Shri Mansukhlal Karsandas Patel (HUF),, JAMNAGAR v. The Assistant Commissioner of Income Tax, Circle-3,, JAMNAGAR

ITA 50/RJT/2009 | 2005-2006
Pronouncement Date: 19-03-2010 | Result: Allowed

Appeal Details

RSA Number 5024914 RSA 2009
Assessee PAN AAGHM0653D
Bench Rajkot
Appeal Number ITA 50/RJT/2009
Duration Of Justice 1 year(s) 1 month(s) 17 day(s)
Appellant Shri Mansukhlal Karsandas Patel (HUF),, JAMNAGAR
Respondent The Assistant Commissioner of Income Tax, Circle-3,, JAMNAGAR
Appeal Type Income Tax Appeal
Pronouncement Date 19-03-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted DB
Tribunal Order Date 19-03-2010
Assessment Year 2005-2006
Appeal Filed On 02-02-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH RAJKOT BEFORE SHRI M.V. NAYAR (AM) AND SHRI D.T. GARASIA ( JM) ITA NO. 50/RJT/09 (ASSESSMENT YEAR 2005-06) SHRI MANSUKHLAL KARSANDAS PATEL (HUF) C/O. M/S. VIRANI & CO. GRAIN MARKET JAMNAGAR APPELLANT PAN : AAGHM0653D V/S. THE ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE-3 JAMNAGAR RESPONDENT ASSESSEE BY : SHRI J C RANPURA C.A. DEPARTMENT BY : SHRI JAI RAJ KUMAR D.R. O R D E R PER M.V. NAYAR A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) JAMNAGAR IN THE APPEAL NO. 105/08-09/487 VIDE ORDER DTD. 24/11/2008. 2. THE ASSESSMENT IN THE CASE OF THE ASSESSEE WAS F INALIZED U/S. 143(3) ON 27.12.2007 WHEREIN THE INCOME OF THE ASSESSEE WAS D ETERMINED AT RS 1 07 65 550/- WHICH WAS THE RETURNED INCOME. HOWEVE R IN THE ASSESSMENT ORDER SO PASSED THE AO HAD ALTERED THE HEADS OF INCOME IN AS MUCH AS OUT OF THE TOTAL LONG TERM CAPITAL GAIN AN AMOUNT OF RS 64 87 500/- WAS TREATED AS SHORT TERM CAPITAL GAIN. THE FACTS OF THE CASE IS THAT O N 10.08.2004 THE ASSESSEE HAD ENTERED IN TO AN AGREEMENT FOR SALE OF 75000 SHARES OF SUZLON ENERGY LTD DURING ITA NO. 50/RJT/2009 A.Y. 2005-06 2 THE YEAR UNDER CONSIDERATION TO M/S. SUZLON CAPITA L LTD. HOWEVER THE DATE OF TRANSFER WAS ADOPTED AT ACTUAL DATE OF TRANSFER BY THE COMPANY I.E. 25.9.2004 AND 20.12.2004. THE AO HAD HELD THAT IN VIEW OF BO ARDS CIRCULAR NO. 704 DATED 28.4.1995 WHEN SHARES ARE TRANSFERRED IN OFF-MARKE T TRANSACTION UNDER ANY AGREEMENT THE DATE OF TRANSFER SHALL BE THE DATE O F AGREEMENT. IN THE CASE OF THE ASSESSEE SINCE THE DATE OF TRANSFER OF 37500 SHARE S RECEIVED ON 30.09.2003 AS BONUS FELL WITHIN ONE YEAR FROM THE DATE OF PURCHAS E THE SAME WERE TREATED AS SHORT TERM CAPITAL GAIN AND TAXED ACCORDINGLY. THE ASSESSEE HAD NO DISPUTE THUS FAR AS THE ORDER WAS ACCEPTED BY HIM AND HE PAID TAX ON THE DIFFERENCE SO DETERMINED IN THE ASSESSMENT ORDER. 