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Income Tax Appellate Tribunal, MUMBAI BENCH “G”, MUMBAI
Before: SHRI D.KARUNAKARA RAO & SHRI PAWAN SINGH
O R D E R
PER PAWAN SINGH, JM:
The present appeal is filed by assessee against the order of CIT(A)-11, Mumbai dated 27th of November 2012 confirming the order of penalty under section 271(1)(c) of the Act, in respect of AY 2005 – 06.
The brief facts of the case are that assessee filed return of income for relevant Assessment Year, declaring total income at Rs. 2,01,190/-. The return was selected for scrutiny and the assessment was completed under section 143(3) of the Act, determining the total income of assessee at Rs.15,90,534/-. While making assessment AO made certain addition u/s 68 in respect of capital gain of Rs.1501240/ - and of Rs.31,344/- sales of shares through M/s Vijay Bhagwandass &Co.The assessee filed appeal against the quantum assessment before CIT appeals. The assessee withdrew the appeal in respect of ground of addition made under section 68 in respect of capital gain of Rs.15,01,240/-.
However the other addition of Rs.31,344/- made u/s 68 of Act, was deleted by the CIT appeals.
After disposal of the appeal AO served notice of penalty under section 274, read with section 271(1) (c) of the Act. The assessee submitted his reply dated 16 April 2009. In reply assessee contended that the assessee neither concealed the income nor furnished inaccurate particular of income. All the relevant particular e.g. bank account, contract notes, share certificates, demat statements, copy of account with broker through whom the share were purchased and sold were submitted. However, the reply of assessee was not considered sufficient and satisfactory. And AO concluded that during the assessment proceeding, the enquiries made with the broker, M/s Vijay Bhagwandas & company and the Bombay stock exchange has revealed that assessee has not made any transaction with them. And AO considered it a fit case for levy of penalty in respect of addition of Rs.15,01,240/-, and thus imposed the penalty of hundred percent of the tax sought to be allegedly evaded.
Aggrieved by the order of penalty assessee filed appeal before Commissioner of appeal but without any success, hence the present appeal is filed before this tribunal.
We have heard AR of the parties and perused the material available on record. AR of assessee argued that assessee purchased 26,400 Shares of Fast Track Entertainment Ltd in physical form from the registered broker, Vijay Bhagwandas & Company vide bill No 2, dated 17 April 2003 and 23 April 2003, and also placed on record the copy of contract notes, transfer certificates and copy of Jumbo certificates. The appeal filed before CIT(A) was not pursued in view of the reasons stated in letter dated 31st of October 2008, which was addressed to CIT appeals. In the said letter it was contended that rate of tax is same in respect of STCG and income considered in Sec 68 of the Act, Mr. Vijay Bhagwandas through whom he has dealings expired on 6th June 2006, the assessee has already paid tax of Rs.6,59,010/-. If the income is considered as income under section 68 instead of capital gain, penalty is not leviable. AR of assessee further argued that coordinate bench of ITAT, Mumbai in in Milan Gandhi versus ITO, further in ITA No.2008/Pune/2012 in Pushpalata Bhandari versus DCIT, considered the similar transaction, transacted through Vijay Bhagwandas & Co. and the transactions were held to be genuine and the claim of LTGS was allowed in the hands of assessee therein. On the other hand CIT(DR) relied upon the assessment order u/s 143(3) and supported penalty order by AO and the impugned order passed by CIT(A). We have considered the rival contention of the parties and further perused the 6. material available on record. It is an admitted fact that capital gain of Rs.15,01,240/- claimed by assessee was disallowed and added to the total income of assessee under section 68 of the Act. The assessee only claimed the capital gain of Rs. 31,344/-on sale of shares through Vijay Bhagwandas & Co, which was also added under section 68 of the Act, in the quantum assessment. We have seen the bills, dated 17 April 2003 and 23 April 2003, certificate of transfer dated 23rdApril 2003, copy of contract notes, transfer certificates and copy of Jumbo certificates of Fast Track Entertainment Limited (filed in the form of paper book) to show the transaction, transacted through Vijay Bhagwandas & Co. The coordinate bench of ITAT Mumbai, while dealing with the sale of shares of Fast Track Entertainment Ltd (FTEL) transacted through Vijay Bhagwandas & Co. in in Nipa Milan Gandhi versus ITO held as under:- “13. Sequences of events may raised suspicion about FTEL shares transactions, but suspicion or doubt of highest degree cannot take place of prime facie evidence. Facts of the case under consideration do not indicate that there are evidence to uphold the view of the CIT (A). We are of the opinion that assessee is entitled to claim exemption under section 54 EC arising out of LTGC. Case relied upon by the AR of assessee. In case of ITO versus Sh. Jitender J Gandhi, Mukesh R Merolia versus ACIT and ITO versus Bibi Rani Bansal also endorse our views. In view of these discussions, we uphold the grievance of the assessee and reversed the order of CIT appeals”.
