TMI Blog2017 (12) TMI 999X X X X Extracts X X X X X X X X Extracts X X X X ..... Hon’ble Delhi High Court are squarely distinguishable from the facts of the instant case. Hence the decision relied upon by the ld DR does not advance the case of the revenue. In view of the aforesaid facts and findings and by placing reliance on the decision of the Hon’ble Jurisdictional High Court in the case of Durga Kamal Rice Mills [2003 (4) TMI 26 - CALCUTTA High Court] we hold that the revenue had not made out any case for levying the penalty u/s 271(1)(c) of the Act for the Asst Year 2010-11. Accordingly, the grounds raised by the assessee are allowed. - I.T.A No. 398/Kol/2014 - - - Dated:- 13-12-2017 - Shri M. Balaganesh, AM And Shri S. S. Viswanethra Ravi, JM For the Appellant : Shri J. P. Khaitan, Sr. Advocate Shri Sujay Sen For the Respondent : Shri A. K. Tiwari, CIT ORDER Per M.Balaganesh, AM 1. This appeal by the Assessee arises out of the order of the Learned Commissioner of Income Tax(Appeals) Central-I, Kolkata [in short the ld CIT(A)] in Appeal No.184/CC-VII/CIT(A)C-I/13-14 dated 17.02.2014 against the order passed by the DCIT, Central Circle-VII, Kolkata [ in short the ld AO] under section 271(1)(c) of the Income Tax Act, 1961 (in sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue are as under:- 3.2. M/s Saltee Infotech Pvt Ltd was holding 100% shares in M/s Graphitech India Ltd, a company incorporated under the Companies Act, 1956. One Mr. Surya Prakash Bagla (assessee herein) is its director. M/s Graphitech India Ltd has long term lease on a piece of land measuring about 60 cottahs and there was no legal impediment to construct commercial building on the said land. There was a Memorandum Of Understanding (MOU) on 4.8.2005 between Saltee Infotech Pvt Ltd represented by its Director Mr. Surya Prakash Bagla and one Mr. Vivek Kathotia, with a recital that the shareholders of M/s Graphitech India Ltd went to transfer their 100% holding in M/s Graphitech India Ltd to Mr. Vivek Kathotia for a consideration of ₹ 16,51,00,000/-. In the said MOU there was a recital to the effect that all the original share certificates and transfer deed shall be deposited with Mr. B. K. Jain Advocate in trust and the same shall be handed over to the transferee on making their full and final payment of the consideration amount. Further, vide clause 4 in liabilities and responsibilities of the transferor, it was stipulated that the transferor at his cost and efforts, sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sent, letters dated 01.11.2007 and 19.11.2007 as void, delivery up and cancellation of such letters and a decree for perpetual injunction restraining the transferee from demanding delivery of possession of the shares and from giving effect to the MOU dated 04.08.2005. In the said suit it was pleaded that pursuant to the MOU the original share certificates were deposited with Advocate Shri B. K. Jain and subsequently all the steps were taken to see that the terms of MOU are implemented, but inspite of various corrections made from time to time to the building plan got prepared by the transferee, the same could not be accomplished and Bidhannagar Municipality refused to approve the plan as such, the transferee ultimately decided to abandon the project and with mutual consent, the contract was rescinded but to the surprise of the transferor, a letter was received from Mr. B. K. Jain, Advocate, wherein the rescinding of contract was disputed and delivery of shares was insisted. In those circumstances, the declaratory suit came to be filed. 3.2.3. The transferee also filed another suit in T.S. No. 222 of 2007 before the Civil Judge (Sr. Division), 2nd Court at Barasat disputing the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not through stock exchanges, the date of contract for sale as declared by the parties shall be treated as the date of transfer, provided it is followed up by actual delivery of shares and the transfer deeds. In view of this circular, the date of contract for sale assumes importance. According to the revenue, the date of contract for sale is the date of MOU whereas, according to the assessee, the date of subsequent compromise by way of which the condition as to the approvals by different authorities was got rid of. Further according to the Revenue, the sale consideration is the entire ₹ 16.51 Cr whereas the Assessee claims it to be only 14.01 Cr as reduced in the compromise decree by way of adjustment. 