Shri A,K,Modi, Baroda v. The Income tax Officer,Ward-2(2),, Baroda

ITA 1569/AHD/2011 | 2004-2005
Pronouncement Date: 23-09-2011 | Result: Allowed

Appeal Details

RSA Number 156920514 RSA 2011
Assessee PAN ACFPM7336N
Bench Ahmedabad
Appeal Number ITA 1569/AHD/2011
Duration Of Justice 3 month(s) 19 day(s)
Appellant Shri A,K,Modi, Baroda
Respondent The Income tax Officer,Ward-2(2),, Baroda
Appeal Type Income Tax Appeal
Pronouncement Date 23-09-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted D
Tribunal Order Date 23-09-2011
Assessment Year 2004-2005
Appeal Filed On 03-06-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH AHMEDABAD (BEFORE S/SHRI BHAVNESH SAINI JM AND A. MOHAN ALAN KAMONY AM) ITA NO.1569/AHD/2011 A. Y.: 2004-05 SHRI A. K. MODI 76 VISHWAS COLONY PARISHRAM APARTMENTS ALKAPURI BARODA VS THE INCOME TAX OFFICER WARD 2 (2) BARODA PA NO. ACFPM 7336 N (APPELLANT) (RESPONDENT) APPELLANT BY SHRI M. K. PATEL AR RESPONDENT BY SHRI Y. C. SURTI DR DATE OF HEARING: 16-09-2011 DATE OF PRONOUNCEMENT: 23-09-2011 O R D E R PER BHAVNESH SAINI: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LEARNED CIT(A)-II BARODA DATED 23-02-2011 FOR ASSESSMENT YEAR 2004-05 CHALLENGIN G THE LEVY OF PENALTY OF PENALTY U/S 271 B OF THE IT ACT. 2. THE BRIEF FACTS OF THE CASE ARE THAT RETURN OF I NCOME WAS FILED ON 29-10-2004 DECLARING TOTAL INCOME OF RS.2 15 820/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS IT WAS NOTED BY T HE AO THAT THE ASSESSEE IS ENGAGED IN SHARE TRADING ON VERY REGULA R BASIS AND TURNOVER HAS EXCEEDED RS.1 CRORES AND STILL THE ASS ESSEE WAS SHOWING INCOME FROM SHARE TRANSACTIONS AS SHORT TER M CAPITAL GAIN. LOOKING INTO THE VOLUME OF FREQUENCY OF SHARE TRANS ACTIONS RELYING ON ITA NO.1569/AHD/2011 SHRI A. K. MODI VS ITO WARD 2 (2) BARODA 2 THE CBDT CIRCULAR NO.1827 IT WAS HELD BY THE AO TH AT THE ASSESSEE WAS ENGAGED IN SHARE TRADING BUSINESS AND SINCE THE TOTAL TURNOVER WAS TO THE TUNE OF RS.1.63 CRORES THEREFORE THE A SSESSEE WAS OBLIGED TO GET HIS ACCOUNTS AUDITED U/S 44AB OF THE IT ACT AND SINCE THERE WAS DEFAULT IN THIS REGARD PROCEEDINGS U/S 27 1 B OF THE IT ACT WERE INITIATED. SUBSEQUENTLY AFTER CONSIDERING THE ASSESSEES REPLY VIDE SEPARATE ORDER ASSESSING OFFICER LEVIED THE PE NALTY OF RS.81 900/- BEING 0.5% OF THE TURNOVER AGAINST THE ASSESSEE. PE NALTY ORDER WAS CHALLENGED BEFORE THE LEARNED CIT(A) AND IT WAS SUB MITTED THAT THE ASSESSEE WAS UNDER BONA FIDE BELIEF THAT HIS INCOME WAS NOT A TRADING INCOME THEREFORE PENALTY SHOULD NOT BE LEVIED. THE LEARNE D CIT(A) HOWEVER DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE AND N OTED THAT THE FREQUENCY OF TRADING IN SHARE SHOWS THAT THE ASSESS EE WAS TRADING IN SHARES THEREFORE PENALTY WAS RIGHTLY IMPOSED. THE APPEAL OF THE ASSESSEE WAS ACCORDINGLY DISMISSED. 3. