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TMI Blog2011 (1) TMI 1224X X X X Extracts X X X X X X X X Extracts X X X X ..... admissible, the explanation of the assessee is not bona fide. In this case, the claim is not supported by any evidence. The explanation is also not based on any affidavit or declaration from the accountant - Following decision of Commissioner of Income-tax Versus ECS Ltd. [2010 (2) TMI 713 - Delhi High Court] - Decided in favour of assessee. - - - - - Dated:- 28-1-2011 - Order These appeals and the cross-objections, pertaining to members of a family, involve common grounds. Therefore, these appeals were argued in a consolidated manner by the learned Departmental representative and learned counsel for the assessee. Accordingly, a consolidated order is passed. The appeals and the objections were argued with reference to the facts of the case of Ms. Madhu Lalwani. Therefore, while passing the order the facts of this case are narrated in detail. It is the common ground of both parties that facts of all the cases are identical. The facts are that the assessee filed her return on August 14, 2006 declaring total income of Rs. 1,11,52,993. The return was processed under section 143(1), accepting the return of income, and refund of Rs. 3,87,960 was granted to her on May 8, 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Ahmedabad Stock Exchange as it had stopped functioning. Therefore, the gains were offered for taxation. It was further submitted that looking to the conduct of the assessee, who is not aware of the technical provisions of the law, the penalty may not be levied. It was also submitted that penalty proceedings are quasi criminal in nature. Therefore, it is imperative to prove that the assessee has concealed income. Such is not the case here. The moment the assessee came to know about the mistake, all facts were furnished and explanation was also tendered. The tax due on the assessed income has also been paid. Further submissions were made to the effect that the total income of the assessee as per return was Rs. 1,11,52,993 and tax of Rs.35,49,541 was payable. Such an assessee will not furnish inaccurate particulars of income for saving tax of Rs. 3,35,000 only. The mistake was committed by the accountant, who claimed the gains to be exempt without understanding the provisions of the Act. Therefore, no conscious effort can be attributed to the assessee to evade tax and it is only a case of bona fide error. The Assessing Officer did not accept this explanation. It is mentioned that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udicial precedents relied upon by counsel. I find that the facts of the case are undisputed. The learned Assessing Officer in the assessment order has mentioned that during the assessment proceedings he had asked the appellant to furnish the details vide letter dated August 29, 2008, the appellant suo motu had pointed out the mistake which crept in while filing the return and offered the impugned long-term capital gains for taxation, which was claimed as exempt in the return, in view of proviso to section 112 of the Income-tax Act. The appellant has come forward to indicate the error and had paid taxes thereon, even before the mistake could be detected by the Department. The explanation behind occurrence of this error given was that the accountant of the appellant, who is common to all family members, had inadvertently and without knowing the implications thereof, failed to inform the chartered accountant of the appellant about the fact of non-payment of STT. I find this explanation as plausible one, as same mistake was committed in respect of all family members, 7 in number, which could be possible due to the fact that they had one common accountant, who was not aware of the impli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny. In such a scenario acceptance of plea of oversight would exonerate a large number of assessees from payment of legitimate tax even when the claim was actuated by a mala fide intention. Reliance has also been placed on the decision of the hon'ble Delhi High Court in the case of CIT v. Escorts Finance Ltd. [2010] 328 ITR 44 (Delhi). In this case, the assessee claimed deduction under section 35D on the basis of representation made in the prospectus. However, in the case of assessment, such a claim was found to be untenable as a finance company is not entitled to the aforesaid deduction at all. The hon'ble court mentioned about the decision in the case of Dharamendra Textile Processors regarding nature of penalty proceedings. It is further mentioned that deduction under section 35D was not at all applicable to the case of the assessee. The assessee had obtained technical assistance from the chartered accountant at the time of filing the return. Therefore, it was held that it is not a case of bona fide error on the part of the assessee. In reply, learned counsel submitted that this is a case of bona fide error, which was rectified before the Assessing Officer by filing letter dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eters set out above. In rejoinder, the learned Departmental representative submitted that the aforesaid decision supports the case of the Revenue. He also relied on the decision of the hon'ble Delhi High Court in the case of CIT v. ECS Ltd. [2011] 336 ITR 162 (Delhi) ; [2010] 194 Taxman 311. In this case, the claim regarding deduction under section 80-O was under dispute. The Assessing Page No: 0238 Officer discussed the legal position and held that the expenses incurred had to be deducted from the income earned in foreign exchange. According to him, the assessee not only interpreted the law wrongly but also did not furnish details of expenditure attributable to earning income in foreign exchange. Therefore, he calculated the deduction admissible under the provision and observed that penalty under section 271(1)(c), has been initiated. The penalty was also levied. The hon'ble court mentioned that the Assessing Officer had been influenced by the consideration that not only the assessee had interpreted the law wrongly, but also did not furnish the details of expenditure attributable to earning in foreign exchange, because of which penalty proceedings were initiated. Thus, his prima ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fter receipt of the assessment order. The explanation of the assessee is that the error occurred due to the accountant who did not properly interpret the relevant provision of the Act. No affidavit has been filed from the accountant in support of this explanation. In the case of Reliance Petro products P. Ltd. [2010] 322 ITR 158 (SC), the decision is that if all the facts have been furnished correctly in the return of income on the basis of which a claim is made, then, mere rejection of the claim does not lead to inference of penalty. The facts of this case are distinguishable because all the facts have not been shown in the return of income, i.e., it is nowhere mentioned that the transactions were "spot transactions". It may be mentioned that there is a gap of about 19 months between purchase and sale of 2,50,000 shares and both transactions involve significant amounts. The bills show that the securities transactioin tax was not paid on either occasion. The details were also furnished in two different letters and surrender was made on the third occasion. The decision in the case of Zoom Communication P. Ltd. [2010] 327 ITR 510 (Delhi) supports the case of the Revenue. In this ca ..... X X X X Extracts X X X X X X X X Extracts X X X X
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