SMT. RAGINI JAIN,KOTA vs. INCOME TAX OFFICER, WARD-1-2, KOTA

This appeal by the assessee is directed against the order dated 14.08.2018 of ld. CIT (Appeals), Kota arising from the penalty order passed under section 271(1)(c) of the IT Act for the assessment year 2014-15. The assessee has raised the following grounds of appeal :-

“ 1. The impugned penalty order u/s 271(1)(c) dated 27.06.2017 is bad in law and on facts of the case, for want of jurisdiction and various other reasons and hence the same may kindly be quashed.

2. Rs. 2,72,550/-: The ld. CIT (A) has grossly erred in law as well as on the facts of the case in confirming the penalty of Rs. 2,72,550/- u/s 271(1)(c) imposed by the AO. The penalty so imposed by the ld. AO and confirmed by the CIT (A) is totally contrary to the provisions of law and facts on the record and hence the additions may kindly be deleted in full.

3. Before the Tribunal, the ld. A/R of the assessee has submitted that there is no concealment of income or furnishing of inaccurate particulars of income on the part of the assessee when the assessee disclosed all relevant facts and details in respect of purchase and sale of shares resulting in long term capital gain exempt under section 10(38) of the IT Act. The AO has treated the said transaction of purchase and sale of shares as bogus and made the addition to the total income of the assessee. The addition was made by the AO on the basis of report of the Investigation Wing, Kolkata, however, no specific finding was given regarding the bogus transactions in case of purchase and sale of shares by the assessee. He has further submitted that during the course of assessment proceedings, the assessee filed the revised computation and surrendered the said amount to tax on the ground that it was not feasible for the assessee to produce all the supporting evidence to prove the genuineness of the transaction. The ld. A/R has submitted that the penalty levied under section 271(1)(c) is not sustainable in law when the assessee produced all the relevant particulars as well as documentary evidence in support of the claim of long term capital gain arising from purchase and sale of shares. In support of his contention, he has relied upon the decision of Hon’ble Supreme Court in case of CIT vs. Reliance Petroproducts (P) Ltd. 322 ITR 158 (SC). The ld. A/R has thus contended that merely because the claim of long term capital gain was disallowed by the AO and consequently the addition was made does not lead to the conclusion that the assessee has concealed the particulars of income or furnished inaccurate particulars of income. The mere fact that the amount has been assessed is not sufficient for the purpose of levying the penalty but the circumstances must show that there was conscious concealment of income or conscious furnishing of inaccurate particulars of income. He has relied upon the decision of Hon’ble Bombay High Court in case of CIT vs. Hiralal Doshi, 383 ITR 19 (Bom.).

Limited as bogus transactions in view of the report of the Investigation Wing, Kolkata. Thus there is no dispute that in the assessment proceedings assessee accepted the fact that the transaction is not genuine and offered the income to tax.

In the penalty proceedings, the assessee has contended that the addition made by the AO would not ipso facto attract the provisions of section 271(1)(c) of the Act.

The ld. A/R of the assessee has submitted that the assessee produced all the relevant evidence in support of the claim. However, all these evidences filed by the assessee are not free from manipulation or creating self serving documents. The assessee has not filed a single piece of evidence which can be verified independently and from independent source. There is no dematerialization of the shares and even the return of income for the assessment year 2013-14 was filed only on 23.03.2014 after the alleged transaction of sale of shares. Therefore, the said return of income for the assessment year 2013-14 and showing the shares in the balance sheet will not help the case of the assessee as the said return was filed belatedly only after the alleged transaction of sale. Hence in the facts and circumstances when the assessee has not produced any tangible material which can be verified independently and free from any manipulation, the same will not constitute a reasonable and bonafide explanation in terms of section 273B of the Act.

5.1. As regards the legal objection raised by the assessee regarding the validity of order passed under section 271(1)(c), it is a clear case of furnishing inaccurate particulars of income by the assessee when the assessee has claimed the long term capital gain exempt under section 10(38) and subsequently this claim of the assessee was found to be wrong. The AO in the penalty order has given a definite finding in para 5.2 of the penalty order that the assessee has furnished inaccurate particulars of income and penalty under section 271(1)(c) is leviable. Accordingly, I do not find any merit or substance in the legal ground raised by the assessee.