Income Tax Appellate Tribunal - Delhi
Diligent Services (P) Ltd., Delhi vs Assessee on 28 October, 2014
ITA No. 510/Del/2012
Asstt.Year: 2006-07
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH `B' NEW DELHI
BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT
AND
SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER
I.T.A.No.510/Del/2012
Assessment Year : 2006-07
Diligent Services (P) Ltd., vs ACIT, Circle 10(1),
201, S-524, Agarwal Complex, New Delhi.
Vikas Marg, Shakarpur,
Delhi-110092
(PAN: AAACD4289R)
(Appellant) (Respondent)
Appellant by: S/Shri Ajay Vohra, Gaurav Jain, Adv.
Respondent by : Miss Ashima Neb, Sr.DR
ORDER
PER CHANDRA MOHAN GARG, JUDICIAL MEMBER
This appeal has been preferred by the assessee against the order of CIT(A)-XVIII, New Delhi dated 21.11.2011 in Appeal No.55/10-11 for AY 2006-07 by which the CIT(A) upheld the penalty order dated 30.03.2010 passed u/s 271(1)(c) of the Income Tax Act, 1961.
2. The assessee has raised following grounds in this appeal:-
"1. That the CIT(A) erred on facts and in law in upholding the levy of penalty under section 271 (1)( c) of the Act holding that the appellant has furnished inaccurate particulars on income.
pg. 1 ITA No. 510/Del/2012 Asstt.Year: 2006-07
2. Without prejudice to ground No 1, That CIT(A) erred in facts and in law in upholding the quantum of penalty overlooking the fact that no tax could have been evaded on following items:
a) Returned Tax
b) Amount of allowance of Interest and other expenses proportionate to earning of income assessed as business income.
c) Rebate U/S 88E on Securities Transaction Tax (STT) which was eligible for deduction. "
3. Briefly stated the facts giving rise to this appeal are that the AO levied penalty of Rs.37,11,280/- at minimum rate, taking tax sought to be evaded at the same amount. During quantum proceedings, the AO made additions on two counts. The first disallowance relates to disallowance of exemption u/s 10(38) of the Act on an amount of Rs.53,61,68,729/- which has been shown as long term capital gain (LTCG) by the assessee but the AO treated the same as business income. The AO also treated an amount of Rs. 1,10,25,787/- shown as short term capital gain (STCG) which was also treated as business income by the AO. The second issue was pertaining to disallowance of Rs. 10 lakh u/s 14A of the Act in the context of earning exempt income. The AO initiated penalty proceedings and levied penalty of Rs. 37,11,280/- u/s 271(1)(c) of the Act. The aggrieved assessee preferred an appeal but remained empty handed as the appeal was dismissed by the CIT(A) by passing the impugned order. Now, pg. 2 ITA No. 510/Del/2012 Asstt.Year: 2006-07 the assessee has preferred this second appeal before the Tribunal with the grounds as reproduced hereinabove.
4. We have heard arguments of both the sides and carefully perused the relevant material placed on record. Ld. Counsel for the assessee has drawn our attention towards order of ITAT Delhi 'B' Bench dated 6.1.2012 in assessee's own case i.e. ITA No. 3299/Del/2009 for AY 2006-07 wherein the order of the CIT(A) in quantum proceedings has been upheld by confirming the action of the AO which treated long term capital gain and short term capital gain as business income of the assessee. Ld. Counsel placed his reliance on the recent decision of Hon'ble Jurisdictional High Court of Delhi in the case of CIT vs Amit Jain (2013) 351 ITR 74 (Del) wherein it was held that the amount in question which forms the basis for the AO to levy the penalty was in fact truthfully reported in the return of income of the assessee. Their lordships further held that in view of these circumstances, the AO chose to treat the income under some other head cannot characterise the particulars reported in the return as inaccurate particulars or as concealment or suppression of facts. Finally, in this case of Amit Jain (supra), it was held that when amount of income is reported in the returns and the AO has reported the same in the return of income under a particular head and AO is treating the same income under some other head, it cannot be said to be furnishing of inaccurate particulars and penalty is not leviable in this situation.
pg. 3 ITA No. 510/Del/2012 Asstt.Year: 2006-07
5. Ld. DR supported the orders of the authorities below and submitted that the assessee has concealed particulars of its income and has furnished wrong particulars of its income, therefore, the AO was right in levying penalty which was upheld by the CIT(A) on justified reasons.
