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TMI Blog2010 (3) TMI 803X X X X Extracts X X X X X X X X Extracts X X X X ..... Capital Loss of Rs. 17,92,461, a sum of Rs. 34,97,437 was offered to tax as Long Term Capital Gain. 4. During the course of assessment proceedings, the working of Long Term Capital Gain was verified by the Assessing Officer and on such verification, he found from the copies of agreements for purchase of shares that total 4,10,000 shares were purchased by the assessee at Rs. 40 each. The cost of acquisition of 1,05,140 shares sold by the assessee thus, worked out to Rs. 42,05,600 only as against Rs. 2,24,99,960 claimed by the assessee in the working of Long Term Capital Gain. When the assessee was called upon by the Assessing Officer to explain the said difference, it was submitted on his behalf that as per the MOA, the essential pre-requisite for purchase of shares was that the buyers should infuse funds to the extent of Rs. 697 lacs apart from the consideration of shares and as such total amount required to be invested was taken into consideration while adopting the cost of acquisition of shares. It was however, noted by the Assessing Officer from the copy of MOA that cost of the shares was categorically specified at Rs. 40 each and the condition with regard to infusion of funds ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment proceedings to avoid any litigation, the cost of shares was rightly adopted while completing LTCG as per original return. It was submitted that the funds were infused by the assessee as shares application money to be followed by allotment of shares and not as loans and the same therefore were rightly taken in to consideration for adopting cost of acquisition of shares. 6. The submissions made on behalf of the assessee was not found acceptable by the Assessing Officer According to him, the revised statement of total income was filed by the assessee offering the additional LTCG only after it was categorically pointed out to him that as per the relevant MOA, the cost of shares was only Rs. 40 each and other funds infused by him could not be treated as cost of acquisition of shares. He also held that even if it were to be accepted that the said funds were infused as share application money to be followed by the allotment of shares, the amount of such funds could not be treated as cost of the shares acquired by the assessee under MOA by any stretch of imagination. He, therefore, found no merit in the submission made on behalf of the assessee during the course of penalty proceedin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 271(1)(c) of the Act for the following reasons given in paragraphs No. 7 to 7.4 of his impugned order, which read as under :-- "7. I have considered the facts of the case as well as the written submissions made by the AR but do not find merit in them. Regarding the AR's claim that the appellant was under the bona fide belief that the cost of shares sold had to include the amount paid towards the discharge of liabilities of the company, a reference to the Memorandum of the Agreement dated 9-9-2003 clearly indicates that the cost of 41 lacs equity shares would be Rs. 164 lacs meaning thereby, that the cost of each share would be Rs. 40. Thus even in the MOA, the cost of shares was explicitly stated at Rs. 40 per share and there was no scope of any confusion or misunderstanding. The balance amount of Rs. 697 lacs had to be 'infused' into the company to meet the various liabilities of the company. The said infusion of money had to be by way of loans or advances to the said company by the appellant; the price of the shares having been explicitly decided in the MOA itself. 7.2 A further enquiry during the appellate proceedings from the AR clearly establishes that the said amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of acquisition of shares at Rs. 210 each while working out LTCG, but the same was committed by the assessee on the basis of a bona fide belief that the total amount of Rs. 8.61 crores invested in the company for acquisition of entire 4,10,000 shares was required to be taken into account for working out the cost of acquisition of each share sold during the year under consideration. He submitted that when the said mistake was pointed out by the Assessing Officer, the assessee immediately filed a revised computation of total income offering enhanced LTCG which clearly establishes the bona fide of the assessee. He contended that the income so revised was adopted by the Assessing Officer for the purpose of the assessment as clearly mentioned in the assessment order and having done so, he was not justified in imposing the penalty under section 271(1)(c) by alleging that inaccurate particulars of income were furnished by the assessee. He contended that the facts and circumstances of the case of the assessee are such that it is not a fit case to impose penalty under section 271(1)(c) and ld. CIT(A) was not justified in confirming the penalty so imposed by the Assessing Officer. In