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2015 (5) TMI 348 - ITAT DELHI

2015 (5) TMI 348 - ITAT DELHI - [2015] 41 ITR (Trib) 655 (ITAT [Del]) - Penalty u/s 158BFA(2) - CIT(A) deleted penalty levy - Held that:- Where two views are possible on the issue, the penalty is not imposable in such cases.

Therefore in such an event as per the spirit of decision of Hon’ble Delhi High Court in the recent case of CIT vs. Sarla Fabrics P. Ltd. (2012 (7) TMI 803 - DELHI HIGH COURT) the Hon’ble Court by relying on their own decision in the case of CIT-IV, New Delhi vs. .....

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mandatory, therefore, in our view, Ld. CIT(A) has rightly deleted the penalty, which in our opinion does not need any interference, accordingly, we uphold the order of the CIT(A) of deleting the penalty made u/s. 158BFA(2) and dismiss the appeal of the Revenue. - Decided in favour of assessee. - I.T.(SS)A. No. 11/DEL/2013 - Dated:- 20-4-2015 - Shri H.S. Sidhu And Shri T.S. Kapoor JJ. For the Appellant : Sh. Gunjan Prashad, CIT(DR) For the Respondent : S h. Rohit Jain, Adv. & Ms. Deepashree .....

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1961. 2. The order of the CIT(A) is erroneous and is not tenable on facts in law. 3. The assesseecraves lave to add, alter or amend any / all of the grounds of appeal before or during the course of the hearing of the appeal. 3. The brief facts of the case are that a search and seizure action u/s. 132 of the I.T. Act was carried out in Shyam Telecom Group of cases on 13.1.2000. Papers relating to the assessee were also seized during the search operation. As there was no search warrant in the name .....

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were found indicating a planning to book long term capital gains. The long term capital gain to be booked in the case of the assessee was ₹ 19,88,140/-. In reply to a question regarding the nature of the profit earned by the assessee, Sh. Rajiv Mehrotra, Chairman of the group replied that the company has earned a long term capital gain of ₹ 19,88,140/- during the A.Y. 1999-00, but in the absence of documents evidencing the transactions in time, the tax could not be paid and return no .....

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served from the regular income tax records, that the return was filed by the assessee on 31.3.2000, i.e. after the due date, as the due date of filing for the return in the case of the assessee was 31.12.1999. Therefore, the case of the assessee was covered in the ambit of provisions of section 158BB(1)(c). Accordingly, assessee was asked to file the written submissions. Assessee filed its written submissions. But AO did not agree with the submission of the assessee and he completed the assessme .....

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) No. 70/Del/2003 and ITA (SS) No. 72/Del/2003 respectively, by relying on the decision of the Hon ble Delhi High Court in the case of Mrs. Kumkum Kohli (2005) 276 ITR 589 (Del) had allowed the appeal of the assessee. Aggrieved with the ITAT order, Revenue has filed the appeal before the Hon ble High Court u/s. 260A of the I.T. Act, 1961 and the Hon ble High Court has vide common order for the five assesses of the group on similar issue has allowed the appeal of the Revenue and set aside the ord .....

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the Ld. CIT(A), now the Revenue is in appeal before the Tribunal. 7. At the time of hearing Ld. Departmental Representative has relied upon the order of the Assessing Officer and reiterated on the contentions raised in the grounds of appeal filed by the Revenue. 8. On the other hand, Ld. Counsel of the assessee relied upon the order of the Ld. CIT(A) and submitted that the order of the Ld. CIT(A) may be upheld. Ld. Counsel of the assessee in support of his contention filed a Brief Synopsis, whic .....

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sessee had earned income from transfer of shares in a company called M/s. SRU Knitters Limited, which was acquired in the earlier year(s). Income-tax return for the assessment year 1999-2000, which was due on 31st December, 1999 under section 139(1) of the Act, could not be filed due to non-receipt of certain documents in support of the transfer of shares. The said return of income for the assessment year 1999- 2000 was filed under section 139(4) of the Act on 31 st March, 2000. It is a matter o .....

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ies on 13th January, 2000, various documents, including provisional financial statements of the assessee for the year ended 31 "March, 1999 was found by the search party. In the said financial statements gains arising on transfer of shares were duly reflected. However, merely on account of non-filing of return of income for the assessment year 1999-2000 before the due date as prescribed in section 139(1) of the Act, income arising on transfer of shares amounting to ₹ 19,59,220 was tre .....

