MR RAHUL MISHRA vs. COMMISSIONER OF INCOME TAX VIII NEW DELHI

IN THE HIGH COURT OF DELHI AT NEW DELHI . ITA 389/2013 . MR RAHUL MISHRA ..... Appellant . Through Mr. M.S. Syali, Sr. Advocate with Mr. Badri Nath, Advocate. . versus . . . COMMISSIONER OF INCOME TAX VIII NEW DELHI . ..... Respondent . Through Mr. Mayank Negi, Advocate. . . . . . CORAM: . HON'BLE MR. JUSTICE SANJIV KHANNA . HON'BLE MR. JUSTICE SANJEEV SACHDEVA . O R D E R . 03.09.2013 . . . This appeal under Section 260A of the Income Tax Act (Act, for short) impugns order dated 18th January, 2013 passed by the Income Tax Appellate Tribunal (tribunal, for short) confirming penalty for concealment under Section 271(1)(c) on two accounts:- . (i) Failure to disclose short term capital gains of Rs.3,91,66,758/- on sale of land/property in the original return filed on 31.10.2007. . (ii) False or bogus claim of short term capital loss of Rs.4,52,00,000/- on sale of shares which was set off to reduce the long term capital gains of Rs.4,42,98,700/- on sale of shares in the original return filed on 31.10.2007. . . . 2. The original return filed on 31st October, 2007 was revised by a return filed electronically on 7th April, 2008. In this revised return appellant accepted that the claim for business loss was erroneous. Appellant withdrew claim on short term capital loss on sale of shares. . . 3. The appellant accepts and admits that in the original return filed on 31.10.2007, income from short term capital gain on sale of property was not disclosed. In the revised return filed electronically on 7th April, 2008, the appellant disclosed short term capital gains of Rs.3,91,66,758/- on sale of property. . 4. The contention of the appellant is that the revised return was filed voluntarily and prior to detection of any concealment. However, this contention of the appellant has been rejected by the authorities and the tribunal by citing valid and cogent reasons. They have recorded that the revised return was filed as an after effect and consequent to notice dated 18th February, 2008 under Section 131(1A) of the Act by Deputy Director, Income Tax (Investigation), to the appellant to furnish the following details: . (i) Brief note on assessee?s sources of income; . (ii) Details of assessee?s bank accounts along with the copy of bank statement of all bank accounts from 1.4.2006 till date i.e. February 18, 2008, the date of summons; . (iii) Copy of latest income tax return filed by the assessee along with all its annexures; . (iv) Details showing the use of cash withdrawn and source of cash deposits in account No.0005108768050 with IndusInd Bank, Barakhamaba Road, New Delhi for the period 1.4.2006 till February 18, 2008 and similar details in respect of other bank accounts maintained by the assessee. (Sale consideration of the property at Noida was deposited in IndusInd Bank, Barakhamba Road, New Delhi). . 5. The factual finding recorded by the authorities and the Tribunal that the revised return was filed after investigation was initiated following issue of notice under Section 131(1A) of the Act dated 18th February, 2008, is justified and cannot be termed as perverse. Admittedly notice under Section 131(1A) of the Act dated 18th February, 2008 had already been issued and the appellant was aware that investigations were being made. The authorities and tribunal have highlighted that this had compelled and was instrumental in the appellant assessee filing the revised return, which is a cogent and sound reasoning. We do not think that the said findings, factual as they are, require interference in an appeal under Section 260A of the Act.. . 6. The Tribunal and the authorities have rejected the contention of the appellant that failure to disclose short term capital gains on sale of property or claim of short term capital loss was a fault or failure of the Chartered Accountant. The said finding is again based upon sound and good reasoning. It is eventually clear that the appellant had sold a property at Noida for consideration of Rs.4,82,70,500/-. The said property was purchased for Rs. 91,03,743/-, and the appellant had earned short term capital gain of Rs.3,91,66,757/-. This transaction or income was not shown in the original return filed on 31st October, 2007 and this fact/income was concealed. The amount involved is substantial and could not have escaped notice of the appellant. Tax payable on the said gain was significant. Interestingly, the appellant had shown short term capital gain of Rs.3,91,66,757/- on sale of shares in the same return but had excluded gain on sale of land. It is difficult to accept that this . concealment was a fault of the Chartered Accountant and the appellant was unaware that short term capital gains on sale of plot had not been disclosed in the return and taxed. This gain is a matter of fact and not a matter of legal opinion. Contention of the appellant and attempt to put the blame on the Chartered Accountant is not acceptable, it is an afterthought and an excuse. . 