Income Tax Appellate Tribunal - Ahmedabad
Punitaben K.Patel, Ahmedabad vs Department Of Income Tax on 3 June, 2016
IN THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD ''A " BENCH - AHMEDABAD
Before Shri R. P. Tolani, JM, & Shri Manish Borad, AM.
ITA No.2005 /Ahd/2008
Asst. Year: 2002-03
DCIT, Circle-10, Ahmedabad. Vs. Smt. Punitaben K. Patel,
Nirma House, Ashram
Road, Ahmedabad.
Appellant Respondent
PAN AAVPP 9688G
Appellant by Shri A. R. Rewar, Sr.DR
Respondent by Shri H. C. Shah, AR
Date of hearing: 31.5.2016
Date of pronouncement: 3/6/2016
ORDER
PER Manish Borad, Accountant Member.
This is an appeal filed by the Revenue against the order of ld. CIT(A) -I, Ahmedabad, dated 20/3/2008 in appeal No.CIT(A)-I/CC- I[1]/9/07-08 passed against order u/s 271(1)(c) of IT Act, 1961 (in short the Act) for Asst. Year 2002-03 on 23/3/2007 by DCIT, CC1(1), Ahmedaad. Following grounds have been raised by the Revenue :-
1. The Ld. CIT(A) has erred in law and on facts in deleting the penalty levied of Rs.22,41,425/- u/s.271(l)(c) by the A.O.
2. On the facts and in the circumstances of the case, the Ld. CIT(A) ought to have upheld the order of the A.O. ITA No.2005/Ahd/2008 2 Asst. Year 2002-03 3 It is therefore, prayed that the order of the Ld.CIT(A) be set aside and that of the Assessing Officer be restored to the above extent.
2. Briefly stated facts of the case as culled out from the records are that the assessee is an individual. Return of income was filed on 9.8.2002 declaring total income of Rs.20,11,420/-. Assessee accounts for the income on cash basis. Assessment u/s 143(3) of the Act was framed on 23.3.2005 on a total income of Rs.82,77,974/- after making following additions :-
1. Addition on account of accrued interest on Rs.50,185/-
OFCPNs of Nirma Indus. Ltd.
2 Addition on account of short term capital gain on Rs.8,79,320/-
sale of DDBs of Nirma Ltd.
3 Addition on account of short term capital gain on Rs.53,49,000/-
the transaction of strips of TATA Finance Ltd.
Total Rs.62,78,505 Assessee's appeal before ld. CIT(A) was dismissed vide CIT(A)'s order dated 9.3.2006. Thereafter assessee came in appeal before the Tribunal against the impugned addition of Rs.8,79,320/- and Rs.53,49,000/- as referred above and succeeded in appeal before the Tribunal. Pursuant to the order of ld. CIT(A) confirming additions, penalty order u/s 271(1)(c) of the Act dated 23.3.2007 was passed by ld. Assessing Officer imposing penalty of Rs.22,42,000/- on the confirmed additions made by ld. CIT(A) at Rs.62,78,505/-.
ITA No.2005/Ahd/2008 3Asst. Year 2002-03
3. Against the order of ld. Assessing Officer imposing penalty u/s 271(1)(c) of the Act assessee went in appeal before ld. CIT(A) and got partly succeeded.
4. Aggrieved, Revenue is now in appeal before the Tribunal.
5. Ld. DR supported the order of ld. Assessing Officer.
6. Ld. AR submitted that the impugned penalty of Rs. 22,42,000/- was imposed by ld. Assessing Officer on the following three additions:-
1. Addition on account of accrued interest on Rs.50,185/-
OFCPNs of Nirma Indus. Ltd.
2 Addition on account of short term capital gain on Rs.8,79,320/-
sale of DDBs of Nirma Ltd.
3 Addition on account of short term capital gain on Rs.53,49,000/-
the transaction of strips of TATA Finance Ltd.
