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Sri Deo Kumar Saraf Versus Assistant Commissioner of Income-tax, Circle-49, Kolkata

2015 (11) TMI 1065 - ITAT KOLKATA

Levy of penalty u/s. 271(1)(c) - bogus speculation profit - Held that:- In the present case, the assessee has disclosed income from speculation profit only and the case is that he could not prove that this is speculation income or any other income for the want of evidence and merely he has not challenged the quantum addition. Assessee may file an appeal against an order of imposition of penalty even though he might not have filed an appeal against the order of assessment. The assessment proceedi .....

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e revenue to prove that the particular amount is profit not from speculation income but income from other sources against which speculation loss cannot be adjusted. No doubt the findings during assessment proceeding for determining or computing the income is conclusive and it is also a good piece of evidence for initiating penalty proceeding but before penalty could be imposed the entirety of circumstances must reasonably point to the conclusion that the disputed amount represented income that t .....

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rd for setting off - Held that:- AO’s levy of penalty is entirely based on the assessment order that the assessee is unable to prove the profit declared in speculation income received to be one from Nakamichi Securities Ltd. in the absence of evidence. In levying penalty the burden is on the revenue to prove that the particular amount is profit not from speculation income but income from other sources against which speculation loss cannot be adjusted. No doubt the findings in the assessment proc .....

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e penalty u/s. 271(1)(c) of the Act in the given facts and circumstances is not leviable.- Decided in favour of assessee.

Disallowance of expenses against exempt income u/s. 14A of the Act by invoking Rule 8D - Held that:- Where no information given in the return of income is found to be incorrect or inaccurate, the assessee cannot be held guilty of furnishing of inaccurate particulars of income. In the present case also, the AO has nowhere found the explanation of the assessee as fa .....

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Shri Waseem Ahmed, AM: This appeal by assessee is arising out of order of CIT(A)-15, Kolkata in Appeal No.11/CIT(A)-15/14-15/Cir-49/Kol dated 13.01.2015. Assessment was framed by ACIT, Cir-49, Kolkata u/s. 143(3) of the Income-tax Act, 1961 (hereinafter referred to as the Act ) for AY 2009-10 vide its order dated 27.12.2011. Penalty was imposed by ACIT, Circle-49, Kolkata u/s. 271(1)(c) of the Act vide his order dated 27.06.2012. 2. The only issue in this appeal of assessee is against the order .....

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s u/s. 271(1)(c) of the Act is separately initiated . The common initiation of penalty in respect to all the three items was done by AO accordingly. Ld. Counsel for the assessee stated that the CIT(A) also confirmed the levy of penalty even though a specific ground before him was raised that there is no specific charge either of concealment of income or furnishing inaccurate particulars of income and as such penalty imposed by AO itself is bad in law. Ld. Counsel for the assessee also stated tha .....

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atisfaction is reached whether penalty is being levied for concealment of particulars of income by the assessee or whether any inaccurate particulars of income has been furnished by the assessee and there should be a clear cut finding by the AO while initiating penalty. Ld. Counsel heavily relied on the decision of Hon ble Gujarat High court cited supra, which has been followed by Coordinate Bench of this Tribunal in the following cases: 1. ACIT Vs. M/s. Vinayak Properties & Developers (AOP) .....

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, Ld. Sr. DR on the issue of initiation of penalty proceedings and recording of satisfaction heavily relied on the decision of Hon ble Supreme Court in the case of Mak Data P. Ltd. Vs. CIT (2013) 358 ITR 593 (SC), wherein Hon ble Supreme Court has held that the AO recorded a categorical finding that he was satisfied that the assessee had concealed true particulars of income and, therefore, there was no illegality in revenue s initiating penalty proceedings u/s. 271(1)(c) of the Act. It is for th .....

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isfaction in a particular manner or reduce it into writing. The scope of section 271(1)(c) has also been elaborately discussed by this court in Union of India v. Dharmendra Textile Processors (2008) 13 SCC 369 and CIT v. Atul Mohan Bindal (2009) 9 SCC 589. 5. On the issue of initiation of penalty and recording of satisfaction, we have heard both the sides and gone through facts and circumstances of the case. We have noticed that the AO has initiated penalty proceedings u/s. 271(1)(c) of the Act .....

