Om Prakash Tandon, New Delhi v. DCIT, New Delhi

ITA 3313/DEL/2010 | 2006-2007
Pronouncement Date: 15-07-2011 | Result: Allowed

Appeal Details

RSA Number 331320114 RSA 2010
Assessee PAN AACPT7284P
Bench Delhi
Appeal Number ITA 3313/DEL/2010
Duration Of Justice 1 year(s) 9 day(s)
Appellant Om Prakash Tandon, New Delhi
Respondent DCIT, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 15-07-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted F
Tribunal Order Date 15-07-2011
Date Of Final Hearing 11-07-2011
Next Hearing Date 11-07-2011
Assessment Year 2006-2007
Appeal Filed On 06-07-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL [ DELHI BENCH F DELHI ] BEFORE SHRI RAJPAL YADAV JM AND SHRI K. D. RAN JAN AM I. T. APPEAL NO. 3313 (DEL) OF 2010 ASSESSMENT YEAR : 2006-07. SHRI OM PRAKASH TANDON DY. COMMISSIONER OF INCOME-TAX C/O. WENGER & COMPANY VS. C I R C L E : 31 (1) A 16 CONNAUGHT PLACE N E W D E L H I. N E W D E L H I. PAN/GIR NO. AACPT 7284P. ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY : SHRI SURESH ANAND C. A.; DEPARTMENT BY : MS. PRATIMA KAUSHIK SR. D. R. O R D E R. PER K. D. RANJAN AM : THIS APPEAL BY THE ASSESSEE FOR ASSESSMENT YEAR 20 06-07 ARISES OUT OF ORDER OF THE LD. CIT (APPEALS)-XXVI NEW DELHI. 2. THE RELEVANT GROUNDS OF APPEAL RAISED BY THE AS SESSEE ARE AS FOLLOWS :- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT (APPEALS) HAS ERRED IN CONFIRMING THE PENALTY PASSED UNDER SE CTION 271(1)(C) AMOUNTING TO RS.99 797/- FOR THE ASSESSMENT YEAR 2006-07 WHICH I S BAD IN LAW AND FACTS; 2. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. AO GROSSLY ERRED IN INITIATING PENALTY PROCEEDING UNDER SECTION 271( 1)(C) OF THE I. T. ACT. HE FURTHER ERRED IN IMPOSING A PENALTY OF RS.99 797/- ON THE APPELLANT UNDER SECTION 271(1)(C) OF THE I. T. ACT AND THE LD. CIT (A) HAS ERRED IN CONFIRMING THE IMPOSITION OF THE SAID PENALTY; 2 I. T. APPEAL NO. 3313 (DEL) OF 2010 3. THAT ON THE FACTS AND IN THE CIRCUMSTAN CES OF THE CASE PENALTY ORDER UNDER SECTION 271(1)(C) AS SUSTAINED BY THE LD. CIT (APPE ALS) IS BASED ON ERRONEOUS VIEWS AND OR NON-APPRECIATION OF FACTS AND LAW INVO LVED AND WITHOUT FOLLOWING THE CASE LAW THAT CLEARLY SUPPORT THE APPELLANTS C ASE. 3. THE ONLY ISSUE FOR CONSIDERATION RELATES TO LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT 1961 AMOUNTING TO RS.99 797/-. THE FACTS OF THE CASE STATED IN BRIEF ARE THAT THE ASSESSEE FILED RETURN OF INCOME DECLARING INCOME OF RS.19 46 925/- ON 31/10/2006 WHICH WAS PROCESSED UNDER SECTION 143(1) OF THE ACT. THE ASS ESSING OFFICER ISSUED NOTICE UNDER SECTION 143(2) AND 142(1). IN RESPONSE TO NOTICES ISSUED TH E ASSESSEE FILED DETAILS. THE ASSESSING OFFICER ON PERUSAL OF COMPUTATION OF INCOME AND DETAILS NOT ICED THAT THE ASSESSEE HAD REDEEMED UNITS OF PRUDENTIAL ICICI INCOME FUND [GROWTH] DURING THE YE AR BUT DID NOT DISCLOSE LONG