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Income Tax Appellate Tribunal, “A”, BENCH KOLKATA
Before: SHRI A. T. VARKEY, JM & DR. A.L. SAINI, AM
IN THE INCOME TAX APPELLATE TRIBUNAL “A”, BENCH KOLKATA BEFORE SHRI A. T. VARKEY, JM & DR. A.L. SAINI, AM ITA No.529/Kol/2014 (Assessment Year: 2006-07) Kamalesh Basu Vs. CIT(A)-XVI, Kolkata 29/1/1, Chetla Central Road, Kolkata – 700 027. �थायी लेखा सं./जीआइआर सं./PAN/GIR No. : AEAPB 6771 K (अपीलाथ� /Appellant) (��यथ� / Respondent) ..
Appellant by : Shri Kamalesh Basu, Assessee Revenue by : Shri Sallong Yaden, Addl. CIT(Sr. DR)
सुनवाई क� तार�ख / Date of Hearing : 18/07/2018 घोषणा क� तार�ख/Date of Pronouncement: 10/10/2018 आदेश / O R D E R Per Dr. A. L. Saini, AM: The captioned appeal filed by the assessee, pertaining to Assessment Year 2006-07, is directed against the order passed by ld. Commissioner of Income Tax (Appeals)-XVI, Kolkata, in Appeal No.16/CIT(A)-XVI/Wd-29(4)/Kol/12-13 dated 12.12.2013, which in turn arises out of a penalty order passed by the Assessing Officer u/s 271(1)(c) of the Income Tax Act, 1961 (hereinafter referred to as the ‘Act’) dated 29.06.2009.
The grievances raised by the assessee are as follows:
“The following points are being put forward in favour of our appeal to waive off the penalty imposed. 1. With reference to para-A at page no. 3 of the APPELLATE ORDER at ANNEXURE-A, we beg to disagree that no explanation has been furnished and we have got no explanation to offer. 2. It was explained repeatedly and as also given in writing that we are of the impression that switching off operations between different schemes of Mutual Fund Schemes does not violate any norms of short term capital gains. 3. The Ld. Commissioner of IT(A)-XVI, on hearing the above explanations questioned the under signed why then the I. Taxes have been paid. Our humble submission was that the taxes were paid to the satisfaction of Ld. A-O as law abiding citizens.
2 Kamalesh Basu ITA No.529/Kol/2014 Assessment Year: 2006-07 4. It is really surprising how Ld. Commissioner has remarked that no explanation has been furnished by us while at para-B at page- 3 of his order at ANNEXURE-A our written submission has been stated with the mention of an article of Economic Times. 5. It is reiterated that it may be an error of judgement on a debatable subject but it is definitely not an attempt to conceal income. Our opinion happen to be similar to the opinions of C.A. Prakash Kothari & CA. Indira Singh - as at ANNEXURE - B. 6. While we readily paid the I.Tax as assessed by A.O. and also explained our conception on a debatable subject, further penalizing 'our rights for free thinking' (very similar to those of Chartered Accountants) is fundamentally not logical & constitutionally right. Hence, in view of the above, it is humbly appealed that the penalty imposed on us, may kindly be waived off.
The brief facts qua the issue are that during the assessment proceedings, it was noticed by the Assessing Officer that the assessee had switched over his mutual fund (MF) investments from one account to other account but had not considered the capital gains in its return of income. The total amount of capital gains was computed to the tune of Rs.2,78,356/-. The ld. Assessing Officer noted that as the assessee had himself agreed that capital gain should have been taxed therefore the entire amount was added back to the income of the assessee. Consequently, the Assessing Officer noted that it was clear case that the assessee had concealed the particulars of his income and has furnished inaccurate particulars of income, therefore, penalty u/s 271(1)(c) should be imposed. During the penalty proceedings, the assessee could not file any explanation within the stipulated date, therefore, the Assessing Officer imposed penalty u/s 271(1)(c) to the tune of Rs. 23,200/-.
Aggrieved by the stand so taken by the Assessing Officer, the assessee carried the matter in appeal before the ld. CIT(A) who has confirmed the penalty imposed by the Assessing Officer u/s 271(1)(c) of the Act.
Aggrieved by the order of the ld. CIT(A), the assessee is in appeal before us.
The ld. Counsel for the assessee submitted before us that assessee has just switched of his operation between different schemes of mutual funds and he was not aware that such switching off operation between different schemes of mutual
3 Kamalesh Basu ITA No.529/Kol/2014 Assessment Year: 2006-07 funds would result into capital gain. The assessee was guided by the Article appeared in the Economic Times, newspaper. Based on the guidance available in the Article appeared in the Economic Times, newspaper, the assessee switched off his operation between different schemes of mutual funds. Therefore, the ld. Counsel for the assessee has submitted that since it was a debatable issue and the assessee was switching off operations between different schemes of mutual funds based on the guidance available in the Article appeared in the Economic Times, newspaper, hence the assessee acted with bona fide intention, therefore, it does not violate any norms of short-term capital gain and hence, penalty should not be levied.
On the other hand, the ld. DR for the Revenue has primarily reiterated the stand taken by the Assessing Officer which we have already noted in our earlier para and is not being repeated for the sake of brevity.
