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Heeranand Ghanshyam Sukhwani and Mohini Ghanshyam Sukhwani, Versus The Income Tax Officer, Ward 8 (2) , Pune.

2016 (1) TMI 630 - ITAT PUNE

Penalty under section 271(1)(c) - unaccounted transaction of shares - dilution of quantum penalty seeked by assessee - Held that:- We find the sequence of transactions as very disconcerting and integruing. The purchase transactions is not routed through stock exchange. It is ‘off market’ transaction where shares have been acquired against payment of ‘cash’. The impugned transaction is the only transaction with the Mumbai Brokers. Again, the shares were received in the Demat Account of the assess .....

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company had not income of more than couple of lakhs. However, there is a huge price rise. From the above facts, it is crystal clear that the purchase transactions have been concocted and manipulated to declare wrongful long term capital gains.

The transactions have been executed through Demat Account and transfer has taken place against the sale. The sale part of the transactions has not been disputed per-se. In view of the above mitigating circumstance, we feel that the assessee dese .....

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CIT(A) has accepted the purchase and sale transaction albeit holding the same as short term capital gain instead of long term capital gain. In the circumstances, it is difficult to say that the transactions do not exist per se. In the totality of circumstances, we feel that while the quantum addition has been sustained on a different footing than what was proposed by the Assessing Officer, imposition of penalty would not be justified on the basis of unproved facts. We, accordingly, set-aside th .....

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disposed of by this consolidated order for the sake convenience and brevity. Heeranand Ghanshyam Sukhwani in ITA No.1513/PN/2013: A.Y. 2003-04 2. First, we may take-up the appeal in the case of Heeranand Ghanshyam Sukhwani in ITA No.1513/PN/2013 which is directed against the order of Commissioner of Income Tax (Appeals)-V, Pune dated 30.05.2013 relating to assessment year 2003-04 passed under section 271(1)(c) of the Income-tax Act, 1961 (in short the Act ). 3. In this appeal, the assessee has r .....

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craves leave to add, alter or amend to the grounds of appeal, before or at the time of hearing. 4. The appeal pertains to levy of penalty under section 271(1)(c) of the Act amounting to ₹ 1,06,800/- @ 150% of the tax evaded. 5. The relevant facts as briefly stated are that the assessee has claimed long term capital gains of ₹ 3,36,476/- on account of sale of Database Finance Ltd. shares which are as under :- Details of share purchase Purchase details scrip Sr. No. Purchase date Purc .....

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ni Group which was covered in search action under section 132 of the Act on 14.06.2006. During the course of search action, Shri Ghanshyam J. Sukhwani, father of the assessee was confronted in respect of sale and purchase of transactions in respect of penny stock companies like Database Finance Co. Suryadeep Salt Ltd. and Fast Tract Entertainment Ltd.. In the course of statement, Shri Ghanshyam J. Sukhwani offered to pay tax @ 30% in case of his wife, while in his own case, it was claimed that t .....

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y members were genuine as it was backed by documents. The Assessing Officer, however, noticed that detailed enquiry was conducted by Bombay Stock Exchange as well as SEBI in respect of the shares and price manipulation of Database Finance Co. Ltd. and SEBI has suspended the brokers Vijay Bhagwandas & Co., DPS Shares & Securities Pvt. Ltd., T.H. Vakil Shares Securities Pvt. Ltd., and several other entities for price manipulation. The Assessing Officer also noticed that the Income-tax Depa .....

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sing Officer further noticed that the onus placed upon the appellant to prove the genuineness of the transaction was not discharged by him. 9. In the backdrop of the enquiries conducted by the Income Tax Department, the Assessing Officer required the assessee to prove the genuineness of the capital gains vide his office letter dated 13.03.2008. The assessee was also asked to produce the Mumbai Brokers as the assessee s witness. In response, the assessee merely filed contract notes in support of .....

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purchase transaction is not routed thought B.S.E. BOLT system. It is an off market deal. 4) Shares have come to the Demat Account on 5-09-2002 whereas the share was purchased on 13-04-2001. 5) Shares were sold on 17-08-2002 whereas as per the details furnished share came in to Demat Account only on 05-09-2002. 6) Shares were sold on 17-08-2002 but they were transferred out from the Demat Account only 17-09-2002, 7) The Mumbai brokers who were part of the ring which used to manipulate the price i .....

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0. In the light of the above observations, the Assessing Officer observed that what was stated by Shri Ghanshyam J. Sukhwani, in his statement under section 132(4) of the Act on the date of search are relevant. Such statement has an immense evidentiary value. Subsequent retraction which is only an afterthought and does not have any merit in it. The Assessing Officer observed that the genuineness of the transactions itself is in question and accordingly he concluded that the claim of capital gain .....