TERM CAPITAL GAIN ON ACCOUNT OF ABOVE REDEMPTION. THE ASSESSEE FILED COMPUTATION OF LONG TERM CAPITAL GAINS OF RS.8 89 457/- ON ACCOUNT OF REDEMPTION OF UNIT AND OFFERED THE SAME FOR TAXATION VIDE LETTER DATED 26/12/2008. ACCORDINGLY THE ASSESSING OFFICER ADDED THE SAME. THE AO INITIATED PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT. 4. DURING THE COURSE OF PENALTY PROCEEDINGS THE ASS ESSEE DID NOT FURNISH ANY REPLY. THE ASSESSING OFFICER THEREFORE DECIDED THE MATTER EX -PARTE. THE AO OBSERVED THAT THE ASSESSEE IN THE RETURN OF INCOME HAD NOT DISCLOSED LONG TERM CA PITAL GAINS ON REDEMPTION OF UNITS OF PRUDENTIAL ICICI FUND (GROWTH) WITH A VIEW TO EVADE TAX THEREON. THE ASSESSEE HAD NOT BROUGHT ON RECORD ANY FRESH MATERIAL OR EVIDENCE DURING THE COURSE OF PENALTY PROCEEDINGS EVEN THOUGH SEVERAL OPPORTUNITIES WERE PROVIDED TO HIM. THE AO ALSO NOTED THAT THE ASSESSEE HAD BEEN ASSISTED BY A QUALIFIED TAXATION PROFESSIONAL. THE REFORE THE ASSESSEE WAS WELL AWARE OF THE CORRECT LEGAL POSITION AND QUANTUM OF LONG TERM CAP ITAL GAINS EVEN AT THE TIME OF FILING OF THE INCOME-TAX RETURN. IT WAS ONLY ON BEING QUERIED TH E ASSESSEE CAME UP WITH OFFERING OF LONG TERM CAPITAL GAIN OF RS.8 89 457/-. THE ASSESSING OFFIC ER IN VIEW OF THESE FACTS CAME TO THE CONCLUSION THAT IF THE CASE HAD NOT BEEN SELECTED FOR SCRUTINY THE AMOUNT WOULD NOT HAVE BEEN OFFERED FOR TAXATION. THE AO THEREFORE HELD THAT THIS WAS A DELIBERATE ACT ON THE PART OF THE ASSESSEE TO CONCEAL TRUE PARTICULARS OF HIS INCOME. ACCORDINGL Y HE IMPOSED PENALTY UNDER SECTION 271(1)(C) OF THE ACT AT RS.99 797/-. 3 I. T. APPEAL NO. 3313 (DEL) OF 2010 5. BEFORE THE LD. CIT (APPEALS) IT WAS SUBMITTED BY THE ASSESSEE THAT THE INCOME-TAX RETURN WAS PREPARED BY THE STAFF OF THE COUNSEL ON THE BAS IS OF ANALYSIS OF BANK ACCOUNT ETC. SINCE THE DETAILS OF REDEMPTION OF UNITS WAS NOT PROVIDED BY THE BROKER THE SAME COULD NOT BE CALCULATED. IT WAS THEREFORE PLEADED THAT PENALTY COULD NOT B E LEVIED SIMPLY BECAUSE THE ASSESSEE HAD COMMITTED A BONAFIDE MISTAKE. RELIANCE WAS PLACED ON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. ICON CONTROLS P. LTD. 207 CTR (DEL.) 592. THE LD. CIT (A) AFTER CONSIDERING THE SUBMISSIONS MADE BY THE ASSESSEE OB SERVED THAT THE ASSESSEE AT NO STAGE HAS POINTED OUT AMBIGUITY IN THE TAX LAWS OR COMPLEXITY OF THE LEGAL POSITION AS ONE OF THE REASONS FOR BONAFIDE MISTAKE. THERE WAS NO DISPUTE THAT LONG T ERM CAPITAL GAIN AROSE ON THE SWITCH OUT FROM ONE PLAN TO ANOTHER PLAN ON REDEEMING UNITS OF MUTU AL FUND WHICH WAS CHARGEABLE TO TAX UNDER THE HEAD CAPITAL GAINS. THE ASSESSEE WAS PROVIDE D OPPORTUNITY TO RECTIFY MISTAKE BY FILING A REVISED RETURN OR LETTER DURING THE ASSESSMENT PROC EEDINGS TO COME OUT CLEAN WITH SUO MOTO FOR CONSIDERATION. HOWEVER DESPITE THE PROFESSIONAL A SSISTANCE THE ASSESSEE DID NOT COME OUT CLEAN IN THIS REGARD TILL