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eal preferred by the Revenue, the order of the Tribunal was, however, reversed by the Hon'ble Delhi High Court vide order dated 29th November, 2010. The High Court, after admitting the substantial question of law raised by the Revenue, held that on account of nonfiling of return before the due date prescribed in section 139(1) of the Act, gainsarising on transfer of shares has to be regarded as "undisclosed income". In the aforesaid facts, the assessing officer vide order dated 19t .....

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i) The investment in shares (which were sold during the year and on which long term has been earned) were duly been reflected in the financial account of the year in which they were purchased. ii) The sale consideration/gain which has been received during the year under consideration has duly been deposited in the declared bank account of the appellant. iii) The unaudited profit and loss account and balance sheet which were found during the search, duly contains the recording of the transaction .....

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me for assessment year 1999-2000 was not filed before the due date i.e. 31.12.1999, therefore the amount of long term capital was rightly assessed as "undisclosed income" with the meaning of section 158BB(1)(c). But the fact that such shares were duly recorded in unaudited balance sheet, profit and loss account and sale proceeds have been deposited in the declared bank account and also the investment in shares (which were sold in the year under consideration) were found to be duly reco .....

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n 158BFA(2) is not an automatic action, the words "may direct" mentioned in section 15 8BF A(2) has to be given its normal meaning. The word "may" cannot be read as "shall". 4.5 Looking into the facts of the appellant's case, it is quite likely that the assesseemight be waiting for the requisite details of shares sold and this may be the genuine reason for not been able to file the return of income by due date i.e. 31.12.1999, but the fact remains that he did fi .....

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7 of 2011), where on the similar facts the ITAT has held penalty under section 158BF A(2) is not leviable if the return of income is not filed by the due date, but the income be assessed as undisclosed income within the meaning of section 158BB(1)(c): "If the assessee had not furnished its belated return immediately after the search, the assessee would have definitely offered the capital gains for taxation in its blockreturn. If that amount is offered through the block return there would be .....

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ory, and AO must use his judicial consideration before imposing the penalty. The foot notes of the said decision read as under: "We have already noted that because the assessee had surrendered the amount bonafide and for the purposes of buying peace and avoiding protracted litigation, it did not follow that there was a determination of undisclosed income in the terms stipulated in Section 158 BC (c) or 158 BB (1) of the said Act. Once this is recognized, there is no question of imposing a p .....

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158 BF A (2) was liable to be cancelled." 4.8 Also it is a trite law that where two views are possible on the issue, the penalty is not imposable in such cases. Applying, this principle to the facts of the present case, it is seen that as per ITAT's decision dated 03.08.2007 in the facts of the appellant's case the capital gain on shares is "not to be treated as undisclosed income", whereas the Hon'ble Delhi High Court vide their decision dated 29.11.2010, was of the v .....

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elhi vs. IP India P. Ltd. (20-4 Taxman 368) (2012) have held that: "Where there is a difference of opinion either between different Benches of Tribunal or the High Courts, which is finally settled by the pending judgment of the Supreme Court and all necessary facts have been disclosed by the assesses in its return, the penalty is not warranted." 4.9 Thus in view of the above discussions, I am of the considered view that in the facts of the appellant's case, the imposition of penalt .....

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sed the material on record. The uncontroverted facts of the case as noticed by the CIT(A) are as follows:- (i) the investment in shares (which were sold during the year and on which long term has been earned) were duly been reflected in the financial account of the year in which they were purchased. (ii) the sale consideration/gain which has been received during the year under consideration has duly been deposited in the declared bank account of the appellant. (iii) the unaudited profit and loss .....

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om the above facts, it is clear that return of income was not filed within due date prescribed u/s 139(1) and in the meanwhile since there was a search, long term capital gain was rightly assessed as undisclosed income within the meaning of Section 158BB(1)(c) of the Act. However, to hold that the assessee has concealed particulars of income and penalty u/s 158BFA(2) is to imposed on facts of this case is unjustified. The penalty u/s 158BF A is not automatic and the assessee did not have any int .....

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unaudited P&L account and balance sheet which were seized in the course of search contained the recording of the transaction of the sale of the shares and resulting capital gains. 7.2 Further, whether long term capital gains can be treated as "undisclosed income" is debatable issue. The assessee had succeeded in the quantum assessment before the Tribunal. On further appeal by the Revenue u/s 260A of the Act the Hon'ble High Court reversed the Tribunal's order. It has been .....

