2013 (9) TMI 889 - HC - Income Tax

Penalty u/s 271(1)(c) of the Income Tax Act for concealment of Income - Assessee had purchased the capital gain bond in NABARD worth Rs.20.00 lacs, the same was duly disclosed in the return. - proof of investment Held that - When the assessee has shown the investment, then the purchases are genuine and the same cannot be treated as bogus - The sale proceedings were made through the bank channel as M/s. CMS Security Ltd., was duly registered in the Stock Exchange. The confirmatory letter dated 16.08.2004 received from M/s. CMS Security Ltd., was produced before AO, where it was confirmed that they have sold the instruments. The only fault of the assessee is that the assessee s name did not appear in the record of the broker. For this act, the assessee cannot be held responsible as there is no fault on her part. In the instant case, there is no concealment on the part of the assessee regarding the transactions - If the income as per law is exempted, then the offer of the assessee is meaningless as the law will prevail and will supersede the offer made by the assessee. In the instant case, surrender was to buy the peace as the assessee is not an expert in income tax matter. The Department cannot take the advantage of the ignorance of the assessee as per CBDT Circulr No.14(XL-35)/1955 dated 01.04.1955 mentioned in Parekh Brothers Versus Commissioner Of Income-Tax, Kerala II, Ernakulam, And Others 1983 (8) TMI 17 - KERALA High Court Decided against the Revenue.

Issues:
Appeal under Section 260A of the Income-Tax Act, 1961 against the judgment and order of the Income Tax Appellate Tribunal for the assessment year 2002-03 based on the substantial question of law regarding the addition of alleged bogus capital gains and the deletion of such additions without necessary inquiries.

Analysis:

1. Alleged Bogus Capital Gains:
The case involved the assessment of an individual with income from various sources, including capital gains. The assessee declared capital gains from the sale of bonds, which were later deemed non-genuine by the Assessing Officer (AO). The AO made additions to the income, a decision upheld by the Commissioner of Income Tax (Appeals) but overturned by the Tribunal. The Department appealed the Tribunal's decision, questioning the legitimacy of the transactions and the deletion of additions. The Department argued that the assessee surrendered the income under certain conditions, and the Tribunal failed to consider crucial aspects, leading to the request for setting aside the order.

2. Surrendered Income and Assessing Officer's Actions:
The Department contended that the assessee surrendered the income to avoid penal proceedings, and the AO's decision was justified based on the lack of suitable replies and discrepancies in the transactions. The Department emphasized the need to uphold the original assessment order and highlighted the initiation of penalty proceedings as a significant factor in the case.

3. Assessee's Defense and Justification:
On the other hand, the assessee's counsel justified the Tribunal's decision, citing inquiries made by the Additional Director of Income-tax and the good faith nature of the income surrender. The assessee's defense revolved around the conditional nature of the surrender, aimed at avoiding penalties, and argued that the AO misinterpreted the situation. The counsel presented the assessee's lack of expertise in tax matters and the reliance on the broker's confirmatory letter to support the transactions.

4. Tribunal's Decision and Legal Precedents:
The High Court analyzed the transactions, emphasizing the genuineness of the purchases and reinvestment, which were duly disclosed. The Court noted the lack of concealment by the assessee and the proper disclosure of all transactions. Legal precedents were cited to support the assessee's position, highlighting the importance of following the law over conditional offers made by the assessee. The Court concluded that the surrender letter should be disregarded, and the Tribunal's decision was upheld, favoring the assessee and dismissing the Department's appeal.

5. Conclusion:
The High Court sustained the Tribunal's decision, ruling in favor of the assessee and against the revenue department. The Court emphasized the assessee's proper disclosure of transactions and the lack of concealment, ultimately rejecting the Department's appeal and dismissing the case.

This detailed analysis of the judgment highlights the key legal arguments, factual background, and the Court's reasoning in resolving the issues raised in the appeal.

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