MEENA KOTHARI,MUMBAI vs. ACIT CIRCLE-16 (1), MUMBAI

This appeal has been preferred by the assessee against order dated 30/10/2013 passed by the Ld. CIT(Appeals)-27, Mumbai, for the Asst. year 2009-10, whereby the Ld. CIT(A) upheld the penalty order passed by the A.O u/s 271(1)(c).

Brief facts of the case are that the appellant/assessee having income from house property, business, capital gains and other sources, filed her return of income for A.Y. 2009-10 on 28/07/2009 declaring the total income of Rs. 91,22,800/-. The case was identified for scrutiny and notice u/s 143(2) was served on the assessee. In response thereof the assessee filed her revised return on 31.3.2011 declaring total income of Rs. 1,05,42,842/-. Accordingly, the assessment was completed u/s 143(3) of the Act determining the total income of Rs. 1,06,31,340/- The appellant/assessee did not challenge the assessment order. The AO issued penalty notice u/s 274 r/w section 271(1)(c) of the Act. In response to the notice the assessee submitted written explanation stating therein that notice u/s 143(2) was received on 3.9.2010 and the return was revised and mistake in calculation of short term capital gain was rectified and the tax due was paid. The assessee further contended that she received first notice u/s 142(1) after revising her return. The A.O levied penalty of Rs. 5,66,570/-u/s 271(1)(C) of the Act, holding that the assessee filed her revised return after receiving notice u/s 143(2)/142(1) of the Act. The penalty order was challenged by the assessee before the first appellate authority. The Ld. CIT(A) after hearing the assessee confirmed the action of the A.O. and dismissed the appeal of the assessee. Aggrieved, the assessee is in appeal before the Tribunal raising the following effective grounds of appeal:-

Before us, the Ld. AR submitted that the assessee sold shares of Kirloskar Oil on 29/09/2008 and offered the gain arising from those shares as long term capital gain. All the shares except the bonus shares were acquired in the year 2003. However, the assessee sold all the shares of Kirloskar Oil together and inadvertently the gain from bonus shares was also offered as long term capital gain instead on short term capital gain. The Ld. AR further submitted that the assessee has not mentioned any wrong date and details, however, the short term capital gain was also erroneously offered as long term capital gain due to reasons that all the shares in question were sold together. The said mistake was rectified by the assessee by filing a revised return on 31/03/2011 which was accepted by the Assessing Officer. Subsequently, notice was issued u/s 142(1) on 28/07/2011 asking for details of short term and long term capital gains. The assessee reiterated that the revised return rectifying the said mistake was accepted by the A.O. The Ld. AR further submitted that the Mumbai Tribunal in the case of Rajesh C. Gandhi vs. ITO (38 SOT 537) has considered the identical issue and held that since the assessee offered the additional income before it was detected by the Assessing Officer and the additional income was accepted in the revised return, no penalty can be levied u/s 271(1)(c) of the Act. The Ld. AR further placed reliance on the order of the Hon’ble Tribunal in the case of ACIT vs. M/s. R.J. Electricals ( dated 29/10/2014), wherein it has been held that if the A.O does not raise any query u/s 143(2) of the Act and subsequently the assessee files a revised return of the income which is accepted by the A.O, no penalty can be levied u/s 271(1)(c) of the Act.

As regards the Ld. AR submitted that the assessee had claimed depository charges of Rs. 33,615/- in the profit and loss account which were incurred for investment in shares earning long term capital gain. The said expenses were disallowed by the Assessing Officer. The Ld. AR relying on the ratio laid down by the Hon’ble Supreme Court in the case of Reliance Petro Products 322 ITR 158 submitted that the assessee’s claim, which is not sustainable in the law itself does not attract the provisions of section 271(1)(c) of the Act.

On the other hand the Ld. Departmental Representative (DR) relying on the concurrent finding of the authorities below submitted that there is no legal or factual infirmity in the impugned order. The Ld. CIT(A) has confirmed the finding of the A.O as per the provisions of law and the evidence on record.

We have heard the rival submissions and also perused the material placed before us including the cases relied upon by the parties. We notice that that the assessee sold 9,00,000 shares of Kirloskar oil on 29/09/2009 out of which 1,08,600 were bonus shares received on 27/10/2007. The return was filed by the appellant on 28/07/2009. Since 1,08,600 shares were received on 27/10/2007, the gain arising out of the sale of the said shares was required to be computed as short term capital gain instead of long term capital gain. When the assessee noticed the said mistake, she suo-moto rectified the same by filing revised return u/s 139(5) on 31/03/2011 treating the gain on sale of bonus shares of Kirloskar Oil as short term capital gain thereby offering a higher income to the tune of Rs. 14,74,930/-. Accordingly the differential tax as well as the interest thereon was paid.

In the case of ACIT vs. M/s. R.J. Electricals (ITA No. 5025/Mum/2012 dated 29/10/2014), the co-ordinate Bench of the ITAT has held that if no query has been issued by the A.O u/s 143(2) of the Act and subsequently the assessee files a revised return declaring the income which has been accepted by the A.O, no penalty can be levied u/s 271(1)(c) of the Act. Respectfully following the views taken by the co-ordinate Bench in the similar circumstances, we hold that it is not a fit case where penalty can be imposed u/s 271(1)(c) of the Act. Hence this ground of appeal of the assessee is allowed.

So far as the second ground is concerned, we find merit in the contention of the Ld. AR that disallowance of any claim which is not sustainable in law itself is not sufficient to imposed penalty u/s 271(1)(c) of the Act. The assessee had claimed depository charges of Rs. 33,615/- and the A.O. disallowed the said expenses. In our considered view the said claim of the assessee does not tantamount to concealment of particulars income or furnishing of incorrect particulars of income. We, therefore, decide this ground of appeal in favour of the assessee.

In the result, appeal filed by the assessee for Asst. year 2009-10 is allowed. Order pronounced in the open court 25th Aug, 2016.