suppor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee by taking the cost of acquisition of shares at a higher side was detected and on such detection, the assessee was left with no option but to file the revised computation of income offering the higher amount of LTCG. He contended that the revised computation of total income thus was filed by the assessee only after detection of understatement of capital gain by the Assessing Officer and therefore such filing of revised computation would not absolve the assessee from the levy of penalty under section 271(1)(c) as held by the Hon'ble Madras High Court in the case of Ravi & Co. v. Asstt. C1T [2004] 271 ITR 286/[2005] 143 Taxman 287. He also contended that the wrong claim as detected by the Assessing Officer was accepted even by the assessee during the course of assessment proceedings and since the explanation sought to be offered by him in this regard was not substantiated by the assessee during the course of penalty proceedings, the imposition of penalty under section 271(1)(c) by the Assessing Officer was fully justified as rightly held by the ld. CIT(A). He, therefore, strongly supported the impugned order of the ld. CIT(A) and also cited the following case laws :-- We ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt of this contention, he has relied on the various judicial pronouncements. After having gone through the said judicial pronouncements cited by the Learned Counsel for the assessee, we find that the facts involved in the said cases are materially different from the facts involved in the present case and the same are hardly of any help to support the case of the assessee. Even otherwise, the issue as to whether the mistake committed by the assessee is bona fide or not would depend on the facts and circumstances of each case. It is, therefore, relevant to see as to whether the mistake committed by the assessee can be said to be bona fide one in the facts and circumstances of the case and whether all the relevant particulars thereto were fully disclosed by him. In this regard, it is observed that in the working of LTCG arising from sale of shares given in the return of income filed originally, the cost of purchase of shares was taken by the assessee at Rs. 2,24,99,960. However, no details whatsoever were filed by the assessee in relation to the said amount. Even no basis whatsoever was given by the assessee for adopting the said cost. It was only when the Assessing Officer verified t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee to take the cost of purchase of share at Rs. 210 each especially when it was explicitly clear from the agreement for the purchase of shares that the shares were purchased at Rs. 40 per share and this is the way it was reflected even in the books of account of the assessee. Having regard to all these facts of the case, we are of the view that it cannot be said by any stretch of imagination that the assessee was not aware of the exact cost of acquisition of shares and the mistake committed by him in adopting the higher cost of acquisition was bona fide. If at all the assessee had done the working of LTCG in a bona fide manner, he would have furnished the basis or details of cost of purchase of shares taken by him at Rs. 210 per share in the said working given in his original return of income. A perusal of the said working however shows that no such basis or details were furnished by the assessee. It is therefore, difficult to say that the assessee acted bona fide and honestly in returning the correct income originally. We, therefore, find that the assessee has not only failed to substantiate his explanation as regards the higher cost of acquisition of shares claimed wrongly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upra). It was however, observed by the Hon'ble Rajasthan High Court that in the case of Suresh Chandra Mittal (supra) the explanation furnished by the assessee for filing revised return so as to buy peace and come out of litigation was accepted by the Tribunal to be bona fide. It was held by the Hon'ble Rajasthan High Court that the said case thus was of little help to the assessee since in his case explanation furnished was apparently concocted one. 17. In view of the reasons given above, we are of the view that it was a fit case to impose the penalty under section 271(1)(c) as rightly held by the Assessing Officer and the learned CIT(A) is fully justified in confirming the penalty imposed by the Assessing Officer under section 271(1)(c). In that view of the matter, we uphold the impugned order of the ld. CIT(A) confirming the penalty imposed by the Assessing Officer under section 271(1)(c) and dismiss this appeal filed by the assessee. 18. As regards the other appeal filed in the case of Mr. Ravindranath S. Doddi (HUF) being ITA No. 2005/Mum/2009, it is observed that the facts involved are similar to that of the case of Mr. Ravindranath S. Doddi (Individual) except the fact tha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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