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TMI Blog2012 (6) TMI 134X X X X Extracts X X X X X X X X Extracts X X X X ..... as levied penalty which is @ 200 % of the tax sought to be evaded but while disposing off the appeal the ld CIT[A] has concluded that to levy penalty u/s 271[1][c] @ 100 % of the tax sought to be evaded on capital gains on renunciation of right shares - As the penalty levied by the AO has already been brought down to 100%, which is the minimum penalty u/s 271[1][c] of the Act no point to reduce it further – against assessee. - ITA No.2402/Mum/2010 - - - Dated:- 17-4-2012 - N V Vasudevan, N K Billaiya, JJ. For Appellant: Shri J D Mistry For Respondent: Shri Pitambar Das ORDER Per: N K Billaiya: This is an appeal by the assessee directed against the appellate order of the Commissioner of Income Tax (Appeals)-13, Mumbai, dated 17.11.2009 relating to AY 93-94. 2. The original grounds of appeal filed along with Form 36 on 26.03.2010 were revised by filing amended grounds of appeal dated 25.04.2011. Grounds taken by the Assessee in the revised grounds are as under : Ground I 1] On the facts and in the circumstance of the case and in law, the ld CIT [A]-13 erred in upholding the action of the A.O of levying penalty u/s 271[1][c] of the act , to the extent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on to purchase right shares was to be exercised by the shareholders from 4-9-1992 to 3-10-1992. By virtue of its shareholding the Assessee became entitled to subscribe for shares (right shares) amounting to 265200 equity shares @ Rs. 125 /- per share. Out of these right shares the assessee company had renounced 90450 equity shares for a premium @ 104.50/- per share totalling to Rs. 9452025.00 which has been transferred to Reserve Account in the balance sheet. The remaining rights shares were subscribed by the assessee. The AO was of the view that the aforesaid receipt was taxable as Capital Gain on renunciation of rights shares. The Assessee took a stand before the AO that no part of the aforesaid receipt was taxable because the cost of acquisition of rights shares cannot be determined and therefore it was not possible to compute capital gain. The Assessee relied on the decision of the Hon ble Supreme Court in the case of B.C.Srinivasa Shetty 128 ITR 294 (SC) wherein it was held that if cost of acquisition of a capital asset cannot be determined then it was not possible to compute capital gain and hence the charge u/s.45 of the Act will fail. This argument was rejected by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h represent the last cum-right rate and first exright rate. It was contended the market rates indicated in the letter of the BSE are not much relevance as these rates were the rates as on 10.06.92 and 16.07.92 whereas for determining the diminution in the market of the shares, the relevant dates were 28.06.92 and 29.06.92. However, on these dates the quotations were not available as the stock exchange remained closed from 11.06.92 to 15.07.92. It was contended by the assessee that in the absence of market quotations on the relevant dates, the working of capital gains/loss should be done on the basis of the principles of accountancy and commercial practices. The assessee furnished a detailed working before the CIT[A] which is annexed as annexure to this order. 8. The CIT[A] held as follows: 11. On a consideration of the submissions, I find that in Dhun Kapadia s case, it is held that the diminution in the value of shares held on the date of declaration of rights is the cost for the purposes of calculating capital gains. However, since the BSE has furnished the figures the same will have to be applied, and it is observed that the last cum-right quotation of the shares was Rs. 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dates i.e. cum-right date (on 28- 6-1992) and the ex-right date (on 29-6-2002). At the same time, it would be unfair to the assessee to assume that there was no erosion in the market rate of the shares on account of the right issue. In the peculiar circumstances mentioned above, in our view, the diminution in the market rate of the shares has to be estimated on an appropriate and logical consideration of the factual position. Finally, the Special Bench concluded as follows: We are of the view that it would be fair and reasonable if the ex-right value of the shares is estimated at Rs. 225 and cum-right rate should be taken at Rs. 250. We, therefore, hold that there was diminution to the extent of Rs. 25 per share. The Assessing Officer is directed to recompute the income under head Short-term capital gains on the above basis and after allowing adequate opportunity to the assessee. Ultimately, the short term capital gain on renunciation of equity shares was recomputed at Rs. 26682750.00 following the directions of the Special Bench. 11. With the above mentioned factual matrix, the AO proceeded with the penalty proceedings u/s 271[1][c] of the Act, and accordingly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gly compute the capital gains/loss, if any. The tribunal has only estimated the cum right/ex right rate at Rs.250/- Rs.225/- respectively. The issue has been debatable/differences of opinion are there. The assessee had no mens-rea. Mere addition/disallowances cannot result in penalty being levied automatically. No inaccurate particulars have been filed. 