ITA No. 510/Del/2012
Asstt.Year: 2006-07
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH `B' NEW DELHI
BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT
AND
SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER
I.T.A.No.510/Del/2012
Assessment Year : 2006-07
Diligent Services (P) Ltd., vs ACIT, Circle 10(1),
201, S-524, Agarwal Complex, New Delhi.
Vikas Marg, Shakarpur,
Delhi-110092
(PAN: AAACD4289R)
(Appellant) (Respondent)
Appellant by: S/Shri Ajay Vohra, Gaurav Jain, Adv.
Respondent by : Miss Ashima Neb, Sr.DR
ORDER
PER CHANDRA MOHAN GARG, JUDICIAL MEMBER
This appeal has been preferred by the assessee against the order of
CIT(A)-XVIII, New Delhi dated 21.11.2011 in Appeal No.55/10-11 for AY
2006-07 by which the CIT(A) upheld the penalty order dated 30.03.2010 passed
u/s 271(1)(c) of the Income Tax Act, 1961.
2. The assessee has raised following grounds in this appeal:-
"1. That the CIT(A) erred on facts and in law in
upholding the levy of penalty under section 271 (1)( c) of the
Act holding that the appellant has furnished inaccurate
particulars on income.
pg. 1
ITA No. 510/Del/2012
Asstt.Year: 2006-07
2. Without prejudice to ground No 1, That CIT(A)
erred in facts and in law in upholding the quantum of penalty
overlooking the fact that no tax could have been evaded on
following items:
a) Returned Tax
b) Amount of allowance of Interest and other expenses
proportionate to earning of income assessed as business
income.
c) Rebate U/S 88E on Securities Transaction Tax
(STT) which was eligible for deduction. "
3. Briefly stated the facts giving rise to this appeal are that the AO levied
penalty of Rs.37,11,280/- at minimum rate, taking tax sought to be evaded at the
same amount. During quantum proceedings, the AO made additions on two
counts. The first disallowance relates to disallowance of exemption u/s 10(38)
of the Act on an amount of Rs.53,61,68,729/- which has been shown as long
term capital gain (LTCG) by the assessee but the AO treated the same as
business income. The AO also treated an amount of Rs. 1,10,25,787/- shown as
short term capital gain (STCG) which was also treated as business income by
the AO. The second issue was pertaining to disallowance of Rs. 10 lakh u/s
14A of the Act in the context of earning exempt income. The AO initiated
penalty proceedings and levied penalty of Rs. 37,11,280/- u/s 271(1)(c) of the
Act. The aggrieved assessee preferred an appeal but remained empty handed as
the appeal was dismissed by the CIT(A) by passing the impugned order. Now,
pg. 2
ITA No. 510/Del/2012
Asstt.Year: 2006-07
the assessee has preferred this second appeal before the Tribunal with the
grounds as reproduced hereinabove.
4. We have heard arguments of both the sides and carefully perused the
relevant material placed on record. Ld. Counsel for the assessee has drawn our
attention towards order of ITAT Delhi `B' Bench dated 6.1.2012 in assessee's
own case i.e. ITA No. 3299/Del/2009 for AY 2006-07 wherein the order of the
CIT(A) in quantum proceedings has been upheld by confirming the action of the
AO which treated long term capital gain and short term capital gain as business
income of the assessee. Ld. Counsel placed his reliance on the recent decision
of Hon'ble Jurisdictional High Court of Delhi in the case of CIT vs Amit
Jain (2013) 351 ITR 74 (Del) wherein it was held that the amount in question
which forms the basis for the AO to levy the penalty was in fact truthfully
reported in the return of income of the assessee. Their lordships further held
that in view of these circumstances, the AO chose to treat the income under
some other head cannot characterise the particulars reported in the return as
inaccurate particulars or as concealment or suppression of facts. Finally, in this
case of Amit Jain (supra), it was held that when amount of income is reported in
the returns and the AO has reported the same in the return of income under a
particular head and AO is treating the same income under some other head, it
cannot be said to be furnishing of inaccurate particulars and penalty is not
leviable in this situation.
pg. 3
ITA No. 510/Del/2012
Asstt.Year: 2006-07
5. Ld. DR supported the orders of the authorities below and submitted that
the assessee has concealed particulars of its income and has furnished wrong
particulars of its income, therefore, the AO was right in levying penalty which
was upheld by the CIT(A) on justified reasons.
