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D.C.I.T,C. C-VIII, Kolkata Versus Ram Chandra Agarwal

Penalty u/s. 271(1)( c) - wrong claim of exemption towards long term capital gains on sale of shares of M/s. Vishal Retail Ltd - claim for exemption u/s. 10(38) - Held that:- We find that the assessee was under bonafide belief that on off market share transaction of trading in listed company share, no capital gains would arise. We hold that this bonafide belief cannot be doubted in the facts of the case. We also hold that the assessee had duly come forward to rectify the mistake in not mentionin .....

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capital gain on sale of shares of M/s. Vishal Retail Ltd is factually incorrect. - The assessee had furnished the explanation to the assessee by filing a revised computation of income offering long term capital gains voluntarily. We also find that the assessee had also given explanation for not offering the same in the original return of income due to his bonafide belief. His bonafide explanation has not been found to be false by the ld. AO. From the above, it could be safely concluded that .....

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n Appeal No. 63/CC-VIII/CIT(A)C-I/Kol/11-12 dated 25th September, 2012 for the assessment year 2008-09 against the order of penalty levied by the Learned AO u/s. 271(1)( c) of the Income Tax Act 1961 (hereinafter referred to as the Act ). 2. The only issue to be decided in this appeal of the revenue is as to whether the penalty u/s. 271(1) ( c) of the Act could be levied in the facts and circumstances of the case. 3. The brief facts of this issue are that the assessee being individual has filed .....

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. 10(38) of the Act, any income from the transfer of a long term capital asset (LTC Asset) being an equity share in a company is exempt from taxation. The condition for exemption is that STT in respect of the transaction ought to have been charged. Since the shares were sold by the assessee offmarket i.e. not through Stock Exchange no STT was paid. During the course of assessment proceedings, the assessee filed a revised computation of his total income by including long term capital gains on sal .....

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in the revised computation was voluntarily made by the assessee before any detection by the department. However, the ld.AO proceeded to levy of penalty u/s. 271(1)( c) amounting to ₹ 94,03,900/-. On 1st appeal, the ld.CIT(A) appreciating the contentions of the assessee and by relying on various decisions deleted the levy of impugned penalty. Aggrieved, the revenue is in appeal before us on the following ground:- That on the facts and circumstances of the case and in law, ld. CIT(A) erred i .....

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in in his revised computation of income. The ld.DR further argued that the assessee was in complete knowledge that STT (Securities Transaction Tax ) was not suffered on such sale of share transaction as it was done on off market. Thus, the assessee ought to have disclosed the same in his original return of income. He also argued that the assessee has merely filed revised computation of his total income and did not bother to file revised return of income. Thus, the ld.AO was justified in imposing .....

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s was duly reflected. The ld. AR argued that the taxes for the same were also paid by the assessee. The assessee was under bonafide belief that since the shares traded were of listed company, the STT was not suffered due to off market share sale transaction, thereby capital gains, if any, could be eligible for exemption u/s. 10(38) of the Act. The ld.AR of the assessee has also filed the copy of order-sheets that were recorded in the course of assessment proceedings. He drew our attention to the .....

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luntarily by the assessee before detection by the department. More so, the belief of the assessee is bonafide in view of listed company s shares traded by the assessee which cannot be doubted. In support of his arguments, the ld.AR of the assessee has placed his reliance on various judgments. 5. We have heard the rival submissions and perused the material available on record including the paper book and the case laws as relied upon by both the parties on the impugned issue before us. We find fro .....

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ssessee. We also find that the assessee was under bonafide belief that since subject mentioned share was a listed company, resultant capital gain thereon could be exempted from tax. However, immediately on noticing the mistake committed by him, the assessee came forward to file a revised computation by disclosing the long-term capital gains on such sale of shares of M/s. Vishal Retail Ltd before the ld.AO together with the reasons for not disclosing the same in the original return of income. We .....

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claim for exemption u/s. 10(38) of the Act was a bonafide mistake made by the assessee has to be accepted. There is no material on record to show that the claim was not made under bonafide mistake. We find that the case laws as relied on by the ld.DR were in respect of search and survey cases and addition was made pursuant to materials found during the survey and search and after detection by the department in the course of search and survey. Hence, the case laws as relied on by the ld.DR before .....

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see:- 5.1.1. Hon ble High Court of Punjab and Haryana in the case of CIT vs. Shahabad Coop. Sugar Mills Ltd (2010) 322 ITR 73 (P&H), wherein it has been held that: From the order of the Tribunal, we do not find any such point having been raised by the Revenue. In any case, reasoning which has been applied for setting aside penalty in respect of wrong claim under section 80P of the Act will also apply to wrong claim under the head of depreciation. Making of wrong claim is not at par with conc .....

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y must follow. What has been laid down is that qualitative difference between criminal liability under section 276C and penalty under section 271(1)( c) had to be kept in mind and approach adopted to the trial of a criminal case need not be adopted while considering the levy of penalty. Even so, concept of penalty has not undergone change by virtue of the said judgment. Penalty is imposed only when there is some element of deliberate default and not a mere mistake. This being the position, the f .....

