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Late Mr. Tayyab Habib Chotani Versus ACIT, Central Circle-1 (1) , Pune

Levy of penalty u/s.158BFA(2) - suppressed capital gain - Held that:- We find out of addition of ₹ 63,79,104/- made by the Assessing Officer on account of suppressed capital gain on sale of plot of land situated at 208, Yerawada, Pune, the CIT(A) had granted relief of ₹ 30,71,741/- and sustained addition of ₹ 33,07,363/-. We find the Assessing Officer levied the penalty on account of suppressed capital gain of ₹ 36,24,695/- for the purpose of levy of penalty. It is the su .....

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er in the penalty order at page 4 para 8(i). Since the addition sustained is only to the extent of ₹ 33,07,363/-, therefore, we find merit in the argument of Ld. Counsel for the assessee that penalty u/s.158BFA(2) should be levied only on ₹ 33,07,363/- and not on ₹ 36,24,695/-. - Decided in favour of assessee.

Unexplained expenditure on education expenses of son of the assessee - submission of the assessee that if telescoping effect is given to the various additions .....

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s bungalow. Further, cash receipt to the tune of ₹ 14,50,000/- has been accepted by the assessee. Since, telescoping effect has been given only for ₹ 16,81,591/-, therefore, we find some force in the argument of the Ld. Counsel for the assessee that for levying penalty u/s.158BFA(2) penalty can be levied only on the balance amount, i.e. ₹ 23,51,818/- as against ₹ 47,04,520/-. It is the settled proposition of law that penalty proceedings and assessment proceedings are sepa .....

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on the balance amount. - Decided partly in favour of assessee for statistical purposes.

Unexplained investments - it is the submission of the assessee that there was no investment in shares during the block period and all those shares were bonus shares out of the holding of shares prior to the block period. However, this fact was also stated before the CIT(A) - Held that:- The Ld.CIT(A) confirmed the addition on the ground that no evidence was put forth to indicate that the shares acq .....

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prove that the shares are not purchased during the impugned block period and are on account of bonus shares issued out of the debentures or shares held prior to the block period. However, nothing was produced before us to substantiate that the investments are out of bonus shares on shares or debentures held prior to the block period. The assessee has already expressed his inability before CIT(A) to substantiate the same. No purpose will be served by remitting this issue to the file of the AO at .....

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of ₹ 59,43,634/- by the Assessing Officer u/s.158BFA(2) of the I.T. Act and upheld by the CIT(A) is the only issue raised by the assessee in the various grounds of appeal. 3. Facts of the case, in brief, are that the assessee Late Mr. Tayyab Habib Chotani was an individual and was engaged in the business of Auto consultancy, Real Estate and Horse Racing etc. A search u/s.132 of the I.T. Act was conducted at his premises on 14-02-2001 during which various incriminating documents were found .....

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ing 3 additions : (a) addition on account of suppressed Capital gain Rs.36,24,695/- (b) unexplained educational expenses of son Rs.47,07,520/- (c) unaccounted investments in shares ₹ 1,37,500/- 4. So far as the penalty levied on addition on account of suppressed capital gain of ₹ 36,24,695/- is concerned, the facts are that the assessee along with his mother Smt Jainabai H. Chotani was the joint owner of the plot of land situated at 208, Yerwada, Pune. The said plot of land was sold .....

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found and inventorised at Party No 6 in Bundle No 1, Page No 18. The said page contains the amount received by the assessee in cash and by way of cheques from Mr. Karia against the sale of plot of land situated at 208, Yerwada, Pune. The AO made addition of cash received as per the loose paper as undisclosed income of the assessee over and above the consideration as decided in the agreement with Mr. Shirish Karia. Thus, for the detailed reasons given in the Assessment Order, AO computed the sup .....

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this ground for which the Ld.CIT(A) confirmed the addition made by the Assessing Officer. The assessee also did not challenge the issue before the Tribunal. Penalty has been levied accordingly by the AO u/s.158BFA(2) which has been confirmed by the Ld.CIT(A). 6. So far as the penalty levied on the second addition, i.e. Education expenses of son is concerned, the facts are that during the course of search it was revealed that the assessee s son Mr. Mishaal Chotani was studying in Cornell Univers .....

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ce of expense i.e. educational expenses of his son. The assessee stated that his son's educational expenses were borne by Mr. Mohd. Siddique, his cousin from U.A.E. It was further stated by the assessee that Mr. Siddique, a Pakistani National, was going to become the father in law of his son Mr. Mishaal Chotani. The confirmation of Mr. Siddique to the effect that he had incurred educational expenses of Mr. Mishaal Chotani was filed during the course of assessment proceedings. The AO proposed .....

