Shri Madhusudan J.Anandpara, Ahmedabad v. The Income tax Officer,Ward-15(3),, Ahmedabad

ITA 2575/AHD/2009 | 2006-2007
Pronouncement Date: 07-03-2011 | Result: Dismissed

Appeal Details

RSA Number 257520514 RSA 2009
Assessee PAN ABJPA0921E
Bench Ahmedabad
Appeal Number ITA 2575/AHD/2009
Duration Of Justice 1 year(s) 5 month(s) 26 day(s)
Appellant Shri Madhusudan J.Anandpara, Ahmedabad
Respondent The Income tax Officer,Ward-15(3),, Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 07-03-2011
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted SMC
Tribunal Order Date 07-03-2011
Date Of Final Hearing 07-03-2011
Next Hearing Date 07-03-2011
Assessment Year 2006-2007
Appeal Filed On 11-09-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL : SMC BENCH : AHMEDABAD (BEFORE HONBLE SHR I T.K. SHARMA J.M.) I.T.A. NO. 2575/AHD./2009 : ASSESSMENT YEAR : 2006-2007 I.T.A. NO. 1215/AHD./2010 : ASSESSMENT YEAR : 2006-2007 SHRI MADHUSUDAN J. ANANDPARA AHMEDABAD -VS- THE I.T.O. WARD-15(3) AHMEDABAD (PAN : ABJPA 0921E) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI J.M.TRIVEDI A.R . RESPONDENT BY : SHRI VIMALENDU VERMA D .R. O R D E R PER SHRI T.K. SHARMA JUDICIAL MEMBER : BOTH THESE APPEALS OF THE ASSESSEE ARE HEARD ON TH E SAME DATE AND ARGUED BY THE COMMON REPRESENTATIVES. THEREFORE THESE ARE DECIDED BY TH IS COMMON ORDER FOR THE SAKE OF CONVENIENCE. I.T.A. NO. 2575/AHD./2009 2. THIS APPEAL FILED BY THE ASSESSEE IS AGAINST THE ORDER DATED 23.07.2009 PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-XXI A HMEDABAD FOR THE ASSESSMENT YEAR 2006-2007. 3. THE ONLY GROUND RAISED IN THIS APPEAL IS AS UNDE R: (1) THAT THE LEARNED I.T.O. ERRED IN TAXING AND TH E LEARNED C.I.T.(A) ERRED IN CONFIRMING TAXING OF RS.332006/- AS SHORT TERM CA PITAL GAIN ON ACCOUNT OF SWIT- CHING OVER FUNDS FROM ONE FUND TO ANOTHER FUND. 4. BRIEF FACTS RELATING TO THE CONTROVERSY INVOLVED IN THE AFORESAID GROUND OF APPEAL IS THAT THE ASSESSEE IS A RETIRED EMPLOYEE OF GUJARAT HOUSI NG BOARD AHMEDABAD. FOR THE ASSESSMENT YEAR UNDER APPEAL HE HAS SHOWN PENSION INCOME AND INCOME FROM OTHER SOURCES. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFF ICER NOTICED THAT THE ASSESSEE HAD INVESTED RS.6 LAKHS ON 09.06.2005 VIDE FOLIO NO.5272093 IN S BI MUTUAL FUND. THE ASSESSEE HAD 2 ITA NO. 2575&1215-AHD-2009 TRANSFERRED THE SAID INVESTMENT IN DIFFERENT SCHEME S OF SBI MUTUAL FUND BY SWITCHING OUT ON VARIOUS DATES AND HIS INVESTMENT WAS RAISED UPTO RS .889003/-. APART FROM THIS THE ASSESSEE HAD ALSO INVESTED RS.2 LAKHS ON 08.08.2005 VIDE FOLIO N O. 5531286 IN SBI MUTUAL FUND. THIS INVESTMENT WAS RAISED UPTO RS.243054/- ON VARIOUS D ATES DURING THE ASSESSMENT YEAR UNDER CONSIDERATION. THE DETAILS OF SHORT-TERM CAPITAL GA INS AMOUNTING TO RS.332006/- IS GIVEN BY THE ASSESSING OFFICER AT PAGE 2 OF THE ASSESSMENT ORDER . 4.1 THE ASSESSING OFFICER ASKED THE ASSESSEE TO EXP LAIN WHY THE ACCRUED AMOUNT ON THE ORIGINAL INVESTMENT SHOULD NOT BE TREATED AS SHORT- TERM CAPITAL GAINS AND BE ADDED TO HIS TOTAL INCOME. THE ASSESSEE VIDE HIS SUBMISSION DATED 24.1 1.2008 STATED THAT SWITCHING OVER IS ONLY PAPER TRANSACTION AND NO ACCRUAL AMOUNT WAS RECEIVE D. HENCE PROFIT OR GAIN CANNOT BE ADDED TO HIS TOTAL INCOME. 