Total Rs.62,78,505
7. Ld. AR further submitted that ld. CIT(A) has rightly deleted the penalty on addition of Rs.50,185/- which was added by ld. Assessing Officer on account of accrued interest on OFCPNs of Nirma Indus. Ltd. because assessee follows cash method of accounting and the income is accounted when it is actually received and the interest of Rs.50,185/- was not included in the income of assessee and, therefore, there was no reason of concealment of income or furnishing of inaccurate particulars of income. As regards the penalty imposed on addition of Rs.8,79,320/- and Rs.53,49,000/- on account ITA No.2005/Ahd/2008 4 Asst. Year 2002-03 of short term capital gain on sale of DDBs of Nirma Ltd. and short term capital gain on the transaction of strips of TATA Finance Ltd. respectively, the issue came up before the Tribunal and both the additions have been deleted by the co-ordinate bench in ITA No.1255/Ahd/2006 for Asst. Year 2002-03. Banking upon the order of the Tribunal towards the deletion of quantum additions, ld. AR submitted that in such situation when the quantum additions have been deleted then no penalty is called for u/s 271(1)(c) of the Act.
8. We have heard the rival contentions and perused the material on record. Through this appeal Revenue is aggrieved with the order of ld. CIT(A) deleting the penalty of Rs. 22,42,000/- which was imposed u/s 271(1)(c) of the Act on the following additions :-
1. Addition on account of accrued interest on Rs.50,185/-
OFCPNs of Nirma Indus. Ltd.
2 Addition on account of short term capital gain on Rs.8,79,320/-
sale of DDBs of Nirma Ltd.
3 Addition on account of short term capital gain on Rs.53,49,000/-
the transaction of strips of TATA Finance Ltd.
Total Rs.62,78,505 Addition of Rs.50,185/- (account of accrued interest on OFCPNs of Nirma Industries Ltd.)
9. We observe that during the course of assessment proceedings itself it was brought to the notice of ld. Assessing Officer that assessee has filed her return of income on cash method of ITA No.2005/Ahd/2008 5 Asst. Year 2002-03 accounting and due to this reason the interest of Rs.50,185/- on OFCPNs of Nirma Indus. Ltd. was not shown in the return of income.
Certainly in such situation there cannot be a case of concealment of income or furnishing of inaccurate particulars of such income which are necessary for imposition of penalty u/s 271(1)(c) of the Act.
10. We further observe that in ITA No.1255/Ahd/2006 for Asst.
Year 2002-03, vide order dated 21.06.2013, the Tribunal has dealt with the grounds of assessee for the impugned additions of Rs.
8,79,320/- & Rs.53,49,000/- made ld. Assessing Officer and the grounds have been allowed by adjudicating the issues as under :-
Addition of Rs. Rs.8,79,320/- (account of short term capital gain on sale of DDBs of Nirma Ltd.) 2.2 Grounds No.2 & 3 are interconnected as reproduced below:
"2. In law and in facts and circumstances of the Appellant's case, the Ld. Commissioner of Income Tax (Appeals) has erred in upholding the action of Id. Assessing Officer in considering the long term capital gain of Rs.8,79,320/- on sale of 40 Deep Discount Bonds of Nirma Limited as short term capital gain.