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osed. The relevant finding of the Hon 'ble High Court read as follows: "In the facts of this case, we are of the opinion that This issue is debatable. We say so because of the reason that not only in the quantum proceedings the Commissioner of lncome-tax (Appeals) had deleted the additions, even when the Tribunal reversed the order of the Commissioner of lncome-tax (Appeals) and this court also dismissed the appeal of the assessee, the Supreme Court has remitted the case back to this co .....

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IT Vs. HB. Leasing and Finance Co. Ltd. reported in 334 ITR 367 and CIT Vs. Devsons Logistics (P) Ltd. reported in 329 ITR 483, we hold that the penalty is not imposable on facts and circumstances of this case. In view of the aforesaid reasoning, we uphold the order of the CIT(A) as correct and in accordance with law, and no interference is called for. It is ordered accordingly. 8. In the result, appeal of the Revenue is dismissed. " (emphasis supplied) It may be pertinent to mention here t .....

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e records especially the impugned order dated 1.2.2013, it is an established preposition that the assessment proceedings and penalty proceedings are two all together different proceedings. An issue may call for an additions in the assessment proceedings, but that addition in itself cannot be the sole ground for imposition or levy of penalty. For the purpose of imposing a penalty, the AO has to walk a little extra mile to prove that the assessee has concealed or likely to conceal the income or fu .....

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ome" and "furnishing of inaccurate particulars" indicate some deliberation on the part of the assessee, though the word "deliberately" and the word willfully" are no longer part of the statue. (ii) Mere omission or negligence would not constitute a deliberate act of suppressiio veri or suggestio falsi. (iii) Primary burden a/proof is on the revenue. The statute requires satisfaction on the part of the Assessing Officer. He is required to arrive at a satisfaction so .....

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e still quasi-criminal requiring the Department to establish that the assessee has concealed his income. 9.2 Ld. CIT(A) further observed that: (i) the investment in shares (which were sold during the year and on which long term has been earned) were duly been reflected in the financial account of the year in which they were purchased. (ii) the sale consideration/gain which has been received during the year under consideration has duly been deposited in the declared bank account of the appellant. .....

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ain have duly been reflected. 9.3 We find considerable cogency in the observations of the Ld. CIT(A) that since the search took place on 13.01.2000, and by that time the return of income for Assessment Year 1999-2000 was not filed before the due date i.e. 31.12.1999, therefore the amount of long term capital was rightly been assessed as "undisclosed income" with the meaning of section 158BB(1)(c). But the fact that such shares were duly been recorded in unaudited balance sheet, profit .....

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enalty must bring on record the primary evidence to establish that the assessee had undisclosed income which he was concealing or likely to conceal. The levy of penalty under 'section 158BFA(2) is not an automatic action, the words "may direct" mentioned in section 158BFA(2) has to be given its normal meaning. The word "may" cannot be read as "shall". 9.4 We find that the Ld. CIT(A) has rightly observed that assessee might be waiting for the requisite details of .....

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on 31.03.2000. 9.5 We further find that Ld. CIT(A) has rightly relied on the decision of ITAT Chennai Bench dated 07.06.2011 in the case of K. Ramakrishnan (HUF) vs. DClT (IT(SS) No. 7 of 2011), where on the similar facts the ITAT has held that penalty under section 158BFA(2) is not leviable if the return of income is not filed by the due date, but the income be assessed as undisclosed income within the meaning of section 158BB(1)(c) of the I.T. Act, 1961. 9.6 We are of the view that the Ld. CIT .....

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lty in certain cases - Block period 1-4-1999 to 6-7-2000 - Whether Legislature did not intend imposition of penalty under section 158BFA{2} by itself to be mandatory; rather it intended same to be left to discretion, which of course has to be exercised upon judicial considerations of Assessing Officer - Held, yes - Whether a pre-condition for imposition of penalty under section 158BFA{2} is that there must be a determination of undisclosed income by Assessing Officer under clause {c} of section .....

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no penalty would be imposable under section 158BFA{2} in such case - Held, yes 9.7 Keeping in view of the facts and circumstances of the case, we are of the view that that where two views are possible on the issue, the penalty is not imposable in such cases. Applying, this principle to the facts of the present case, it is seen that as per ITAT's decision in the facts of the assessee s case the capital gain on shares is "not to be treated as undisclosed income", whereas the Hon' .....

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