6. On careful consideration of above rival contentions and submissions, at the outset, we observe that the additions made by the AO treating the long term capital gain and short term capital gain as business income has been upheld by the Tribunal in its order dated 6.1.2012 (supra). The relevant operative paragraph no. 7.4 of the Tribunal reads as under:-
"7.4 As regards short term capital gain made by the assessee, Ld. Commissioner of Income Tax (Appeals) has given a finding that even though all the shares have been held as investment in the balance sheet, there were a large number of shares transacted relating to a variety of shares wherein the frequency of transactions is clearly reflected. It was further found that there are many instances where the holding period of shares is also very short and it clearly indicates the intention of the assessee to earn short term profit by purchasing and selling of shares in the market. In this regard, certain samples transaction as under:-
Name of the company Date of purchase of shares Date of sale of shares TNPL September, 2005 October, 2005 Rajapamil September, 2005 October, 2005 Patel Engineering July, 2005 December, 2005 Madras Cen September, 2005 September, 2005 Madras Cen September, 2005 October, 2005 Jindal Poly September, 2005 October, 2005 Gulf Oil December, 2005 January, 2006 IDFC September, 2005 November, 2005 IFSI September, 2005 March, 2006 pg. 4 ITA No. 510/Del/2012 Asstt.Year: 2006-07 The above clearly indicate that these shares were held with the intention of earning profits and not earning dividend. Thus, it is found that with respect to these shares transaction, the transactions were regularly entered during the year; purchase and sale of shares were continuous; holding period was very short; circumstances clearly indicate that the intention of the assessee was not to earn the dividend but to earn profit on sale and purchase of shares. The assessee has also shown speculation loss which indicate that share transactions in the nature of business were also being carried out by the assessee. Ld. Commissioner of Income Tax (Appeals) is correct in holding that whenever any investment is made by a person, a reasonable timeframe has to be kept in mind before the shares are sold, unless there are certain exceptional circumstances. In the present case, the shares have been claimed to be shown as investment have not been held as investment with the intention of earning dividends and therefore, merely because they have been shown as investment in the balance sheet does not strengthen their claim that sale of these shares should be treated as capital gain and not business income. The facts clearly indicate that keeping in view of the frequency of transaction, intention of the assessee to earn profits as well as most of these shares having been held in a separate DEMAT account, is pointing towards the fact that to the extent of these shares the assessee was carrying out business transactions. Thus, we agree with the finding that Ld. Commissioner of Income Tax (Appeals) with regard to these shares which have been shown as short term capital gain, these transactions cannot be treated as short term capital gains and have to be considered as business income of the assessee. Therefore, we uphold the order of the Ld. Commissioner of Income Tax (Appeals) on the issue of long term capital gain and short term capital gain. The long term capital gain is to be held as long term capital gain and short term capital gain is to be held as business income. "
7. In view of above, we take cognizance of the recent decision of Jurisdictional High Court of Delhi in the case of Amit Jain (supra) wherein it was held thus:-
pg. 5 ITA No. 510/Del/2012 Asstt.Year: 2006-07 "3. This Court notices that the Tribunal while upholding the order of the appellate commissioner relied upon the decision in CIT Vs. Reliance Petroproducts Pvt. Ltd. (2010) 322 ITR 158 (SC). Furthermore, the record reveals that the amount in question, which formed the basis for the assessing officer to levy penalty was in fact truthfully reported in the returns. In view of this circumstance, that the assessing officer chose to treat the income under some other head cannot characterize the particulars or reported in the return as an inaccurate particulars or as suppression of facts. The Court is also conscious of the decision of the Supreme Court in Calcutta Discount Co. Ltd. vs. Income Tax Officer (1961)41 ITR 191 (SC) where it was held that it is up to the assessing officer to interpret the return and discern as to which head of income the amount had to be brought to tax."
8. In view of above factual matrix of the present case, we are inclined to hold that if the assessee has declared income under a particulars head which was treated by the AO under income of some other head and the findings of the AO were confirmed upto the Tribunal, then, it cannot be presumed and concluded that the assessee has furnished inaccurate particulars or wrong particulars of its income and penalty in this situation is not leviable in the light of ratio of the decision of Hon'ble Jurisdictional High Court in the case of CIT vs Amit Jain (supra).
9. Accordingly, both the grounds of assessee appellant are allowed and AO is directed to delete the penalty.
pg. 6 ITA No. 510/Del/2012 Asstt.Year: 2006-07
10. In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 28.10.2014.
Sd/- Sd/-
(G.D. AGRAWAL) (CHANDRAMOHAN GARG)
VICE PRESIDENT JUDICIAL MEMBER
DT. 28th OCTOBER, 2014
'GS'
Copy forwarded to:-
1. Appellant
2. Respondent
3. C.I.T.(A)
4. C.I.T.
5. DR
By Order
Asstt.Registrar
pg. 7