3. In law and in facts and circumstances of the Appellant's case, the Ld. Commissioner of Income Tax (Appeals) has erred in upholding the action of Id. Assessing Officer in not allowing claim of deduction u/s.54EC of the Act on long term capital gain referred to in ground no. 2 above."ITA No.2005/Ahd/2008 6
Asst. Year 2002-03 2.2.1 The brief facts of the case are that it is noted by the A.O. in para 4 of the assessment order that the assessee has shown long term capital gain (LTCG) of Rs.8,79,320/- in respect of purchase and sale of deep discount bonds (DDBs) of Nirma Ltd. He has also noted that the purchase cost of the same have been shown at Rs.40 lacs and sale consideration has been declared at Rs.48,79,320/-. He has further noted that these DDBs were allotted to the assessee on 28.07.2000 and the allotment letter was issued to the assessee dated 23.09.2000. He has further noted that the debenture certificate has been issued to the assessee dated 05.10.2001. Thereafter, it is noted that DDBs of Series A of Nirma Industries Ltd. were listed in National Stock Exchange (NSE) on 20.09.2001 and was made available for dematerialization as on 19.09.2001. Thereafter, he has noted that these DDBs of Nirma Ltd were sold by the assessee on18.03.2002. The assessee has claimed it as long term capital asset by counting the holding period starting form the date of allotment i.e. 28.07.2000 but the A.O. was of the view that these are short term capital assets on the basis of counting of holding period from the date of listing of the same in NSE i.e. 20.09.2001. On the basis of this, the A.O. held that this capital gain of Rs.8,79,320/- is assessable as short term capital gain and he taxed the same accordingly. Moreover, the A.O. disallowed the claim of the assessee for deduction u/s 54EC of the Income tax Act, 1961 also for the same reason that such deduction is allowable against LTCG only and not against STCG. Being aggrieved, the assessee carried the matter in appeal before Ld. CIT(A) but without success and now, the assessee is in further appeal before us.
2.2.2 It was submitted by the Ld. A.R. before us that in the case of Shri Karsanbhai P Patel (HUF) for the same assessment year i.e. assessment year 2002-03, this issue was decided in favour of the assessee in I.T.A.No. 1042/A/2006 dated 09.10.2009. He submitted that this decision is available on pages 62-87 of the paper book and the relevant para is para 26 of this Tribunal decision on page 85 of the paper book. Ld. D.R. supported the orders of authorities below.
2.2.3 We have considered the rival submissions, perused the material on record and have gone through the orders of authorities below and the Tribunal decision cited by Ld. A.R. From the facts noted by the tribunal in that case, we find that the dispute before the tribunal was regarding the same DDBs of Nirma Ltd. for which letter of allotment was issued by Nirma Ltd. on 23.09.2000 and debenture certificate was issued on 05.10.2001 and the same was listed in NSE only on 20.09.2001. Hence, the facts in the present case are identical. This issue was decided by the tribunal as ITA No.2005/Ahd/2008 7 Asst. Year 2002-03 per para 26 of the tribunal decision and for the sake of ready reference, the same is reproduced below:
"For the aforesaid reasons, we are of the view that the assessee is right in claiming that the capital gains arising on the sale of the deep discount bonds should be assessed as long term capital gains on the footing that he held them for a period of more than 12 months starting form 23.09.2000 before they were sold on 2.03.2002. Consequently, we also hold that the assessee is entitled to the exemption u/s 54EC as claimed. Thus both grounds Nos. 2 and 3 are allowed."
2.2.4 From the above para of the Tribunal order, we find that it was held by the tribunal that the holding period has to be counted form the date of allotment till the date of sale and if the same is more than 12 months then, it has to be accepted that it is a LTCG and the assessee is entitled to deduction u/s 54EC also. Hence, in the present case also, by respectfully following the Tribunal decision, we decide both these issues in favour of the assessee and it is held that since period of holding was more than 12 months from the date of allotment i.e. 23.09.2000 till the date of sale i.e. 18.03.2002, the resulting gain has to be assessed as LTCG and the assessee should be held as eligible for deduction u/s 54EC also because there is no other objection of the revenue regarding allowability of deduction u/s 54EC except that the income in question is not a LTCG. Both these grounds no.2 & 3 are allowed.
Addition of Rs.53,49,000/- (account of short term capital gain on the transaction of strips of TATA Finance Ltd.
2.3 Grounds No.4 & 5 are interconnected which read as under:
"4. In Jaw and in facts and circumstances of the Appellant's case, the Ld. Commissioner of Income Tax (Appeals) has erred in upholding the action of Id. Assessing Officer in considering the long term capital gain of Rs.53,49,000/- arising on sale of principal strip part A of Tata finance Ltd. NCDs as short term capital gain.