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Department is specifically rejected by the Supreme Court in a recent judgment in the case of CIT Vs. Reliance Petroproducts Pvt. Ltd (2010) 322 ITR 158. 5.1.4. In the landmark judgment of the Hon ble Apex Court in the case of Hindustan Steel vs. State of Orissa 83 ITR 26, wherein it was held that- An order imposing penalty for failure to carry out a statutory obligation is the result of a quasi-criminal proceedings, and penalty will not ordinarily be imposed unless the party obliged either acte .....

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will be justified in refusing to impose penalty, when there is a technical or venial breach of the provisions of the Act, or where the breach flows from a bona fide belief that the offender is not liable to act in the manner prescribed by the statute. 5.1.5. In the decision of the Hon ble Supreme Court in the case of Price Waterhouse Coopers P.Ltd vs. CIT reported in (2012) 25 taxmann.com 400/211 Taxman 40/348 ITR 306, wherein it has been held that:- 17. Having heard learned counsel for the par .....

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nt was not allowable under section 40A(7) of the Act indicates that the assessee made a computation error in its return of income. Apart from the fact that the assessee did not notice the error, it was not even noticed even by the Assessing Officer who framed the assessment order. In that sense, even the Assessing Officer seems to have made a mistake in overlooking the contents of the Tax Audit Report. 19. The contents of the Tax Audit Report suggest that there is no question of the assessee con .....

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he assessee should have been careful cannot be doubted, but the absence of due care, in a case such as the present does not mean that the assessed is guilty of either furnishing inaccurate particulars or attempting to conceal its income. 20. We are of the opinion, given the peculiar facts of this case, that the imposition of penalty on the assessee is not justified. We are satisfied that the assessee had committed an inadvertent and bona fide error and had not intended to or attempted to either .....

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es have to be taken into account. The question is at what point of time this material fact is to be found out. Generally it is with reference to the return of income and at that time it is to be seen whether there was concealment of income from or furnishing of inaccurate particulars thereof in the return of income chargeable to tax. But there may be cases, where an income is not declared in the return or the particulars of income shown inaccurately in the return but assessee on realization of m .....

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y action rectified relates back to original act and to the date and time of filing the return. When the Assessing Officer starts scrutiny of the return and initiate assessment proceedings there is nothing concealed and the inaccuracy, if any, disappeared. Therefore the assessee cannot be held guilty of concealment. 20. A perusal of the provision of Section 271(1)(c ) read with Explanation 1 clearly show that it is in the course of any proceedings under the Act, assessment proceedings in this cas .....

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ing Officer. In this case the assessee has no doubt did not show the amounts received as alleged gifts as his income,but no details of loans are given in the return nor any other particulars thereof given by the assessee at that stage, not to speak of inaccurate one. When the assessment was taken up and a general enquiry was made by the Assessing Officer requiring him to furnish details of any loans / gifts, if any, the assessee offered the amounts received as alleged gifts as his income and bef .....

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id harassment to the assessee and the donors who were non-resident persons, it cannot convert an offer to tax as concealment of income. Therefore, in my opinion the assessee has not furnished inaccurate particulars of the income in the returns. 22. Therefore, mere omission of the surrendered income from the return of an item of receipt does neither amount to concealment nor furnishing of inaccurate particulars of income unless and until there is some evidence to show exist or some circumstances .....

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d upon information in the possession of the revenue. These are : Sr.No. 4 - Bank statement of all bank accounts maintained by you individually or Jointly with any other person during the financial year along with narration of each debit / credit entry. Sr.No. 9 - Cash flow statement for the financial year under consideration. Sr.No.10-Had you taken / given any loan / gift during the financial year under consideration ? If yes, please furnish details. 23. On a perusal of the questionnaire, it is .....

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ection of concealment. There was neither any detection, nor any information in the possession of the revenue, nor the manner of its communication to the assessee which might lead to a detection of concealment. 24. There was no specific provocation or an apprehension of detection prevailing at the time when the offer was made and in the absence of any such imminent fear from the side of the revenue, if the assessee came forward and paid the tax thereon by adding the same in the returned income, i .....

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and the cogent evidences placed on record are such as to exonerate the assessee from concealment penalty. The CIT(A) in my opinion is right in deleting the penalty, his order is affirmed and the appeals of the revenue are dismissed. 5.1.7. We find that this Delhi Tribunal decision (i.e Prem Chand Garg case) has been considered and approved by the Jurisdictional High Court in the case of CIT vs Ramesh Chand Goyal in G.A.No. 2347 of 2010 in ITAT No. 181 of 2010 dated 11.8.2010 while adjudicating .....

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ry action on the part of the assessee to settle the tax issues for peace of mind appears from the conduct of the assessee. While recording the aforesaid fact, the Learned Tribunal ultimately relied on a decision of the Tribunal rendered in the case of Additional CIT vs Prem Chand Garg. Mr. Sinha, however, is unable to say whether the earlier decision of the Tribunal in the case of Prem Chand Garg has been challenged or not. Moreover, the learned Tribunal has also relied on a large number of deci .....

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the long term capital on sale of listed company s shares on off market in his original return of income, and on noticing the same the assessee immediately filed revised computation of income during assessment proceedings and as entered in the order sheets by the ld.AO. Thus, the assessee offered the same voluntarily before detection by the department. We also find that the version of the ld.AO in his penalty order that assessee was confronted with the specific issue on taxability of long term c .....

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