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Income Tax Appellate Tribunal - Ahmedabad

Arvindkumar S.Somany,Huf, Ahmedabad vs Department Of Income Tax on 9 July, 2009

1


             IN THE INCOME TAX APPELLATE TRIBUNAL,
                      D-BENCH, AHMEDABAD.

             Before: Shri T.K. SHARMA, Judicial Member, and
                     Shri D.C. AGRAWAL, Accountant Member.

                          ITA No.2868/Ahd/2009
                       Assessment Year : 2004-2005
ITO,                                  Shri Arvindkumar S. Somany
Ward-12(2),                           HUF, C/o.Soma Textile
Ahmedabad                      Versus Industries,
                                      Rakhial,
                                      Ahmedabad.
(Appellant)                                                 (Respondent)
PAN: AAFHS 4917R

             For the appellant:   Shri    Shri C.K.Mishra
             For the              Shri.   Shri M.K.Patel
             respondent

                                  ORDER

Per T K Sharma (Judicial Member):- This appeal by the assessee is against the order dated 9.07.2009, passed by Ld. Commissioner of Income Tax(Appeals)-XX, Ahmedabad, canceling the penalty of Rs.9,97,619/- levied by Assessing Officer under section 271(1)(c) of I.T.Act, 1961 for the Assessment Year 2004-05.

2. The facts in brief in the case are that the assessment for the assessment year under appeal was completed vide order under section 143(3) dated 20.12.2006, determining assessed income of Rs.1,85,427/- i.e. at the return of income. However in the assessment order, Assessing Officer determined the loss to be carry forward at Rs.8,28,518/- as against Rs.31,09,814/- worked out by the assessee in the return of income. Since the assessee has claimed excess loss to be carry forward, Assessing Officer initiated the penalty proceedings under section 271(1)(c). Subsequently, Assessing Officer levied the penalty of Rs.997619 under section 271(1)(c) for claiming excess loss to be carry forward.

3. On appeal, Learned Commissioner of Income Tax (Appeals) cancelled the penalty for the details reasons given in para.4 in the impugned order which are as under

"I have carefully considered the facts of the case and arguments of the Authorised Representative as well as the observations of the Assessing Officer. The Legal submissions put forth by the appellant are also duly considered. On perusal of the penalty order, it is seen that the Assessing Officer has relied upon the findings arrived at in the assessment order and has further relied upon the facts that the quantum appeal against the assessment order has been dismissed and that the appellant has not preferred a second appeal before the ITAT. It is true that the quantum appeal has been dismissed and that no second appeal has been filed by the appellant but that in itself in my considered opinion does not bring the appellant's case within the scope and purview of the penal provisions of section 271(1)(c) of the Act. The core issue which is to be seen and weighed while levying a penalty is that whether the appellant has furnished inaccurate particulars of income or has concealed its income. On facts of the case, I find that the appellant had furnished complete particulars and evidences in support of the claim of long term capital loss before the Assessing Officer in the assessment proceedings. I also find that the Assessing Officer in re-computing the long term capital loss has applied the provisions of the section 45(4) of the Act, which in the opinion of the appellant was not correct since the provisions of the said section are not applicable in his case but are applicable in the case of the dissolved firm M/s. Hiralla Surendrakumar for the purpose of computation of capital gains in the hands of the firm on transfer of shares to the partners on dissolution. This contention of the appellant however, did not find favour with the Assessing Officer or the Learned Commissioner of Income Tax (Appeals) in the quantum appeal. In the given set of facts, I agree with the contentions of the appellant that this facts in itself does not warrant penalty under section 271(1)(C)of the Act since the issue is debatable and rotates around the interpretation of the provisions of the section 45(4) of the act. On going through various decisions I find that no penalty is warranted merely on rejection of the explanation of the appellant more particularly on rejection of the explanation of the appellant more particularly on a debatable issue. Also, mere non-filing of the second appeal does not bring the appellant's case within the purview of section 271(1)(c) of the Act, since it does not tantamount to acceptance of concealment or furnishing of inaccurate particulars by the appellant. The difference arose only on account of computation made by the appellant and the Assessing Officer has no revenue implication and has also not affected the total income of the Assessing Officer has no 3 ITA No.3841/Ahd/2004 revenue implication and has not affected the total income of the appellant as the returned income has been accepted as assessed income as the issue under dispute is only with reference to determination of the amount of carry forward of long term capital loss for the year under consideration. Thus, according to the learned Authorised Representative the total income even after the assessment order and Learned Commissioner of Income Tax (Appeals)'s order remains the same and the demand after giving effect to Learned Commissioner of Income Tax (Appeals)'s order also remains the same i.e. Rs.NIL. I do not find from the facts that there could have been any malafide intention of evading taxes. In view of the foregoing discussion, I am of the opinion that no penalty under section 271(1))(c) of the Act is warranted on facts of the appellant's case and the same is therefore, hereby cancelled."