3.3. The assssee offered capital gains for sale of shares in Asst Year 2010-11 on the basis of transfer of shares that happened pursuant to decree and revised MOU dated 25.5.2009 in the original return filed on 15.9.2010. The assessee also offered the sums of ₹ 7,40,90,000/- in the revised return filed on 27.12.2010 for the Asst Year 2010- 11 under the head income from other sources being the cash component received on sale of shares. But during the course of assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... educe the sale price of the shares but there is an agreement to pay compensation of a sum of ₹ 2.5 cr. which liability does not arise with reference to the price of shares as stated in the MOU, but arose due to the intervening litigation. Since the transfer could not have materialised in the absence of payment of such compensation it forms part of sale consideration. According to revenue in search assessments, sale consideration remained the same although the transaction but the liability of the transferor for compensation only intervened. Hence it was contended by the revenue that the date of MOU is the date of contract for sale and the sale consideration is the entire amount of ₹ 16,51,00,000/-. On this premise, the revenue in the search assessments argued that the sale consideration of shares of the assessee is ₹ 16.51 cr. and following the CBDT circular 704 dated 28.04.1995, such date (i.e the date of MOU dt 4.8.2005) will be treated as the date of transfer, since, it is only pursuant to the terms of the MOU, the delivery took place. 3.6. The assessee contended that the MOU dated 04.08.2005 came to an end with rescinding thereof by the parties with mutual c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d were to be deposited with Mr. B. K. Jain (Advocate) in trust and were to be transferred to transferee (i.e. Vivek Kathotia) only on full and final payment of consideration. The assessee further relied on the letter written by him to the Solicitor Mr. B. K. Jain which shows that the Solicitor was holding such share certificates only in trust in terms of the MOU dt. 4.8.2005 and the shares were never transferred to Mr. Vivek Kathotia and /or his assignees/ associates as mentioned in MOU. The assessee further relied on the ROC returns for Asst Years 2006-07 2007-08 as well as for Asst Year 2010-11 and contended that since the share certificates have been transferred by the assessee and recorded in the Financial Year 2009-10 relevant to Asst Year 2010-11, the fact so contended by the revenue is not correct and in terms of the Circular No. 204 itself, the transfer had happened only in Financial Year 2009-10 relevant to Asst Year 2010-11. The assessee further contended that the value of consideration at ₹ 14,01,00,000/- is in terms of direction of the Court only. 4. Hence it could be seen from the above facts that the assessee had treated the cash component received on sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e would arise only in Asst Year 2010-11. Admittedly, the assessee had admitted only the cheque portion of share sale consideration in the original return of income filed on 15.9.2010. The cash component of share sale consideration of ₹ 7,40,90,000/- was offered by the assessee in the revised return of income filed on 27.12.2010 , even though the entire taxes due thereon were paid prior to 15.9.2010 as detailed above. Admittedly the assessee had offered the cash component of share sale consideration in the revised return filed on 27.12.2010 under the head income from other sources in the sum of ₹ 7,40,90,000/-. During the course of assessment proceedings, it was pleaded by the assessee that the said cash component be treated as share sale consideration on sale of shares of Graphitech Ltd and hence the same should only go to increase the sale consideration of shares and consequential increase in capital gains liability. But this was rejected by the ld AO. 4.2. Action of the ld AO in Asst Year 2010-11 a) The ld AO accepted the revised return filed on 27.12.2010 wherein the capital gains for cheque portion was offered and other sources for cash portion was offered b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rbitrarily confirming the penalty of ₹ 2,28,93,810/- imposed by the AO u/s 271(1)(c) of the Act @ 100% of the tax sought to evade on the alleged concealed income of ₹ 7,40,90,000/- without at all considering and appreciating the facts elaborately explained before him that there was neither any concealment of income nor furnishing of any inaccurate particulars of income nor there was any evasion of tax as wrongly alleged on total misinterpretation misconception of the statutory provision. Both the orders of the AO and the Ld. CIT(A) imposing and confirming the penalty u/s 271(1)(c) being unreasonable, uncalled for and bad in law are liable to be quashed/ cancelled. 