M/s. Aagam Shares & Commodities Pvt.Ltd., Ahmedabad v. The DCIT.,Circle-1(1)(1), Ahmedabad

ITA 2082/AHD/2018 | 2007-2008
Pronouncement Date: 26-03-2021 | Result: Allowed

Appeal Details

RSA Number 208220514 RSA 2018
Assessee PAN AABCK4493P
Bench Ahmedabad
Appeal Number ITA 2082/AHD/2018
Duration Of Justice 2 year(s) 5 month(s) 18 day(s)
Appellant M/s. Aagam Shares & Commodities Pvt.Ltd., Ahmedabad
Respondent The DCIT.,Circle-1(1)(1), Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 26-03-2021
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted A
Tribunal Order Date 26-03-2021
Last Hearing Date 04-03-2021
First Hearing Date 04-03-2021
Assessment Year 2007-2008
Appeal Filed On 08-10-2018
Judgment Text
A IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH AHMEDABAD ( CONVENED THROUGH VIRTUAL COURT ) BEFORE SHRI RAJPAL YADAV VICE PRESIDENT AND SHRI PRADIP KUMAR KEDIA ACCOUNTANT MEMBER ./ I.T.A. NO. 2082/AHD/2018 ( ASSESSMENT YEAR : 2007-08) M/S. AAGAM SHARES & COMMODITIES PVT. LTD. 607 PIPARDI NI POLE HAJAPATELS POLE RELIEF ROAD KALUPUR AHMEDABAD - 380001 / VS. DCIT CENTRAL CIRCLE -1(1)(1) AHMEDABAD - 380015 ./ ./ PAN/GIR NO. : AABCK4493P ( APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI P. D. SHAH A.R. / RESPONDENT BY : SHRI S. S. SHUKLA SR.DR DATE OF HEARING 04/03/2021 !'# / DATE OF PRONOUNCEMENT 26/03/2021 / O R D E R PER PRADIP KUMAR KEDIA - AM: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF I NCOME TAX(APPEALS)-1 AHMEDABAD (CIT(A) IN SHORT) DATE D 07.08.2018 ITA NO. 2082/AHD/18 (M/S. AAGAM SHARES & COMMODITIES PVT. LTD. VS. DCIT) A.Y. 2007-08 - 2 - ARISING IN THE PENALTY ORDER DATED 30.06.2017 PASSE D BY THE ASSESSING OFFICER (AO) UNDER S. 271(1)(C) OF THE IN COME TAX ACT 1961 (THE ACT) CONCERNING AY 2007-08. 2. THE GROUND OF APPEAL RAISED BY ASSESSEE READ H EREUNDER: 1. THAT THE LEARNED CIT(A) HAS ERRED IN LAWS AND F ACTS BY CONFIRMING THE PENALTY OF RS.13 50 000/- U/S. 271(1 )(C) OF THE ACT AND THEREFORE THE LD.AO SHOULD BE DIRECTED TO DELET E THE SAID PENALTY OF RS.13 50 000/-. 3. BRIEFLY STATED THE ASSESSEE COMPANY EARLIER NAM ED KGMS FINANCIAL SERVICES PVT. LTD. IS ENGAGED IN THE BUSI NESS OF DEALING STOCK MARKET AND PURCHASE AND SALE OF SHARES. THE ASSESSEE FILED RETURN OF INCOME FOR AY 2007-08 DECLARING TOTAL INC OME OF RS.24 60 420/-. THE RETURN FILED BY THE ASSESSEE W AS SUBJECTED TO SCRUTINY ASSESSMENT UNDER S.143(3) OF THE ACT WHERE IN TOTAL