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2. The facts are that the assessee filed her return on 14.8.2006 declaring total income of Rs. 1,11,52,993/-. The return was processed u/s C.O.Nos. 144 to 150(Del)/2010 143(1), accepting the return of income, and refund of Rs. 3,87,960/- was granted to her on 8.5.2007. Thereafter, the case was selected for scrutiny by issuing a notice u/s 143(2).

2.1 The point in dispute is regarding the taxability of capital gains arising on sale of 2,50,000 shares of Indocare Pharmaceuticals Ltd., purchased by the assessee on 25.2.2004 and sold on 21.10.2005. The shares were purchased for a sum of Rs. 16,65,227/- and sold for Rs. 50.00 lakh. In the statement of income, the assessee claimed the capital gains of Rs. 33,34,973/- to be exempt u/s 10(38) of the Income-tax Act, 1961. She was required to furnish the purchase and sale agreements. The sale bill was submitted on 6.8.2008 vide letter of the same date in which information on two other points was also submitted. The purchase bill was submitted on 11.8.2008 vide letter of the same date in which information regarding one more point was furnished. Thereafter, the assessee submitted a letter dated 29.8.2008, in which it is stated that the sale agreement was on "spot basis". The share was listed on Ahmedabad Stock Exchange. She held the shares in demat form with a depository. In the relevant period, the Ahmedabad Stock Exchange (ASE) was not in operation for more than a year and, therefore, the C.O.Nos. 144 to 150(Del)/2010 shares were sold on "spot basis". The accountant, by mistake, has treated the gains to be exempt u/s 10(38) at the time of preparing income-tax return, without paying to the attention to the effect that the securities transaction tax (the STT) had not been paid on the sale- transaction and the shares were not sold on the exchange. The gains attracted tax @ 10%. The AO completed assessment on 2.12.2008 in which, it is inter-alia mentioned that in view of earlier discussion, the amount of Rs. 33,34,973/-is treated as income of the assessee from capital gains arising out of the transaction of listed securities, as mentioned in proviso to section 112 of the Act. It is further mentioned that penalty u/s 271(1)(c) has been initiated on this point separately. 2.2 The penalty proceedings were completed on 24.6.2009 and minimum penalty of Rs. 3,74,184/- was levied. In the penalty proceedings, it was inter-alia submitted that in the course of assessment proceedings, the assessee came to know that the claim of exemption u/s 10(38) was a mistake as the shares were not sold through the ASE as it had stopped functioning. Therefore, the gains were offered for taxation. It was further submitted that looking to the conduct of the assessee, who is not aware of the technical provisions of the law, the penalty may C.O.Nos. 144 to 150(Del)/2010 not be levied. It was also submitted that penalty proceedings are quasi- criminal in nature. Therefore, it is imperative to prove that the assessee has concealed income. Such is not the case here. The moment the assessee came to know about the mistake, all facts were furnished and explanation was also tendered. The tax due on assessed income has also been paid. Further submissions were made to the effect that the total income of the assessee as per return was Rs. 1,11,52,993/- and tax of Rs. 35,49,541/- was payable. Such an assessee will not furnish inaccurate particulars of income for saving tax of Rs. 3,35,000/- only. The mistake was committed by the accountant, who claimed the gains to be exempt without understanding the provisions of the Act. Therefore, no conscious effort can be attributed to the assessee to evade tax and it is only a case of bona fide error. The AO did not accept this explanation. It is mentioned that the assessee came forward with documentary evidence of purchase and sale only when she was required to do so by the AO. If the case was not selected for scrutiny or the evidence not called for in support of exemption u/s 10(38), the assessee would have gotten away without paying tax on capital gains. The plea regarding lack of knowledge of ignorance of law was not accepted on the ground that she is being assisted by professional accountants. Coming to the mens rea, C.O.Nos. 144 to 150(Del)/2010 reliance was placed on the decision of Hon'ble Supreme Court in the case of Union of India Vs. Dharmendra Textile Processors, (2008) 306 ITR 277. A part of the judgment as indicated below, was reproduced in the order:

4.1 Coming to the nature of penalty proceedings, reliance has been placed on the decision of Hon'ble Supreme Court in the case of Dharmendra Textile Processors (supra), in which it has been held that the C.O.Nos. 144 to 150(Del)/2010 proceedings are civil in nature and the levy is to compensate the revenue for the default of the assessees. Further, reliance has been placed on the decision of Hon'ble Delhi High Court in the case of CIT Vs. Zoom Communication P. Ltd., (2010) 327 ITR 510, in which it has been held that the plea of inadvertence cannot be accepted unless it is explained as to who committed the mistake and what were the circumstances in which the mistake was committed. It is also mentioned in the judgment that a large number of returns are accepted u/s 143(1) and only a few cases are selected for scrutiny. In such a scenario acceptance of plea of oversight would exonerate a large number of assessees from payment of legitimate tax even when the claim was actuated by a mala fide intention. Reliance has also been placed on the decision of Hon'ble Delhi High Court in the case of CIT Vs. Escorts Finance Ltd., (2010) 328 ITR 44. In this case, the assessee claimed deduction u/s 35D on the basis of representation made in the prospectus. However, in the case of assessment, such a claim was found to be untenable as a finance company is not entitled to the aforesaid deduction at all. The Hon'ble Court mentioned about the decision in the case of Dharmendra Textile Processor (supra) regarding nature of penalty proceedings. It is further mentioned that deduction u/s 35D was not at all applicable to the case of C.O.Nos. 144 to 150(Del)/2010 the assessee. The assessee had obtained technical assistance from chartered accountant at the time of filing the return. Therefore, it was held that it is not a case of bona fide error on the part of the assessee.