove that such explanation is bona fide and that all the facts relating to the same and material to the computation of his total income have been disclosed by him,
then the amount added or disallowed in computing the total income of such person as a result thereof shall, for the purposes of clause ( c) of this sub-section, be deemed to represent the income in respect of which particulars have been concealed. “
In the instant case, the assessee had furnished the explanation to the assessee by filing a revised computation of income offering long term capital gains voluntarily. We also find that the assessee had also given explanation for not offering the same in the original return of income due to his bonafide belief as stated supra. His bonafide explanation has not been found to be false by the ld. AO. From the above, it could be safely concluded that as per Explanation 1 to section 271(1)(c) of the Act, no penalty could be imposed on the assessee in the facts of the case.
In view of the aforesaid facts and respectfully following the various judicial precedents mentioned herein above, we have no hesitation in upholding the impugned order of the ld. CIT(A) in cancelling the penalty levied u/s. 271(1)(c) of the Act. The ground raised by the revenue is dismissed.
6. In the result, the appeal of the revenue is dismissed as stated above.
THIS ORDER IS PRONOUNCED IN OPEN COURT ON 17 -02- 2016
( N.V. Vasudevan, Judicial Member ) (M. Balaganesh, Accountant Member)
No Penalty u/s 271(1)(c) when assessee was under bonafide belief that listed company share sold off market are exempt from income tax | 17-02-2016 |