INCOME WAS DETERMINED AT RS.69 69 045/-. THE AO INTER ALIA MADE AN ADDITION OF RS.45 LAKHS UNDER S.68 OF THE ACT ON AC COUNT OF INTRODUCTION OF SHARE CAPITAL AT PREMIUM IN THE BOO KS OF ACCOUNT AND CONSEQUENTLY IMPOSED A PENALTY OF RS.13 50 000/- TH EREON. THE QUANTUM ADDITION WAS SUSTAINED BY THE CIT(A) AS WEL L AS THE ITAT. THE IMPOSITION OF PENALTY OF RS.13 50 000/- WAS CHA LLENGED BEFORE THE CIT(A) WITHOUT ANY SUCCESS. 4. THE ASSESSEE HAS FILED APPEAL BEFORE THE TRIBUNA L AGAINST THE IMPOSITION OF PENALTY BY THE AO AND SUSTAINED BY TH E CIT(A). 5. WE HAVE CAREFULLY HEARD THE RIVAL SUBMISSIONS ON THE IMPOSITION OF PENALTY AND PERUSED THE MATERIAL AVAI LABLE ON RECORD. THE IMPOSITION OF PENALTY OF RS.13 50 000/- IS IN C ONTROVERSY IN THE GIVEN SET OF FACTS OF THE CASE. IT IS THE CASE OF THE ASSESSEE THAT THE ITA NO. 2082/AHD/18 (M/S. AAGAM SHARES & COMMODITIES PVT. LTD. VS. DCIT) A.Y. 2007-08 - 3 - ADDITION TOWARDS SHARE CAPITAL AT PREMIUM WAS AGREE D BY THE ASSESSEE VIDE LETTER DATED 17 TH SEPTEMBER 2009 PLACED BEFORE THE AO WHEREBY WITHOUT PREJUDICE TO THE BONAFIDES CLAI MED IN THE SHARE CAPITAL THE ADDITION WAS CONDITIONALLY AGREE D TO BUY MENTAL PEACE AND TO AVOID LONG AND PROTRACTED LITIGATION O N A CLEAR UNDERSTANDING THAT NO PENALTY SHALL BE INITIATED OR BE IMPOSED AS A CONSEQUENCE OF SUCH ADDITION. IT IS CONTENDED THAT THE CROSS EXAMINATION OF DIRECTOR OF THE SUBSCRIBING COMPANIE S SHRI RUPANG SHAH WAS NOT PRESSED FOR CROSS EXAMINATION HAVING R EGARD TO SUCH OFFER. IT WAS FURTHER CONTENDED THAT IN REBUTTAL THE DIRECTOR SHRI CHETAN SHAH HAS STATED THAT TRANSACTIONS ARE TOTALL Y GENUINE WITHOUT ANY ELEMENT OF ACCOMMODATION IN THE STATEMENT PURSU ANT TO SECTION 131 OF THE ACT. THE UNVERIFIED STATEMENT OF RUPANG SHAH HAS BEEN GIVEN UNDUE PRIMACY WHICH WAS GIVEN ONLY TO ABSOLVE HIM AT THE COST OF ASSESSEE. IN THIS BACKGROUND IT IS CONTEN DED THAT THE PENALTY IMPOSED ON SHARE CAPITAL MONEY RECEIVED THR OUGH BANKING CHANNEL IS NOT JUSTIFIED AT ALL. 6. IT WAS SECONDLY CONTENDED THAT THE AO HAS INITIA TED PENALTY PROCEEDINGS UNDER S.274 R.W.S. 271(1)(C) OF THE ACT USING THE EXPRESSION FURNISHING INACCURATE PARTICULARS/CONCEALMENT OF INCOME . IT WAS THUS CONTENDED THAT APPARENTLY THE AO HI MSELF HAS NOT MADE ANY DEFINITE SATISFACTION TOWARDS THE NATU RE OF CHARGE LEVELED AGAINST THE ASSESSEE REQUIRED UNDER S.271(1 )(C) R.W.S. 271(1B) OF THE ACT. IT IS CONTENDED THAT SO CALLED SATISFACTION