2. For that in view of the facts and circumstances of the case the Ld. CIT(A) is wholly wrong and unjustified in confirming the above penalty u/s 271(1)(c) without considering the basic fact that the total income for the A.Y. 2010-11 declared in the valid return was ₹ 10,15,47,560/- whereas the total income assessed u/s 143(3) dated 31.03.2013 was ₹ 10,15,47,560/-, causing difference of ₹ 15,000/- only owing to disallowance of ₹ 15,000/- u/s 80D in respect of which the Ld. C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10 within the due date and furthermore the tax on the entire capital gain on such sale which includes the said sum of ₹ 7,40,90,000/- was paid in full even before the due date filing the return u/s 139(1). 6. For that your petitioner craves the right to put additional grounds and/or to alter/amend/modify the present grounds before or on the date of hearing. 6. We have heard the rival submissions and perused the materials available on record. At the outset, the ld AR did not press the aspect of defective show cause notice issued u/s 274 read with section 271(1)(c ) of the Act and hence no finding is given on the same in this order. Accordingly the issue of levy of penalty is adjudicated herein on merits of the case. The facts stated hereinabove have been adjudicated by this tribunal very elaborately while deciding the quantum appeals for the search assessment years 2006-07 to 2009-10 and 2010-11 in IT(SS) A Nos. 34 to 37/Kol/2012 and ITA No. 857/Kol/2014 respectively dated 5.10.2016 wherein it was finally held as under:- a) The share transfer deeds of Graphitech Ltd were executed by the transferor (assessee herein) in favour of the transferee (Mr Vivek Kathotia) pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he year under appeal) to prove that there was concealment in the return of income for the Asst Year 2010-11. The most crucial fact which could not be brushed aside or swept under the carpet is that the assessee was conscious of the fact that he has to offer the capital gains on sale of shares of Graphitech Ltd in Asst Year 2010-11. Accordingly he offered the same in the original return of income filed on 15.9.2010. The taxes paid on the cash component of ₹ 740.90 lacs are as under:- 50,00,000/- in the form of advance tax 1,00,00,000/- in the form of part of self assessment tax 78,93,811/- in the form of self assessment tax 2,28,93,811/- ( 7,40,90,000 * 30.9% = 2,28,93,811) Hence the very fact of payment of taxes for the cash component also in the capital gains goes to prove that the assessee had no intention to conceal the same. Infact we find that the assessee had paid taxes at the rate of 30.90% as against 20.60% (which is the rate applicable for long term capital gains) . This clearly proves the fact that the assessee had some confusion in his mind with regard to the cash component of share sale consideration with regard to the head of income to be offered b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld AO had raised the very same issue of taxing the cash component in Asst Years 2006-07 and 2007-08 in the search assessments, for which notices were already issued by the ld AO, the assessee entertained a doubt and belief that in case if he loses in those two asst years and parallely offers the cash component in Asst Year 2010-11, then it would result in double taxation of the very same receipt of ₹ 740.90 lacs. These facts clearly prove the bonafide belief entertained by the assessee with regard to the offer of the said sum of ₹ 740.90 lacs and the same cannot be doubted with. Even the revenue had the same doubt of taxing the cash component in two different years. While it is so, there is nothing unusual for an assessee (who is not conversant with income tax provisions) to entertain a doubt / belief with regard to the year of taxation of the subject mentioned transaction. Hence there could be no penalty on the same u/s 271(1)(c ) of the Act. In this regard, the reliance placed by the ld AR on the decision of the Hon ble Jurisdictional High Court in the case of Durga Kamal Rice Mills vs CIT reported in (2004) 265 ITR 25 (Cal) is very well founded. It was held in that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t be any conclusive proof that this amount was owned by the assessee. Therefore, no penalty can be imposed in such a case. (Underlining provided by us) 5. We have occasion to hear this matter at length. It is an admitted proposition in law that the finding in the quantum proceeding is not a factor for determining