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gs and there is no further requirement under the Act to reduce it into writing. This view of ours is fully supported by the decision of Hon ble Supreme Court in Mak Data P. Ltd., supra. Accordingly, this jurisdictional issue is decided against the assessee and in favour of revenue. 6. Coming to the merits of the case. The first aspect added by the AO is bogus speculation income. Briefly stated facts are that the assessee has disclosed speculation profit to the extent of ₹ 53,34,463/- in th .....

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1 from Nakamichi Securities Ltd. 23A, N. S. Road, Kolkata-700001. The AO served a notice u/s. 133(6) of the Act to Nakamichi Securities Ltd. having its registered office at Mercantile Building, Block Ä , 1st floor, 9/12, Lal Bazar St., Kolkata 700001. Nakamichi Securities Ltd responded to the notice u/s 133(6) of the Act stating that no such share trading profit was given to the assessee company and they have denied the same. The AO accordingly, added the undisclosed speculation profit to t .....

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not provided. Accordingly, AO accepted sale and purchase account of shares but disallowed the claim of interest received/adjusted against sale and purchase and added to the returned income of the assessee under the head interest received. This was also not contested by assessee in second appeal and assessment was accepted as it is. 8. Coming to third item of addition in respect to disallowance of expenses qua exempt income by invoking the provision of section 14A of the Act read with rule 8D of .....

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vidence was filed contrary to the observation of the AO made in the assessment order in respect to all these three items. Accordingly, AO levied penalty u/s. 271(1)(c) of the Act for furnishing inaccurate particulars of income as under: On the basis of the above discussion, total penalty u/s. 271(1)(c) on the issues as discussed above, is computed as under. Penalty imposed as per discussion in para 2.0 Rs.17,60,912/- Penalty imposed as per discussion in para 3.0 Rs. 3,82,940/- Penalty imposed as .....

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s of income. Hence, after discussing the modus operandi of assessee, he confirmed the levy of penalty relying on the decision of Hon ble Supreme Court in the case of K. P. Madhusudanan Vs. CIT (2001) 251 ITR 99 (SC) and also Hon ble Karnataka High Court decision in the case of B. Damodar Vaman Baliga Jewellers Vs. JCIT (2014) 353 ITR 205 (Kar). In respect to suppression of interest income under the head short term capital loss, the CIT(A) confirmed the penalty by observing that this intra head a .....

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ccordingly, he confirmed the penalty on this count also. Aggrieved, now assessee is in second appeal before Tribunal. 11. We have heard rival submissions and gone through facts circumstances of the case. The first aspect of merits of the case is that the assessee has claimed speculation profit amounting to ₹ 53,34,463/- earned on account of share trading with Nakamichi Securities Ltd. but Nakamichi Securities Ltd. vide letter dated 21.12.2011 denying having any transaction with the assesse .....

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ceedings or during the penalty proceedings. Even during first appeal, this letter of Nakamichi Securities Ltd. was never confronted to the assessee. When a specific query was put to Ld. Sr. DR he categorically stated that this statement was never confronted to the assessee. When a query was put from the bench whether any details or evidence were filed by the assessee in respect to speculation profit of ₹ 53,39,463/- other than a certificate purportedly received from Nakamichi Securities Lt .....

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e from speculation profit only and the case is that he could not prove that this is speculation income or any other income for the want of evidence and merely he has not challenged the quantum addition. Hon ble Rajasthan High Court in the case of CIT Vs. G. Nemichand (1976) CTR (Raj) 193 held that an assessee may file an appeal against an order of imposition of penalty even though he might not have filed an appeal against the order of assessment. The assessment proceedings are quite distinct and .....