3. THE AO HOWEVER INITIATED PENALTY ON THE SAME BY HOLDING THAT THE ASSESSEE HAD FURNISHED INACCURATE PARTICULARS OF IN COME. THIS ORDER OF PENALTY WAS CHALLENGED BEFORE THE LD. CIT(A) WHO HAD UPHELD THE PENALTY ORDER. HENCE THE MATTER IS IN APPEAL BEFORE US. 4. BEFORE US THE LD. AR OF THE ASSESSEE SUBMITTED THAT THE ONLY VARIATION MADE IN THE ASSESSMENT ORDER WAS IN RESPECT OF LONG TERM CAPITAL GAIN ON PART OF HOLDING OF SHARES I.E. 37500 SHARES WHICH WAS TREAT ED AS SHORT TERM CAPITAL GAIN AND THUS IN OTHER WORDS THE RETURNED AND ASSESSED INCOME BEING THE SAME THERE IS NO CONCEALMENT OF INCOME. SECONDLY THE CL AIM WAS ERRONEOUS DUE TO INADVERTENT CLERICAL MISTAKE OCCURRED WHILE ENTERIN G THE DATE WHICH WAS A GENUINE MISTAKE AND IT WAS NOT AN INTENTIONAL AT AL L. AN ERRONEOUS CLASSIFICATION FROM CAPITAL GAIN IN TERMS OF SHORT TERM AND LONG T ERM HAPPENED DUE TO UNINTENDED AND INADVERTENT MISTAKEN INTERPRETATION AS TO DATE OF TRANSFER BASED ON AGREEMENT VERSUS RECORDED DATE WHICH RESULTED IN TO SHORT PAYMENT OF TAX I.E. @ 20% AS AGAINST APPLICABLE RATE OF 30%. SUCH MISTA KEN CALCULATION IS DISTINCT FROM CONCEALMENT. THE CONCEALMENT IMPLIES THE EXIST ENCE OF DELIBERATE INTENT TO PREVENT FACTS TO BE KNOWN WHICH IS NOT IN THE CASE OF THE ASSESSEE. THE LD. AR OF THE ASSESSEE ALSO RELIED UPON THE FOLLOWING JUDICIA L PRONOUNCEMENTS. ITA NO. 50/RJT/2009 A.Y. 2005-06 3 A. UDAYAN MUKHERJEE VS CIT 291 ITR 318 (CAL.) B. CIT VS SARADHA TEXTILE PROCESSORS P LTD. 286 ITR 499 (MAD) C. INDIA CINE AGENCIES VS DCIT 275 ITR 430 (MAD) D. CIT VS JAGJIT ENGINEERING WORKS P LTD 275 ITR 239 (P&H) E. CHANDRA PAL BAGGA VS ITAT 261 ITR 067 (RAJ). 5. WE HAVE CONSIDERED THE PAPER BOOK SUBMITTED BY T HE LD. AR AS ALSO PERUSED THE ASSESSMENT ORDER AS WELL AS THE ORDER O F THE LD. CIT(A). THE MATTER IS NOT IN DISPUTE AS TO WHETHER THE SAID TRANSFER A CCOUNT FOR LONG TERM CAPITAL GAIN OR SHORT TERM CAPITAL GAIN. HENCE THERE IS NO LEGA L ISSUE INVOLVED. THE ONLY GROUND IS THE LEVY OF PENALTY BY THE AO WHO HAD HEL D THAT THE ASSESSEE HAD CONCEALED THE PARTICULARS OF HIS INCOME BY SHOWING SHORT TERM CAPITAL GAIN AS LONG TERM CAPITAL GAIN. 5.1 WHILE UPHOLDING THE PENALTY ORDER THE LD. CIT( A) HAD BROADLY ANSWERED THE FOLLOWING TWO QUESTIONS ARISING OUT OF