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Income Tax Appellate Tribunal, “C”, BENCH MUMBAI
Before: SHRI R.C.SHARMA, AM & SHRI PAWAN SINGH, JM
O R D E R
PER R.C.SHARMA (A.M): This is an appeal filed by the revenue against the order of CIT(A), Mumbai, for the assessment year 2005-06, in the matter of imposition of penalty u/s.271(1)(c) of the I.T.Act. 2. There is a delay of 66 days in filing the appeal by revenue. Considering the reasons given for delay, we condone the delay of 66 days in filing the appeal by the revenue and the appeal is heard on merits. 3. Rival contentions have been heard and record perused. Facts in brief are that a search and seizure action u/s.132 of the Act, was conducted in the case of Ankur Group on 26-4-2007. The assessee is a member of Ankur Group. In response to the notice u/s.153A of the Act, 2 the assessee filed return of income on 31-3-2009 declaring total income of Rs.69,97,496/-. Original return of income was filed by the assessee u/s.139(1) on 10-10-2005 declaring total income of Rs.36,05,133/-. Further during the course of the search in the case of the search in the case of the assessee’s Balance sheets of 3 companies viz. Italic Techno Financial Consultants Pvt. Ltd., Attalika Impex Pvt. Ltd. and Tater Fin-Vest Pvt. Ltd. were found. On enquiry, the assessee informed that these companies were controlled by his uncle who is the major shareholder in all the three companies. The assessee also informed that neither he nor any of his family members is Director and/ or shareholder of these companies. From the perusal of the balance sheets of these companies, the AO found that these companies had earned huge capital gains on sale of shares of M/s. Ankur Drugs & Pharma Ltd. The assessee was asked by the A,O, to furnish the details of purchase value and sale of value of these shares and also the detailed working of Long Term Capital Gains from the sale of shares. From the details submitted by the assessee, the A.O. found that these companies had shown the purchase value of most of the shares at Rs,2/ - or Rs.3/-. On enquiry the A.O. found that the market price of shares of M/s Ankur Drugs & Pharma prevailing in Bombay Stock Exchange on the date of purchase was much higher than the purchase value shown by these companies in their books of accounts. The assessee was asked to explain how the purchase price of these shares is at lower price compared to the market price. The assessee submitted before the A.O. that in all the three companies, his uncle Mr.
3 Rishabh Raj Mohnot is the majority shareholder and that he and his family members are not shareholders and/or directors of these three companies. The assessee submitted that Ankur Drugs and Pharma Ltd. of which he is the Managing Director came out with public issue in February 1996 and the equity shares were issued at the price of Rs.10/- per share (face value, no premium). The assessee stated before the A.O. that the issue was not at all a success and as such the company was not in good financial position for upto financial year 2003-04. The assessee reconfirmed before the A.O. that he was offering this additional income as under in order to obviate undue litigation and to have peace provided no penalty and prosecution proceedings were initiated and further no double taxation of the relevant amount in the hands of the respective companies. A.Y.2002-03 Rs. 6,43,700/- A.Y.2004-05 Rs. 11,38,050/- A.Y. 2005-06 Rs.2,06,67,820/- The assessee had also submitted the requisite certificate from the company secretary of Ankur Drugs and Pharma Ltd. about the shareholding of the three companies as on 30th Sept., 2004 and had also furnished the said certificate also the certificate from the share agent about the date of transfer of the shares before the A.O. The AO on the basis. of the above discussion and disclosure of Rs.2,06,67,820/-, added the same to the total income of the assessee as 'Income from undisclosed sources. The AO also levied penalty u/s.271(1)(c) of the Act.
