SMT. SWARN DURGIA,JAIPUR vs. ITO, WARD-6(1), JAIPUR

PER VIJAY PAL RAO, JM

notice dated 3-11-2017 vis. ‘’furnished inaccurate particulars of income’’ or concealed particulars of such income’’ bad in law.’’ 2. Under the facts and circumstances of the case and in law the ld. CIT(A) has erred in confirming the penalty of Rs. 23,48,470/- imposed by AO u/s 271(1)( c) of the Act is against the principles of judicial consistency and therefore, bad in law.’’ 2.1 The assessee is an individual and filed her return of income on 21-08-2015 declaring total income of Rs. 2,23,54,740/- inclusive of Long Term Capital Gain arising from sale of securities /shares of Rs. 2,23,89,673/-. The assessee has paid the advance tax @ 10% on Long Term Capital Gain by showing them as Long Term Capital Gain arising from sale of listed securities. During the course of assessment proceeding, the assessee revised her computation of income and offered the tax on Long Term Capital Gain @ 20% by treating them as unlisted shares instead of listed shares. The AO completed the scrutiny assessment u/s 143(3) on 3-11-2017 accepting the returned income, though the AO recorded his satisfaction for initiation of penalty proceedings u/s 271(1)© of the Act in respect of Long Term Capital Gain declared by the assessee for sale of listed shares which was found to be unlisted shares. The AO accordingly initiated the penalty proceedings by issuing show cause notice dated 3-11-2017 as well as dated 13-04-2018 and levied the penalty of Rs. 23,48,470/- being 100% of tax sought to be evaded in respect of Long Term Capital Gain classified as listed shares. The assessee challenged the action of the AO before the ld. CIT(A) but could not succeed.

2.2 Before us, the ld.AR of the assessee submitted that the assessee is residing in USA and is NRI. Therefore, the assessee is dependent on her tax consultant for filing her return of income. In the income tax return, the Tax Consultant has mistakenly shown the capital gains from listed securities whereas the shares were not listed in the stock exchange.

Therefore, it was only an inadvertent and bona fide mistake on the part of the Tax Consultant of the assessee. The assessee has duly disclosed the transactions of sale of shares/ securities and also offered Long Term Capital Gain to tax, though due to some confusion, the shares were classified as listed securities in the return of income instead of unlisted securities. Thus the ld.AR of the assessee submitted that it cannot be held that the assessee has either furnished inaccurate particulars of income or concealed the particulars of income when all the necessary particulars being the names of the securities as well as other details were furnished only because the shares sold by the assessee are classified as listed securities which would not amount to furnishing the inaccurate particulars of income or concealment of particulars of income. The ld.AR of the assessee relied on the decision of Hon'ble Supreme Court in the case of Price Waterhouse Coopers Pvt Ltd. vs CIT , 348 ITR 306 (SC) and submitted that the Hon'ble Supreme Court has held that the mistake on the part of the Chartered Accountant in not detecting the mistake about the allowability of the provisions towards payment of Gratuity was a bona fide and inadvertent error and thereby the assessee was not guilty of either furnishing inaccurate particulars of income or attempting to conceal its income. The ld.AR of the assessee also relied on the decision of Hon'ble Delhi High Court in the case of CIT vs Societex,212 Taxman 73 (Del). The ld.AR of the assessee further contended that even the initiation of penalty proceedings are not valid as the AO has not specified the limb for which penalty was proposed to be levied. The ld.AR of the assessee referred to the assessment order and submitted that the AO while recording his satisfaction in the assessment order has stated that the assessee has furnished the inaccurate particulars of income whereas in the show cause notice the AO has not specified the limb or deleted the irrelevant part of the charge for which penalty was proposed to be levied.

Further, the ld.AR of the assessee pointed out that AO has finally levied the penalty for concealment of income. Therefore, the AO was not sure about the default of the assessee either at the time of assessment proceeding or at the time of issuing show cause notice as well as at the time of passing the penalty order which is the incorrect charge as the assessee has disclosed the transactions in the return of income. Therefore, the assessee does not fall in the ambit of concealment of income. Thus the ld.AR of the assessee submitted that when the AO was not sure about the charge at the time of initiation of the penalty proceedings and finally levied the penalty on wrong default then the order passed by the AO is not sustainable in law and liable to be quashed. In support of this contentions the ld.AR of the assessee relied on the decision of Hon'ble Karnataka High Court in the case of CIT vs Manjunath Cotton and Ginning Factory, 359 ITR 565 (Kar.).

2.3 On the other hand, the ld. DR has submitted that it is a clear case of concealment of particulars of income when the assessee has shown capital gains from the listed securities as against non-listed securities.