6. On careful consideration of above rival contentions and submissions, at
the outset, we observe that the additions made by the AO treating the long term
capital gain and short term capital gain as business income has been upheld by
the Tribunal in its order dated 6.1.2012 (supra). The relevant operative
paragraph no. 7.4 of the Tribunal reads as under:-
"7.4 As regards short term capital gain made by the
assessee, Ld. Commissioner of Income Tax (Appeals) has given
a finding that even though all the shares have been held as
investment in the balance sheet, there were a large number of
shares transacted relating to a variety of shares wherein the
frequency of transactions is clearly reflected. It was further
found that there are many instances where the holding period of
shares is also very short and it clearly indicates the intention of
the assessee to earn short term profit by purchasing and selling
of shares in the market. In this regard, certain samples
transaction as under:-
Name of the company Date of purchase of shares Date of sale of shares
TNPL September, 2005 October, 2005
Rajapamil September, 2005 October, 2005
Patel Engineering July, 2005 December, 2005
Madras Cen September, 2005 September, 2005
Madras Cen September, 2005 October, 2005
Jindal Poly September, 2005 October, 2005
Gulf Oil December, 2005 January, 2006
IDFC September, 2005 November, 2005
IFSI September, 2005 March, 2006
pg. 4
ITA No. 510/Del/2012
Asstt.Year: 2006-07
The above clearly indicate that these shares were held
with the intention of earning profits and not earning dividend.
Thus, it is found that with respect to these shares transaction,
the transactions were regularly entered during the year;
purchase and sale of shares were continuous; holding period
was very short; circumstances clearly indicate that the intention
of the assessee was not to earn the dividend but to earn profit
on sale and purchase of shares. The assessee has also shown
speculation loss which indicate that share transactions in the
nature of business were also being carried out by the assessee.
Ld. Commissioner of Income Tax (Appeals) is correct in
holding that whenever any investment is made by a person, a
reasonable timeframe has to be kept in mind before the shares
are sold, unless there are certain exceptional circumstances. In
the present case, the shares have been claimed to be shown as
investment have not been held as investment with the intention
of earning dividends and therefore, merely because they have
been shown as investment in the balance sheet does not
strengthen their claim that sale of these shares should be
treated as capital gain and not business income. The facts
clearly indicate that keeping in view of the frequency of
transaction, intention of the assessee to earn profits as well as
most of these shares having been held in a separate DEMAT
account, is pointing towards the fact that to the extent of these
shares the assessee was carrying out business transactions.
Thus, we agree with the finding that Ld. Commissioner of
Income Tax (Appeals) with regard to these shares which have
been shown as short term capital gain, these transactions
cannot be treated as short term capital gains and have to be
considered as business income of the assessee. Therefore, we
uphold the order of the Ld. Commissioner of Income Tax
(Appeals) on the issue of long term capital gain and short term
capital gain. The long term capital gain is to be held as long
term capital gain and short term capital gain is to be held as
business income. "
7. In view of above, we take cognizance of the recent decision of
Jurisdictional High Court of Delhi in the case of Amit Jain (supra) wherein it
was held thus:-
pg. 5
ITA No. 510/Del/2012
Asstt.Year: 2006-07
"3. This Court notices that the Tribunal while
upholding the order of the appellate commissioner relied
upon the decision in CIT Vs. Reliance Petroproducts Pvt.
Ltd. (2010) 322 ITR 158 (SC). Furthermore, the record
reveals that the amount in question, which formed the basis
for the assessing officer to levy penalty was in fact truthfully
reported in the returns. In view of this circumstance, that
the assessing officer chose to treat the income under some
other head cannot characterize the particulars or reported
in the return as an inaccurate particulars or as suppression
of facts. The Court is also conscious of the decision of the
Supreme Court in Calcutta Discount Co. Ltd. vs. Income
Tax Officer (1961)41 ITR 191 (SC) where it was held that it
is up to the assessing officer to interpret the return and
discern as to which head of income the amount had to be
brought to tax."
8. In view of above factual matrix of the present case, we are inclined to
hold that if the assessee has declared income under a particulars head which was
treated by the AO under income of some other head and the findings of the AO
were confirmed upto the Tribunal, then, it cannot be presumed and concluded
that the assessee has furnished inaccurate particulars or wrong particulars of its
income and penalty in this situation is not leviable in the light of ratio of the
decision of Hon'ble Jurisdictional High Court in the case of CIT vs Amit Jain
(supra).
9. Accordingly, both the grounds of assessee appellant are allowed and AO
is directed to delete the penalty.
pg. 6
ITA No. 510/Del/2012
Asstt.Year: 2006-07
10. In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 28.10.2014.
Sd/- Sd/-
(G.D. AGRAWAL) (CHANDRAMOHAN GARG)
VICE PRESIDENT JUDICIAL MEMBER
DT. 28th OCTOBER, 2014
`GS'
Copy forwarded to:-
1. Appellant
2. Respondent
3. C.I.T.(A)
4. C.I.T.
5. DR
By Order
Asstt.Registrar
pg. 7
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