5. In law and in facts and circumstances of the Appellant's case, the Ld. Commissioner of Income Tax (Appeals) has erred in upholding the action of Id. Assessing Officer in not allowing claim of deduction ITA No.2005/Ahd/2008 8 Asst. Year 2002-03 u/s.54EC of the Act on long term capital gain referred to in ground no. 4 above."
2.3.1 The brief facts regarding these issues are that it is noted by the A.O. in the same para 4 of the assessment order that the assessee has shown LTCG of Rs.53.49 lacs from the transaction of NCD principle strip, Part A Series I of Tata Finance Ltd. having purchase cost of Rs.495.51 lacs and sale consideration being Rs.549 lacs. In respect of this capital gain also, the assessee claimed deduction u/s 54EC of the Income tax Act, 1961 because the assessee had made investment in the bonds of Rural Electricity Corporation (REC) of Rs.62.20 lacs and the LTCG of only Rs.8320 had been offered by the assessee. The A.O. has further noted that the assessee has purchased 9 principle strips of Part A Series I of Tata Finance Ltd. of Rs.1 crores (face value) for a consideration of Rs.495.41 lacs on 23.10.2000 from Nirma Industries Ltd., which is a group concern of Nirma group and the same was sold by the assessee on 20.03.2002 at Rs.549 lacs to Nirma Industries Ltd. i.e. the same concern from which the assessee purchased these strips. The A.O. issued show cause notice to the assessee as to why the Board's Circular No.2 of 2002 dated 15.02.2002 is not applicable and why this capital gain should not be considered as STCG in the light of this Board's Circular. In reply, it was submitted by the assessee before the A.O. that the letter of board dated 12.03.1996 was applicable in the present case and therefore, the gain is LTCG. It was further submitted by the assessee before the A.O. that as per the press release of the Board dated 20.03.2002, the applicability of the circular is prospective and not retrospective and for this reason also, the gain in question is LTCG and the same cannot be considered to be STCG. The A.O. was not satisfied and he held that this gain of Rs.53.49 lacs is STSCG and the assessee is not eligible for deduction u/s 54EC also. Being aggrieved, the assessee carried the matter in appeal before Ld. CIT(A) but without success and now, the assessee is in further appeal before us.
2.3.2 It was submitted by the Ld. A.R. that this issue is also covered in favour of the assessee by the tribunal decision rendered in the case of ITO Vs Kulgam Holdings Pvt. Ltd. in I.T.A.No. 3785 and 2574/Ahd/2004 dated 25.04.2007, copy of which is available on page 136-140 of the paper book II. He further submitted that on the same issue, another tribunal decision rendered in the case of Navin Associates Vs ACIT and Others in I.T.A.No. 1248, 1256 & 1266/Ahd/2006 is also in favour of the assessee and a copy of this Tribunal decision is available on pages 196- 199 of the paper book II. Ld. D.R. supported the orders of authorities below.
ITA No.2005/Ahd/2008 9Asst. Year 2002-03 2.3.3 We have considered the rival submissions, perused the material on record and have gone through the orders of authorities below and the Tribunal decisions cited by Ld. A.R. We find that in the case of Navin Associates (supra), the issue involved was, whether the Board's Circular No.2 of 2002 dated 15.02.2002 can be applied ignoring the press note dated 20.03.2002 issued in this regard by CBDT. The Tribunal in that case has decided this issue in favour of the assessee by following the Tribunal decision rendered by the Mumbai Bench of the Tribunal rendered in the case of ITO Vs Kulgam Holdings Pvt. Ltd. (Supra). The tribunal has also followed SMC Bench decision of Ahmedabad Bench of the tribunal rendered in the case of Navin Associates in I.T.A.No. 1621/Ahd/2007 dated 04.04.2008. We find that in the case of ITO Vs Kulgam Associates (supra), it was held by Ld. CIT(A) that since the Bonds were acquired by the assessee prior to the date of Board's Circular No.2 dated 15.02.2002, such Board's circular cannot be made applicable because the bonds in question were acquired prior to this date and as per subsequent