TMI Blog2012 (9) TMI 967X X X X Extracts X X X X X X X X Extracts X X X X ..... giving rise to this appeal are that assessee is a trust established in Japan. In India, it is registered with the Securities and Exchange Board of India (SEBI) as a sub-account of The Nomura Trust and Banking Company Ltd, a SEBI registered Foreign Institutional Investor (FII). Assessee invests in the Indian capital markets in accordance with SEBI (FII) Regulations, 1995 and earns income in the nature of capital gains on transfer of Indian securities and dividend income. For the assessment year under consideration, assessee filed its return of Income stating net short-term capital gains of ₹ 19,07,63,554 and exempt dividend income of ₹ 14,18,67,409. Assessee worked out the tax payable on short term capital gains of ₹ 19,07,63,554 @ 10% by applying section 111A of the Act, which comes to ₹ 2,16,13,551. However, assessee paid advance tax of ₹ 6,48,40,532. Hence, in the return of income filed, assessee claimed a refund of ₹ 4,32.27,021. During the course of assessment proceedings, assessee stated that the capital gain was liable to tax @ 30% and not at 10% as claimed, as section 111A was not applicable in this case. Therefore, during the course of qu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd hence no STT was paid in respect of the same. In all such cases where no STT is paid in respect of sale of shares, the rate of tax applicable is 30% and not 10%. It is the AOs contention that there can be no doubt on whether the rate of tax applicable is 30% or 10% when the transaction was not subjected to STT. (d)Fourthly the AO has also made certain observations regarding non compliance of the assessee before him during the course of assessment proceedings. (e) Finally the AO has held that the assessee had mens rea to evade tax on capital gains earned on sale of shares of Gujarat Ambuja Cement Ltd. It is stated that though the assessee had paid the advance tax to the extent of ₹ 6.48 crores on 28-12-2007 and further sum of ₹ 1,315/- on 08-02-2008 to take care of the short fall at the end of the financial year. It still made a claim for refund at the time of filing its return of income. The AO s case appears to be that the very fact that such huge amount of advance tax was being claimed as refund should have alerted the assessee to the fact that there was some mistake in the return which requires verification; the fact that the assessee still went ahead and cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee has furnished inaccurate particulars of its income and justified the levy of penalty. 4. Being aggrieved, assessee is in further appeal before the Tribunal. 5. Ld A.R it was submitted that assessee paid full advance tax on short term capital gains of ₹ 19,07,63,554 @ 30% but inadvertently at the time of filing of return, said short term capital gain was inadvertently characterized chargeable to tax @ 10% under section 111A of the Act. As a result of such a classification, a refund of ₹ 4,32.27,021 was claimed in the return of income. Ld A.R. submitted that in the return filed, assessee disclosed all the facts correctly save and except to charge tax @ 10% on short term capital gains in stead of chargeable to tax @ 30%. Ld A.R. submitted that on receipt of notice u/s.142(1) issued on 20.10.2010, wherein, various details of income and tax liability was asked for and to be filed on 22.11.2010, assessee requested for short adjournment and it was given additional time of one day i.e. upto 23.11.2010. Assessee filed all the details as per notice issued u/s.142(1) i.e. one day after initial hearing date and while preparing the reply noted the mistake and voluntaril ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is pertinent to note that based on this tax calculation, the assessee proceeded to pay on 24 December, 2007 the right amount of advance taxes (ie at the rate of 30%, plus surcharge and education cess) into the Government treasury in respect of the transaction. At the time of preparation of the Indian tax return of the assessee after the end of tax year, all sale transaction undertaken during the 12 month period were aggregated for computing the annual tax liability. Given the large volume of work within a short span of time, an inadvertent clerical error occurred at the time of aggregation of transaction data in respect of the assessee s tax return. It is for this reason, that in the case of the assessee, one off market sale transaction of Ambuja Cement Company shares was inadvertently treated as an on market sale transaction at the time of preparation of the annual tax return, resulting in computation of tax at a lower rate of 10% instead of at the rate of 30%. This bonafide inadvertent error resulted in a claim for refund in the tax return for assessment year 2008-09. 6. Ld A.R. submitted that return of income as well as assessed income is same and thus, there is n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt in the case of Reliance Petro Products P. Ltd.,322 ITR 158(SC) held that it is a mere disallowance of claims which does not attract any penalty under section 271(1)(c) of the Act. He submitted that penalty as confirmed by ld CIT(A) is not justified and same be deleted. 