Income Tax Appellate Tribunal - Mumbai
Aasia Management & Consultancy P. Ltd, ... vs Assessee on 8 January, 2010
IN THE INCOME TAX APPELLATE TRIBUNAL,
MUMBAI BENCH 'A', MUMBAI
Before Shri P.M. Jagtap and Smt. Asha Vijayaraghavan, JM
I.T.A.No.1916/Mum/2010
Assessment Year: 2006-07
M/s. Aasia Management & The Asst. Commissioner of Income-
Consultancy Pvt. Ltd., Hinduja House tax-6(1),R.No. 506, 5th floor,
171, Dr. Annie Besant Road, Worli, Vs. Aayakar Bhavan, M.K. Road,
Mumbai 400 016. Mumbai 400 020.
PAN: AAACI 3370 C
(Appellant) (Respondent)
Appellant by : Shri J.P. Bairagra
Respondent by : Shri Vijay Shankar
ORDER
PER P.M. JAGTAP, AM:
This appeal filed by the assessee is directed against the order of the Learned Commissioner of Income-tax(Appeals)-14, Mumbai, dated 08.01.2010 for the assessment year 2006-07, whereby he confirmed the penalty of Rs. 10,00,000/- imposed by the Assessing Officer under section 271(1)(c) of the Act.
2. The assessee in the present case is a company, which is engaged, inter alia, in the business of trading in shares and securities. The return of income for the year under consideration was filed by it on 30.11.2006 declaring its total loss of Rs.9,86,12,719/-. In the said return, exemption of Rs. 52,66,68,726/- was claimed by the assessee under section 10(38) in respect of long term capital gain arising from sale of shares. In order to verify its claim for the said exemption, the assessee company was required by the Assessing Officer during the course of assessment proceedings to submit the details of purchase and sale of shares giving rise to the long term capital gain. While furnishing the said details, it was submitted by the assessee vide letter dated 26.12.2008 that a short-term capital gain of Rs. 71,14,710/- arising from the sale of IBL shares had been incorrectly and inadvertently included in the long tem capital gain. It was submitted by the 2 ITA No.1916/M/2010 M/s. Aasia Management & Consultancy P.Ltd.
assessee that its claim for exemption under section 10(38) in respect of long term capital gain arising from sale of shares, therefore, may be restricted to 51,95,54,016/- and the amount of Rs. 71,14,710/- claimed as exempt under section 10(38) may be treated as short-term capital gain. The claim of the assessee for exemption u/s.10(38) accordingly was disallowed by the Assessing Office to the extent of Rs. 71,14,710/- in the assessment completed under section 143(3) vide an order dated 26.12.2008. A notice was also issued by him requiring the assessee to show cause as to why penalty u/s.271(1)(c) should not be imposed in respect of the addition made to its total income by way of disallowance of exemption u/s.10(38) to the extent of Rs.71,14,710/-. In reply to the said notice, the following submission was made on behalf of the assessee before the Assessing Officer in writing :-
"Non-inclusion of Short Term Capital Gain of Rs. 71.14 lacs
i) In the letter dt. 26.12.2008 the assessee had pointed out to your goodself that the short term capital gains of rs.71.14 lacs was inadvertently through an mistake included in long term capital gains thereby claiming exemption in respect of the said gain. The relevant extracts of the letter 26.12.2008 are reproduced as under:
In the computation of long term capital gain which are claimed as exempt u/s.10(38) of the IT Act, a short term capital gain of Rs. 71.14.710/- arising on the sale of IBL shares stood incorrectly and inadvertently included. Resultantly the long term capital gains which are exempt from tax should be computed at Rs.51,95,54,016/- and the short term capital gain should be taken short term capital gain at Rs. 71,.14,710/-.
ii) It is a settled proposition that penalty u/s.271(1)(c) of the Income Tax Act (ITA) can not be levied in respect of such inadvertent mistakes. The Gujarat High court in BTX Chemical (P) Ld. Vs. CIT (205 CTR 252) has upheld the cancellation of penalty u/s.271(1)(c) of the ITA by holding that where double deduction in respect of loss of stock by fire has been claimed on account of a bonafide mistake, which could be easily deducted and would not have resulted in any advantage to the assessee. In CIT vs. Laxmi Vilas Bank lt. (2008) 303 ITR 428, the Madras High Court upheld the cancellation of penalty by holding that mistake due to misplacement of decimal in the computation does not tantamount concealment, so as to attract penalty u/s.271(1)(c) of the ITA. In CIT v/s. Milex Cable Industries (2003) 261 ITR 675, the Gujarat High Court while upholding the cancellation of penalty has held that although the assessee conceded the totaling mistakes, which had resulted in under assessment only after he had received the notice of the Assessing Officer (AO), pointing out the mistakes. Tribunal having come to a conclusion that the assessee had no 3 ITA No.1916/M/2010 M/s. Aasia Management & Consultancy P.Ltd.
intention of concealing particulars of his income or misguiding the AO. The Madras High Court in CIT v/s. Cholamandalam Securities Ltd. (2008) 296 ITR 408 has held that in respect of a bonafide unintentional mistake, penalty u/s.271(1)(c) of the ITA could not be levied".