4.2 THE ASSESSING OFFICER REJECTED THE AFORESAID CO NTENTION OF THE ASSESSEE HOLDING THAT THE ASSESSEE HAS TRANSFERRED HIS INVESTMENT IN ANOTHER SCHEME WITH THE INTENTION TO EARN MORE PROFIT OR GAIN. THE ASSESSING OFFICER OBSERVED THAT ACCRUE D INTEREST BY SWITCHING OVER HIS FUND HAS BEEN INVESTED IN THE ASSESSMENT YEAR. THEREFORE HE WORKED OUT THE PROFIT AMOUNTING TO RS.332006/- AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE AS SHORT-TERM CAPITAL GAINS. 5. ON APPEAL IN THE IMPUGNED ORDER THE LEARNED CO MMISSIONER OF INCOME TAX(APPEALS) UPHELD THE ACTION OF THE ASSESSING OFFICER TAXING T HE PROFIT AMOUNTING TO RS.332006/- AS SHORT- TERM CAPITAL GAINS. 6. AGGRIEVED WITH THE ORDER OF THE LEARNED COMMISSI ONER OF INCOME TAX(APPEALS) THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 7. AT THE TIME OF HEARING SHRI J.M.TRIVEDI A.R. A PPEARED ON BEHALF OF THE ASSESSEE AND RELYING ON THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF NILA PRODUCTS LTD. VS- CIT REPORTED IN 148 ITR 99 (BOM.) CONTENDED THAT S INCE NO PAYMENT HAS BEEN MADE BY THE ASSESSEE IN SWITCHING OVER FROM ONE SCHEME TO ANOTH ER CAPITAL GAINS IS NOT TAXABLE. THE LD. COUNSEL OF THE ASSESSEE ALSO RELIED ON THE DECISION OF ITAT MUMBAI BENCHH MUMBAI IN THE CASE OF ACIT-VS- ABC BEARINGS LTD. REPORTED IN [201 0] 6 TAXMANN 73 (MUM.) AND CONTENDED THAT IN THIS CASE IT IS HELD THAT CONVERSION OF UTI US-64 INTO UTI 6.75% TAX FREE BONDS DID NOT 3 ITA NO. 2575&1215-AHD-2009 AMOUNT TO TRANSFER AND THEREFORE THERE WAS NO QUEST ION OF ANY CAPITAL GAINS/LOSS ARISING OUT OF SUCH CONVERSION. ON THE BASIS OF RATIO OF THIS DECI SION OF ITAT ( SUPRA ) HE CONTENDED THAT CAPITAL GAINS IS NOT TAXABLE. AS AGAINST THE LD. D.R. POIN TED OUT THAT BOTH THE DECISIONS RELIED ON BY THE LD. COUNSEL OF THE ASSESSEE ARE NOT APPLICABLE. 8. AFTER HEARING BOTH THE SIDES I HAVE CAREFULLY G ONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AS WELL AS BOTH THE DECISIONS RELIED ON BY T HE LD. COUNSEL OF THE ASSESSEE. IT IS PERTINENT TO NOTE THAT JUDGEMENT OF THE HON'BLE BOMBAY HIGH COUR T IN THE CASE OF NILA PRODUCTS LTD. ( SUPRA ) IS NOT APPLICABLE TO THE FACTS OF THE ASSESSEES CA SE BECAUSE IN THAT CASE THERE WAS NO COST OF ACQUISITION. IN THE CASE OF THE ASSESSEE UNITS WER E PURCHASED AND CONSIDERATION WAS DULY PAID. THE OTHER DECISION OF THE ITAT MUMBAI BENCH H M UMBAI IN THE CASE OF ABC BEARINGS LTD. ( SUPRA ) IS ALSO NOT APPLICABLE TO THE FACTS OF THE ASSESS EES CASE BECAUSE IN THAT CASE OLD UNITS OF US-64 WERE SURRENDERED IN LINE WITH SCHEME ANNOUNCE D BY UTI. AS A RESULT OF THIS SCHEME THE ASSESSEE BOUGHT NEW TAX TREE BONDS. IN VIEW OF THIS THE VIEW TAKEN BY BOTH THE DEPARTMENTAL AUTHORITIES BELOW TAXING THE GAIN AROSE DUE TO SWIT CHING OVER OF FUNDS FROM ONE SCHEME TO ANOTHER IS TAXABLE AS SHORT-TERM CAPITAL GAINS. I THEREFORE DECLINE TO INTERFERE. AS A RESULT THE APPEAL OF THE ASSESSEE IS DISMISSED. I.T.A. NO. 1215/AHD./2010 9. THIS APPEAL FILED BY THE ASSESSEE IS AGAINST THE ORDER DATED 29.03.2010 PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-XXI A HMEDABAD CONFIRMING THE PENALTY OF RS.50 000/- LEVIED BY THE ASSESSING OFFICER UNDER S ECTION 271(1)(C) FOR THE ASSESSMENT YEAR 2006-2007. 