HE WAS PUT TO CORNER AT THE FAG -END OF THE PROCEEDINGS. THE LD. CIT (A) IN VIEW OF THE DECISION OF HONBLE SUPREME COURT IN THE CAS E OF UNION OF INDIA VS. DHARMENDRA TEXTILE & PROCESSORS 209 CTR 617 HELD THAT PENALTY PROCEEDI NG UNDER SECTION 271(1)(C) OF THE ACT IS CIVIL LIABILITY. SINCE NO CASE OF BONAFIDE BELI EF WAS MADE OUT BY THE ASSESSEE THE LD. CIT (A) CAME TO THE CONCLUSION THAT THE AO WAS JUSTIFIED IN LEVYING PENALTY UNDER SECTION 271(1)(C) AT THE RATE OF HUNDRED PER CENT OF THE TAX SOUGHT TO BE EV ADED. 6. BEFORE US THE LD. AR OF THE ASSESSEE SUBMITTED T HAT THE MISTAKE COMMITTED BY THE ASSESSEE IS BONAFIDE AND HAS OCCURRED BECAUSE HIS CHARTERED ACCOUNTANT COULD NOT FIND OUT FROM THE BANK ACCOUNT THAT INCOME UNDER THE HEAD CAPITAL GAINS WAS EARNED BY THE ASSESSEE. THE ASSESSEE HAD NOT MADE PURCHASE / REDEMPTION OR SALE OF ANY OF HI S INVESTMENTS IN UNITS OF MUTUAL FUND DURING THE YEAR EXCEPT TRANSFER OF RS.2 LAKHS EVERY MONTH FROM ICICI INCOME PLAN TO BALANCED FUND. THE ASSESSEE HAD MADE INVESTMENTS OF RS.25 LAKHS IN THE PRUDENTIAL INCOME GROWTH ON 21/05/2000. IN OTHER WORDS THE ASSESSEE DID NOT SE E DIVIDEND OPTION. HOWEVER DURING THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR UNDER CON SIDERATION THE ASSESSEE ISSUED INSTRUCTIONS TO ICICI MUTUAL FUND TO TRANSFER RS.2 LAKHS EVERY MONT H TO ITS BALANCED FUND FROM INCOME PLAN FUND UNDER THE SYSTEMATIC PLAN STARTING 5 TH MAY 2005 FOR 12 MONTHS. THE INVESTMENT IN MUTUAL 4 I. T. APPEAL NO. 3313 (DEL) OF 2010 FUND IS BEING LOOKED AFTER BY ANY BROKER WHO USUALL Y PROVIDE THE DETAILS OF CAPITAL GAINS. DUE TO IGNORANCE OF LAW HE DID NOT CONSIDER THE SAID TRANS FER OF RS.2 LAKHS PER MONTH AS DEEMED REDEMPTION. THE DEEMED REDEMPTION HAD NOT BEEN CON SIDERED AS A PART OF CAPITAL GAIN UNDER THE HEAD LONG TERM CAPITAL GAIN THROUGH A BONAFIDE MI STAKE. THE LD. AR OF THE ASSESSEE FURTHER SUBMITTED THAT THE ASSESSEE HAD VOLUNTARILY OFFERED FOR TAXATION LONG TERM CAPITAL GAINS IN RESPECT OF DEEMED REDEMPTION OF UNITS OF ICICI INCOME FUND AS SOON AS HE CAME TO KNOW THAT DUE TO BONAFIDE MISTAKE THE INCOME FROM LONG TERM CAPITAL GAIN WAS OMITTED TO BE TAKEN INTO ACCOUNT. THE SAID MISTAKE HAD SURFACED WHEN COUNSEL OF THE A SSESSEE PREPARED THE DETAILS OF INVESTMENT FROM THE AIR [ANNUAL INFORMATION REPORT] SUPPLIED B Y THE DEPARTMENT IN THE SECOND WEEK OF NOVEMBER 2008 IN THE CASE OF SHRI ATUL TANDON THE SON OF THE ASSESSEE. THE SAID AIR COULD NOT BE SUPPLIED BY THE DEPARTMENT IN THE CASE OF SH RI ATUL TANDON WHICH WAS GENERATED ON 3 RD NOVEMBER 2008. IT WAS ALSO SUBMITTED THAT THE AIR INFORMATION COULD NOT BE GENERATED IN THE CASE OF THE ASSESSEE BECAUSE OF WHICH THE EFFECTIV E ASSESSMENT COULD NOT BE TAKEN BY THE AO BECAUSE THE CASES WHICH WERE PICKED UP UNDER SCRUTI NY THROUGH AIR COULD BE COMPLETED ONLY ON THE BASIS OF THE AIR. THE MOMENT THE ASSESSEE FROM THE