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Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: SHRI KUL BHARAT & SHRI MANISH BORAD
BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER Assessment Year: 2010-11 Shri Rakesh Agrawal, ITO-4(4) बनाम/ 36, Teli Bakhal, Malharganj, Indore Vs. Indore (Appellant) (Revenue) PAN: ADZPA0506H Appellant by Shri Prakash Jain & Smt. Shreya Jain, ARs Revenue by Shri Puneet Kumar, Sr. DR Date of Hearing: 10.12.2019 Date of Pronouncement: 12.12.2019 आदेश / O R D E R PER MANISH BORAD, A.M: This appeal at the instance of Assessee pertaining to A.Y. 2010-11 is directed against the order of Commissioner of Income Tax(Appeals)-II, Indore, (in short ‘CIT’), dated 11.03.2019 which is arising out of the order u/s 274/271(1)(c) of the Income Tax Act 1961(hereinafter called as the ‘Act’) framed on 27.03.2018 by ITO- 4(4), Indore.
The assessee has raised following grounds of appeal:
Shri Rakesh Agrawal ITANo.478/Ind/2019 “1. That impugned order passed by the Ld. CIT(A) is bad in law as well as on the facts. It is based on incorrect interpretation of law and the facts have also been incorrectly construed. 2. That on the facts and in the circumstances of the case and in law the Ld. CIT(A) has erred in passing an ex-parte order without allowing reasonable opportunity being heard and without deciding on merits, the grounds of appeal raised before him. That on verification of file of Ld. CIT(A) it is found that notice for hearing of appeal was issued at the address LG-8, Royal Gold, 4 Y.N. Road, Indore-452002 while on the memo of appeal assessee has given address of 36, Teli Bakhal, Malharganj, Indore.
3. That on facts and in the circumstances of the case, and in law the Ld. CIT(A) failed to appreciate the fact that penalty of Rs.20,00,000/- is imposed by the Ld. AO on the ground that short term capital on redemption of mutual fund shown by the assessee under the head short term capital gain while same is assessed under the head income from business and on appeal the Hon'ble I.T.A.T. vide ITANo.23/Ind/2017 order dated 31.05.2018 directed the Ld. AO to assessee the same under the head short term capital gain.
4. That on the facts and in the circumstances of the case the Ld. CIT(A) erred in not deciding the following grounds of appeal raised before him on merits; i. That no reasonable opportunity being heard have been allowed before imposing penalty which will be clear from the fact that notice imposing penalty u/s 274 r.w.s. 271(1)(c) of the I.T. Act dated 23.03.2018 fixing the date of hearing on 27.03.2018 itself and on contacting Ld. AO on 28.03.2018 it was told that penalty order is already passed. ii. That on the facts and in the circumstances of the case and in law the Ld. AO has erred in imposing the penalty u/s 271(1)(c) of the Act on the basis of printed notice without striking irrelevant portion and without specifying the limb for reasons in the penalty notice to impose the penalty i.e. whether it is for concealment of particulars of income. And more so ever without recording satisfaction. iii. That on the facts and in the circumstances of the case and in law the Ld. AO erred in imposition penalty u/s 271(1)(c) without 2
Shri Rakesh Agrawal ITANo.478/Ind/2019 appreciating the fact that in the instant case there is no concealment of income as returned income and assessed income is same. In the assessment the Ld. AO merely assessed short term capital gain on STT paid stock under the head income from business. iv.That on the fact and in the circumstances of the case and in law the Ld. AO erred that the penalty of Rs.20,00,000/- imposed u/s 271(1)(c) is very excessive and high. The appellant craves leave to add, to alter or amend the aforesaid grounds of appeal as and when necessary.”
3. At the outset, Ld. counsel for the assessee made two fold contention submitting that firstly, the impugned order passed by the Ld. CIT(A) is ex-parte as notice was served on wrong address. Secondly, the impugned penalty is liable to be deleted since the quantum addition on which the penalty has been levied stands deleted by the Coordinate Bench in vide ITANo.153/Ind/2013 & others dated 31.05.2018.
4. Per contra Ld. Departmental Representative(DR) could not controvert the fact that the quantum addition stands deleted.
We have heard rival contentions and perused the record placed before us and also gone through the decision of the Tribunal in assesseee’s own case in ITANo.154/Ind/2013 referred and relied by the Ld. counsel for the assessee. We observe that the assessee offered Short Term Capital Gain for tax at Rs. 63,99,568/- which was earned from redemption of mutual funds after paying security transaction tax. The assessee paid 15% tax under section 111A of 3
Shri Rakesh Agrawal ITANo.478/Ind/2019 the Income Tax Act on the Short Term Capital Gain. The Ld. AO while framing assessment u/s 143(3) of the Act on 27.02.2015 treated the Short Term Capital Gain as business income which was subject to normal rate of tax. The Ld. AO also levied penalty u/s 271(1)(c) of the Act @ 100% of tax sought to be evaded on the income of Rs.63,99,568/-, thereby, levying penalty at Rs.20,00,000/- against which the assessee is appeal before us.
We also observe that against the quantum addition assessee challenged the action of the lower authorities of treating Short Term Capital Gain from sale of mutual funds as business income and succeeded. Tribunal vide its order dated 31.05.2018 in para 24 allowed the issue in favour of the assessee and treated the profit of Rs.63,99,568/- as short term capital gain from sale of mutual funds observing as follows: 24. We further find that similar issue has been raised in the case of another assessee Mr. Rakesh Agrawal for A.Ys. 2009- 10 & 2010-11. No distinguished facts has been brought on record by the revenue authorities. We therefore, applying our decision mentioned above in relation to assessee, Shri Sharad Agrawal in ITANo.153/Ind/2013, similarly hold in the case of Rakesh Agrawal for A.Y. 2009-10 & 2010-11 that income from purchase and sale of mutual funds is to be taxed as capital gain and not business income. We accordingly allow this common issue in all these three appeals and direct the AO to tax the profit/gain earned from purchase and sale of mutual funds/shares of Rs.60,86,999/- in the case of Sharad Agrawal and Rs.5,65,161/- & Rs. 63,99,568/- in the case of Rakesh Agrawal for A.Y. 2009-10 & 2010-11 as Short term capital gain and not as business income. This first common issue raised by two assesseew in Ground No.2 in &
Shri Rakesh Agrawal ITANo.478/Ind/2019 and Ground No. 3 in I.T.A. No.23/Ind/2017 is allowed.
Penalty u/s 271(1)(c) of the Act is levied on the tax sought to be evaded on the additions. If the very basis of levying the penalty i.e. addition is deleted then there remains no legs for the penalty to stands for.
We, therefore, in the given facts and circumstances of the case wherein the addition on which the penalty has been levied already stands deleted by the Tribunal, irrespective of the fact that the impugned order passed by the Ld. CIT(A) is ex-parte, delete the penalty of Rs.20,00,000/- levied u/s 271(1)(c) of the Act and allow the appeal of the assessee on merits.
In the result, the appeal of the assessee stands allowed. Order was pronounced in the open court on 12.12.2019.