THE PRES ENT APPEAL AS CAN BE SEEN UNDER PARA 6 OF HIS ORDER. THE ISSUE THEREFORE IN APPEAL AGAINST THE PENALTY RAISED BY THE APPELLANT IS AS FOLLOWS:- I. WHETHER THERE WAS UNINTENDED AND INADVERTENT MIS TAKE IN CLASSIFICATION OF SHARES WHILE ENTERING THE DATE OF SALE OF ABOVE SHARES AT THE TIME OF PREPARING THE RETURN OF INCOME. II. WHETHER THE PENALTY IS EXIGIBLE IN THE CASE WHEN T HERE IS NO CHANGE IN INCOME BUT CHANGE IN APPLICABILITY OF RATES ON GIV EN FACTS I.E. THE ABOVE SHARES WERE TAXABLE AS SHORT TERM CAPITAL GAI N AND THE DIFFERENCE IN TAX BEING RS 7 15 557/-. 5.2 REGARDING QUESTION (I) ABOVE THE LD. CIT(A) CO NCLUDED AS UNDER WHICH CAN BE SEE FROM PARA 6.1 PAGE NO. 10 OF HIS ORDER. ITA NO. 50/RJT/2009 A.Y. 2005-06 4 THE APPELLANT HAS DURING THE COURSE OF PENALTY PROC EEDINGS ADMITTED BEFORE THE AO THAT THERE WAS INADVERTENT ERROR IN C LASSIFICATION OF THE SHARES SOLD WHILE ENTERING THE DATE AT THE TIME OF PREPARING THE RETURN OF INCOME. HOWEVER IT IS SEEN THAT NOTHING PREVENTED THE APPELLANT TO FURNISH THE ABOVE REPLY TO THE NOTICE / SHOW CAUSE NOTICE I SSUED TO THE APPELLANT. THE APPELLANT VIDE SUBMISSION DATED 24.12.2007 MERE LY AGREED TO TAKE THE DATE OF AGREEMENT OF SALE OF SHARES AS 10.8.200 4 IN RESPONSE TO THE SHOW CAUSE. THE APPELLANTS SURRENDER DURING THE CO URSE OF ASSESSMENT ITSELF SHOWS THAT HE WAS CAUGHT ON THE WRONG FOOT A ND HAD NO ALTERNATIVE BUT TO AGREE TO THE TAXABILITY OF THE SALE OF THE A BOVE SHARES AS SHORT TERM CAPITAL GAINS. THE APPELLANT HAS NEITHER DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOR PENALTY PROCEEDINGS SUBMITTED ANY EVIDENCE TO SHOW THAT THERE WAS ACTUALLY WRONG CLASSIFICATION OF SAL E OF SHARES AT THE TIME OF PREPARING OF THE RETURN. ON THE CONTRARY THE APPEL LANT DURING THE COURSE OF ASSESSMENT PROCEEDINGS DID NOT EVEN TAKE THE ARGUME NT THAT THE MISTAKE WAS DUE TO WRONG CLASSIFICATION OF SALE OF SHARES W HICH HAS BEEN TAKEN DURING THE COURSE OF PENALTY AND APPELLATE PROCEEDI NGS. THE CONDUCT OF THE APPELLANT THEREFORE SHOWS THAT HE HAD NO REPL Y TO OFFER TO THE ABOVE FINDING ARRIVED AT BY THE AO. IF THERE HAD BEEN AN INADVERTENT ERROR THE APPELLANT WOULD HAVE FILED THE REPLY DURING THE COU RSE OF ASSESSMENT PROCEEDINGS AND EXPLAINED HIS POSITION AS ABOVE. 