press release dated 20.03.2002, it was made clear that this Board's circular No.2 will be applicable only for bonds which are acquired after this date. This decision of Ld. CIT(A) was approved by the tribunal in that case. Similarly in the case of Navin Associates (supra), similar issue was decided by the tribunal in favour of the assessee and while deciding this issue in that case, the Tribunal has followed a decision of SMC Bench of Ahmedabad Bench of the Tribunal rendered in the case of Navin associates (supra). This SMC Bench decision of the tribunal has followed a division bench decision of Ahmedabad Bench of the tribunal rendered in the case of Kisan Discretion Family Trust in I.T.A.No. 1850/Ahd/2007 dated 02.11.2007. This Tribunal decision is also available in the paper book-II on pages 141-195. In para 57 of this tribunal decision on page 194 (backside), it was held by the Accountant Member in that case that this Board's Circular dated 15.02.2002 is applicable only to DDBs acquired on or after 15.05.2002 and since Judicial Member in that case was also having the same view, the matter was decided in favour of the assessee without referring the same to the Third Member although the Accountant Member was having some reservations about the view of the Judicial Member on some other aspects. Be that as it may but this is admitted position that on this aspect, i.e. Board's Circular No.2 dated 15.02.2002 is applicable only on those bonds which were acquired on or after 15.02.2002, there are several Tribunal decisions in favour of the assessee and no contrary decision was brought to our notice by the Ld. D.R. and since in the present case, the strip of TATA Finance Ltd. were acquired by the assessee on 23.03.2000 i.e. much prior to 15.02.2002, it has to be accepted that in the facts of the present case, this board's Circular No.2 dated 15.02.2002 is not applicable and therefore, the gain in question has to be assessed as LTCG and the ITA No.2005/Ahd/2008 10 Asst. Year 2002-03 assessee has to be allowed deduction u/s 54EC also. We hold accordingly. Grounds No.4 & 5 of the assessee are also allowed.
11. We are of the considered view that there are series of decisions of the Tribunal wherein it has been held that if the quantum addition is deleted by the Tribunal then in such cases assessee should not be visited with penalty u/s 271(1)(c) of the Act for concealment of income or furnishing of inaccurate particulars of income.
12. In appeal before us, we observe that out of total addition of Rs.62,78,505/-, penalty on the addition of Rs.50,185/- has already been deleted by us and for the remaining amount of addition i.e. Rs.62,28,320/- (Rs. 8,79,320/- + Rs.53,49,000/-) as the quantum addition has been deleted by the Tribunal in ITA No. 1255/Ahd/2006 for Asst. Year 2002-03 vide order dated 21.06.2013, and so no penalty is to be sustained u/s 271(1)(c) of the Act. Accordingly, we do not find any reason to interfere with the order of ld. CIT(A), we uphold the same. This ground raised by the Revenue is dismissed.
13. Other grounds are general in nature, hence no need of adjudication.
ITA No.2005/Ahd/2008 11Asst. Year 2002-03
14. In the result, appeal of the Revenue is dismissed.
Order pronounced in the open Court on 3rd June, 2016 Sd/- sd/-
(R. P. Tolani) (Manish Borad)
Judicial Member Accountant Member
Dated 3/6/2016
Mahata/-
Copy of the order forwarded to:
1. The Appellant
2. The Respondent
3. The CIT concerned
4. The CIT(A) concerned
5. The DR, ITAT, Ahmedabad
6. Guard File
BY ORDER
Asst. Registrar, ITAT, Ahmedabad
1. Date of dictation: 2/06/2016
2. Date on which the typed draft is placed before the Dictating Member: 3/0/2016 other Member:
3. Date on which approved draft comes to the Sr. P. S./P.S.:
4. Date on which the fair order is placed before the Dictating Member for pronouncement: __________
5. Date on which the fair order comes back to the Sr. P.S./P.S.:
6. Date on which the file goes to the Bench Clerk: 3/6/16
7. Date on which the file goes to the Head Clerk:
8. The date on which the file goes to the Assistant Registrar for signature on the order:
9. Date of Despatch of the Order: