9911796707
TMI Blog2012 (9) TMI 967X X X X Extracts X X X X X X X X Extracts X X X X ..... Act. 2. The relevant facts 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. Theref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rms of an open offer and 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of AO that assessee 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sale. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court 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 ..... 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 197,708,543 197,708,543 Less: short term capital loss - (6,944,989) Net short term capital gains chargeable to tax at the rate of 30 percent - 190,763,554 Total tax liability @ 33.99 per cent - 64,840,532 Advance t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ven 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 itself, will not amount to furnishing inaccurate particulars regarding income of the assessee and such claim made in the return cannot amount to furnishing inaccurate particulars. 12.1 In the case before us, we observe that assessee placed all the facts relating to its income in the return filed and also furnished requisite information in the return in respect of its income. AO has initiated penalty proceedings for the reason that while calculating liability of tax, assessee applied rate of tax @ 10% in stead of rate of tax @ 30% as applicable, as assessee had not, admittedly, paid STT on the share transactions. AO has not disputed that total capital gain as disclosed by the assessee was found to be correct and assessed. We are of the considered view that such a mistake to state lower rate of tax applicable in the return of income cannot constitute furnishing inaccurate particulars of income particularly when assessee has furnished all the relevant materials in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 applicable to the year under consideration. Such requirement of the column in the return has been inserted by amendment in return form, ITR-6, at page 17, "Schedule CG capital gain" S. N. 3(d) which is applicable from assessment year 200 7-08. In the case of Reliance Pretro products Ltd. (supra) the Hon'ble Supreme Court held that where there is no finding that any details supplied by the assessee in its return are found to be incorrect or erroneous or false there is no question of inviting the penalty under section 271(1)(c). A mere making of a claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such a claim made in the return cannot amount to furnishing inaccurate particulars. The case of the assessec under consideration is squarely covered by the above judgment of the Apex Court The assessee demonstrated that their claim was bona fide claim. In the light of above discu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment 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 Hon'ble jurisdictional High Court held that by making an incorrect claim in law cannot tantamount to furnishing inaccurate particulars. Simply in the case before us, assessee furnished all the requisite details in the return save and except wrongly applied charging of rate of tax on short term capital gains disclosed by the assessee. Therefore, we are of the considered view that applying wrong rate of tax at which short term capital gains disclosed by the assessee does not amount to furnishing inaccurate particulars of income and that too when assessee rectified the said mistake suo moto before assessment proceedings were completed and stated that said mistake had occurred inadvertently while computing the income. Not only this, the Hon'ble Apex Court by its order dated 25.9.2012 in Civil Appeal No.6924/2012(arising out of S.L.P.(C) No.10700 of 2009) in the case of Price Waterhouse Coopers Pvt Ltd. vs. CIT, has held that when there is a bonafide and inadve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 that assessee should have been careful cannot be doubted, but the absence of due care, in a case such as the present, does not mean that assessee is guilty of either furnishing inaccurate particulars or attempting to conceal its income. The Apex Court held that on the facts of the case, the imposition of penalty under section 271(1)(c) of the Act on the assessee is not justified. The assesse had committed an inadvertent and bonafide error and had not intended to or attempted to either conceal its income or furnish inaccurate particulars. Considering above case and facts of the case before us, we are of the considered view that above decision of Hon'ble Apex Court squarely applies to the facts of the case. Therefore, we hold that assessee has committed an inadvertent error in the return of income to charge the tax @ 10% in stead of applicable rate of tax @ 30% on short term capital gains shown by the assessee as assessee has not paid STT on share transactions. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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