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Income Tax Appellate Tribunal, “A”, BENCH MUMBAI
Before: SHRI R.C.SHARMA, AM & SHRI AMARJIT SINGH, JM
O R D E R PER R.C.SHARMA (A.M): This is an appeal filed by the assessee against the order of CIT(A), Mumbai, for the assessment year 2005-2006, in the matter of imposition of penalty u/s.271(1)(c) of the I.T.Act.
Rival contentions have been heard and record perused. Facts in brief are that assessee filed return of income at Rs.8512/-, which was processed u/s.143(1) of I.T.Act. Thereafter a search & Seizure action U/S 132 of the I.T.Act was conducted in the case of M/s Mahasagar Securities Pvt. Ltd. wherein it was found that, M/s Mahasagar Securities Pvt. Ltd. and its related group of 34 odd companies were engaged in fraudulent billing activities. In view of the above, notice u/s 148 dt. 27.03.2011 was 2 issued to the assessee company, who had taken entry from the said concern regarding its share transaction.
During the assessment proceedings, the transactions of the assessee company with M/s Mahasagar Securities Pvt. Ltd. of purchase and sale of shares was found to be not a genuine business transaction but a mere booking of loss to set off against profit of the assessee as detailed in the assessment order dated 14. 12-2011 at Para G. Hence, loss incurred of Rs.62,44,116/- was treated as non genuine and the same was ignored while computing the total income of the assessee and no carry forward of this loss was allowed. The AO computed the profit on sale of equity shares at Rs.63,00,000/- was taxed under the head capital gains as long term capital gain and penalty proceedings u/s.271(1)(c) of the I.T.Act,1961 were initiated for furnishing inaccurate particulars of income.
By the impugned order, the CIT(A) confirmed the action of AO, against which assessee is in further appeal before us.
We have considered rival contentions and found that the assessee company has sold 4,13,000 equity shares of M/s Arch Commerce Ltd. as appearing in the ledger A/c of income from operations, and has accounted the profit on sale of equity shares in income from operation. However, the assessee has set off this sale proceeds on investment against its trading business. From the statement of long term capital gain furnished by the assessee, it is observed that short term loss on sale of shares of Rs.62,44,116/- has been set off against the long term capital gains of 3 Rs.63,00,000/-. As the loss of Rs.62,44,116/- has been treated as non- genuine, the set off has not been considered.
It was contended by ld. AR that all the transaction are genuine. Even though the Ld. AO not allowed the Short term capital loss on mere ground that Mr. Mukesh Chokshi through whom assessee executed the transaction given general statement that he is involve in the providing Bogus Share transaction entries. Hence, the Transaction is not genuine. Accordingly computed the Income at Rs.63,00,000/-. He further contended that the assessee also obtained the delivery in D-MAT account on 1-3-2005 and which was settled from D-MAT account on 2-4-2005. The assessee made the payment through account payee cheque and received the amount from account payee cheque only. As per ld. AR all the observations so made by AO raise a doubt on assumption basis, but at the same time the AO did not state that these evidence are fake. Hence, the disallowance was made on mere assumption basis. Authenticity of Statement of Mukesh Chokshi come before the various High Courts and Tribunals. After Considering the Statement and other evidence judicial authority come to conclusion that transaction are genuine and required to be allowed. For this purpose reliance was placed on decision of coordinate bench in the case of ITO Vs. Mrs. Rasila N Gada, ITA No.1773/Mum/2010, M/s SDB Estate Private Limited, ITA No.584/Mum/2015, Smt. Jyoti D Shah, ITA No.1843/Mum/2012 and Shri Jafferali K. Rattonsey, ITA No.5068/Mum/2009. As per ld. AR no penalty can be imposed if the facts and circumstances are equally consistent with 4 the hypothesis that the amount does not represent the concealed income as with the hypothesis that it does. If the assessee gives an explanation which is unproved but not disproved, i.e. it is not accepted but circumstances does not head to the reasonable and positive inference that the Assessee's case is false, and then the same amount cannot be disallowed. In present case also appellant explain the genuineness of share loss alongwith all the supporting evidence. But the AO not satisfied with the explanation but same time AO also not brought on record that appellant explanation is false he merely relied on the statement of Mr. Mukesh Cokshi. Thus, assessee did not furnish any inaccurate of particulars. Therefore, levy of penalty u/s 271(I)(c) is unjustified.
On the other hand, ld. DR relied on the others of lower authorities.
We have considered rival contentions, carefully gone through the orders of authorities below. As per our considered view the penalty section get attracted only in case where the assessee had either acted deliberately in defiance of law or was guilty of conduct and constant and persistent disregard of his statutory obligation, which is not the case with the assessee. It is well settled law that findings in assessment proceedings are relevant but not conclusive in penalty proceedings because the considerations that arise in penalty proceedings are different from those that arise in the assessment proceedings has been held in the case of Ashok Grih Udyog Kendra(P) Ltd. Vs. ACIT-VI , Kanpur (2009) 120 ITD 151 (LUCK). The provisions which govern the assessment proceedings and the penalty proceedings are separate and the