The above submission made on behalf of the assessee in reply to the penalty notice issued by him was not found acceptable by the Assessing Officer for the following reasons:
1) The assessee filed its return of income on 30.11.2006 and the assessee was entitled to file revised return stating the omission.
2) It was only after issue of notice asking specific details of capital gains, the assessee acknowledged the mistake and before that during the period from the date of issue notice u/s.143(2) dated 25.12.2008, there was no voluntary admission of mistake in not disclosing the short term capital gain of Rs.71,14,710/-.
3) The case laws cited by the assessee are not at all relevant in the case of the assessee and the decisions as well were not squarely applicable in the case of the assessee.
4) The case of assessee is squarely covered by the decision of the Supreme Court in the case of Union of India & Others v/s.
Dharmendra Textiles Processors & Others 306 ITR 277."
For the reasons given above, the Assessing Officer held that the assessee had furnished inaccurate particulars of its income to the extent of Rs. 71,14,710/- and imposed penalty of Rs. 10 lakhs u/s.10(38) being 100% of the amount of tax sought to be evaded by the assessee by making a wrong claim for exemption u/s.10(38) of the Act.
3. The penalty imposed by the Assessing Officer u/s.271(1)(c) of the Act was challenged by the assessee in an appeal filed before the learned Commissioner of Income-tax (Appeals) and in addition to the submissions made before the Assessing Officer during the course of penalty proceedings, it was also submitted on behalf of the assessee before the Learned CIT(A) that due to the situation of the high turn over of staff at key accounting position in its organization, the mistake of misclassification had been inadvertently occurred which could be realized only when the relevant details were being prepared during the course of assessment proceeding. It was further submitted that a short-term 4 ITA No.1916/M/2010 M/s. Aasia Management & Consultancy P.Ltd.
capital gain on sale of listed shares was wrongly claimed to be exempt as long term capital gain u/s.10(38) through sheer bonafide human error which could not be treated s concealment to impose penalty. It was submitted that there was neither any concealment of particulars of income by the assessee nor furnishing of any inaccurate particulars of its income warranting levy of penalty u/s.271(1)(c). It was also submitted that the assessee never attempted to keep off the particulars of capital gains from the sight of the Department in order to prevent the discovery of the same. Reliance was placed on behalf of the assessee on various judicial pronouncements to submit that when the primary facts of the case were correctly furnished, there was no justification to impose penalty u/s.271(1)(c) merely because there was some error or mistake in computation of total income chargeable to tax.
4. The above submissions made on behalf of the assessee before him were not found acceptable before the Learned CIT(A) and he proceeded to confirm the penalty imposed by the Assessing Officer u/s.271(1)(c) for the following reasons given in para 6 of his impugned order:
"I have carefully considered the submissions of the appellant and also perused the order of the Assessing officer. In this case, the short term capital gains of Rs. 71.14 lakhs was included in long term capital gains., thereby claiming exemption in respect o the said gains in the return of income. During the course of assessment proceedings u/s.14393), the appellant came to know this mistake and vide letter dated 26.12.2008 has communicated the mistake to the assessing officer. The relevant portion of the letter is as under:
"In the computation f long term capital gain which are claimed as exempt u/s.10(38) of the I.T.Act a short term capital gain of Rs. 71,14,000/- arising on the sale of IBL shares stood incorrectly and inadvertently included. Resultantly the Long term capital gains which are exempt from tax should be computed at Rs. 51,95,54,016/- and the Short Term capital gain should be taken short term Capital Gain at Rs.71,14,710/-.
The appellant submitted that the period fro filing of a revised return of income had elapsed that is why the appellant immediately communicated to the assessing officer about the inadvertent mistake of misclassification, explaining the circumstances in which the mistake had occurred vide its above referred letter. The assessing officer has imposed a penalty u/s.271(1)(c) in respect of misclassification of short term capital gain arising on sale of shares of Indusind Bank Limited of Rs.71,14,710/-. According to assessee mistakenly claimed as exempt under the 'long term capital gains'.5 ITA No.1916/M/2010
M/s. Aasia Management & Consultancy P.Ltd.