STATEMENT OF SHRI ATUL TANDON FOUND THAT INCOME FROM REDEMPTION OF UNITS OF MUTUAL FUND WAS OMITTED TO HAVE BEEN SHOWN HE FILED LETTER BEFORE THE ASSESSING OFFICER OFFERING THE CA PITAL GAINS. IT WAS ALSO SUBMITTED THAT THE UNITS OF PRUDENTIAL ICICI MUTUAL FUND WERE JOINTLY HELD B Y THE ASSESSEE WITH SHRI ATUL TANDON. SINCE THE ASSESSEE HAD FOUND OUT THE MISTAKE ON THE BASIS OF AIR IN CASE OF SHRI ATUL TANDON IT COULD BE SAID THAT THE ASSESSING OFFICER HAD DETECTED CON CEALMENT. IN VIEW OF THE ABOVE IT HAS BEEN SUBMITTED THAT NON-ADMISSION OF INCOME FROM CAPITAL GAINS WAS DUE TO BONAFIDE MISTAKE COMMITTED BY THE COUNSEL OF THE ASSESSEE AND THERE FORE PENALTY UNDER SECTION 271(1)(C) OF THE ACT WAS NOT IMPOSABLE. 6.1 ON THE OTHER HAND THE LD. SR. DR SUBMITTED THA T THE ASSESSEE HAD OFFERED THE INCOME WHEN HE WAS CORNERED BY THE ASSESSING OFFICER DURIN G THE COURSE OF ASSESSMENT PROCEEDINGS. IT IS NOT A CASE WHERE ASSESSEE HAD INVESTED FOR THE FIRS T TIME. SHE FURTHER SUBMITTED THAT THE ASSESSEE HAS BEEN FILING RETURNS OF INCOME AND WAS ASSISTED BY CHARTERED ACCOUNTANT. IT WAS NOT MANDATORY TO SEE ONLY BANK ACCOUNT. THE ASSESSEE W AS SUPPOSED TO HAVE TAKEN INTO ACCOUNT THE CAPITAL GAINS ARISING ON TRANSFER OF UNITS OF MUTUA L FUND. THEREFORE IT IS NOT A CASE OF BONAFIDE 5 I. T. APPEAL NO. 3313 (DEL) OF 2010 BELIEF. SHE ACCORDINGLY SUBMITTED THAT THE PENALTY UNDER SECTION 271(1)(C) OF THE ACT IS IMPOSABLE AND THE LD. CIT (A) HAS RIGHTLY CONFIRMED THE PENALTY. 7.1 WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. THERE IS NO DISPUTE ABOUT THE FACT THAT THE LONG TERM CAP ITAL GAIN HAS ARISEN ON THE SWITCH OUT FROM ONE PLAN TO ANOTHER. THE SWITCHING OUT FROM ONE PLAN T O ANOTHER IS A CASE OF DEEMED REDEMPTION OF UNITS AND THEREFORE THE PROFIT ARISING ON SUCH DE EMED REDEMPTION IS CHARGEABLE TO TAX UNDER THE HEAD CAPITAL GAINS. FROM THE ASSESSMENT ORDER WE FIND THAT ASSESSING OFFICER HAD NOT ISSUED ANY SHOW CAUSE NOTICE SEEKING EXPLANATION OF THE ASSESS EE AS TO WHY THE CAPITAL GAIN ARISING ON TRANSFER OF REDEMPTION OF UNITS OF PRUDENTIAL ICICI INCOME FUND TO ANOTHER FUND WAS NOT SHOWN AS INCOME. FROM THE ASSESSMENT ORDER IT IS ALSO NO T KNOWN THAT ON WHAT BASIS THE AO HAD COME TO KNOW THAT INCOME ON REDEMPTION OF UNITS OF PRUDE NTIAL ICICI MUTUAL FUND HAD ESCAPED ASSESSMENT. WE ALSO DO NOT FIND ANY MENTION OF AN NUAL INFORMATION REPORT ON THE BASIS OF WHICH THE ASSESSING OFFICER CAME TO THE CONCLUSION THAT R EDEMPTION OF UNITS OF PRUDENTIAL ICICI INCOME FUND HAD ESCAPED ASSESSMENT. THE ASSESSEE HELD THE SE UNITS IN JOINT ACCOUNT WITH HIS SON SHRI ATUL TANDON. ON THE BASIS OF AIR IN CASE OF SHRI A TUL TANDON THE ASSESSEE CAME TO KNOW THAT CAPITAL GAIN HAS ARISEN IN THE CASE OF THE ASSESSEE AND NOT IN THE NAME OF SHRI ATUL TANDON. HE ACCORDINGLY VIDE LETTER DATED 26/12/2008 OFFERED TH E AMOUNT OF CAPITAL GAINS OF RS.8 89 