ANNAPURNA BODDU,WEST GODAVARI vs. ACIT, CENTRAL CIRCLE-1(2), HYDERABAD

This appeal filed by the assessee is directed against the order dated 19.07.2022 of the learned CIT (A)-11, Hyderabad, relating to A.Y.2014-15.

Levy of penalty of Rs.24,00,000/-by the Assessing Officer u/s 271(1)(c) of the I.T. Act which has been confirmed by the learned CIT (A) is the only issue raised by the assessee in the grounds of appeal.

Facts of the case, in brief, are that the assessee is an individual and had filed her return of income for the AY 2014-15 on 31/03/2016 admitting NIL income. Subsequently, a Search & Seizure operation us 132 of the Act was conducted on 13.12.2017 in the case of M/s Meenakshi Infrastructures Pvt Ltd and others covering the office premises of the company and the residential premise of its directors and their family members including the assessee. Sri Boddu Srinivas, son of the assessee, is a director in M/s Meenakshi Infrastructures Pvt Ltd. He has subscribed to 4,00,000 shares of M/s RISA International Ltd through preferential allotment at a face value Rs. 10/- in the year 2012. The shares were allotted to him on 13/08/2012 as per the share certificate issued to him. Subsequently, he gifted 1,00,000 shares to his Mother Smt. Boddu Annapurna i.e. the assessee. The assessee sold 15,000 shares (FV of Re.1) during the A.Y 2014-15 for a consideration of Rs. 83,15,000/-. The assessee treated the receipts from the sale of the shares of M/s RISA International Ltd as Long-Term Capital Gains (LTCG) which is exempted from tax as per the provisions of the section 10(38) of the IT Act, 1961.

During the course of assessement proceedings, the Assessing Officer confronted the assessee to explain as to why the Long-Term Capital Gain should not be added to the total income of the assessee. He also confronted the statement recorded of his son Sri Boddu Srinivas, u/s 132(4) of the I.T. Act and the affidavit of the assessee withdrawing the claim of exemption u/s 10(38). Rejecting the various explanations given by the assessee and observing that the transactions were sham transactions and aimed only to bring unaccounted money in the guise of Long- Term Capital Gain and that the paper work has been done merely to give a colour of authenticity to the transaction and by creating facade of legitimate transaction, the Assessing Officer rejected the claim of Long-Term Capital Gain and made addition of Rs.83,15,000/- as income from other sources.

The Assessing Officer thereafter initiated penalty proceedings u/s 271(1)(c) of the I.T. Act. Rejecting the various explanations given by the assessee and relying on various decisions, the Assessing Officer levied penalty of Rs.24,00,000/- u/s 271(1)(c) of the I.T. Act by recording as under:

In appeal, the learned CIT (A) confirmed the penalty levied by the Assessing Officer by observing as under:

Aggrieved with such order of the learned CIT (A) the assessee is in appeal before the Tribunal.

The learned Counsel for the assessee strongly challenged the order of the learned CIT (A) in confirming the penalty of Rs.24,00,000/- levied by the Assessing Officer u/s 271(1)(c) of the Act. He submitted that the assessee had claimed Long-Term Capital Gain u/s 10(38) of the I.T. Act and full details were furnished before the Assessing Officer. There was absolutely no concealment or furnishing of inaccurate particulars of income. He submitted that the amount of Long-Term Capital Gain was duly disclosed in the computation of income and therefore, it cannot be said to be a case of the assessee attempting to make a false claim. Referring to the decision of the Hon'ble Supreme Court in the case of CIT vs. Reliance Petroproducts (P) Ltd (322 ITR 158 (S.C) he submitted that the Hon'ble Supreme Court in the said decision held that if all the particulars of income are duly disclosed, mere disallowance of a claim or non-acceptance of a claim would not attract levy of penalty u/s 271(1)(c) of the I.T. Act.

Referring to the decision of the Hon'ble Supreme Court in the case of Price Waterhouse Coopers (P) Ltd vs CIT reported in (2012) 25 Taxmann.com (S.C) he submitted that the Hon'ble Supreme Court in the said decision has held that a bonafide mistake on the part of the assessee would not attract levy of penalty where all the particulars of income are duly disclosed and where there is just a failure on the part of the assessee to act as per the provisions of the Act while computing the income. He also relied on the following decisions and submitted that under somewhat similar circumstances, the penalty u/s 271(1)(c) is held to be not justified: a) Late Shri Pawan Garg vs. ACIT in 2018 dated 17.01.2022 b) Dineshkumar Kanjibhai Patel – HUF vs. Income Tax Officer in ITA No.367/Ahd/2023 dated 14.07.2023 c) PCIT vs. Indusind Bank Ltd (2024) 158 Taxmann.com 575 (S.C) d) Sarika Dugar vs. Income Tax Officer in ITA No.363/Kol/2023 order dated 16.11.2023 e) CIT vs. Gurdaspur Coop.Sugar Mills (P) Ltd reported in (2024) 159 taxmann.com 7 (S.C) f) PCIT vs. E-City Investment & Holdings Company (P) Ltd g) PCIT vs. Ashok Kumar Manekal Parikh 274 Taxmann 457 h) Trine Entertainment Limited Vs ITO (ITAT Mumbai) in ITA No.276/Mum/2023 order dated 10.05.2023