7. The penalty order records that the so called short term capital loss on sale of shares was not bonafide and had been deliberately booked to set off and not pay tax short term capital gain. The appellant assessee did not justify the shoddy transactions which were emphasized and set out in the order of penalty dated 26.05.2010 under Section 271 (1)(c) of the Act. In the penalty order, it is recorded as under:- . ?In his original return, the assessee has claimed short term loss of Rs.4,52,00,000/- on sale of shares and has set off this loss from the long term capital gain arisen to him from sale of shares of M/s. Karamchand Domestic Products Ltd. During the F.Y. 2006-07 relevant to the A.Y. 2007-08, the assessee has sold shares of M/s. Karamchand Domestic Products Ltd. and earned long term capital gain of Rs.4,42,98,700/- duly shown in the original as well as revised return. Besides, the assessee also made the following sale/purchase transactions during the months of Feb/March, 2007 (A.Y. 2007-08):- . . . . . . . . . Name of the company . Date of sale . Amount . Date of purchase . Amount . Loss . K.G. Invest P. Ltd. . 22.03.2007 . 300000 . 09.02.2007 . 5000000 . 4700000 . V.P. Realtors P. Ltd. . 20/26.03.2007 . 3000000 . Feb/March, 2007 . 30000000 . 27000000 . SKB Tradex P. Ltd. . 23.03.2007 . 450000 . Feb/March, 2007 . 4500000 . 4050000 . Sainik Cement P. Ltd. . 23.03.2007 . 300000 . 05.03.2007 . 5000000 . 4700000 . Ex-servicemen Blackgold Transport P. Ltd. . 24/26.03.2007 . 250000 . 08.03.2007 . 2500000 . 2250000 . Jaipur Golden Infrastructure Developer P. Ltd. . 24.03.2007 . 187500 . 08.03.2007 . 3000000 . 2812500 . . . . . . . Total loss . . . 45512500 . . . By making the above transaction the assessee had booked short term loss of Rs.4,55,12,500/- and claimed Rs.4,52,00,000/- in the original return to nullified the long term capital gain arisen from sale of the shares of M/s Karamchand Domestic Products Ltd. During the pendency of enquiry the assesseee has revised his return wherein he withdraws the aforesaid short term capital loss. By doing so it is implied that he accepted the bogus nature of the share transactions as tabulated above which means the aforesaid companies must have returned cash to the assessee. It is thus clear that the revision of return by assessee is not on account of omission and the revised return was filed only after the enquiries in his case were initiated by the Investigation Wing by issuing summons U/s 131(1A) of the Income-tax Act, 1961 on 18.02.2008. The revision of the return therefore, cannot give a benefit of omission. Satisfaction was recorded in the assessment order and on the basis thereof penalty proceedings U/s 271(1)(c) of the Income Tax Act, 1961 for concealment of income as aforesaid and furnishing inaccurate particulars within the meaning of explanation 1 to Sub-section (1) of the section 271(1)(c) of the Income Tax Act, 1961 were initiated.? . . . 8. The said order of the assessing officer has been affirmed by the first appellate authority and the tribunal. The tribunal has specifically underscored and highlighted the short time span between purchase of shares and sale of shares and mammoth difference in the purchase price and sale price. It is obvious that the appellant was unable to justify this difference and the transactions which were booked as short term capital loss and, therefore, had surrendered the claim in the revised return. . 9. The onus to explain the said conduct was bonafide, lay solely upon the appellant as per mandate of explanation 1 to Section 271(1)(c). The onus could have been discharged by placing facts and proving why and for reason the short term capital gains was not disclosed and by justifying and explaining why in the original return short term capital loss on sale of shares was claimed. The appellant did not render any rational and weighty explanation or produce any material or evidence to validate his conduct except attributing and blaming the Chartered Accountant and stating that the revised return was filed before detection of concealment. After examining the factual matrix, the Tribunal has rejected the said contentions and has held that the appellant has been unable to explain that his conduct was bonafide. . 10. In view of the factual findings recorded by the Tribunal affirming the view taken by the Assessing Officer and the CIT (Appeals), we are of the opinion that no substantial question of law arises for consideration. . 11. We clarify that the appellant assessee has not challenged the penalty imposed under Section 271(1)(c) on addition of Rs.1,89,793/- towards house tax and Rs.46,890/- on account of personal travel expenses. . 12. The appeal is dismissed in limine. . . . . . SANJIV KHANNA, J . . . . . . . . . SANJEEV SACHDEVA, J . SEPTEMBER 03, 2013 . Kkb/st . . . $ 12 .