The reason for the said mistake given by the appellant is the non- availability of the Taxation manager and Manager Accounts in its organization. It is only at the end of august 2006, that the appellant could find out suitable candidates to fill in these vacancies. The manager accounts (Mr. Umesh Kamdar) who had made classification of long term and short term capital gains a5 the time of filing of the return of income for the year under consideration, had left the appellants organization in September 2007. The new person (Mr. Phadke), appointed in his pace also left the organization abruptly in the month of December 2008. It was these set of circumstances that led to an inadvertent bonafide mistake in misclassification of the said short term capital gain, which was incorrectly claimed to be an exempt long term capital gain. The appellant relied upon the decision of the Madras High Court in CIT v. Cholamandalam Securities Ltd. (2008) 296 ITR 408 wherein it is held that in respect of a bonafide unintentional mistake penalty u/s.271(1)(c) should not be levied.
From the above facts it is clear that the mistake was detected by the assessing officer during the course of scrutiny assessment, and thereafter being admitted and rectified by the appellant. Had the case not been scrutinized, the mistake could not be rectified and there would have been loss of revenue. The case laws cited by the appellant are not at all relevant in the case of the appellant and I fully agree with the assessing officer that the appellant's case is squarely covered by the decision of the Honourable Supreme Court in the case of Union of India and Ors. Vs. Dharmendra Textile Processors and Others 306 ITR 277 wherein the Apex Court has held as under:
"The revenue has put greater faith on the assessee with the expectation that true and full particulars requiring correct income will be filed by the assessee. For this reason each and every case is not being scrutinized to ascertain the correctness of the particulars of income furnished by the assessee. In the circumstances, the responsibility of furnishing correct particulars of income is more on the assessee. Therefore any return .......paying lesser than due taxes is an act of furnishing of inaccurate particulars of income on the part of the assessee".
In view of the above, the action of the assessing officer levying the penalty u/s.271(1)(c) appears to be justified. Therefore, the same is confirmed. In view of the above, the action of the assessing officer levying the penalty u/s.271(1)© appears to be justified. Therefore, the same is confirmed." Aggrieved by the order of the learned CIT(A), the assessee has preferred this appeal before the Tribunal.
5. The learned counsel for the assessee submitted that the mistake in claiming the short-term capital gain as long term capital gain exempt u/s.10(38) was realized by the assessee while preparing the details required by the Assessing Officer during the curse of assessment proceedings. He submitted that this mistake was brought to the notice of the Assessing Officer by the assessee company itself and the claim wrongly made for exemption u/s. 10(38) was 6 ITA No.1916/M/2010 M/s. Aasia Management & Consultancy P.Ltd.
withdrawn by it voluntarily. He submitted that there was only one instance of short term capital gain and the same was inadvertently included in the amount of long term capital gain due to mis-classification. He contended that the entire amount of profit on sale of investment thus was taken as long term capital gains while claiming exemption u/s.10(38). He invited our attention to the details of long term capital gains furnished by the assessee (copy placed at page No. 39 of the paper book) to show that all the relevant details of capital gains were fully and truly furnished by the assessee. He contended that exemption u/s.10(38) in respect of one instance of short term capital gain thus was claimed inadvertently by mistake and keeping in view that there was huge loss, the assessee never intended to evade any tax by making the said claim. He contended that the conduct of the assessee of withdrawing a wrong claim of exemption made by it immediately after coming the same to its notice, on the other hand, shows its bonafide and having regard to all the facts of the assessee's case, there was no justification in imposing penalty u/s.271(1)(c) of the Act. He, therefore, urged that the penalty imposed by the Assessing Officer and confirmed by the Learned CIT(A) may be cancelled. In support of his contention, the learned counsel for the assessee relied, inter alia, on the decision of the Hon'ble Supreme Court in the case of Reliance Petro Products Pvt. Ltd.(322 ITR 158)(SC).
6. The Learned Departmental Representative, on the other hand, submitted that the details furnished by the assessee in respect of long term capital gains placed at page 39 of the assessee's paper book cannot be regarded as full and true details. He invited out attention to the said details and pointed out that in the absence of the dates of relevant transactions given therein, it was not possible to ascertain whether the relevant transactions gave rise to a long term capital gain or short term capital gain. He submitted that only when the specific information was called for by the Assessing Officer in order to verify the claim of the assessee for 7 ITA No.1916/M/2010 M/s. Aasia Management & Consultancy P.Ltd.
exemption u/s.10(38), the wrong claim made by the assessee for exemption u/s.10(38) by showing short-term capital gain as long term capital gain was detected and the assessee was let with no option but to withdraw its claim for the said exemption which was patently wrong. He contended that this mistake of mis- classification of short term capital gain as long tem capital gain cannot be attributed to change of staff as sought to be contended on behalf of the assessee. He submitted that there is nothing to show that this mistake of misclassification was bonafide and in the absence of relevant details furnished by the assessee along with its return of income, it is not a case where the assessee can be said to have furnished all the relevant details relating to its claim for long term capita gain fully and truly. He contended that the case of the assessee thus is a fit case to impose penalty u/s.271(1)(c) as there was furnishing of inaccurate particulars of its income by the assessee by making wrong claim for exemption u/s.10(38) of the Act.
