USHA CHANDRESH SHAH,MUMBAI vs. ITO 19(1)(2), MUMBAI

This appeal in A.Y.2006-07 arises out of the order by the ld. Commissioner of Income Tax (Appeals)-34, Mumbai in appeal No.CIT(A)-34/ITO-19(1)(2)/IT-34/13-14 dated 11/03/2015 (ld. CIT(A) in short) in the matter of imposition of penalty u/s.271(1)(c) of the Income Tax Act, 1961 (hereinafter referred to as Act.

None appeared on behalf of the assessee. The notice sent to the assessee had returned unserved. Since, it is an old appeal, we proceeded to dispose of this appeal on hearing the ld. DR and perused the materials available on record.

The only issue to be decided in this appeal is as to whether the ld. CIT(A) was justified in confirming the levy of penalty u/s.271(1)(c) of the Act in the facts and circumstances of the instant case.

We have heard ld. DR and perused the materials available on record. We find that the return of income for the A.Y.2006-07 was filed by the assessee on 06/07/2006 declaring total income of Rs.1,50,049/-. The ld. AO observed that assessee is deriving income from other sources. The assessee was asked to furnish bank summary and capital account vide order sheet noting dated 12/09/2008 during the course of original assessment proceedings and the same were duly furnished before the ld. AO on 29/09/2008. From the perusal of the capital account, the ld. AO observed that on 10/09/2005, the assessee has received sale proceeds of shares amounting to Rs.7,53,061/- resulting in earning long term capital gain on sale of shares of Rs.7,39,103/-. The ld. AO completed the assessment u/s.143(3) of the Act on 29/12/2008 making addition of Rs.7,53,061/- as unexplained cash credit u/s.68 of the Act representing the sale proceeds of the shares of M/s Robinson Worldwide Trade Limited. The ld. AO initiated penalty proceedings for furnishing inaccurate particulars of income in the assessment proceedings. The ld. AO in his penalty order u/s.271(1)(c) of the Act passed on 19/03/2013 stated that assessee had purchased 2700 shares on 13/05/2004 at Rs.5.17 per share totaling to Rs.13,959/-. These shares were sold through broker Shri Sanju Kabra on 10/09/2005 @279.50 amounting to Rs.7,53,894/-. The net sale proceeds amounting to Rs.7,53,061/- was credited by the assessee in her capital account. Since, there was an astronomical appreciation in the price of the scrip from Rs.5.17 to Rs.279.50 within a span of 16 months, the ld. AO, based on the enquiries conducted from Kolkata Stock Exchange, brokers, depository participant M/s. India Bulls Securities Ltd., the company i.e. M/s. Prime Capital Market Ltd., and M/s. Brightsun Merchants Pvt. Ltd., observed that the scrip treated by the assessee had been categorised as “penny stock” and investigations of Kolkata Investigation Wing revealed that Shri Sanju Kabra (broker) had been involved in manipulation of share prices. The addition made by the ld. AO in the quantum proceedings was upheld by the ld. CIT(A) vide order dated 28/03/2011. It was pointed out that assessee had furnished purchase and sale bills / contract notes, bank statements, brokers confirmations, books of accounts etc., to establish that the share transaction was genuine and bonafide, hence, there cannot be any allegation of concealment of particulars of income or furnishing inaccurate particulars of income on the part of the assessee. The ld. AO however, did not heed to the contentions of the assessee and proceeded to levy penalty u/s.271(1)(c) of the Act on the ground that assessee had furnished inaccurate particulars of income and accordingly, levied penalty of Rs.1,79,430/- in the order passed u/s.271(1)(c) of the Act dated 19/03/2013. The ld. CIT(A) on the basis of quantum appeal being confirmed by the Tribunal vide order dated 26/09/2014, upheld the levy of penalty u/s.271(1)(c) of the Act.

We find that against the dismissal of the appeal by the Tribunal vide order dated 26/09/2014 in the quantum appellate proceedings, the assessee had preferred an appeal before the Hon’ble Jurisdictional High Court and the same has been admitted in the Income Tax Appeal No.13 of 2016 dated 18/06/2018. Once the question of law has been admitted by the Hon’ble High Court, there cannot be any allegation that could be levied on the assessee for furnishing inaccurate particulars of income thereon as the issue becames debatable. In the instant case, the assessee had indeed furnished all the relevant documents that are necessary for factual adjudication of the issue in dispute. It is only question of non-acceptance of the said evidence by the ld. AO due to astronomical increase in share price of the scrip dealt by the assessee which had eventually led to addition. The substantial question of law raised by the assessee on such addition has been admitted by the Hon’ble Jurisdictional High Court which order is enclosed in page 39 of the paper book filed by the assessee. Once, the substantial question of law on the quantum proceedings is admitted by the Hon’ble High Court, the issue in dispute became debatable. Hence, there cannot be any concealment penalty of the assessee for alleged furnishing of inaccuarate particulars of income. Reliance in this regard is placed on the decision of the Hon’ble Delhi High Court in the case of PCIT vs. Harsh International Pvt. Ltd., in Income Tax Appeal No.620/2019 dated 22/12/2020. Hence, we have no hesitation in directing the ld. AO to delete the penalty in the sum of Rs.1,79,430/- in the instant case. Accordingly, the ground raised by the assessee is allowed.

In the result, appeal of the assessee is allowed. Order pronounced on 30/09/2021 by way of proper mentioning the notice board.