OF THE AO FOR INITIATION OF PENALTY PROCEEDINGS UNDER S.27 1(1)(C) OF THE ACT AT THE THRESHOLD CLEARLY CONSTITUTES A VAGUE AN D NONDESCRIPT SATISFACTION WHICH DOES NOT AUTHORIZE THE AO TO INI TIATE PENALTY PROCEEDINGS. TO SUPPORT THE CASE OF THE VAGUE SATI SFACTION FORMED IN THE COURSE OF ASSESSMENT PROCEEDINGS A REFERENC E WAS MADE TO ITA NO. 2082/AHD/18 (M/S. AAGAM SHARES & COMMODITIES PVT. LTD. VS. DCIT) A.Y. 2007-08 - 4 - THE ASSESSMENT ORDER WHEREBY SO CALLED SATISFACTION WAS SHOWN TO FORM BY THE AO. 7. WE HAVE PERUSED THE ASSESSMENT ORDER THE APPELL ATE ORDERS IN THE QUANTUM PROCEEDINGS AS WELL AS THE PENALTY ORDE R PASSED. WE STRAIGHTWAY FIND THAT THE AO WHILE PASSING THE ASSE SSMENT ORDER DATED 29.10.2009 UNDER S.143(3) OF THE ACT INITIATE D PENALTY ON THE ADDITIONS MADE ALLEGING FURNISHING INACCURATE PAR TICULARS/ CONCEALMENT OF INCOME. SECTION 271(1)(C) OF THE A CT ENVISAGES A RULE ABOUT THE AO BEING SATISFIED IN THE COURSE OF ANY PROCEEDINGS UNDER THIS ACT ABOUT THE NATURE OF DEFAULT. WE NO TICE THAT THE ACTION OF THE AO FOR FORMATION OF SATISFACTION IN T HE COURSE OF ASSESSMENT IS QUITE VAGUE WITHOUT EXPRESSING EXACT NATURE OF CHARGE PROPOSED AGAINST THE ASSESSEE. THE SATISFACTION IN THE COURSE OF ASSESSMENT PROCEEDINGS WAS NEITHER HERE NOR THERE. IT IS NOT KNOWN WHETHER THE CHARGE IS FORMED FOR ALLEGED FURNISHIN G OF INACCURATE PARTICULARS OF INCOME OR FOR CONCEALMENT OF PARTI CULARS OF INCOME. THE ASSESSMENT ORDER DOES NOT CLEARLY SPECIFY THE N ATURE OF DEFAULT FOR WHICH THE PENALTY IS SOUGHT TO BE INITIATED AND THUS SUFFERS FROM VICE OF AMBIGUITY. THE SHOW CAUSE NOTICE DATED 10. 01.2017 ISSUED BY THE AO TO THE ASSESSEE IS ALSO COMPLETELY SILENT ABOUT THE NATURE OF CHARGE AGAINST THE ASSESSEE. IT IS A MANDATE OF LAW THAT SATISFACTION FOR THE INITIATION OF PENALTY PROCEEDI NGS SHOULD BE ARRIVED AT DURING THE COURSE OF ANY PROCEEDINGS WHI CH COULD POSSIBLY BE ASSESSMENT RE-ASSESSMENT OR RECTIFICAT ION PROCEEDINGS BUT NOT DURING THE PENALTY PROCEEDINGS. THE NATURE OF CHARGE PROPOSED AGAINST THE ASSESSEE IS NEITHER DISCERNABL E FROM THE ASSESSMENT ORDER NOR FORM THE PENALTY NOTICE. THE CONDITION PRECEDENT FOR EXERCISE OF JURISDICTION UNDER S. 271 (1)(C) R.W.S. 271(1B) OF THE ACT IS THUS NOT SATISFIED IN THE INS TANT CASE. HAVING REGARD TO THE COMPLEX FACTS INVOLVED IN THE CASE IN HAND THE NATURE ITA NO. 2082/AHD/18 (M/S. AAGAM SHARES & COMMODITIES PVT. LTD. VS. DCIT) A.Y. 2007-08 - 5 - OF CHARGE AGAINST THE ASSESSEE CANNOT BE LEFT TO IM AGINATION. CONSEQUENTLY THE PENALTY PROCEEDINGS INITIATED TOW ARDS ADDITIONS MADE ON THE BASIS OF VAGUE SATISFACTION IN THE COUR SE OF ASSESSMENT IS A COMPLETE NON-STARTER. THE CONSEQUENT PENALTY IMPOSED UNDER S.271(1)(C) OF THE ACT AS A SEQUEL TO SUCH INVALID SATISFACTION REQUIRES TO BE QUASHED. 