By the impugned order, the CIT(A) deleted the penalty after observing as under :- “8. I have considered the issue. In this case penalty has been levied with respect to the following additions made: i) Additional income admitted by the appellant during the assessment proceedings with regard to the purchase of shares of M/s. Ankur Drug & Pharma Ltd., belonging to his uncle amounting to Rs.2,06,67,820/-. ii) The following unaccounted income admitted by the appellant in the return filed u/s.153A of the I.T. Act: i) Short Term Capital Gain Rs. 5,92,512/- ii) Car hire charges Rs. 97,762/- iii) Income from house property Rs. 57,906/- iv) Shortfall in cash Rs.26,15,000/- 8.1 With regard to the addition made in the assessment order of Rs.2,06,67,820/-, it is to be noted that in this group of cases during the assessment proceedings, the A.O found that the three companies namely M/s. Italic Techno Financial Consultants Pvt. Ltd., Attalika Impex Pvt. Ltd. and Tater Fin-Vest Pvt. Ltd. have earned huge capital gain on sale of shares of M/s. Ankur Drugs & Pharma Ltd. The A.O also found that these companies have purchased shares of M/s. Ankur Drugs & Pharma Ltd. at the cost of Rs. 2 or 3 whereas the price quoted in the stock market was around Rs.6. The A.O enquired with the assessee how it was possible to purchase the shares of M/s Ankur Drugs & Pharma Ltd. at Rs.2 or 3 when the market rate was at Rs. 6. With regard to this question the appellant submitted to the A.O that the appellant was continuously under pressure from friends and associates who subscribed to the public issue of M/s. Ankur Drugs & Pharma Ltd. as they were not able to sell the shares after listing. Due to this pressure the appellant's group was forced to purchase the shares from the relatives and friends. The appellant also submitted that even though the market price is said to be have been Rs. 6 j -, the volume of purchase in the stock market was very thin and the appellant's relatives and friends could not sell through the open market and the appellant's group was forced to purchase these shares. The appellant submitted that his uncle came forward to support the appellant and his uncle purchased the shares of M/s. Ankur Drugs & Pharma Ltd. from the relatives and friends of the appellant at an agreed price with the sellers which is recorded in the books of accounts of these three companies. Since the A.O has raised the issue, in order to purchase peace with the department and to avoid unnecessary inconvenience to the appellant’s uncle, the appellant came forward and offered the income in his The appellant has also stated that his offering of this additional Income is in order to 5 purchase peace with the department and also to avoid undue litigation and the appellant has also made a condition in the offer letter that no penalty and prosecution should be initiated. The A.O has extracted the copy of the letter filed by the appellant in page 2,3,4,5 of the assessment order and it is also discussed in page 3,4,& 5 of this appellate order. In this group of cases search and seizure action has been conducted. There was no evidence found to show that either the appellant or his uncle or the above mentioned three companies paid any extra three companies. During the assessment proceedings to avoid inconvenience and additions in the hands of his uncle and his three companies which will lead to protracted litigation, the appellant has admitted additional income in his assessment. Disclosure of this additional income seems to be voluntary and additions are not based on any seized material found during the search. Further it is also to be appreciated that if at all any additions is to be made it should be in the hands of the three companies since the shares were purchased by the said three companies and not by the appellant. So from these facts, it is very clear that the additions made in the appellant's hands is purely on the basis of the voluntary offering of additional income in the appellant's hands. There was no material found either during the search proceedings or subsequent enquiries to show that the assessee utilized any of his unaccounted income and paid extra money to the Investors of shares in the company M/ s. Ankur Drugs & Pharma Ltd. who sold the shares to the said three companies. It is also to be noted that the assessee has offered an explanation for admitting the additions in the hands of the appellant and it was not found to be malafide or false. In view of this I hold that the conditions listed in Explanation 1 (A) to Explanation 1 (8) of Section 271 (1 )(c) are not satisfied in this case. Explanation 1 to Section 271(1)(c) of the IT Act is not applicable in the appellant's case. Further there is no material to show that the appellant has concealed his particulars of income as contemplated in the main provisions of section 271(1)(c) of the IT. Act. In view of this I hold that penalty 271(1)(c) cannot be levied in this case for this assessment year. The A.O is directed to delete the penalty levied u/s. 271 (1)(c) with regard to this addition of Rs. 2,06,67,820/-.”
Against the above order of CIT(A), the revenue is in appeal before us.
We have considered rival contentions and found from the record that there was no evidence found by the department to show that either the assessee or his uncle or the three companies paid any extra money than the purchase price mentioned by the three companies. However, during the assessment proceedings, to avoid inconvenience and additions 6 in the hands of his uncle and the three companies, the assessee has admitted the additional income in his assessment. The disclosure of this additional income was voluntary and the additions are not based on any seized material found during the course of search. The detailed finding recorded by the CIT(A) as per para -8 of his appellate order has not been controverted by ld. DR by brining any positive material on record. Accordingly, we do not find any reason to interfere in the order of CIT(A) deleting the penalty imposed with respect to the additional income offered during the assessment proceedings.
In the result, appeal of the revenue is dismissed. Order pronounced in the open court on this 09/10/2015.