TMI Blog2014 (1) TMI 1178X X X X Extracts X X X X X X X X Extracts X X X X ..... ular a Managing Director of a listed company can be assumed to know that transactions not carried out in Stock Exchange are liable to tax under the head ‘capital gains' since no STT is payable and the assessees cannot plead ignorance year after year - Following Zoom Communication P. Ltd [2010 (5) TMI 34 - DELHI HIGH COURT] - The assessees herein have not proved the bonafides of making a wrong claim which amounts to furnishing of inaccurate particulars of income - Decided against assessee. - ITA No.4618,4780/Mum/2012 - - - Dated:- 13-11-2013 - D Manmohan And Rajendra, JJ. For the Appellant : Shri V K Tulsian For the Respondent : Shri J K Garg ORDER:- PER : D Manmohan These appeals are filed by the respective assessees against the orders passed by the CIT(A)-25, Mumbai wherein penalty levied under section 271(1)(c) of the Act for assessment years 2007-06 and 2005-06 respectively were confirmed by the learned CIT(A). Shri Ravindrakumar Toshniwal (ITA No. 4618/Mum/2012) 2. The assessee was engaged in the business of export of textiles and yarns. For the year under consideration he has credited a sum of Rs.36,19,831/- referable to sale of shares of M/s. Shree S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the CIT(A) and the same was upheld by the Tribunal. However, since no STT was paid the same was brought to tax under the head capital gains'. The order giving effect to CIT(A)'s order was passed on 16.02.2010. Consequently penalty proceedings were initiated on the ground that the intention of claiming false exemption of tax assessable under LTCG would prove that the assessee has wilfully furnished inaccurate particulars of income, notwithstanding the main claim of Revenue that they are accommodation entries. In response thereto the assessee submitted that it was only during the scrutiny assessment proceedings the assessee came to know through the brokers that STT has not been paid on the said transactions. It was also contended that the transactions were carried out through a broker and genuineness of the transactions cannot be disputed. 5. The AO observed that the assessee cannot plead ignorance of the factum of non payment of STT and the consequent non-taxability of the income therefrom under the head capital gains'. As per statute STT is payable only on transactions entered through a recognised Stock Exchange whereas the impugned transactions were off market transactio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e companies are found not traceable on trading list of the Stock Exchange. 7. Out of curiosity the learned CIT(A) tried to locate the status of M/s. Buniyad Chemicals Ltd. and M/s. Talent Infoways Ltd. He noticed that the companies are not found traceable on trading list of the Exchange and even different websites could not furnish the companies history, quotations, price, etc. The assessee claimed that the factum of non-payment of STT was not known to the assessee which made him to claim exemption under section 10(38) of the Act. Looking at the background of the assessee, the learned CIT(A) observed that such claim is not believable. Perusal of the sale bills and purchase bills shows that the transactions were not carried out through Stock Exchange which implies that no STT was payable by the broker since the transactions were off market transactions. Ordinarily the particulars of payment of STT are mentioned in the bills where transactions are carried out either on BSE or NSE. Under these peculiar facts there is no force in the argument of the assessee that he was not aware of the fact that STT was paid/payable by the broker. Assessee being Chairman Managing Director of liste ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of Reliance Petro Products and distinguished the same with regard to the circumstance under which bonafides of a claim can be accepted. The Hon'ble Delhi High Court observed, in this regard, as under: - It is true that mere submitting a claim which is incorrect, in law, would not amount to giving inaccurate particulars of the income of the assessee, but it cannot be disputed that the claim made by the assessee need to be bona fide. If the claim, besides being incorrect, in law, is mala fide the Explanation 1 to section 271(1) would come into play and work to the disadvantage of the assessee. Having regard to the particular circumstance of the case the learned CIT(A) confirmed the penalty levied on the ground that the assessee claimed exemption of LTCG under section 10(38) of the Act wrongly, with a view to conceal income assessable to tax, by furnishing inaccurate particulars of income and hence it is a fit case for levy of penalty. Aggrieved, assessee is in appeal before us. Smt. Radhika R. Toshniwal (ITA 4780/Mum/2012) 9. This appeal pertains to A.Y. 2005-06. The assessee, in her individual status, declared income of Rs.5,99,510/-, which was processed un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claim of exemption under section 10(38) of the Act. It was further submitted that no case was made out with regard to furnishing of inaccurate particulars or non-submission of particulars with any mala fide intention. The AO observed that the assessee furnished incorrect particulars of income by claiming wrong exemption under section 10(38) of the Act. In this regard he observed that though the assessee has contended that she was not aware of the transaction being off market one but the assessee cannot be assumed to be innocent since not only the assessee but her husband and other family members have claimed similar exemption and it is difficult to assume that they were not aware of nonpayment of STT. Since penalty was levied in the case of assessee's husband also the AO levied penalty @ 100% of tax sought to be evaded. 12. Aggrieved, assessee contended before the CIT(A) that non-payment of Securities Transaction Tax by the broker is not under the control of the assessee and the assessee having furnished all particulars separately, as per available material on the genuine belief of its correctness, merely because there is a difference of opinion about the claim with regard to ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s'; similar order was passed for A.Y. 2005-06 in the case of Shri Ravindrakumar Toshniwal wherein the Bench held that merely because the transactions were off market transactions it cannot be stated that they are bogus transactions; for A.Y. 2005-06 the ITAT D Bench, Mumbai cancelled the penalty levied by the AO by observing that the issue of claim of exemption was not examined by the AO and has been crystallised by the order of the CIT(A) and hence penalty proceedings under section 271(1)(c) cannot be decided by the AO as no such finding or satisfaction or even examination was done by the AO: - i. ITA No. 1356/Mum/2010 dated 13.03.2013 ii. ITA No. 7536/Mum/2010 dated 13.03.2013 iii. ITA No. 5302/Mum/2008 dated 24.02.2010 In the case of Smt. Radhika R. Toshniwal the learned counsel filed a copy of the order of the ITAT in the quantum appeal to show that the transactions of sale of shares are genuine. 15. On the other hand, the learned D.R. submitted that the decision of the Hon'ble Apex Court in the case of Reliance Petro Products is distinguishable on facts. He relied upon the decision of the Hon'ble Delhi High Court in the case of Zoom Communication P. Ltd. ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded in Stock Exchange and STT is paid. It is not in dispute that the assessees miserably failed to prove that they have been traded in Stock Exchange. On the contrary, it is proved beyond doubt that they have not been traded in Stock Exchange but they were off market transactions on which no STT is payable. Shri Ravindrakumar Toshniwal claimed ignorance of the fact that STT is not paid but having regard to the fact that he was Managing Director of a listed company it cannot be assumed that he was not even aware of the nature of transactions, particularly when they involved substantial amount. Under these peculiar circumstances the initial burden is upon the assessees to prove that the assessees bonafidely believed that they were entitled to exemption under section 10(38) of the Act. In the case of Shri Ravindrakumar Toshniwal the ITAT D Bench considered the issue of leviability of penalty for A.Y. 2005-06 wherein the assessee contended that the proceedings under section 271(1)(c) were initiated on an altogether different issue and the issue of section 10(38) was not part of the assessment order and based on such claim the Tribunal, in para 7, observed that penalty cannot be levie ..... X X X X Extracts X X X X X X X X Extracts X X X X
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