the question for the purpose of imposing penalty. Such a question arose for our consideration in the case of CIT v. Bimal Kumar Damani [IT Reference No. 39 of 1997, dated 10-2-2003]. In the said decision, we have considered a few of the decisions operating in the field and had so held. This proposition has not been disputed by either of the learned Counsel appearing for the parties. We cannot look into the findings arrived at by the authorities in the quantum proceedings. This question has to be decided independent of such finding. If we do not fall back on the finding in the quantum proceedings, then it seems on facts, that this income was shown as the opening balance of the following previous year and it was open to the assessee to disclose the said income in the returns for the following previous year. That in law, it could be treated as income of the relevant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e-tax authorities under section 132 in the premises of certain persons stated to be connected with the racket of making false claim under section 35CCA in respect of certain donations. The Assessing Officer accordingly disallowed the claim. Thereafter, penalty was imposed of under section 271(1)(c). The Commissioner (Appeals), deleted the penalty. The Tribunal upheld the findings of the Commissioner (Appeals) and based its conclusion on an order of the Tribunal in the case of Deepak Singh Family (HUF) v.Asstt. CIT [1994] 48 ITD 465 (Delhi) which was also a case where a claim of deduction was made under section 35CCA in respect of donations made through 'V' and 'P'. In that case the Tribunal had cancelled the penalty on the ground that the filing of the revised return before any concrete evidence was gathered by the authorities would exonerate the assessee from any guilt. The Hon ble Court held as under:- There was concerted design to enable reduction of taxable income The Tribunal was not right in upholding the cancellation of the penalty. It cannot be denied that there were searches and investigations which resulted in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y been taken out of the bank account opened in the name of 'C'. The account itself had been closed. In the light of these facts, the contention that the revised return was filed voluntarily is untenable. It was provoked by the evidence collected by the revenue and the survey conducted in the assessee's premises. In other words, the revised return was filed by the assessee only when it was cornered and the income tax authorities had collected material on the basis of which it could be said that the claim for deduction was false or bogus. The filing of the revised return is thus an act of despair and the assessee can gain nothing from it. [Para 16] Subsequent conduct of the assessee after filing the original return is relevant and that should be taken into account while judging the guilt of the assessee. It would however depend on the facts and circumstances of the each case as to whether the filing of the revised return of income would purge the assessee of any guilt and would avail him in penalty proceedings. The condition is that the revised return should have been filed before the department discovered anything remiss therein or before any material was g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion paid which it did in the revised return filed. Such revised return filed was considered by the Hon ble Court as not filed voluntarily by the assessee. But in the instant case, it could be seen from the aforesaid facts, the assessee had bonafide doubt and belief as to in which year the capital gains had to be offered ie. in Asst Years 2006-07 , 2007-08 or in 2010-11. This confusion gets further strengthened by the act of the ld AO by trying to levy capital gains in Asst Years 2006-07 and 2007- 08 in the search assessments for which show cause notices were issued by the ld AO. Even though the cash component got surfaced only pursuant to the search, the year of taxability of capital gains was in dispute between the assessee and the revenue. Moreover, the assessee had offered the entire cash component in the revised return and the assessment for the Asst Year 2010-11 was framed by the ld AO u/s 143(3) of the Act on 31.3.2013 accepting the same. There was absolutely no concealment of income or furnishing of inaccurate particulars of income by the assessee for the Asst Year 2010- 11 , for which penalty u/s 271(1)(c ) of the Act has been levied by the ld AO. Hence we hold that the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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