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te of search. Similarly, the AO drew inference that the money belonged to the assessee and it is for this reason that his son has brought all these documents to India and has been giving accounts of his expenditure incurred in USA to his parents. In respect of the claim of the assessee that the expenditure on education of his son was borne by Mr. Usham Ibrahim Siddique, the AO rejected the claim of the assessee on the ground that assessee has not furnished any evidence in support of his claim an .....

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r travelled to the Tribunal the Tribunal vide order dated 29-07-2011 in ITA No.571/PN/2005 for the block period 01-04-1990 to 14-02-2001 upheld the addition made by the Assessing Officer. We find the Tribunal at para 19 of the order has observed as under : 19. Identity, credit worthiness, and the genuineness of the transaction are the relevant issues for deciding the present dispute. Regarding identity, from the above it is evident that it is case of the plurality of name of the impugned credito .....

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n the assessee to demonstrate the same and therefore, we hold the same against the assessee. Regarding the issue of genuineness, we find there is lack of transparency in the matter and claim of Sri Siddique about destroying of the records and thereby following the Dubai's way of accounting and book keeping is not acceptable. Should one destroy the records which constitute the evidences? Thus, there is opacity in matters of identity, creditworthiness and genuineness of the transactions involv .....

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hares valued at ₹ 1,37,500/- were acquired in the block period. During the course of assessment proceedings, the assessee contended that the shares stood in the maiden name of his wife who was filing returns even before the marriage. Similarly, the assessee also contended that the shares were not purchased but were accrual to the original shares in the form of bonus shares. The AO as well as the Ld. CIT(A) did not accept the contention of the assessee on the ground that the assessee's .....

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y the CIT(A) by observing as under : 4.3 I have carefully considered the facts of the case and the law as are apparent from the record. Section 158BFA was introduced by the Income Tax(Amendment) Act, 1997 w.e.f. 1/01/1997, in chapter XIVB, as a lacuna was noticed for not providing provision for interest for delayed filing of return and penalty for understatement of undisclosed income in the block return. Sub.sec.(1) deals with levy of interest and sub.sec.(2) deals with levy of penalty. Penalty .....

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n to the above, only the rates are provided in the main provision which is to be from minimum of the tax leviable upto the three times of the tax leviable. However the two provisos available under this sub sec. defines the circumstances in /which these penalties can be levied or not levied. Though the penalty structure provided in this sub-sec, is similar to the one available in sec.271(1)(c), but it has to be noted that there is no whisper of the words like 'concealment' or 'filing .....

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. Second proviso, disables the applicability of immunity available under the first proviso where the assessed income is more than the returned income and appeals are filed by the appellant. Second proviso therefore can be seen to be dealing with situations in which the additions are made by the AO over and above the returned income and in this respect it has been provided that the penalty shall be imposed on that portion of undisclosed income which are determined in excess of the amount shown in .....

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way of penalty ..............". It has been held that the word "shall" appearing before the rates to be applied only leads to the interpretation that once the penalty is held to be leviable, it cannot be less than the amount of tax determined and which may extend upto three times of the tax so determined. There cannot be any dispute to this interpretation also. Though the appellant has tried to argue that the AO has levied the penalty treating the provision as mandatory, but the s .....

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d to be incorrect. In this context, the appellant has tried to argue the facts relating to additions made in respect of unaccounted receipts resulting into higher capital gains and the unaccounted expenditure found relating to educational expenditure of appellant's son at Cornel University, USA. What the appellant appear to be suggesting was the fact that the AO is required to prove more than what is required for making the assessment, while levying the penalty u/s.158BFA(2). Similar argumen .....

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ed before dismissing the appeal of the appellant filed against the order of the CIT(A). Therefore it is incorrect to claim that any positive evidence was not available on record, for levying the penalty. The order of the Hon'ble ITAT referred to above can be seen for the same alongwith the orders of the lower authorities. Without prejudice to the above finding, as discussed above, in my considered opinion levying of penalty u/s.158BFA(2), does not require fulfillment of conditions similar to .....

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the penalty at the minimum rate and therefore even the quantum of penalty cannot be considered to be excess. The claim of the appellant that the AO has not considered the decision of the jurisdictional High Court given in the case of CIT vs Dodsal Ltd. 312 ITR 112 (Bom), has also been found to be incorrect. As already discussed, the AO has not levied the penalty because he was of the opinion that the penalty is mandatory in all cases of additions. He has considered the nature of the additions a .....

