THE PRINCIPAL COMMISSIONER OF INCOME TAX-1 vs. SUSHILABEN D SHAH

PDF · subscribers
TAXAP/270/2020HC GujaratGJHC24019078202010 September 2020Author: HONOURABLE THE CHIEF JUSTICE MR. JUSTICE VIKRAM NATH,HONOURABLE MR. JUSTICE J.B.PARDIWALA2 pages
AI SummaryDismissed

What did the High Court hold?

The Tribunal held that the incidence of penalty under Section 271(1)(c) is not automatic and should not be imposed merely because it is lawful to do so. Considering the smallness of the amount involved, the Tribunal decided to give the benefit of doubt to the assessee due to mitigating circumstances, specifically the absence of a copy of Mr. Mukesh Chokshi's statement or any other substantive material. The assessee had supported the face value of the transactions with bills and payments. In the backdrop of ambiguity, the Tribunal found it difficult to hold that the assessee's explanation was blatantly false. Therefore, the assessee was exonerated from the penalty. However, the Tribunal clarified that this view would not operate as a precedent in any manner. The High Court found no substantial question of law in the proposed question and dismissed the appeal.

What were the facts?

The Revenue has filed this appeal under Section 260A of the Income Tax Act, 1961, against an order of the Income Tax Appellate Tribunal (ITAT), Ahmedabad Bench, dated July 26, 2019. The appeal pertains to Assessment Year 2006-07. The dispute involves a penalty of Rs. 50,330 levied under Section 271(1)(c) of the Act on account of a Long Term Capital Gain (LTCG) claim made by the assessee on transactions in penny stocks, allegedly involving accommodation entry providers from the Mukesh Choksi Group. The ITAT had allowed the assessee's appeal against the penalty.

What were the issues?

1. Whether the Appellate Tribunal was correct in law and on facts in deleting the penalty of Rs. 50,330 levied under Section 271(1)(c) on a bogus LTCG claim of the assessee on transactions in penny stocks of the Mukesh Choksi Group of accommodation entry providers? Assessee's Contentions (as per ITAT's findings): - The assessee furnished supporting bills and details of payments for the transactions reported as LTCG. - The addition was based on the statement of Mr. Mukesh Chokshi, which was never provided to the assessee. - It was possible that Mr. Mukesh Chokshi's statement did not include transactions with the assessee. Revenue's Contentions: - Not recorded in the judgment.

Which sections of the Income-tax Act were involved?

Section 271(1)(c),Section 260A

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
C/TAXAP/270/2020 ORDER IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL NO. 270 of 2020 ========================================================== THE PRINCIPAL COMMISSIONER OF INCOME TAX-1 Versus SUSHILABEN D SHAH ========================================================== Appearance: MRS MAUNA M BHATT(174) for the Appellant(s) No. 1 for the Opponent(s) No. 1 ========================================================== CORAM: HONOURABLE THE CHIEF JUSTICE MR. VIKRAM NATH and HONOURABLE MR. JUSTICE J.B.PARDIWALA Date : 10/09/2020

ORAL ORDER (PER : HONOURABLE MR. JUSTICE J.B.PARDIWALA)

1.

This tax appeal under Section 260A of the Income Tax Act, 1961 is at the instance of the revenue and is directed against the order passed by the Income Tax Appellate Tribunal, “B” Bench, Ahmedabad dated 26.07.2019 in the ITA No.627/Ahd/2018 for the A.Y. 2006-07. The Revenue has proposed the following question of law for the consideration of this Court;

"Whether the Appellate Tribunal was correct in law and on facts in deleting the penalty of Rs.50,330/- levied under section 27(1)(c) on bogus LTCG claim of the assessee on transaction in penny stocks of Mukesh Choksi Group of accommodation entry providers?"

2.

The Appellate Tribunal, while allowing the appeal filed by the assesseee held as under; C/TAXAP/270/2020 ORDER '

6.

We have considered the rival submissions on the issue as pointed out on behalf of the assessee. It is not in dispute that the assessee has furnished the supporting bills and details of payments in support of transactions reported to be long term capital gain. It was contended that entire addition is based on the statement of Mr. Mukesh Chokshi which was never provided to the assessee. It was also pointed out that it is quite possible that Mr. Mukesh Chokshi has not included the transactions with assessee in his statement at all.

7.

At this stage, we bear in mind that incidence of penalty under s. 271(1)(c) of the Act is not automatic and should not be imposed merely because it is lawful to do. Considering the smallness of the amount involved, we consider it expedient to give benefit of doubt to the assessee owing to mitigating circumstances viz; the absence of copy of statement of Mr. Mukesh Chokshi or any other substantive material. The assessee has supported the face value of transactions with bills and payments. In the backdrop of ambiguity in circumstances, it is difficult to hold that the explanation offered by the assessee is blatantly false. We are thus inclined to exonerate the assessee from the incidence of penalty. However, in peculiar circumstances, this view shall not operate as precedent in any manner. "

3.

Having regard to the reasons assigned by the Appellate Tribunal, referred to above, we see no good reason to entertain this appeal. Even otherwise, in our opinion, the question of law, as proposed, cannot be termed as a substantial question of law.

4.

In the result, this appeal fails and is hereby dismissed.

(VIKRAM NATH, CJ) (J. B. PARDIWALA, J) Vahid

More judgments on Section 271(1)(c)

All 25,141 judgments and leading authorities on Section 271(1)(c) →

Recent GST High Court judgments

Search GST case law →