The learned DR, on the other hand, heavily relied on the orders of the Assessing Officer and the learned CIT (A). She submitted that the evidences available with the Department clearly and categorically establish absolute and conscious intent on the part of the assessee to evade tax using organized operators. The assessee had deliberately and willfully planned the sham share transactions for laundering her unaccounted money. She submitted that in the present case, the assessee was not under a mistaken belief but had in fact deliberately and willfully concealed income by entering into sham share transactions. Merely because the transactions are reflected in the Bank Account statement and supported by contract notes, the same will not prove that they were genuine transactions. Referring to various decisions, she submitted that the penalty levied by the Assessing Officer u/s 271(1)(c) and upheld by the learned CIT (A) is justified under the facts and circumstances of the case. She relied on the following decisions: i) Pr. CIT vs. JMJ Essential Oil Company (2023) 148 Taxmann.com 447 (HP) ii) JMJ Essential Oil Company vs. CIT (2023) 148 taxmann.com 448 (S.C) (SLP dismissed)

Referring to the decision of the Coordinate Bench of the Tribunal in the case of Shri Shavva Sudheer Reddy vs. ACIT vide order dated 22.05.2023, she submitted that the Tribunal under somewhat similar circumstances has upheld the penalty levied by the Assessing Officer on the ground that the addition so made was not voluntary but on being confronted during the assessement proceedings on the basis of seized material. She submitted that the case of the assessee in the instant case is still worse than the case decided by the Tribunal in the case of Shri Shavva Sudheer Reddy where he has admitted the additional income. However, in the instant case, despite given opportunity, the assessee has not voluntarily come forward by declaring additional income which was admitted by her as well as her son who was looking after her financial affairs admitted during the course of search.

We have heard the rival arguments made by both the sides, perused the orders of the AO and the learned CIT (A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us by both the sides. We find the AO in the instant case made addition of Rs.83,15,000/- by rejecting the claim of Long-Term Capital Gain u/s 10(38) on the ground that investment in shares of M/s RISA International Ltd by the assessee is not bonafide. We find the assessee did not challenge the addition before the learned CIT (A) and the Assessing Officer thereafter levied penalty of Rs.24,00,000 u/s 271(1)(c) of the I.T. Act which has been upheld by the learned CIT (A). We have already reproduced the findings of the learned CIT (A) confirming the penalty levied by the Assessing Officer in the preceding paragraph.

We do not find any infirmity in the order of the learned CIT (A) on this issue. A perusal of the assessment order, the statement recorded of Mr. Boddu Srinivas who was looking after the affairs of the assessee show clearly that the transactions are sham share transactions and not genuine. In fact, in his reply to question No.48, Shri Boddu Srinivas has replied as under:

We find the assessee filed an affidavit dated 22.12.2017 in her individual capacity withdrawing the exemption claimed u/s 10(38) of the I.T. Act. However, in the return filed in response to the notice u/s 148 on 16.9.2019, the assessee did not include the Long-Term Capital Gain by offering to tax. This type of flipflop on the part of the assessee shows that despite knowing fully well that the claim of exemption u/s 10(38) is not correct and is a sham transaction, the assessee did not include the same in the taxable income in the return filed in response to notice u/s 148. Had there been no search in the group cases of M/s. Meenakshi Enterprises Ltd, all these things would not have come to light. If the transaction, according to the assessee, are genuine there was no occasion on the part of the assessee to withdraw the claim by filing an affidavit and thereafter not honoring the same. In view of the above discussion and in view of the detailed discussion by the Assessing Officer as well as the learned CIT (A) on this issue, we are of the considered opinion that it is a fit case for levy of penalty u/s 271(1)(c) of the I.T. Act and it was rightly levied by the Assessing Officer and rightly confirmed by the learned CIT (A). We therefore, uphold the order of the learned CIT (A) confirming the penalty levied by the Assessing Officer u/s 271(1)(c) and the grounds raised by the assessee are dismissed.