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arbhai P. Parmar (2012) 341 ITR 499 (Guj), it has been held that where an addition on merit has become final, the claim of the assessee that penalty cannot be levied because the addition itself was not justified could not be entertained, and therefore penalty in such cases have to be upheld. The case of the appellant is exactly covered by this judgment also. In Harish Dargan vs. DCIT (2011) 8 ITR (Trib) 125 (Dei), it has been held that where assessee's explanation for cash found was found to .....

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grounds : 1) On the facts and circumstances of the case and in law the honourable CIT (A) erred in confirming the penalty levied ₹ 59,43,634/- by the learned ACIT Central Circle 1(1) Pune under section 158BFA(2) of the Income Tax Act, 1961 without appreciating the facts of the case and the law in proper perspective. The appellant prays that the penalty may please be deleted. Without prejudice to above the appellant is preferring the following grounds of appeal. 2) The appellant had receive .....

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he case and in law the honourable CIT (A) erred in confirming the penalty levied in respect of so called suppression of the capital gain of ₹ 36,24,695/- without appreciating the fact that the appellant had received aggregate cash and cheque not in excess of the agreement value. The honourable CIT (A) and learned AO failed to appreciate the facts of the case. The appellant prays that the penalty levied by AO and confirmed by CIT(A) in respect of alleged suppression of capital gain may plea .....

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he hands of the appellant. The appellant prays that the penalty may please be deleted. 4) On the facts and circumstances of the case and in law the honourable CIT (A) erred in confirming the penalty levied by the learned ACIT Central Circle 1(1) Pune under section 158BFA(2) of the Income Tax Act, 1961 in respect unaccounted investment in shares of ₹ 1,37,500/- without appreciating the fact that the said shares stood in the name of the wife of the appellant. The appellant prays that the pen .....

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y prays that the penalty may please be restricted with reference to suppression of capital gain of ₹ 33,07,363/-. 2. On the facts and the circumstances of the case and in law the Hon ble CIT(A) erred in confirming penalty levied by AO in respect of educational expenses of ₹ 47,04,520 without considering the telescoping effect of cash available of about ₹ 23.52 lacs. The appellant hereby prays that the penalty may please be reduced considering cash available . 12. After hearing .....

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u/s.158BFA(2). We find out of addition of ₹ 63,79,104/- made by the Assessing Officer on account of suppressed capital gain on sale of plot of land situated at 208, Yerawada, Pune, the CIT(A) had granted relief of ₹ 30,71,741/- and sustained addition of ₹ 33,07,363/-. We find the Assessing Officer levied the penalty on account of suppressed capital gain of ₹ 36,24,695/- for the purpose of levy of penalty. It is the submission of the Ld. Counsel for the assessee that in th .....

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addition sustained is only to the extent of ₹ 33,07,363/-, therefore, we find merit in the argument of Ld. Counsel for the assessee that penalty u/s.158BFA(2) should be levied only on ₹ 33,07,363/- and not on ₹ 36,24,695/-. The additional ground raised by the assessee is accordingly allowed and ground of appeal No.2 is dismissed. 14. So far as the penalty levied on addition on account of unexplained expenditure on education expenses of son of the assessee amounting to ₹ 4 .....

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,520/- and penalty can be levied only on the balance amount of ₹ 23,51,818/- (i.e. 47-04,520 - 23,52,702). We find some force in the above argument of the by the Ld. Counsel for the assessee. We find from the various details filed in the paper book that the son of the assessee went to USA during the period 1997 to 2000. The addition is based on the documents found during the search action. It is the submission of the Ld. Counsel for the assessee that during 1993 to 1998 cash receipts of &# .....

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by Mr. Karia Rs.10,40,000 Total Rs.25,84,294 Add : Cash receipt accepted as a Part of sale consideration Rs.14,50,000 Total Rs.40,34,295 Less : Telescopic benefit granted by CIT(A) Rs.16,81,591 Rs.23,52,704 15. Since the addition on account of on-money has been confirmed, therefore, the said amount is available to the assessee to meet the unaccounted expenditure apart from meeting the amount paid towards bungalow. Further, cash receipt to the tune of ₹ 14,50,000/- has been accepted by the .....

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levy of penalty or penalty of a lesser amount. However, the above details furnished by the Ld. Counsel for the assessee requires verification at the level of the AO. We therefore remit this issue to verify as to whether the assessee has taken any benefit out of the on-money received as well as the cash receipt of ₹ 14.50 lakhs and adjustment at ₹ 10.40 lakhs. The AO shall compute the penalty on the balance amount. Needless to say, the AO shall give due opportunity of being heard whil .....

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