Itxa/750/2016 Of Commissioner Of Income Tax-17 v. Prakash Mangilal Jain

Priya Soparkar IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO.750 OF 2016 Pr. Commissioner of Income-Tax-17. V/s. Prakash Mangilal Jain --- Mr.Suresh Kumar for the Appellant.--- … Appellant … Respondent CORAM : AKIL KURESHI AND M.S.SANKLECHA, JJ. DATE : DECEMBER 10, 2018. P.C.:- 1.This appeal is filed by the Revenue challenging the judgmentof the Income Tax Appellate Tribunal (Tribunal for short) dated 8[th] May, 2015. 2.Following question is presented for our consideration:- “Whether on the facts and in the circumstance ofthe case and in law, the Tribunal was correct inlaw in deleting the penalty levied under section271(C) of the Income Tax Act, 1961?” Priya Soparkar Officer under Section 271(1)(c) of the Income Tax Act, 1961 (theAct for short). The CIT appeals granted at partial relief to theassessee upon which the issue reached the Tribunal. Tribunal bythe impugned judgment deleted the penalty upon which theRevenue has filed this appeal. 4.We have perused the orders on record with the assistanceof learned counsel for the Revenue. The Tribunal in the impugnedjudgment in order to delete the penalty, has made followingobservations: “We have heard the rival submissions and perusedthe material before us. We find that the AO hasmade additions on three counts share transactions,House property income and dividend stripping,that the AO had levied penalty u/s. 271(1)(c) ofthe Act for concealing the particulars of income,that the assessee did not contest additions made bythe AO, that the FAA had confirmed the penaltyorder of the AO. We would like to take up the issue one by onewith regard to the additions made and penaltylevied. The assessee had shown the income fromthe share transaction under the head capital gainswhereas the assessee AO was of the opinion thatsame had to be taxed under the head business head.It is a fact that in the earlier year, income fromshare transaction was accepted by the AO underthe head capital gains. The FAA held that merechange of head could not result levy in penalty. We would like to take up the issue one by onewith regard to the additions made and penaltylevied. The assessee had shown the income fromthe share transaction under the head capital gainswhereas the assessee AO was of the opinion thatsame had to be taxed under the head business head.It is a fact that in the earlier year, income fromshare transaction was accepted by the AO underthe head capital gains. The FAA held that merechange of head could not result levy in penalty. But, in her opinion, by not following the FIFOmethod the assessee had made himself liable forlevying concealment proceedings. We are of theopion that following FIFO or LIFO method cannotbe the basis for levying penalty as per the provisionsof section 271(1)(c) of the Act. In order to justifythe levy of penalty, two factors must co-exist, (i)there must be some material or circumstancesleading to the reasonable conclusion that theamount does represent the assessee's income andthe amount in question was disclosed by theassessee in his return. Explanation filed by theassessee about the disputed amount plays a vitalrole in deciding the justification of levyingconcealment penalty. In the matter before us, theassessee had disclosed all the necessary details. Inour opinion, explanation filed by the assessee inthat regard was bonafide. Secondly, it is anaccepted principle of taxation jurisprudence thatadditions made during assessment proceedingscannot result in automatic levy of penalty.Therefore, we delete the penalty confirmed by theFAA with regard to share transactions. We find thatthe assessee had claimed that all the three houseproperties were his SOPs and he had made ajustifiable claim in that regard. In our opinion, theprovisions of the Act dealing with SOP are veryclear and unambiguous and they stipulate that theassessee cannot claim SOP deduction for more thanone property. In the return filed by the assessee, hehad claimed that all the three properties were to betreated as self occupied . In the explanation it wasstated that in one of the properties his parentswere residing and the property at Nasik was usedfor business purposes. In our opinion theexplanation of the assessee for including theincome from the properties cannot be treated abonafide explanation. A patent wrong andinadmissible claim, made against the clear cut provisions of the Act, falls under the category offiling of inaccurate particulars of income resultingin concealment. Had the return not been picked upfor scrutiny the assessee would be taken benefit ofthe provision even though he was not entitled forit. In these circumstances, we are of the opinionthat the order of the FAA, does not suffer from anylegal infirmity. We uphold her order to that extent.As far as dividend stripping is concerned, we findthat the Tribunal in the case of has dealt theidentical issue and has decided the issue in favourof the assessee in the case of Walter Saldanah(supra). We would like to reproduce the relevantportion of the order and same reads as under: “On perusal of the orders of Revenueauthorities, it is found that the penaltyunder s.271(1)(c) was levied on theground that the assessee violated ofprovisions of s.94(7) by not ignoringlosses while computing short-termcapital gains on transactions related tos.94(7). It is important to state herethat the AO made the addition onlyon the basis of material andinformation furnished by the assessee.But in the case under considerationthe assessee has furnished full detailand has not concealed any particularsof income or has furnished anyinaccurate particular of income.Further, it is noticed that there wereno such specific requirements in thereturn form applicable to the yearunderconsideration.Suchrequirement of the column in thereturn has been inserted byamendment in return form. ITR 6, atp 17, “Sch.CG capital gain” S. No.3(d)which is applicable from asst. yr. 2007-08. A mere making of a claim,which is not sustainable in law, byitself, will not amount to furnishinginaccurate particulars regarding theincome of the assessee. Such a claimmade in the return cannot amount tofurnishing inaccurate particulars. Theassessee demonstrated that theirclaim was bonafide claim. In the lightof above discussion, the case underconsideration is not found to be a fitcase for levy penalty under s.271(1) (c), therefore the penalty levied iscancelled.” Following the above order, we reverse the order ofthe FAA in respect of dividend stripping. Effectiveground of appeal is decided in favour of theassessee, in part.” 5.Perusal of the said portion of the Tribunal's judgment would show that the penalty comprises of two separate elements. The first was with respect to the question whether the assessee'stransactions of sale of shares would result into capital gain or business income. Tribunal noted that in absence of anyconcealment of particulars of income, penalty cannot be attached.Likewise, the second issue was with respect to taxing theassessee's house properties which the assessee had not offered totax. Here also the Tribunal came to the conclusion that theexplanation offered by the assessee for not offering the notional 613 itxa 750-16-o rental income of such properties was a plausible explanation. TheTribunal, therefore, did not confirm the decision of the AssessingOfficer to impose penalty. 6.We are broadly in agreement with the view of the Tribunal.The Tribunal having examined the facts on record, has come tofactual conclusions. No question of law in this respect therefore,arises. 7.The third element of penalty was the assessee's claimexemption on tax pursuant to the dividend stripping activity. Inthis respect, the Tribunal instead of giving independent findingsrelied upon completely on its earlier decision in case of WalterSaldanah. Learned counsel for the Revenue correctly pointed outthat the decision of the Tribunal in the said case of WalterSaldanah was challenged by the Revenue and the Revenue'sIncome Tax Appeal No.62 of 2011 is admitted. Ordinarily,therefore we would have entertained the Revenue's presentappeal also on this issue. However, we notice from the order ofCIT appeals that the Revenue implication in connection with Priya Soparkar 7 13 itxa 750-16-o this issue is barely Rs.66,500/-. Only on this ground of therevenue impact being small, this appeal is not entertained. Wemake it clear that nothing stated in this order would prevent theRevenue from raising all contentions in Income Tax AppealNo.62 of 2011 concerning the Tribunal's judgment in case ofWalter Saldanah. Accordingly, Tax Appeal is disposed of. (M.S.SANKLECHA,J.) (AKIL KURESHI,J.) ….