15. The CIT[A] rejected the contention of the assessee and held as follows: On facts and circumstances of the case, it is clear that the assessee had failed to mention in the return filed the details of income which was claimed as exempt. The assessee failed to mention the material facts regarding the taxability of capital gains on renunciation of right share which have been found to be taxable. Besides, even during the assessment proceedings, the assessee could not prove be evidence how the cum rate price of the shares was Rs. 250/- and ex-right price of the shares was Rs.200/-. The assessee therefore furnished inaccurate particulars of his income and could not substantiate the basis on which the said claim of exemption of capital gain on renunciation of right shares was made. The assessee has there fore concealed the particu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the penalty so levied deserves to be confirmed. 18. We have heard the arguments from both sides and perused the orders of the lower authorities. The question to be decided is whether the appellant has disclosed the receipt of share premium on renunciation of its rights and whether disclosure, if any, can be termed as proper disclosure in the light of the provisions of sec 271[1][c] read with the rules framed for filing of income tax returns? 19. At the outset we have to clarify that the decision of the Hon ble Supreme Court in the case of B.C.Srinivasa Shetty (supra) is of no relevance to the facts of the present case as the taxability of capital gain on renunciation of rights shares was never in challenge even in the quantum proceedings in the light of the decision of the Hon ble Supreme Court in the case of Miss Dhun Dadabhoy Kapadia (supra). The case of the Assessee that there was no cost of acquisition and therefore there can be no capital gain computed under Section 48 of the Act and therefore the charge to tax u/s.45 itself fails, is a plea which cannot be accepted in the penalty proceedings. 20. We shall now examine the disclosure made by the Assessee in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the learned counsel for the Assessee before the Tribunal was that if the ex-right price of the shares is assumed at Rs.200/- then there would be capital loss. The Assessee did not claim this loss by way of set off or carry forward and that way the Assessee has been very fair. We do not think that this is a valid argument. Firstly, the Assessee s presumption that the ex-right price was Rs.200 has already found to be not correct by the Tribunal. Secondly, the Assessee, if it had given a note regarding its belief that there was no capital gain on renunciation of shares and that there would in fact be capital loss, then that would have been a proper disclosure. The explanation given by the Assessee is therefore held to be not a bonafide explanation. The mere mention indirectly in the balance sheet under the head Capital Reserve cannot be said to be a proper disclosure . 22. Now let us examine the cases relied upon by the ld. Sr.Counsel appearing for the appellant. In M/s CHEMT vs ACIT CIR 19[2], MUMBAI in ITA No. 7196/MUM/2005 , the facts were that the assessee received compensation on termination of agency agreement amounting to Rs.25659783.00 and treated the same as capital re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stinguishable from the facts of the instant case as can be seen that in the above mentioned case the assessee has explained in its return why it is not treating the compensation received as part of its total income and further the auditors have also clarified this by way of a note. But in the present appeal, neither the clarification was given in the return nor in the computation of income accompanied with the return. As the facts are clearly distinguishable, we do not find any reason to follow the findings of the tribunal in the aforementioned case. 23. The next case relied upon by the Ld Sr.Counsel for the appellant is that of M/s Nayan Builders and Developers Pvt Ltd vs ITO ward 7[1][1] in ITA No.2379/Mum/2009 dated18.03.2011 . The facts of the case were that the as against the additions made in the quantum proceedings, the Assessee preferred appeal before the Hon ble High Court and the Hon ble High Court had framed substantial question of law for consideration. In those circumstances the question before the Tribunal was as to whether penalty could be levied. The Tribunal held that when the High Court admits substantial question of law on an addition, it becomes apparent that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h Court confirming the order of the Tribunal cancelling penalty imposed on an Assessee held as follows : A glance at the provisions of section 271(1)(c) of the Income-tax Act, 1961, suggests that in order to be covered by it, there has to be concealment of the particulars of the income of the assessee. Secondly, the assessee must have furnished inaccurate particulars of his income. The meaning of the word "particulars" used in section 271(1)(c) would embrace the details of the claim made. Where no information given in the return is found to be incorrect or inaccurate, the assessee cannot be held guilty of furnishing inaccurate particulars. In order to expose the assessee to penalty, unless the case is strictly covered by the provision, the penalty provision cannot be invoked. By no stretch of imagination can making an incorrect claim tantamount to furnishing inaccurate particulars. There can be no dispute that everything would depend upon the return filed by the assessee, 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. To attract penalty, the details supp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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