7. We have considered the rival submissions and also perused the relevant material on record. It is observed that while claiming exemption u/s.10(38) in respect of long term capital gain, a short term capital gain of Rs. 71,14,710/- was also included by the assessee in the amount of long term capital gain. Although an attempt has been made on behalf of the assessee to submit before the authorities below as well as before us that the said mistake in misclassifying short term capital gain as long term capital gain was attributable to human error inadvertently occurred, there is noting on record to support and substantiate the same. The details furnished by the assessee along with its return of income while making the claim for exemption of long term capital gain are placed at page No. 39 of the assessee's paper book and a perusal of the same shows that the very material and relevant details in the form of corresponding dates of purchase and sale of shares were not given therein. As rightly contended by the learned 8 ITA No.1916/M/2010 M/s. Aasia Management & Consultancy P.Ltd.
Departmental Representative, it was not possible to ascertain whether the capital gain arising from the relevant transaction of purchase and sale of shares was long term capital gain or short term capital gain in the absence of the said details. It, therefore, cannot be said that all the relevant particulars relating to its claim for exemption u/s.10(38) on account of long term capital gain were truly an fully furnished by the assessee. Whether a transaction of purchase and sale of shares has resulted in short term or long term capital gain would depend on the corresponding dates of purchase and sale of shares and if such dates are not furnished by the assessee along with the corresponding transaction of purchase and sale of shares, it cannot be said that the assessee has furnished full and true particulars relating to its claim for exemption u/s.10(38) in respect of long term capital gain. Moreover, there is noting brought on record by the assessee to show as to how the mistake committed by it in misclassifying short term capital gain as long term capital gain was a bonafide one. In our opinion, if there was no confusion as regards the corresponding dates of purchase and sale of shares, there was no reason or basis to show that a mistake in misclassifying the short term capital gain as long term capital gain was bonafide or the same was attributable to inadvertent human error. The facts borne out from record clearly show that the wrong claim made by the assessee for exemption u/s.10(38) in respect of short term capital gain was detected as a result of enquiry made by the Assessing officer during the course of assessment proceedings by calling for the specific details and left with no other choices the assessee had to withdraw the said claim wrongly made which, in our opinion, cannot be regarded as a voluntary act.
8. It is observed that even the various judicial pronouncements cited by the learned counsel for the assessee are of no help to the assessee's case as the same are clearly distinguishable on facts. For instance, in the case of CIT vs. Milex 9 ITA No.1916/M/2010 M/s. Aasia Management & Consultancy P.Ltd.
Cable Industries (261 ITR 675)(Guj.), totaling mistakes committed were detected by the assessee himself while preparing the accounts for the subsequent year and immediately thereafter, the assessee informed about the said mistake to the Assessing Officer voluntarily without there being any enquiry made by the AO. In the case of Mrs. Nagma M. Kanchwala v. ITO (24 DTR 369)(Mum) although wrong calculation of capital gain was found to be made by the assessee by claiming higher indexation of the cost of acquisition, all the relevant particulars and details relating to the said claim were fully and truly furnished by the assessee and it was, therefore, held that concealment penalty could not be imposed u/s.271(1)(c). Similarly, in the case of reliance Petroproducts Pvt. Ltd. (surpa), the assessee was found to have furnished all the relevant particulars relating to the claim truly and fully and it was, therefore, held by the Hon'ble Supreme Court that merely because the assessee had claimed the expenditure, which claim was not accepted or was not acceptable to the Revenue, that by itself would not attract the penalty u/s.271(1)(c). As such, considering all the facts of the case, we are of the considered opinion that it was a case of furnishing of inaccurate particulars of its income by the assessee by claiming a wrong exemption in respect of short term capital gain u/s.10(38) making it liable to penalty u/s.271(1)(c) as rightly held by the authorities below. In that view of the matter, we uphold the impugned order of the learned CIT(A) confirming the penalty imposed by the A.O. under section 271(1)(c) and dismiss this appeal filed by the assessee.
9. In the result, the appeal of the assessee is dismissed.
Order pronounced in the open court on this 13TH day of April, 2011.
Sd. Sd.
Asha Vijayaraghavan) (P.M. Jagtap)
Judicial Member Accountant Member
Mumbai, dated the 13th April, 2011.
kn
10 ITA No.1916/M/2010
M/s. Aasia Management & Consultancy P.Ltd.
Copy to:
1. The Assessee
2. The Revenue
3. The CIT -6, Mumbai.
4. The CIT(A)-XIV, Mumbai
5. The DR 'A' Bench, Mumbai By order
/True copy/
Asst. Registrar, ITAT, Mumbai