LATE MR. ROSHAN RAJA,MUMBAI vs. ITO 19(3)(2), MUMBAI

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ITA 7212/MUM/2014Status: DisposedITAT Mumbai20 June 2016AY 2005-063 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

Since the primary addition that formed the basis for the penalty was deleted, the penalty under Section 271(1)(c) could not survive. The Tribunal therefore deleted the penalty.

What were the facts?

The assessee's appeal was against a penalty levied under Section 271(1)(c) of the Income Tax Act. The original addition of Rs. 32,94,982/- made under Section 68 for Long Term Capital Gain on share sale had already been deleted by the Tribunal in a prior quantum appeal.

What were the issues?

Whether a penalty for concealment of income can be sustained when the underlying addition has been deleted by the appellate authority. The issue revolves around the survival of penalty post deletion of the primary addition.

Which sections of the Income-tax Act were involved?

Section 271(1)(c),Section 68

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI

For Appellant: Shri Dikshit Doshi, AR
For Respondent: Shri Somanath S. Ukkali, DR

O R D E R

PER MAHAVIR SINGH, JM:

1.

This appeal by the assessee is arising out of the order of the CIT (A)-30, Mumbai passed in appeal No. CIT (A)-30/ITO-19(3) (2)/IT-11/12-13 dated 28-10-2014. Assessment was framed by the ITO, Ward- 19(3)(2), Mumbai for assessment year 2005- 06 vide his order dated 27-12-2007 passed u/s 143(3) 147 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”). Penalty under dispute was levied by the ITO, Ward-19 (3) (2), Mumbai u/s 271 (1) (c) of the Act vide order dated 28-03-2012.

2.

At the outset, the learned Counsel for the assessee stated that this is a penalty appeal for levy of penalty u/s 271 (1) (c) of the Act by the AO and confirmed by the CIT and the Tribunal has already allowed the quantum appeal deleting the addition of Rs.32,94,982/- made by the AO u/s 68 of the Act in respect of Long Term Capital Gain shown by the assessee on sale of shares by treating the same as income from undisclosed sources. The learned Counsel for the assessee further stated that this addition has been deleted by the Tribunal vide order dated 27-04-2016 passed in vide Para 3.4.7 as under:-

“3.4.7 From the appreciation of the facts of the case, the material evidence placed on record by the assessee and in the light of the discussion of the factual and legal matrix of the case as discussed from para 3.1 to 3.4.6 of this order (supra), we are of the considered view that the authorities below i.e. AO/CIT (A) have made the addition under section 68 of the Act merely on presumptions, suspicions and surmises in respect of penny stocks; disregarding the direct evidences placed on record and furnished by the assessee in the form of brokers contract notes for purchases and sale of the „said shares‟ of M/s. Shukun Constructions Ltd., copies of the physical share certificates and her D-MAT account statement establishing the holding of the shares in name prior to the sale thereof; confirmation of the transactions of buying and selling of the „said shares‟ by the respective stock brokers, receipt of sale proceeds through banking channels, etc. We are also of the view that the ratio and the factual matrix of the decisions in the cited case, i.e. Jatin Chhadwa (supra) and Harkhchand K. Gada (HUF) & others (supra) would be applicable and support of the case of the assessee since no adverse finding has been rendered in respect of the direct material evidence placed on record in respect of her transactions of purchase and sale of the „said shares‟ of M/s. Shukun Constructions Ltd. which stand duly disclosed in her audited Balance Sheets filed with the return of income of assessment years 2004-05 and the current year under consideration. In this factual and legal matrix of the case, as discussed above, we find that the addition of Rs.32,94,982/- under section 68 of the Act made and confirmed by the authorities below to be unsustainable and therefore direct the AO to delete the said addition and accept the LTCG income of Rs.31,96,507/- shown as exempt under section 10(38) of the Act. Consequently, ground No.1 of the assessee‟s appeal is allowed”. Since, the quantum addition has been deleted, penalty u/s 271 (1) (c) of the Act for concealment of income will not survive. Accordingly, I delete the penalty and the appeal of the assessee is allowed.

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