RAJESH JAGDISH TRIVEDI,CHENNAI vs. ITO, CON CORPORATE WARD-6(1), CHENNAI

This appeal by the assessee is arising out of the order of the Commissioner of Income-Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi, in Order No.ITBA/NFAC/S/250/2023- 24/1061748126(1) dated 29.02.2024. The assessment was framed by the Income Tax Officer, Non-Corporate Ward 6(1), Chennai for the assessment year 2014-15 u/s.143(3) r.w.s.147 of the Income

The only issue in this appeal of assessee is as regards to the order of CIT(A) confirming the action of the AO in levying penalty u/s.271(1)(c) of the Act amounting to Rs.1,38,123/-.

Brief facts are that the assessee filed his return of income for assessment year 2014-15 on 12.11.2014. Subsequently, the assessment was reopened by issuing notice u/s.148 of the Act on 27.03.2019. The assessee filed his return of income in response to notice u/s.148 of the Act declaring the same income as filed in the original return of income on 25.04.2019. Subsequently, in response to notice u/s.142(1) of the Act dated 15.10.2019, the assessee withdrawn the claim of exemption made u/s.10(38) of the Act in the return of income against the long term capital gain arising out of sale of shares of Rekvina Laboratories. The assessee purchased 6000 shares of Rekvina Laboratories with a face value of Rs.10 per share off market on 15.04.2010 at the rate of Rs.5/- per share for a - 3 - Rs.30,600/-. The assessee sold these shares for a sum of Rs.4,47,000/- and claimed exemption u/s.10(38) of the Act of Rs.4,16,400/-. The AO treated the entire sale proceed from sale of Rekvina Laboratories shares of Rs.4,47,000/- as unexplained income of the assessee and denied the claim of exemption u/s.10(38) of the Act in lieu of withdrawal letter filed by the assessee. The AO also initiated penalty proceedings u/s.271(1)(c) of the Act for concealment of income. The AO initiated penalty proceedings and levied penalty u/s.271(1)(c) of the Act vide order dated 21.02.2022 and levied penalty to the extent of 100% of tax evaded at Rs.1,38,123/-. Aggrieved, assessee preferred appeal before CIT(A).

The CIT(A) confirmed the levy of penalty by the AO by observing as under:- “In view of the above, the appellant is deemed to have concealed particulars of his income as he has furnished an explanation which is found to be false. The credits of Rs. 4,47,000/- do not get explained as proceeds of sale of shares and the source thereof remains unexplained. The contention of the appellant that a wrong claim under section 10(38) cannot be construed as concealment is liable for rejection. The other case laws relied upon by the appellant have also been perused but in view of the specific statutory provision reproduced and in view of the peculiar nature of claim made in this case, none of these case laws help the case of the appellant. The AO has correctly levied penalty u/s 271(1)(c) of Rs. 1,38,123/- for concealment of income and the same is upheld. Grounds no. 1.1, 1.2 and 1.3 are hereby dismissed.”

We have heard rival contentions and gone through the facts and circumstances of the case. We noted that the alleged SIT report considered by the AO while framing assessment and the information received form Investigation Wing, Vadodara does not name the assessee for earning of this penny stock shares long term capital gain but now, the assessee has withdrawn the claim and paid the taxes on this income before completion of assessment. The assessee has filed complete particulars of income and hence, the assessee’s issue is covered by the decision of Hon’ble Supreme Court in the case of Reliance Petroproducts reported in [2010] 322 ITR 158 (SC). Hence, we delete the penalty and allow the appeal of assessee.

In the result, the appeal filed by the assessee is allowed.