8. IT IS ALSO WELL SETTLED THAT PENALTY UNDER S. 27 1(1)(C) OF THE ACT WILL NOT BE IMPOSED IN EVERY CASE MERELY BECAUSE IT IS LAWFUL TO DO SO. THE PENALTY WILL NOT ORDINARILY TO BE IMPOSED UNLESS THE PARTY OBLIGED EITHER ACTED DELIBERATELY IN DEFIANCE OF L AW OR WAS GUILTY OF CONTUMACIOUS CONDUCT OR DISHONEST ACT. THE EXPLANA TION OFFERED TOWARDS BONAFIDE ISSUE OF SHARE CAPITAL THUS CANNOT BE OUTRIGHTLY REJECTED WHEN TESTED ON THE TOUCHSTONE OF PENALTY P ROCEEDINGS OF STRICT NATURE. THE FACT IN THE PRESENT CASE DOES NO T CONCLUSIVELY ESTABLISH THE MALAFIDE ON THE PART OF THE ASSESSEE COMPANY. THE ASSESSEE HAS FILED DETAILED SUBMISSIONS IN THE COUR SE OF ASSESSMENT. THE CONTENTIONS RAISED DO CREATE SOME DOUBT IN FAVO UR OF THE ASSESSEE. THE IMPUGNED TRANSACTIONS OF ISSUE OF SH ARE CAPITAL HAVE BEEN CARRIED OUT THROUGH BANKING CHANNEL. THE STAT EMENT OF THIRD PARTY HAS NOT BEEN CROSS EXAMINED TO FASTEN THE ONE ROUS PENALTY. HENCE THE ASSESSEE HAS SHOWN EXISTENCE OF MITIGATI NG CIRCUMSTANCES FOR EXONERATION FROM IMPOSITION OF PE NALTY. THUS WHEN TESTED ON DISTINCT PARAMETERS OF PENALTY PROCE EDINGS THE ISSUE INVOLVED CANNOT SAID TO BE ENTIRELY FREE OF ANY DEB ATE WHATSOEVER. HENCE ADDITIONS TOWARDS SHARE CAPITAL IN QUESTION WOULD NOT IPSO FACTO TANTAMOUNT TO ALLEGED CONCEALMENT OF INCOME. IT I S TRITE THAT FINDING IN QUANTUM PROCEEDINGS FOR SUCH ADDITIONS/D ISALLOWANCE CANNOT BE AUTOMATICALLY ADOPTED FOR THE PURPOSES OF SECTION 271(1)(C) OF THE ACT. ITA NO. 2082/AHD/18 (M/S. AAGAM SHARES & COMMODITIES PVT. LTD. VS. DCIT) A.Y. 2007-08 - 6 - 9. WE THUS FIND MERIT IN THE PLEA OF THE ASSESSEE F OR DELETION OF PENALTY ON BOTH COUNTS. 10. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWE D. SD/- SD/- (RAJPAL YADAV) (PRADIP KUMA R KEDIA) VICE PRESIDENT ACCOUNTANT MEMBER AHMEDABAD: DATED 26/03/2021 TRUE COPY S. K. SINHA !'#' / COPY OF ORDER FORWARDED TO:- &. / REVENUE 2. / ASSESSEE (. )*+ / CONCERNED CIT 4. - / CIT (A) /. 012 33*+4 *+#4 56) / DR ITAT AHMEDABAD 7. 289 : / GUARD FILE. BY ORDER / 4 /5 *+#4 56) THIS ORDER PRONOUNCED ON 26/03/2021