457/- FOR TAXATION AS INCOME UNDER THE HEAD LONG TERM CAPITA L GAINS. FROM THE ABOVE FACTS IN OUR CONSIDERED OPINION THE ASSESSEE HAS COME FORWARD T O DISCLOSE THE INCOME AS SOON AS HE CAME TO KNOW THAT INCOME OF RS.8 89 457/- WAS OMITTED TO BE OFFERED IN THE HANDS OF THE ASSESSEE. SINCE THE TIME OF 12 MONTHS FOR FILING THE REVISED RETURN HAD EXPIRED THE ASSESSEE HAD NO ALTERNATIVE BUT TO OFFER THE INCOME BY WAY OF A LETTER DURING T HE COURSE OF ASSESSMENT PROCEEDINGS. 7.2 EXPLANATION (1) TO SECTION 271(1)(C) PROVIDES T WO SITUATIONS UNDER WHICH THE AMOUNT ADDED OR DISALLOWED IN COMPUTING THE TOTAL INCOME O F A PERSON SHALL BE DEEM TO REPRESENT THE INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CO NCEALED. FIRSTLY WHERE ASSESSEE FAILS TO OFFER AN EXPLANATION OR OFFERS AN EXPLANATION WHICH IS F OUND BY THE ASSESSING OFFICER OR THE CIT (APPEALS) OR THE COMMISSIONER TO BE FALSE. IN SECON D SITUATION THE PERSON OFFERS AN EXPLANATION 6 I. T. APPEAL NO. 3313 (DEL) OF 2010 WHICH HE IS NOT ABLE TO SUBSTANTIATE AND FAILS TO P ROVE THAT SUCH EXPLANATION IS BONAFIDE AND THAT ALL THE FACTS RELATING TO SAME AND THE MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAS BEEN DISCLOSED BY HIM. IN THE CASE BEFORE US THE ASSESS EE HAS OFFERED AN EXPLANATION THAT ON THE BASIS OF AIR IN THE CASE OF HIS SON SHRI ATUL TANDON HE CAME TO KNOW THAT INCOME BY WAY OF CAPITAL GAINS FROM DEEMED REDEMPTION OF UNITS OF MUTUAL FUN D HAD BEEN OMITTED TO BE OFFERED FOR TAXATION. THE AO HAD NOT ISSUED ANY SHOW CAUSE NOT ICE BEFORE THE INCOME WAS OFFERED BY THE ASSESSEE FOR TAXATION. THEREFORE THE EXPLANATION OFFERED BY THE ASSESSEE IN OUR CONSIDERED OPINION IS BONAFIDE. HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. ICON CONTROL P. LTD. (SUPRA) HAS HELD THAT IN A CASE WHERE ASSESSEE DOES NOT MAKE ANY CONSCIOUS ATTEMPT TO CONCEAL INCOME AND THE MISTAKE IN NOT ADDING BACK THE LOSS ON SALE OF CAPITAL ASSET WAS A BONAFIDE OMISSION WHICH WAS IMMEDIATELY CORRECTED ON BEING POINTED OUT THE PENALTY UNDER SECTION 271(1)(C) OF THE ACT WAS NOT IMPOSABLE. FROM THE A SSESSMENT ORDER IT IS CLEAR THAT THE AO HAD COME TO KNOW ONLY FROM THE DETAILS FILED DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND NO NOTICE POINTING OUT NON-ADMISSION OF CAPITAL GAINS HAS BEEN ISSUED TO THE ASSESSEE. THEREFORE IN OUR CONSIDERED OPINION PENALTY UNDER SECTION 271(1 )(C) OF THE ACT IS NOT IMPOSABLE. WE ACCORDINGLY DELETE THE PENALTY. 8. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. THE ORDER PRONOUNCED IN THE OPEN COURT ON : 15 TH JULY 2011. SD/- SD/- [ RAJPAL YADAV ] [ K. D. RANJAN ] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 15 TH JULY 2011. * MEHTA * 7 I. T. APPEAL NO. 3313 (DEL) OF 2010 COPY OF THE ORDER FORWARDED TO : - 1. APPELLANT. 2. RESPONDENT. 3. CIT 4. CIT (APPEALS) 5. DR ITAT NEW DELHI. TRUE COPY. BY ORDER. ASSISTANT REGISTRAR ITAT.