Gujarat High Court
Pr.Commissioner Of Income-Tax vs M/S Bilakhia Holdings Pvt ... on 9 June, 2016
Author: Akil Kureshi
Bench: Akil Kureshi, A.J. Shastri
O/TAXAP/132/2016 ORDER
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
TAX APPEAL NO. 132 of 2016
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PR.COMMISSIONER OF INCOME-TAX....Appellant(s)
Versus
M/S BILAKHIA HOLDINGS PVT LTD....Opponent(s)
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Appearance:
MR SUDHIR M MEHTA, ADVOCATE for the Appellant(s) No. 1
MR RK PATEL, CAVEATOR for the Opponent(s) No. 1
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CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI
and
HONOURABLE MR.JUSTICE A.J. SHASTRI
Date : 09/06/2016
ORAL ORDER
(PER : HONOURABLE MR.JUSTICE AKIL KURESHI)
1. Revenue is in appeal against the judgement of the Income Tax Appellate Tribunal dated 08.05.2015 raising following question for our consideration:
"[A] Whether in law and on facts and in the circumstances of the case, the ITAT was justified in deleting the penalty levied u/s. 271(1)(c) of the Act even though the assessee had credited the profit on sale of shares claimed to have been received as a gift by way of family arrangement directly in to the capital reserve account instead of routing it through the profit and loss account which amounts to furnishing inaccurate particulars of income by the assessee and resulting in reduction of book profit U/s. 115JB of the Act?"
2. For the assessment year 2003-04 the assessee had filed return of Page 1 of 4 HC-NIC Page 1 of 4 Created On Fri Jun 10 02:25:17 IST 2016 O/TAXAP/132/2016 ORDER income declaring total income of Rs. 37.65 lacs. During the course of the assessment, the Assessing Officer noted that the assessee had sold 86,25,000 shares for a sum of Rs. 2.43 crores (rounded off) and made profit of the said sum since the assessee claimed to have received such shares by way of gift pursuant to family arrangement. The assessee had not shown such profit in the profit and loss account but had directly credited the same to the capital reserve account in the balance sheet. According to the Assessing Officer, thus, the assessee had reduced the book profit. This was relevant because the case of the assessee fell under Section 115JB of the Income Tax Act, 1961.
3. The Assessing Officer made quantum additions which have been upheld by CIT (Appeals) and the Tribunal. Further appeal by the assessee being Tax Appeal No. 1080 of 2014 is admitted by the High Court and is pending for final hearing.
4. In the present appeal, however, we are concerned with the question of penalty. The Assessing Officer was of the opinion that by the above method, the assessee had evaded tax and was, therefore, liable to be visited with penalty under Section 271 of the Act. The assessee carried the matter in appeal. CIT (Appeals) deleted the penalty making following observations:
"7.18 In the present case, as pointed above, there is no dispute that all the relevant facts material to the computation of total income are duly furnished by the assessee and no deficiencies in furnishing of such facts are pointed out by the AO. There is thus Page 2 of 4 HC-NIC Page 2 of 4 Created On Fri Jun 10 02:25:17 IST 2016 O/TAXAP/132/2016 ORDER no cause of action for deeming fiction being triggered byt eh conduct of the assessee.
7.19 Be that as it may, even assuming that deeming fiction under Explanation 1 to Section 271(1)(c) can be triggered by a wrong legal claim, it cannot be the case that merely because there is a wrong claim, even if that be so, penalty under Section 27(1)(c) can be imposed. This deeming fiction under section 271(1)(c) only shifts the onus of proof on the assessee, as this Explanation itself provides that a penalty can only be imposed
(a) when there is no explanation by the assessee, (b) when the explanation given by the assessee is found to be false, and (c) when the assessee provides an Explanation which he fails to substantiate and he fails to prove that the explanation was bonafide and that all the facts necessary for the same and material for computation of income have been duly disclosed by the assessee."
5. Revenue carried the matter in appeal before the Tribunal. The Tribunal, by the impugned judgement, noted that for the earlier assessment year 2002-03, the assessee had made a similar claim which was accepted by the department during scrutiny assessment. However, later on, such assessment was reopened. Be that as it may, with respect to the penalty, the Tribunal, relied upon the decision of Supreme Court in case of CIT vs. Reliance Petroproducts Pvt. Ltd. reported in [2010] 322 ITR 158 (SC) and observed as under:
"15. We find that the Assessing Officer was not justified in holding that the inaccurate particulars of income relating to capital gain was furnished by the assessee. No inaccuracy in any of the particulars in respect of capital gain earned by the assessee was found by the Assessing Officer and the addition to the book profit was made because of difference in the opinion in respect of presentation of such capital gain whether such capital gain should have been credited in the profit and loss account or Page 3 of 4 HC-NIC Page 3 of 4 Created On Fri Jun 10 02:25:17 IST 2016 O/TAXAP/132/2016 ORDER directly to capital reserve in the balance sheet.
16. The assessee was of the opinion that such capital gain could have been directly credited to capital reserve account in the balance sheet, whereas as per the Assessing Officer such capital gain should have been credited in the profit and loss account only."
6. We have heard learned counsel for the parties. We do not find that the CIT(Appeals) and the Tribunal committed any error. Undisputed facts are that, all necessary declarations were made by the assessee with respect to the receipt in question. Regarding the tax liability of such receipt, there was a difference of opinion between the assessee and Assessing Officer. That by itself would not give rise to penalty proceedings. We are not concerned with the quantum addition. We are only concerned whether the facts give rise to applicability of Section 271(1)(c) of the Act. Reference can be made to the decision of Supreme Court in case of CIT vs. Reliance Petroproducts Pvt. Ltd.[supra] and in case of Price Waterhouse Coopers Pvt. Ltd. vs CIT and anr reported in [2012] 348 ITR 306 (SC).
7. In the result, tax appeal is dismissed.
(AKIL KURESHI, J.) (A.J. SHASTRI, J.) Jyoti Page 4 of 4 HC-NIC Page 4 of 4 Created On Fri Jun 10 02:25:17 IST 2016