7. On the other hand, ld D.R. supported the orders of authorities below. Ld D.R. submitted that assessee made an untenable claim to charge tax at the special rate of 10% on short term capital gain knowing that assessee had not paid any STT in respect of sales transaction of the shares on which short term capital gain arose to the assessee. She submitted that when AO asked details of calculation, assessee came out with a plea of a bonafide mistake. Ld D.R. submitted that it was a conscious decision by the assessee to avoid tax as the assessee admitted its mistake only after the notice u/s.142(1) issued by the AO. Ld D.R. submitted that assessee is a foreign institutional investor and is assisted with professional assistance in computing the income. Hence, it cannot be said that there was an inadvertent mistake in applying the rate of tax. She by placing reliance on the decision of Hon ble Delhi High Court in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same is chargeable to tax at the rate of 30 percent. Accordingly, in respect of the aforesaid gains, tax at the rate of 30 percent was paid as advance tax. However, at the time of preparation of this submission, it has come to our notice that in the return of income filed for the relevant assessment year aforesaid short-term capital gains have been inadvertently categorized erroneously as short term capital gains chargeable to tax at the rate of 10 per cent under section 111A of the Act. As a result of such a classification, a refund of ₹ 43,227,021 was claimed in the return of income. We have provided below a revised computation wherein, short term capital gains on shares tendered under an open offer has been categorized as transactions not chargeable to STT and computed the total tax liability accordingly: Particulars Amount(Rs.) Amount(Rs.) Short term capital gains From transactions chargeable to STT Nil From transactions not chargeable to STT 197,708,543 197, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on as error was discovered, it was suo moto brought to the notice of AO vide first written submission filed on 23.11.2010. Assessee stated that it was not the intention of the assessee to defraud the revenue. We also observe that the returned income was accepted while finalizing the assessment and the AO considered the revised computation of income and tax payable working filed by assessee vide its letter dated 23.11.2010. Considering the facts, we find merit in the submission of assessee that there was a bonafide clerical error in the computation of tax liability while filing the return in regard to chargeability of tax rate which was rectified during the course of assessment proceedings and, accordingly, no refund as claimed by the assessee in the return filed was processed by the department. The Hon ble Supreme Court in the case of Reliance Petro Products (P) Ltd (supra) has held that if all the facts relating to claim are disclosed and the information given in the return is not found incorrect or inaccurate, assessee cannot be held guilty of furnishing inaccurate particulars of income. Their Lordships also held that mere making of a claim which is not sustainable in law by itse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reproduce para 16 of the said case, which reads as under: 16. On perusal of the orders of revenue authorities, we find that the penalty under section 271(1)(c) was levied on the ground that the assessee violated of provisions of section 94(7) of the Act by not ignoring losses while computing short-term capital gains on transactions related to section 94(7) of the Act. It is important to state here that the Assessing Officer made the addition only on the basis of material and in formations furnished by the assessee. The Apex Court in the case of Reliance Petroproducts (P.) Ltd. (supra) regarding the word particulars used in section 271(1)(c) has held that there can be no dispute that everything would depend upon the Return filed because that is the only document, where the assessee can furnish the particulars of his income. When such particulars are found to be inaccurate, the liability would arise. But in the case under consideration we find that the assessee has furnished full detail and has not concealed any particulars of income or has furnished any inaccurate particular of income. Further, we noticed that there were no such specific requirements in the return form appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 306 ITR 277(SC) and the decision of CIT Vs. Reliance Petroproducts Pvt. Ltd. (supra), has held that the levy of penalty even where a claim for deduction is not upheld, even though the assessee has disclosed all material facts and has not suppressed any material facts, the levy of penalty is not justified. In the said case, the assessee claimed deduction of ₹ 9,94,399/- on account of diminution in the value of shares held by it. The same were disallowed on the ground that the shares were held as investments, and profits and losses on the sale thereof were to be considered under the head capital gains . Therefore, the quantum proceeding was concluded against the assessee. The Assessing Officer levied penalty under Section 271(1)(c) of the Act. The Hon ble jurisdictional High Court held that it was not the case of the department that the assessee withheld any information or furnished any false information. The facts necessary for carrying out the assessment proceedings were admittedly disclosed in the return filed by the assessee. It was held that the assessee had wrongly claimed deduction and it was not entitled to the same as it is a pure question of law. In that context, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to 100%. Assessee approached the Hon ble High Court, which also dismissed the appeal. Hence, assessee filed appeal before the Hon ble Supreme Court. The Supreme Court after hearing ld counsel for the parties observed that assessee is undoubtedly a reputed firm and has great expertise available with it. Notwithstanding this, it is possible that even the assessee could make a silly mistake and indeed this has been acknowledged both by the Tribunal as well as by Hon ble High Court. The Hon ble Apex Court held that the contents of the tax audit report suggest that there is no question of the assessee concealing its income, when assessee filed tax audit report alongwith the return which was unequivocally for provision of payment was not allowable under section 40A(7) of the Act but still assessee made computation of the assessee in its return of income. The Hon ble Apex Court held that all that has happened is that through a bonafide and inadvertent error by the assessee while submitting his return and failed to add provision of gratuity to its total income. The caliber and expertise of the assessee has little or nothing to do with the inadvertent error. The Apex Court also stated th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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