Aggrieved by the order of Learned Commissioner of Income Tax (Appeals), canceling the penalty, the revenue is in appeal before us.

4. At the time of hearing, on behalf of the revenue Shri C.K.Mishra appeared and contended that Learned Commissioner of Income Tax (Appeals) has not appreciated the facts and material brought on record by Assessing Officer. In the return of income, assessee has determined long terms capital loss to be carry forward so that it can set off the same from future income. In these facts, Explanation-4(a) section 271(1)(c) of the Act is not applicable. The learned Departmental Representative further submitted that while canceling the penalty of Rs.9,97,619/- levied by the Assessing Officer under section 271(1)(c), the Learned Commissioner of Income Tax (Appeals) has not appreciated that assessee could not substantiate its claim of long term capital loss Rs.39,38,332/- because according to the provisions of section 45(4) of the Act, the long terms capital loss admissible to the assessee was only Rs.8,28,518/-. The Learned Commissioner of Income Tax (Appeals) has cancelled the penalty without appreciating the ratio of the decision of the Hon'ble Delhi High Court in the case of CIT Vs. Sohan Singh reported in 244 ITR 177, in which the Hon'ble Court held that assessee must offer an explanation to show that there was no fraud, gross or 4 ITA No.3841/Ahd/2004 willful negligence involved in not returning the correct income in his return and it is not sufficient explanation if any fanciful or totally untenable explanation is officered.

5. On the other hand, Shri M.K.Patel learned Authorised Representative appeared on behalf of the assessee supported the order of the Learned Commissioner of Income Tax (Appeals).

6. We have carefully gone through the orders of the authorities below. It is pertinent to note that assessee has neither concealed the income or has furnished particulars thereof. The amount of long term capital loss to be carry forward, determined by Assessing Officer is based on interpretation of provisions of section 45 (5) of the Act which according to Learned Commissioner of Income Tax (Appeals) was a debatable. The return as well as assessed income is same therefore, the tax effect in the assessment year is Nil. In these facts, in our opinion, Learned Commissioner of Income Tax (Appeals) is legally and factually correct in holding that there is no malafide intention of evading tax. As a matter of fact, assessee had furnished complete particulars and evidence in support of the claim of long term capital loss before the Assessing Officer during the course of assessment proceedings. The Assessing Officer merely recomputed long term capital loss by applying the provisions of section 45(5) of the Act which according to bonafide belief of the assessee are applicable in case of dissolved firm M/s.Hiralal Surendrakumar for the purpose of computation of capital gain in the hands of the firm on transfer of share to the partner on dissolution. It is the different matter whether this contention is accepted or not. In our opinion, explanation furnished by the assessee is bonafide, therefore, Learned Commissioner of Income Tax (Appeals) is legally and factually correct in canceling the penalty of Rs.9,97,619/- levied by Assessing Officer under section 271(1)(c) of Income Tax Act, 1961. We therefore, decline to interfere.

7. In the result, the appeals of the revenue is dismissed.

This order is pronounced in open Court on Dated 31st December, 2009.

         Sd/-                                                   Sd/-
  (D.C. AGRAWAL)                                        (T.K. SHARMA)
ACCOUNTANT MEMBER                                     JUDICIAL MEMBER

Ahmedabad;          Dated: 31/12/2009
Paras#

Copy of the Order forwarded to:
1. The Appellant
2. The Respondent
3. The CIT(A) Concerned
4. The CIT,
5. The DR, Ahmedabad Bench
6. The Guard File.
                                                            BY ORDER,

               स᭜यािपत ᮧित //True Copy//

                             ASSTT. REGISTRAR/ DEPUTY REGISTRAR
                                          ITAT, Ahmedabad Benches,
                                                     AHMEDABAD.