Further, coordinate bench of ITAT Pune in ITA No.2008/Pune/2012, while dealing with transactions of share of fast track entertainment Ltd held as under: “20. The question which arises before us is the treatment of gain arising on the said transaction of sale, purchase of shares is to be assessed under the head income from long term capital gains as claimed by the assessee or under the head income from other sources as determined by the authorities below. The first aspect to be considered in the case of assessee is that though enquiries were made in respect of several companies and brokers, but the name of broker through whom the assessee had transacted in the shares of M/s. Fast Track Entertainment Ltd. does not appear in that said list. Further, the assessee has produced complete evidence vis-à-vis the purchase of shares and the delivery of shares certificates to the assessee and its ITA No.372/PN/2014 Mrs Pushpalata Omprakash Bhandari consequent conversion into Jumbo Certificates and further sale transaction through different brokers. In the totality of the above said facts and circumstances, where the assessee has placed on record the complete evidence of purchase and sale of shares, merely because the shares were D- matted in July, 2004 and thereafter, were sold in the month of August, 2004, does not establish the case of authorities below, in view of the circumstantial evidence produced by the assessee. In the totality of said evidences, we hold that once the assessee had taken the delivery of shares by way of share certificates, which in turn, were forwarded to the company along with transfer deeds on 04.07.2003 itself establishes the case of the assessee of having purchased the said shares during that period. Further, the said shares were converted into Jumbo Certificates vide communication dated 16.02.2004 and thereafter, there was de-materialization of the shares on 26.07.2004. In the entirety of the above said facts and circumstances, we hold that the gain arising on transfer of shares is to be assessed as income from long term capital gain in the hands of the assessee.
We further find support from the ratio laid down by the Hon'ble Bombay High Court in CIT Vs. Shri Mukesh Ratilal Marolia in Income Tax Appeal No.456 of 2007, vide order dated 07.09.2011, wherein it was held as under:-
"5. On further Appeal, the ITAT by the impugned order allowed the claim of the Assessee by recording that the purchase of shares during the year 1999-2000 and 2000-2001 were duly recorded in the books maintained by the Assessee. The ITAT has recorded a finding that the source of funds for acquisition of the shares was the agricultural income which was duly offered and assessed to tax in those Assessment Years. The Assessee has produced certificates from the aforesaid four companies to the effect that the shares were in-fact transferred to the name of the Assesses. In these circumstances, the decision of the ITAT in holding that the Assessee had purchased shares out of the funds duly disclosed by the Assessee cannot lie faulted. 6 Similarly, the sale of the said shares for Rs.1,41,08,484/- through two Brokers namely, M/s Richmond Securities Pvt. Ltd. and M/s.Scorpio Management Consultants Pvt. Ltd. cannot be disputed, because the fact that the Assessee has received the said amount is not in dispute. It is neither the case of the Revenue that the shares in ITA No.372/PN/2014 Mrs Pushpalata Omprakash Bhandari question are still lying with the Assessee nor it is the case of the Revenue that the amounts received by the Assessee on sale of the shares is more than what is declared by the Assessee. Though there is some discrepancy in the statement of the Director of M/s. Richmand Securities Pvt. Ltd. regarding the sale transaction, the Tribunal relying on the statement of the employee of M/s. Richmand Securities Pvt. Ltd. held that the sale transaction was genuine. 7 In these circumstances, the decision of the ITAT in holding that the purchase and sale of shares are genuine and therefore, the Assessing Officer was not justified in holding that the amount of Rs.1,41,08,484/- represented unexplained investment under Section 69 of the Income Tax Act, 1961 cannot be faulted.
In the result, we see no merit in this Appeal and the same is dismissed with no order as to costs."
Further, Pune Bench of the Tribunal in Sushila Suresh Chavan Vs. ITO in relating to assessment year 2003-04, vide order dated 15.01.2014, in similar circumstances had held that the transaction of purchase and sale of shares of Database Finance Ltd. was a genuine transaction and the claim of long term capital gain was allowed in the hands of the assessee therein. In the totality of the above said facts and circumstances and the case laws, we find no merit in the order of CIT(A) and reversing the same, we direct the Assessing Officer to compute the income in the hands of the assessee under the head 'income from long term capital gains'. Thus, the grounds of appeal raised by the assessee are allowed.
8. Now coming to the fact of the present case, the assessee submitted her reply in response to the notice for penalty vide her reply dated 17 November 2007, wherein it was contended that sale consideration was paid through banking channel and she has no reason to believe that that the documents were not genuine or bogus as indicated to her by AO. The sale price of shares was received by assessee through her DMAT account out of which, 10,000 shares of were sold on 2nd June 2004 and remaining 16400 shares were sold on 15 June 2004 through DMAT account. Moreover, the claim LT CG was considered as income under section 68 of the Act, Thus it was a sufficient reply as per explanation 1 of Section 271(1) (c) of the Act. Moreover the coordinate bench of ITAT Pune, and Mumbai, while dealing with the sale of shares of Fast Track Entertainment Ltd (FTEL) transacted through Vijay Bhagwandas & Co. in ITA No. 1123/M/2009 in Nipa Milan Gandhi vs. ITO and titled as Pushpalata Omprakash Vs DCIT, while dealing with transactions of share of Fast Track Entertainment Ltd. held that the assessee in those case were held entitled for LTCG on the sales of shares of FTEL, thus the contention of the revenue was not accepted.
9. In view of the above discussion, wet find that the assessee sufficiently explained in the reply to the notice u/s 274 r.w.s. 271(1)(c) of the Act. And as such no inaccurate particular was filed by the assessee and the levy of the penalty was wrongly inflicted upon the assessee, hence there is no merit in the order of penalty and the same is deleted. The ground raised
in the present appeal is allowed.