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Nath Royal Ltd. Versus Assistant Commissioner of Income Tax, Circle 1, Aurangabad

2017 (9) TMI 1224 - ITAT PUNE

Penalty u/s. 271(1)(c) - addition on account of disallowance of capital loss - Held that:- Since, the case of assessee is at parity with sister concern Nath Seeds Ltd. (supra), we find no reason to take contrary view. Accordingly, we direct the cancellation of penalty on disallowance of capital loss as held Assessee discharged the initial or preliminary onus cast him in so far as furnishing of correct particulars. We don't find any inaccuracy in matters of furnishing of details/particulars. Thus .....

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ad dated 30-07-2014 for the assessment year 2004-05 confirming levy of penalty u/s. 271(1)(c) of the Income Tax Act, 1961 (hereinafter referred to as the Act ). 2. Shri N.R. Agarwal appearing on behalf of the assessee submitted that the assessee company is a subsidiary of M/s. Nath Seeds Ltd. During the course of scrutiny assessment proceedings the Assessing Officer disallowed trading loss of ₹ 8,49,47,027/- and capital loss of ₹ 2,43,06,000/-. Penalty proceedings u/s. 271(1)(c) were .....

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d appeal before the Tribunal against confirming of levy of penalty on disallowance of capital loss ₹ 2,43,06,000/-. 2.1 The ld. AR of the assessee submitted that the assessee had sold shares to sister concerns on which the assessee has suffered loss of ₹ 2.43 crores. The assessee neither in return of income for the impugned assessment year nor, in the subsequent assessment years has claimed capital loss against capital gain. Therefore, there is no tax effect. The ld. AR further conte .....

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(Appeals) in confirming levy of penalty in respect of disallowance of capital loss of ₹ 2.43 crores. The ld. DR submitted that the assessee failed to furnish relevant documents in support of loss claimed on sale of investment. The Assessing Officer found the claim of assessee fake and fictitious. However, the ld. DR fairly admitted that Co-ordinate Bench of the Tribunal in the case of sister concern of assessee i.e. Nath Seeds Ltd. Vs. ACIT (supra), has deleted penalty on the additions ma .....

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Bench of the Tribunal in the case of sister concern of assessee i.e. Nath Seeds Ltd. Vs. ACIT (supra), has deleted penalty on the additions made under similar circumstances. 4. We have heard the submissions made by the representatives of rival sides and have perused the orders of the authorities below. In the present case penalty u/s. 271(1)(c) has been levied on addition of ₹ 2.43 crores on account of disallowance of capital loss. The penalty has been levied on the ground that the assess .....

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old the said shares to another sister concern ( say- S2) at the then prevailing market rates of that date/time. All these transactions are done off-line. However, the sale price of the shares is based on either at market rate or the NAV of the company. In effect, the Assessee sold the shares at the rates below par. There is no contrary evidence with the AO to substantiate that the sale price is manipulated. It is also a fact that the Assessee financed S2 to purchase the securities. On this aspec .....

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with diminishing rates per shares or debentures from the Assessee - the original to S1 and then to S2, AO is of the view that it is the case of 'furnishing of the inaccurate particulars' in the return of income. 43. Further, AO ignored the undisputed fact that the Assessee made claim of loss in the return vide the contents in the computation of income. Assessee furnished details of the sale and purchases of the securities. Dates of purchase, purchase cost per shares, sale price per share .....

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urn and the submissions of the explanation made during the penalty proceedings. 45. Accordingly, we are of the considered opinion that the Penalty proceedings are different from the assessment proceedings and it is a settled legal proposition of law. Describing the alleged transactions as fake or fictitious ones may be okay from the point of view of the quantum additions. But when it comes penalty proceedings, AO needs to rebut the explanation of the Assessee by bringing incriminating evidence o .....

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enuine for the purpose of penalty proceedings, book entries are genuine, share transfers are recorded, the payments of the consideration are squired-up or the liabilities do exists in the books of accounts etc. We cannot understand what is fake about them. Therefore, in our view, it is the case of mere suspicion. Considering the penalty proceedings, such suspicion is not adequate enough to penalise the Assessee u/s 271(1)(c) of the Act. It is rightly so, as the penalty has the other implications .....

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he paragraphs above, and find we need to approve the arguments of the Authorised Representative. Further, regarding the discharge of primary onus, we find that the AO has no grievance in the matter. Regarding the bonafide of the Assessee in matters relating to accounting of the transactions, making claim of loss in the return, submitting the explanations during the assessment and penalty proceedings, we find there is no complain from the side of the AO. It is also relevant to mention that the As .....

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