THE ACIT-CIRCLE 4(1), INDORE vs. SHRI SANJAY LUNAWAT, INDORE

PER SHRI D.T. GARASIA, JM This appeal by the Revenue is directed against the order of the learned CIT(A)-II, Indore, dated 27.3.2012. ACIT vs. Sanjay Lunawat

taken by the Revenue is that the learned CIT(A) was not justified in deleting the penalty levied by the Assessing Officer u/s 271(1)(c) of the Act.

Officer while passing the assessment order U/s 143[3]

had added an amount of Rs 5615590/- to the income

of the assessee by the treating the Long term capital

gain as unaccounted income of the assessee and initiated penalty U/s 271[1][c] of the Act. The assessee

had preferred an appeal before the Ld CIT[A] but could

not succeed. Thereafter, the assessee preferred appeal

to the Tribunal where also the assessee met with the same fate. The assessee had purchased 94000 Equity

Shares at a consideration of Rs. 222899/-. The entire were duly credited in his D-MAT account. The assessee

out of 94000 Equity shares, sold 61200 Equity shares

at a consideration of Rs 5615595/- from Dec 2014 to March 2015. The assessee in his return of total income

has offered the Long term capital gain on sale of shares

as exempt. However, the Assessing Officer on the basis

of his inquiry reached to a conclusion that the amount

of long term capital gain as offered by the assessee was not a genuine transactions and, therefore, the same

was added to the income of the assessee. On the basis

of these facts, the Assessing Officer came to the conclusion that the assessee has not disclosed full and correct particulars of his income and thereby he had concealed the income and he accordingly initiated

penalty proceedings u/s 271(1)(c) of the Act and deleted the same by observing as under :-

“3.5 I have considered the entirety of the facts and circumstances brought out in the relevant assessment order, penalty order & the written submission filled by the Appeallent which was duly reproduced above. After considering the same and in the view of the above discussion, I find sufficient merit in the arguments put forth by the appellant. It is undisputed fact that in the appellants own case the Hon’ble MP high court has admitted a substantial question of law on the issue of genuineness of transaction, making the issue debatable. It is now a settled position of law that once the issue becomes debatable penalty cannot be levied. The Hon’ble jurisdictional ITAT in the case of Kusum Oswal has upheld this view and held that when a substantial question of law has been admitted, the penalty cannot leveid since the issue has become debatable.

Ranisati Shares & Securities P Limited having its office

at Indore and Mumbai. He also submitted that in the year in which these shares were sold out by the assessee, the said broking firm having its office at Indore. He submitted that in subsequent year local

office of the Broking firm was closed and broking

transactions were executed from Mumbai office. The assessee during the course of assessment proceeding

filed copy of sale bill, D- MAT account and copy of 7 received by the assessee from his broker M/s Shree

Rani Sati Shares and Securities P Limited but in turn

amount was credited in the bank account of the broker

from the bank account of M/s Jakson Traders, M/s

Arihant Securities Shares and M/s Agrawal Road

Carriers Limited. That when the Assessing Officer

himself found that cheques were received by the assessee from his broker, in that case the onus of the assessee has properly been discharged and there was no reason to disbelieve the transactions as executed by the assessee. In this case, as brought out in the assessment order, the genuineness of the long term

8 ACIT vs. Sanjay Lunawat capital gain on sale of shares of Rs.56,15,595/- was rejected mainly on the ground that there was sharp

increase in the sale price and the brokers to whom

letter were issued did not respond and there was also cash deposit in the bank account of M/s Jactson

Traders which was ultimately transferred in the bank

account of the broker through which these shares were sold-out by the assessee. In the wake of these facts,

the learned counsel for the assessee submitted that in the present case, the assessee has furnished complete

details to justify the genuineness of the capital gain.

The shares as sold by the assessee were kept in his D- as to attract the penal provision U/s 271(1)( c) of the Income Tax Act. The assessee in this case preferred an appeal before the Hon’ble High court and the same was admitted on the ground of substantial question of law.

The learned counsel for the assessee, therefore, prayed

that the order of the learned CIT(A) be maintained.

has framed the following substantial question of law :-

“Whether the Hon'ble Tribunal, while passing the non-speaking impugned order dated 30th April, 2014, was justified in concurring with the views of the Respondent No. 1 and 2 that under the Income Tax Act, 1961 some transactions entered through banking channels, entire details of which have already been disclosed and placed on record by the assessee concerned at the time of assessment, can be said to be a sham transaction, just because some other person disassociated with the assessee 10 ACIT vs. Sanjay Lunawat has failed to provide information, unrelated to the transaction in hand, if yes, under what provision of the Income Tax Act, 1961 ?”

Hon'ble High Court of Madhya Pradesh has admitted

the above question which is a substantial question of law and it is not a question of fact. Therefore, we are of the view that the decision of the Hon'ble Gujarat High

Court in the case of Prakash S. Vyas; 58 taxman.334

(Guj.) is not applicable. Hon'ble Gujarat High Court

has held that mere admission of appeal by the High

Court cannot be without there being any further be an indication that the judgment is debatable as to delete

the penalty u/s 271(1)(c) of the Act even if there are independent grounds and reasons to believe that the assessee’s case falls under the mischief in clause (c) of sub-section (1) of section 271 of the Act. Hon'ble (ओ.पी.मीना) (डी.ट".गरा"सया) लेखा सद"य "या"यक सद"य (O.P.Meena) (D.T.Garasia) Accountant Member Judicial Member

"दनांक /Dated : 19th January, 2016. Dn/

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