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e particular amount is profit not from speculation income but income from other sources against which speculation loss cannot be adjusted. No doubt the findings during assessment proceeding for determining or computing the income is conclusive and it is also a good piece of evidence for initiating penalty proceeding but before penalty could be imposed the entirety of circumstances must reasonably point to the conclusion that the disputed amount represented income that the assessee has concealed .....

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ital loss of ₹ 9,67,232/- and gave complete computation of purchase and sale of shares, which is as under: Shares Purchase A/c 14,51,62,084.49 Less: Interest received 11,26,622.00 14,40,35,464.49 Shares Sales A/c. 14,30,68,229,97 SHORT TERM CAPITAL GAIN/LOSS 9,67,232.52 13. The assessee has also reduced interest received from share purchase account at ₹ 11,26,622/- and disclosed in the return of income and made a claim. The assessee has reduced interest income from the cost of shares .....

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hares in Balarampur Chini Mills Limited in NSE for FY 2008-09 relevant to AY 2009-10. According to them, it does not have any transaction with the assessee. The assessee s main claim was that this letter of Nakamichi Securities Ltd. was never confronted to the assessee during the course of assessment proceedings or during the penalty proceedings. Even during first appeal, this letter of Nakamichi Securities Ltd. was never confronted to the assessee. When a specific query was put to Ld. Sr. DR he .....

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that the assessee has concealed the particulars of income. Once the very basis for levy of penalty is in doubt, it cannot be said that the assessee has concealed the particulars of income or furnished inaccurate particulars of income, as the case may be. Here in the present case, the assessee has disclosed income from speculation profit only and the case is that he could not prove that this is speculation income or any other income for the want of evidence and merely he has not challenged the q .....

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. In the present case before us, the AO s levy of penalty is entirely based on the assessment order that the assessee is unable to prove the profit declared in speculation income received to be one from Nakamichi Securities Ltd. in the absence of evidence. In levying penalty the burden is on the revenue to prove that the particular amount is profit not from speculation income but income from other sources against which speculation loss cannot be adjusted. No doubt the findings in the assessment .....

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t the penalty u/s. 271(1)(c) of the Act in the given facts and circumstances is not leviable. Accordingly, we delete the penalty and allow this issue of assessee s appeal. 14. Now coming to third aspect on account of disallowance of expenses against exempt income u/s. 14A of the Act by invoking Rule 8D of the I. T. Rules, 1962. We find that the assessee himself disclosed the same in audit report in Form No. 3CB and 3CD along with return of income and complete particulars were filed along with re .....

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enalty u/s. 271(1)(c) of the Act. A mere making of a claim, which is not sustainable in law, by itself will not amount to furnishing of inaccurate particulars of income regarding those items of income of the assessee. Such a claim made in the return of income cannot be treated as furnishing of inaccurate particulars of income. The provisions of section 271(1)(c) of the Act clearly defined that there has to be concealment of the particulars of income by the assessee and secondly the assessee must .....

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In the present case also, the AO has nowhere found the explanation of the assessee as false and moreover from the details filed it could not be ascertained that the claim made by assessee is false. The AO has to prove that the assessee has concealed the particulars of income. In such circumstances, the penalty levied by the AO cannot be sustained. 16. Here, we are relying on the decision of Hon ble Supreme Court in the case of Reliance Petro-product Ltd. supra, wherein Hon ble court has observed .....

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conjunction, they must mean the details supplied in the return, which are not accurate, not exact or correct, not according to truth or erroneous. We must hasten to add here that in this case, there is no finding that any details supplied by the assessee in its return were found to be incorrect or erroneous or false. Such not being the case, there would be no question of inviting the penalty under section 271(1)(c) of the Act. A mere making of the claim, which is not sustainable in law, by itse .....

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come. It was, therefore, reiterated before us that the Assessing Officer had correctly reached the conclusion that since the assessee had claimed excessive deductions knowing that they are incorrect ; it amounted to concealment of income. It was tried to be argued that the falsehood in accounts can take either of the two forms ; an item of receipt may be suppressed fraudulently ; (ii) an item of expenditure may be falsely (or in an exaggerated amount) claimed, and both types attempt to reduce th .....

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