We have given a careful consideration to the rival submissions and perused the materials available on record, we note that switching off operation between different schemes of mutual funds are not actually ‘transfer’ as per section 2(47) of the Act as the capital remains with the mutual funds only. The assessee has done this switching off operation based on an Article appeared in the Economic Times (Newspaper). Therefore, the assessee was guided by the Article of Economic Times (Newspaper) which states that switching off operation from one scheme of MF to another scheme of MF, does not violate the rule of capital gains, that is, no capital gain tax would attract. This fact, was clearly explained to the Assessing Officer stating that it was not a case of concealment of income but mere misinterpretation of debatable subject for which the assessee should not be penalized, as he acted based on the guidance in the Article published in the newspaper of Economic Times. We note that assessee was in bona fide belief that switching in or switching off operations between different schemes of mutual funds are not ‘transfer’ as per section 2(47) of the I.T. Act as the capital remains with the mutual funds only. Therefore, since, the money remains with the mutual fund, therefore, it is not a ‘transfer’ as contemplated by section 2(47) of the Act.
4 Kamalesh Basu ITA No.529/Kol/2014 Assessment Year: 2006-07 The assessee has been guided with the bona fide belief, therefore, penalty should not be imposed.
We note that on the same identical facts, the Coordinate Bench of this Tribunal in the case of Sakuntala Basu in ITA No.528/Kol/2014, for Assessment Year 2006-07, deleted the penalty observing the following:
“3.5 We have heard the rival submissions and perused the materials on record, we are of the view that assessee had been guided by the bona fide belief and he was in the impression that switching in operation between different schemes of mutual funds does not violate the rules of capital gains and does not ‘transfer’ as per section 2(47) of the Act, because ultimately the capital remains with the mutual fund only. For bona fide belief, we rely of the following judgments: (1)Rajendra vs. ACIT (2O1O) 127 ITD 361 (Chennai) The facts of the above case before the Hon'ble Tribunal were that the assessee received gifts from NRIs. The A.O. to verify the genuineness of the gifts examined the donors, who have confirmed the gifts. However, disbelieving the gifts, the amounts were considered as undisclosed income of the assessee and added to his total income. The assessee was unsuccessful before the Ld. C.I.T.(A) and Hon'ble Tribunal and thus carried the matter the Hon'ble High Court. The assessee then moved in further appeal before the Hon'ble High Court and was successful. However, the department being aggrieved moved further before the Hon'ble Supreme Court, which reversed the findings of the Hon'ble High Court and held in favour of the revenue. Based on the addition made with reference to undisclosed income in the guise of gift, the A.O. initiated penalty proceeding u/s. 271(1)(c) of the Act and more or less came to the same conclusions that he had come to in the quantum assessment and imposed penalty on the ground of concealment. Appeal of the assessee before the CIT(A) met with no success and resultantly the assessee moved before the Hon'ble Tribunal against such levy and sustenance of penalty u/s. 271(1)(c) of the Act by the revenue authorities. On the aforesaid facts and circumstances of the case, the Hon'ble Tribunal held that although the explanations regarding the alleged gifts were discounted by the A.O. as well as CIT(A) and thereafter by the Tribunal and finally upheld by the Hon'ble Supreme Court, this cannot by itself mean that the explanations given by the assessees were not bona fide. Further, the rules of preponderance of probability that are to be applied to assessment proceedings cannot be so applied qua penalty proceedings. Considering the totality of the case, the Hon’ble Tribunal came to the conclusion that there was no case for the Revenue that the explanations offered by the assessees were not bona fide or there was concealment and thus cancelled the penalty. (2)Hon'ble Apex Court in the case of CIT vs. Reliance Petroproducts Ltd. (2010 322 ITR 158 (SC) that if no fault can be found with the particulars submitted by the assessee in the return of income, then penalty u/s. 271(1)(c) of the Act cannot be imposed.
The ratio of these judgments (supra) are applicable to the assessee under consideration, because the assessee was under bona fide belief that just to switchover from one MF investment to another MF investment does not mean transfer U/s 2(47) of the Act and moreover the same amount remains with the mutual fund, therefore, it was a bona fide belief of the assessee. Therefore, the assessee had been guided with the bona fide belief and the penalty should not be levied. Therefore, we are of the view that the penalty imposed by the Assessing Officer and confirmed by the CIT(A) needs to be deleted. Accordingly, we delete the penalty u/s 271(1)(c).”
5 Kamalesh Basu ITA No.529/Kol/2014 Assessment Year: 2006-07
Therefore, we note that the judgment of the Coordinate Bench are squarely applicable to the assessee under consideration because the assessee was under bona fide belief that just to switchover from one mutual fund scheme to another mutual fund scheme does not amount to ‘transfer’ u/s 2(47) of the Act. We note that the same amount remains with the mutual fund in switchover schemes, therefore, it was a bona fide belief of the assessee, as the assessee had been guided by an article appeared in Economic Times, newspaper, therefore, we are of the view that the penalty imposed by the Assessing Officer and confirmed by the ld. CIT(A) needs to be deleted. Accordingly, we delete the penalty u/s 271(1)(c) of the Act.
In the result, the appeal filed by the assessee is allowed.
Order pronounced in the open court on this 10/10/2018. Sd/- Sd/- (A. T. Varkey) (A. L. Saini) �या�यक सद�य / JUDICIAL MEMBER लेखा सद�य / ACCOUNTANT MEMBER कोलकाता /Kolkata; Dated:10/10/2018 RS, Sr. PS आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : अपीलाथ� / The Appellant- Kamalesh Basu 1. ��यथ� / The Respondent.- CIT(A)-XVI, Kolkata 2. आयकर आयु�त(अपील) / The CIT(A)- , Kolkata 3. आयकर आयु�त / CIT 4. 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, कोलकाता / DR, ITAT, Kolkata 6. गाड� फाईल / Guard file.
//True Copy// By Order
Senior Private Secretary, Head of Office/D.D.O, I.T.A.T, Kolkata Benches, Kolkata.