10. BRIEFLY STATED THE FACTS ARE THAT THE ASSESSING OFFICER LEVIED THE PENALTY UNDER SECTION 271(1)(C) IN RESPECT OF PROFIT EARNED BY THE ASSESS EE AMOUNTING TO RS.332006/- AS SHORT TERM CAPITAL GAIN. FACTS RELATING TO THIS ADDITION HAVE BEEN DISCUSSED IN QUANTUM APPEAL ( SUPRA ). THE ASSESSING OFFICER WORKED OUT THE MINIMUM PENALTY OF RS.45 517/- @100% ON INCOME ALLEGED TO BE CONCEALED TO THE EXTENT OF RS.332006/-. HOWEVER HE LEVIED THE PENALTY OF RS.50 000/-. ON APPEAL IN THE IMPUGNED ORDER THE LEARNED COMMISSI ONER OF INCOME TAX(APPEALS) CONFIRMED THE PENALTY. 11. AGGRIEVED WITH THE ABOVE THE ASSESSEE IS IN AP PEAL BEFORE THE TRIBUNAL. 4 ITA NO. 2575&1215-AHD-2009 12. AT THE TIME OF HEARING SHRI J.M. TRIVEDI A.R. APPEARED ON BEHALF OF THE ASSESSEE AND CONTENDED THAT THE ASSESSEE IS A RETIRED EMPLOYEE O F GUJARAT HOUSING BOARD AHMEDABAD. HE WAS OF THE BONA FIDE BELIEF THAT INCOME ACCRUED BY SWITCHING OVER FROM ONE SCHEME TO ANOTHER OF MUTUAL FUND INCOME IS NOT TAXABLE BECAUSE HE HAS N OT MADE ANY FRESH INVESTMENT. THE COUNSEL OF THE ASSESSEE SUBMITTED THAT THIS BELIEF OF THE A SSESSEE WAS BONA FIDE . COMPLETE FACTS OF INCOME WERE DISCLOSED IN THE RETURN OF INCOME. THEREFORE PENALTY OF RS.50 000/- CONFIRMED BY THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) IN THE IMPUGNED ORDER BE CANCELLED. IN SUPPORT OF THIS THE COUNSEL OF THE ASSESSEE ALSO SUBMITTED THAT MERELY BECAUSE A BONA FIDE CLAIM OF DEDUCTION WAS FOUND TO BE INADMISSIBLE PENALTY DOE S NOT NECESSARILY FOLLOW AS HELD BY THE HON'BLE KARNATAKA HIGH COURT IN THE CASE OF BALAJI VEGETABLE PRODUCTS P. LTD. VS- CIT REPORTED IN [2007] 290 ITR 172 (KARN). 13. RIVAL SUBMISSIONS HAVE BEEN CONSIDERED. IT IS P ERTINENT TO NOTE THAT THE ASSESSEE INVESTED CERTAIN AMOUNT IN MUTUAL FUNDS. BY SWITCHING OVER THE INVESTMENT INCREASED BY RS.332006/- AS MENTIONED BY THE ASSESSING OFFICER AT PAGE 2 OF THE ASSESSMENT ORDER IT APPEARS THAT THE ASSESSEE WAS OF THE BONA FIDE BELIEF THAT SWITCHING OVER WAS A PAPER TRANSACTION AND SINCE NO AMOUNT WAS RECEIVED IT WAS NOT LIABLE TO BE TAXED. THE ASSESS ING OFFICER DID NOT AGREE WITH THE ASSESSEE AND MADE ADDITION OF RS.332006/- AS INCOME FROM SHORT-T ERM CAPITAL GAINS AND LEVIED THE PENALTY ON THE SAME AMOUNTING TO RS.50 000/-. THE HON'BLE GUJA RAT HIGH COURT IN THE CASE OF SARABHAI CHEMICALS VS- CIT REPORTED IN 257 ITR 355 HAS HELD THAT WHEN THE BONA FIDE BELIEF THAT INCOME HAS NOT ACCRUED IS HELD PRESUMPTION OF CONCEALMENT IS NOT APPLICABLE. THE ASSESSEE BEING A RETIRED GOVERNMENT EMPLOYEE WAS NOT AWARE OF THE L EGAL INTRICACIES. THEREFORE I AM OF THE VIEW THAT THIS IS NOT A FIT CASE TO LEVY PENALTY UNDER S ECTION 271(1)(C) OF THE I.T. ACT. I ACCORDINGLY CANCEL THE PENALTY OF RS.50 000/- LEVIED BY THE ASS ESSING OFFICER UNDER SECTION 271(1)(C) OF THE I.T. ACT. AS A RESULT THIS APPEAL OF THE ASSESSEE IS ALLOWED. 14. IN THE RESULT THE APPEAL IN ITA NO. 2575/AHD./ 2009 FILED BY THE ASSESSEE IS DISMISSED WHEREAS THE ASSESSEES APPEAL IN ITA NO.1215/AHD./2 010 IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 07 .03.2011. SD/- (T.K. SHARMA) JUDICIAL MEMBER DATED : 07 /03/20 11 5 ITA NO. 2575&1215-AHD-2009 COPY OF THE ORDER IS FORWARDED TO : 1) THE ASSESSEE 2) THE DEPARTMENT. 3) CIT(A.) CONCERNED 4) CIT CONCERNED 5) D.R. ITAT AHMEDABAD. TRUE COPY BY ORDER DEPUTY REGI STRAR ITAT AHMEDABAD TALUKDAR/SR.P.S.