Therefore, the assessee has attempted to conceal the particulars of income by paying less tax @ 10% instead of 20% applicable. When the AO has issued the notices u/s 143(2) and 142(1) of the Act then the assessee has come out with a revised computation of income and offered the correct income to tax. In support of his contentions, the ld. DR has relied on the decision of Hon'ble Supreme Court in the case of Mak Data (P) Ltd vs CIT, 358 ITR 593 (SC) and submitted that surrender of income by the assessee only after the issuance of notices u/s 143(2) and 142(1) of the Act by the AO, would not be a voluntary disclosure and therefore, the assessee would not release from mischief of penalty proceedings u/s 271(1)( c) of the Act. Thus the ld. DR relied on the orders of the authorities below.

2.4 We have considered the rival submissions as well as the relevant materials available on record. There is no dispute that returned income was accepted by the AO while passing the scrutiny assessment u/s 143(3) of the Act except the fact that during the course of assessment proceeding the assessee had paid additional tax @ 10% on Long Term Capital Gain by admitting the fact that the shares sold by the assessee are unlisted and therefore, attracting the tax @ 20% instead of 10% as offered by the assessee in the return of income. Thus it is only a case of wrong classification of capital asset sold by the assessee yielding Long Term Capital Gain. The particulars as furnished by the assessee regarding the name of the scrip, proof of shares, sale consideration and indexed cost are duly disclosed in the return of income and accepted by the AO as correct.

The AO initiated the penalty proceedings u/s 271(1)© of the Act only in respect of additional tax paid by the assessee during the course of assessment proceeding based on revised computation of income and correctly classifying the shares as unlisted securities. Therefore, in the return of income, the assessee has wrongly shown the shares as listed securities and paid self assessment tax @ 10% instead of 20%. The said short payment of tax was made up by the assessee during the course of assessment proceeding when the assessee realizsed the mistake in classification of the capital asset being unlisted shares as listed shares.

The AO has rejected this explanation of the assessee by observing as under:-

‘’It is a fact that the assessee being an NRI and well educated and having the services of qualified professional, she was well aware regarding the taxation provisions. She was aware that there was a liability of 20% on the Long Term Capital Gain earned by her but only to evade taxes, the capital gain was declared in the slab of 10% in the ITR. Accordingly, there was under computation of tax due and payment of tax. This conduct of the assessee cannot be treated as inadvertent error of mistake. She was having the services of a qualified chartered accountant and was in a position to identity the correct nature of transaction and correct tax rate.’’ Thus the AO was of the view that the assessee being a NRI and well educated and having availed of the services of a qualified professional, cannot take the plea of inadvertent mistake or error. Once the assessee's status being a NRI and staying out of country is not in dispute then the dependence of the assessee on the Tax Consultant is also not in dispute.

Therefore, when the return was filed through the Tax Consultant then it is only a matter of misclassification of the capital asset sold by the assessee which has resulted into short payment of tax. Therefore, in the facts and circumstances of the case, we find that it is a case of inadvertent and bona fide mistake of wrong classification of the securities yielding Long Term Capital Gain and consequently the assessee had paid the tax @ 10% instead of 20%. Except the classification of securities, all other necessary and relevant particulars/ details furnished by the assessee are not in dispute. Therefore, the said classifications of the asset is nothing but a mistake occurred while filing the return of income by the Tax Consultant of the assessee and accordingly the same falls in the ambit of reasonable and bona fide explanations/ reasons for the default/ failure on the part of the assessee. Once the assessee has explained the reasons for wrong classification of the securities and the said explanation of the assessee is bona fide being inadvertent mistake on the part of the Tax Advisor then this case would not fall in clause B of Explanation 1 to Section 271(1)© of the Act. Thus no penalty shall be levied u/s 271(1)( c) of the Act in view of the decision of Hon'ble Supreme Court in the case of Price Waterhouse Coopers Pvt. Ltd vs CIT (supra) wherein the Hon'ble Supreme Court has held as under:-

‘’17. Having heard learned counsel for the parties, we are of the view that the facts of the case are rather peculiar and somewhat unique. The assessee is undoubtedly a reputed firm and has great expertise available with it. Notwithstanding this, it is possible that even the assessee could make a "silly" mistake and indeed this has been acknowledged both by the Tribunal as well as by the High Court.

Thus the appeal of the assessee is allowed. 3.0 In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 25/02/2020.

Sd/- Sd/- ¼jes’k lh 'kekZ½ ¼fot; iky jko½ (Ramesh C. Sharma) (Vijay Pal Rao) ys[kk lnL;@ Accountant Member U;kf;d lnL;@Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 25 /02/ 2020 *Mishra आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू vihykFkhZ@The Appellant- Smt. Swarn Durgia, Jaipur 1. 2. izR;FkhZ@ The Respondent- The ITO, Ward- 6 (1), Jaipur 3. vk;dj vk;qDr¼vihy ) @ CIT(A), vk;dj vk;qDr@ CIT, 4. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत 5. xkMZ QkbZy@ Guard File (ITA No1326/JP/2019) 6. vkns'kkuqlkj@ By order,

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