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essional rate. He accordingly assessed the undisclosed income including the estimated cost involved in obtaining such accommodation entries and calculated penalty at ₹ 2,13,600/- being 300% of the tax sought to be evaded. To support his action, he observed that the purchases are bogus and antedated. The entire series of alleged transaction are premeditated and meticulously planned. 11. In first appeal, the CIT(A) upheld the action of levy of penalty. However, he observed that interest of j .....

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actually delivered in his Demat Account which is a reality. The appeal has not been preferred before the Tribunal in the quantum appeal only to avoid the protracted litigation. He, therefore, pleaded that the penalty sustained by the CIT(A) should be set-aside and cancelled. In support of the contentions raised, the Assessee relied on following case laws: (i) Smt. Smita P. Patil & Ors. vs. ACIT, (2014) 159 TTJ 0182 (Pune); (ii) ITO vs. Ajay Shantilal Lalwani & Neelesh Shantilal Lalwani, .....

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um-Trib) 14. In the alternative, the penalty should be reduced to minimum being 100% of the tax evaded as provided by the statute. 15. The Ld. Departmental Representative for the Revenue, on the other hand, vehemently relied upon the orders of the authorities below and submitted that it is gross case for sustenance of penalty. He relied upon the decision of the Hon ble Supreme Court in the case of MAK Data (P.) Ltd. vs. CIT reported in (2013) 358 ITR 593 (SC) and which lays down that in the abse .....

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considered the rival submissions, orders of the authorities below and perused the case laws. We find the sequence of transactions as very disconcerting and integruing. The purchase transactions is not routed through stock exchange. It is off market transaction where shares have been acquired against payment of cash . The impugned transaction is the only transaction with the Mumbai Brokers. Again, the shares were received in the Demat Account of the assessee on 05.09.2002 after a gap of nearly 1 .....

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n couple of lakhs. However, there is a huge price rise. From the above facts, it is crystal clear that the purchase transactions have been concocted and manipulated to declare wrongful long term capital gains. In MAK Data (P.) Ltd. (supra), the Hon ble Supreme Court held on facts that when the assessee had no intention to declare its true income and no explanation is offered for alleged concealment of income, the imposition of penalty justified. The Assessing Officer has reportedly made detailed .....

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til (Supra) inter alia arrived at a finding that Assessee failed to establish clear case against the assessee and contract notes were found to be genuine. This is not so in the present case. Likewise, facts in other cases cited are materially different. Incisive circumstances pitted against the assessee in the present case pointing out to dishonest conduct were absent in cases cited by the assessee. However, in the same vein, we find that the transactions have been executed through Demat Account .....

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o assessment year 2003-04 is dismissed. Heeranand Ghanshyam Sukhwani in ITA No.1514/PN/2013: A.Y. 2004-05 18. The relevant grounds of appeal in ITA No.1514/PN/2013 concerning A.Y. 2004-05 against the order of CIT(A)-V, Pune dated 30.05.2013 is noted below for ready reference :- 1. On the facts & circumstances of the case & in law, the learned CIT(A)-V, Pune erred in law and on facts in levying concealment penalty of ₹ 2,27,500/- on the appellant for furnishing inaccurate particular .....

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nsaction involved is noted below for convenience :- Details of share purchase of Suryadeep Salt Ltd. (SSL) Purchase details scrip Sr. No. Purchase date Broker Name Qty Qty Purchase Rate Purchase amount Demat Date Payment details 1 23/10/02 Drishti Securities Pvt. Ltd. 10000 3.2 33,500 5/6/03 Chq. No.051962 Dtd. 25/12/02 for Rs.81,500/- 2 25/09/02 15000 48000 5/6/03 Total 81,500 15000 shares written off on 01/04/2007. Details of share sales Sr. No. Date of sale Sale through (Broker) Qty Sale rate .....

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ear. The transfer towards purchase by the selling broker was albeit after more than 7 months of purported purchase by the Assessee. As noted in the quantum order of the CIT(A), the shares were credited to the demat account of the Assessee on 5-6-2003. It is also noted in this year that the purchase considerations were paid by cheque dated 25/12/2002 albeit delayed by 2 to 3 months of the purchase as against purported cash payment for the earlier year. In the backdrop of such variances, the trans .....

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ransaction albeit holding the same as short term capital gain instead of long term capital gain. In the circumstances, it is difficult to say that the transactions do not exist per se. In the totality of circumstances, we feel that while the quantum addition has been sustained on a different footing than what was proposed by the Assessing Officer, imposition of penalty would not be justified on the basis of unproved facts. We also find that the facts in this case are broadly similar to the case .....

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d 30.05.2013 is noted below for ready reference. 1. On the facts & circumstances of the case & in law, the learned CIT(A)-V, Pune erred in law and on facts in levying concealment penalty of ₹ 1,92,501/- on the appellant for furnishing inaccurate particulars of income. 2. Alternatively and without prejudice, the learned CIT(A)-V, Pune erred in levying concealment penalty @ 150% on the alleged concealed particulars of income when the law permits levy of minimum penalty of 100%. The a .....

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