5.2 REGARDING QUESTION (II) I.E. WHEN THERE IS NO CHANGE OF INCOME BUT THE INCOME DISCLOSED IS ON ACCOUNT OF LONG TERM CAPITAL GAIN WHICH ATTRACTS LOWER RATE OF TAXATION INSTEAD OF SHORT TERM CAPITAL GAIN WH ICH IS TAXED AT THE NORMAL RATES WHETHER THERE IS CONCEALMENT INVOLVED. THE LD. CIT( A) HELD UNDER PAGE 12 OF HIS ORDER THAT THE AMOUNT OF TAX SOUGHT TO BE EVADED I N THE CASE OF AN ASSESSEE IS THE DIFFERENCE BETWEEN THE AMOUNT OF TAX DECLARED I N THE RETURN OF INCOME AND THE AMOUNT OF TAX ON THE ASSESSED INCOME. THE SAID DIFFERENCE IS ARISING BECAUSE OF THE FACT THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF HIS ITA NO. 50/RJT/2009 A.Y. 2005-06 5 CAPITAL GAIN WHICH ATTRACTS TAX LIABILITY AT 20% ON LY WHEREAS THE FACTS CLEARLY SHOW THAT IT WAS NOT A CALCULATION ERROR OR BONA FI DE MISTAKE BY THE ASSESSEE AND THE CAPITAL GAIN ARISING TO THE ASSESSEE IS CHARGEA BLE TO TAX AS SHORT TERM CAPITAL GAIN AT THE NORMAL RATE. 5.3 WE FIND THAT THE LD. CIT(A) HAS NOT PROPERLY CO NSIDERED THE FACT THAT THE REASONS FOR CONFUSION WAS ON ACCOUNT OF VARIOUS DAT ES OF TRANSFER OF SHARES. THE FACT THAT THERE WAS AGREEMENT DATED 10.08.2004 AND THAT THE RECORD DATES WERE DIFFERENT IS NOT IN DISPUTE. IT IS ALSO FACT THAT T HE ASSESSEE ACCEPTED THE AOS ACTION OF TREATING PART OF THE LONG TERM CAPITAL GA IN AS SHORT TERM IN GOOD FAITH AND UNDER THE BONA FIDE IMPRESSION THAT THE RECORD DATE IS TO BE TREATED AS THE DATE OF TRANSFER AND ON REALIZATION ACCEPTED THE SAME. NOW MERELY BECAUSE HE AGREED FOR THE TREATMENT OF PART HOLDING AS SHORT TERM BY THE AO IN THE ASSESSMENT ORDER DOES NOT MEAN HE HAD A MALA FIDE INTENTION T O EVADE TAX. THE HONBLE RAJASTHAN HIGH COURT IN THE CASE OF CHANDRA PAL BAG GA VS ITAT 261 ITR 067 ON A SIMILAR ISSUE HAD HELD THAT WHEN THE ASSESSEE HAS DISCLOSED THE TRANSACTION WHICH IS THE BASIS FOR CAPITAL GAIN TAX AND THOUGH WRONGLY CLAIMED EXEMPT FROM CAPITAL GAIN THAT CANNOT BE A CASE OF PENALTY UNDER SECTION 271(1)(C). IF IT HAS CLAIMED ANY EXEMPTION AFTER D ISCLOSING THE RELEVANT BASIC FACTS AND UNDER THE IGNORANCE OF THE PROVISIONS OF THE ACT AND NOT OFFERED THAT AMOUNT FOR TAX IN SUCH CASES PENALTY SHOULD NOT B E IMPOSED. IN SUCH CASES RATHER IT IS THE DUTY OF THE AO TO ASK FURTHER DETA ILS AND TAX INCOME IF IT IS LIABLE TO TAX AND THAT HAS BEEN DONE IN THIS CASE. HERE IN THE CASE OF THE ASSESSEE THE ASSESSEE HAD NOT EVEN CLAIMED THE SAME AS EXEMPT. R ATHER HE FILED HIS RETURN SHOWING THE RECEIPTS AS LONG TERM CAPITAL GAIN INST EAD OF SHORT TERM CAPITAL GAIN. IN SUBSTANCE THERE WAS NO DELIBERATE INTENTION TO EVADE