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Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
Before: SHRI N.K. BILLAIYA & SHRI AMARJIT SINGH
आदेश / O R D E R
PER N.K. BILLAIYA, AM:
This appeal by the assessee is preferred against the order of the Ld. CIT(A)-38, Mumbai dated 26.12.2013 pertaining to Assessment year 2006-07.
The sole grievance of the assessee is that the Ld. CIT(A) erred in confirming the levy of penalty of Rs. 14 lakhs u/s. 271(1)(c) of the Act.
The roots for the levy of penalty lie in the assessment order dated 29.12.2008 made u/s. 143(3) of the Act. During the course of the scrutiny assessment proceedings, it came to the notice of the Assessing Officer that pursuant to a search action u/s. 32 of the Act conducted in Commodities Market Group of cases on 19.6.2007, the assessee was found to be engaged in large number of client code modifications. The AO further found that the assessee has shown its inability to substantiate the loss incurred by it for certain transactions of Commodity trading through Multi Commodity Exchange (MCX) for which the assessee has offered Rs. 16 crores for A.Y. 2007-08. However, the assessee could not provide the basis for computation and the modus operandi adopting the calculation of losses and the same time, the assessee submitted that on having re- look at the transactions out of the total losses of Rs. 16 crores an amount of Rs. 20,49,773/- falls in the previous year i.e. A.Y. 2006-07. The AO not only disallowed Rs. 20,49,773/- on account of losses on Commodity Trading but also initiated penalty proceedings u/s. 271(1)(c) of the Act for concealing the particulars of income and furnishing inaccurate particulars of income.
3.1. As no appeal was preferred against the assessment order, the AO proceeded by initiating penalty proceedings u/s. 271(1)(c) of the Act. Once again , the assessee was asked to furnish the details of the transactions in respect of the trades of commodity futures in MCX Ltd. In response, the assessee vide letter dated 12.9.2007 stated that “ We had entered into certain transactions of commodity trading through Multi Commodity Exchange and had incurred losses. We will not be in a position to substantiate before the tax authorities the above referred losses. In order to avoid litigation and buy peace we have expressed our willingness to pay the taxes due thereon.”
3.2. The assessee further claimed that though the total offer was of Rs. 16 crores subsequently it came to the notice of the assessee that an amount of Rs. 20,49,773/- falls in the assessment year 2006-07. The assessee strongly contended that this amount has already been offered and taxed in A.Y. 2007-08 and the same is once again taxed in A.Y 2006-07 therefore there is no question of concealing any particulars of income. This explanation of the assessee did not find any favour with the AO. The AO was of the firm belief that had there been no search, assessee would have concealed this income and further had there been no scrutiny proceedings, the assessee would not have disclosed the true income. On the tax sought to be evaded at Rs. 6,89,954/-, the AO levied a penalty of Rs. 14 lakhs, which is roughly more than 200% of the tax sought to be evaded.
Aggrieved by this, the assessee carried the matter before the Ld. CIT(A) but without any success.
Before us, the Ld. Counsel for the assessee reiterated what has been stated before the lower authorities. It is the say of the Ld. Counsel that the total loss of Rs. 16 crores which was offered in A.Y. 2007-08 was finally assessed at Rs. 17.66 crores which also included the loss of Rs. 20,49,773/- which pertains to the year under consideration. It is the say of the Ld. Counsel that the assessee has infact being double taxed for the same amount once in A.Y. 2007-08 and another in A.Y. 2006-07. The Ld. Counsel continued by stating that though the assessee did not prefer any appeal against the assessment order but that cannot be the sole reason for the levy of penalty u/s. 271(1)(c) of the Act. Alternatively, the Ld. Counsel stated that the levy of penalty @ more than 200% is unreasonable and minimum penalty should be levied.
The Ld. Departmental Representative strongly relied upon the findings of the lower authorities.
We have given a thoughtful consideration to the orders of the authorities below. Let us see the conduct of the assessee. The assessee filed its return of income for the year under consideration on 30.11.2006. The return was selected for scrutiny assessment on 5.10.2007. A search operation u/s. 132 of the Act was conducted in the Commodity Market Group of cases on 19.6.2007. If the assessee was so honest in its statement of affairs, nothing prevented it from filing a revised return of income. Subsequent to the search on 19.6.2007, on 12.9.2007 the assessee filed a letter to the Additional Director of Investigation offering losses incurred by it by trading in MCX. On 15.10.2007, the assessee quantified the losses at Rs. 16 crores which was offered for A.Y. 2007-08. Throughout this process, the assessee did not care to file a revised return of income for A.Y. 2006-07. It was only during the course of the assessment proceedings, the assessee came up with this claim of loss of Rs. 20,49,773/- pertains to A.Y. 2006-07 which is wrongly offered in the consolidated figure of Rs. 16 crores for A.Y. 2007-08.
7.1. At no stage, the assessee filed the details of how this loss is computed nor the transactions were given on which the assessee had incurred these losses. The assessee has simply stated that it is not in a position to substantiate before the tax authorities. Therefore, in order to avoid litigation and buy peace, the assessee agreed to pay the tax. This explanation of the assessee is not acceptable as the conduct of the assessee throughout the factual matrix discussed hereinabove is not acceptable.
7.2. The offer made by the assessee was subsequent to the search which itself proves that had there been no search, there would never have been any offer. Considering the factual matrix and the conduct of the assessee, in our considered opinion, this is a fit case for the levy of penalty u/s. 271(1)(c) of the Act though at the same time, we find that the levy of penalty @ more than 200% is excessive. We, accordingly modify the findings of the Ld. CIT(A) and direct the AO to levy the penalty @ 100% of the tax sought to be evaded. The assessee will get a relief of Rs. 7,10,046/-.
In the result, the appeal filed by the assessee is partly allowed.