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND S UBMITTED THAT THE ASSESSEE IS A COMPANY SECRETARY BY PROFESSION A ND WAS MAKING INVESTMENTS IN SHARES ON WHICH INCOME WAS CORRECTLY SHOWN AS INCOME FROM CAPITAL GAINS. HE HAS SUBMITTED THAT IN PAST YEARS ALSO ASSESSEE HAS SHOWN INVESTMENTS IN SHARES AND NO STO CK IN TRADE HAS BEEN KEPT. HE HAS THEREFORE SUBMITTED THAT THE AS SESSEE IS INVESTOR AND THE AO HAS WRONGLY TREATED THE INVESTMENT AS TR ADING IN SHARES. HE HAS SUBMITTED THAT IT IS THE DEFAULT ON THE PART OF THE ASSESSEE BECAUSE THE ASSESSEE WAS ON BONA FIDE BELIEF THAT O N MAKING INVESTMENT IN SHARES THE ACCOUNTS ARE NOT REQUIRED TO BE AUDITED. ITA NO.1569/AHD/2011 SHRI A. K. MODI VS ITO WARD 2 (2) BARODA 3 THEREFORE PENALTY MAY NOT BE IMPOSED. HE HAS SUBMI TTED THAT THE ASSESSEE MAY NOT COMMIT SAME DEFAULT IN FUTURE. ON THE OTHER HAND THE LEARNED DR RELIED UPON THE ORDERS OF THE AUTHOR ITIES BELOW. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE FINDINGS OF THE AUTHORITIES BELOW. SECTION 273B OF THE IT ACT PROVIDES THAT NO PENALTY SHALL BE IMPOSSIBLE ON THE PERSON O R THE ASSESSEE AS THE CASE MAY BE FOR FAILURE TO REFER TO IN THE ABOV E PROVISIONS (271-B) IF HE PROVES THAT THERE WAS REASONABLE CAUSE FOR TH E SAID FAILURE. REASONABLE CAUSE MEANS WHICH IS BEYOND THE CONTROL OF THE ASSESSEE AND WOULD MEAN WHICH PREVENTS A REASONABLE MAN OF ORDINARY PRUDENCE ACTING UNDER NORMAL CIRCUMSTANCES WITHOUT NEGLIGENCE OR INACTION OR WANT OF BONA FIDE. THE AS SESSEE IS A PROFESSIONAL AND HAS EXPLAINED THAT HE HAS MADE INV ESTMENTS IN SHARES AND IS NOT KEEPING ANY STOCK IN TRADE. INCOM E WAS THEREFORE SHOWN ON ACCOUNT OF CAPITAL GAIN. HOWEVER EXPLANAT ION OF THE ASSESSEE WAS NOT FOUND RELIABLE AND INCOME WAS ASSE SSED ON ACCOUNT OF TRADING IN SHARES. THE LEARNED COUNSEL F OR THE ASSESSEE MADE A STATEMENT AT THE BAR THAT THIS WAS THE FIRST DEFAULT ON THE PART OF THE ASSESSEE BECAUSE OF THE ABOVE BONA FIDE BELI EF OF THE ASSESSEE THE ACCOUNTS WERE NOT AUDITED AS THE ASSES SEE HAS SHOWN INVESTMENT IN SHARES. THE EXPLANATION OF THE ASSESS EE THUS IS ACCEPTABLE. THE EXPLANATION OF THE ASSESSEE APPEARS TO BE BONA FIDE AND WOULD ALSO SHOW THAT THE ASSESSEE HAS A REASONA BLE CAUSE FOR FAILURE TO GET THE ACCOUNTS AUDITED IN SUCH CIRCUMS TANCES WHEN THE ASSESSEE CLAIMED HIMSELF AS INVESTOR IN SHARES. THE LEARNED COUNSEL FOR THE ASSESSEE ALSO ASSURED THAT THE ASSESSEE WOU LD NOT COMMIT ITA NO.1569/AHD/2011 SHRI A. K. MODI VS ITO WARD 2 (2) BARODA 4 ANY DEFAULT IN FUTURE IN THIS REGARD. CONSIDERING T HE FACTS AND CIRCUMSTANCES OF THE CASE WE ARE OF THE VIEW THAT THE ASSESSEES CASE FALL UNDER EXCEPTION TO THE RULE THEREFORE P ENALTY SHOULD NOT BE LEVIED IN SUCH CIRCUMSTANCES. IT IS SETTLED LAW PEN ALTY NEED NOT TO BE IMPOSED IN EACH AND EVERY CASE NECESSARILY BECAUSE IT WOULD DEPEND UPON THE FACTS AND CIRCUMSTANCES OF EACH CAS E. THE EXPLANATIONS OF THE ASSESSEE NOTED ABOVE CLEARLY PR OVE THAT DEFAULT IS BONA FIDE. WE ACCORDINGLY SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND CANCEL THE PENALTY. 5. IN THE RESULT THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (A. MOHAN ALANKAMONY) ACCOUNTANT MEMBER (BHAVNESH SAINI) JUDICIAL MEMBER LAKSHMIKANT/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR ITAT AHMEDABAD 6. GUARD FILE BY ORDER D Y. REGISTRAR ITAT AHMEDABAD