PAYMENT OF LAWFUL TAX BY INDULGING IN CONCEALMENT OF TRUE INCOME. WHEN THE D ISCLOSURE WAS TOTAL BUT IMPROPER IN THE EYES OF LAW ON ACCOUNT OF A SPECIFI C EXISTING DIRECTION / CIRCULAR THE AUTHORITIES IN THEIR DISCRETION OUGHT NOT CONSI DER IT PROPER TO IMPOSE ANY PENALTY UNDER SECTION 271(1)(C) IBID AS A CASE OF C ONCEALMENT. TRUE THE MATTER SUFFERED INFIRMITY ON THE PART OF THE ASSESSEE WHI CH WAS MADE GOOD BY THE AO IN ITA NO. 50/RJT/2009 A.Y. 2005-06 6 THE ASSESSMENT ORDER. HOWEVER IT ALSO REQUIRES TO BE APPRECIATED THAT THE ASSESSEE WAS MOVED BY HIS OWN INTERPRETATION ALBEIT SUCH INTERPRETATION BEING AN INNOCENT ERROR. THE REVENUE FAILED TO BRING ON RECO RD THE MALA FIDE INTENTION OF THE ASSESSEE TO EVADE TAX PARTICULARLY WHEN THE EN TIRE PARTICULARS OF INCOME WAS FILED ALONG WITH THE RETURN OF INCOME AND DULY RECO RDED IN HIS BOOKS. THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS AMARNATH (173 TAXMAN 395) HAD HELD THAT THE ASSESSEE ACTED UPON THE ADVICE OF HIS COUNSEL A ND SINCE THE ASSESSEE HAD FURNISHED ALL THE DETAILS RELATING TO THE CAPITAL GAINS ALONG WITH THE RETURN OF INCOME IT CANNOT BE SAID THAT THE AS SESSEE HAD CONCEALED ANYTHING FROM THE REVENUE. THEREFORE THIS MAY BE A GOOD CAS E FOR MAKING ADDITION AGAINST THE ASSESSEE SINCE HE HAD MADE A WRONG CLAI M. HOWEVER THIS ADDITION IN ITSELF IS NOT SUFFICIENT FOR LEVYING THE PENALTY UNDER SECTION 271(1)(C). IN VIEW OF THE FACT THAT THE ASSESSEE HAD CLAIMED THE SAID DED UCTION UNDER A BONA FIDE BELIEF THAT HE IS ENTITLED TO THE SAID DEDUCTION ON THE BASIS OF LEGAL ADVISE GIVEN BY HIS COUNSEL AND THAT HE HAD FURNISHED ALL THE DE TAILS RELATING TO THE CAPITAL GAINS ALONG WITH THE RETURN OF INCOME IT CANNOT BE HELD THAT THERE WAS ANY MALA FIDE INTENTION OF THE ASSESSEE TO CONCEAL THE INCOM E. IN VIEW OF THE ABOVE THE PENALTY IS DIRECTED TO BE DELETED. 6. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER IS PRONOUNCED IN THE OPEN COURT ON _19/03/201 0_ SD/- SD/- (D.T. GARASIA) (M.V. NAYAR) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 19/03/2010 RAJKOT ITA NO. 50/RJT/2009 A.Y. 2005-06 7 COPY FORWARDED TO 1. SHRI MANSUKHLAL KARSANDAS PATEL ( HUF) C/O. M/S . VIRANI & CO. GRAIN MARKET JAMNAGAR 2. THE ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE -3 JAMNAGAR. 3. THE CIT JAMNAGAR 4. THE CIT(A) JAMNAGAR 5. THE D.R. I.T.A.T. RAJKOT 6. THE GUARD FILE TRUE COPY BY ORDER SENIOR P RIVATE SECRETARY