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TMI Blog2019 (4) TMI 1666X X X X Extracts X X X X X X X X Extracts X X X X ..... CA For the Revenue : Smt.Zeenia Handa, Sr.DR ORDER This appeal filed by the assessee is directed against the order dated 23.10.2018 of the Commissioner of Income Tax (Appeals)-3, Ludhiana (in short CIT(A)). 2. The only grievance of the assessee in this appeal relates to sustenance of penalty of ₹ 12,50,630/- levied by the A.O. u/s 271(1)(c) of the Income Tax Act, 1961 (hereinafter referred to as Act ). 3. The facts of the case, in brief, are that the assessee originally filed return of income on 4.11.2014 through e filing module, declaring net taxable income of ₹ 12,81,720/-. Later on, the case was selected for scrutiny under CASS with the reason suspicious Long Term Capital Gain . The A.O. during the course of assessment proceedings asked the assessee to confirm as to whether she has undertaken any sale or purchase during the year under consideration and if yes, to furnish the following details: (a) Details of income/loss derived from these transactions and its treatment in the return of income. In case of income, please intimate detail of its utilization indicating the n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Capital Gain was to be provided alongwith with the break-up of individual beneficiaries and this data was essential to decide which penny stock or companies to use for the job and which beneficiaries to buy how many shares. The A.O. was of the view that a well planned transactions had been undertaken in order to laundering of money without paying taxes and that the assessee had no option but to surrender the amount of bogus Long Term Capital Gain, claimed as exempt income u/s 10(38) of the Act in the return of income. He also observed that the assessee was well aware of the facts that the transactions of shares had been manipulated for bogus Long Term Capital Gain and that at the time of assessment proceedings the matter was discussed with the assessee with regard to the modus operandi adopted for gaining bogus Long Term Capital Gain. He admitted that the assessee had paid taxes before imposition of the penalty but was of the view that the same was due to the departmental (Investigation Wing) hard work, which unearthed the said modus operandi to earn bogus Long Term Capital Gain. The A.O. held that the assessee furnished inaccurate particulars of income amounting to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, challenging the Legitimacy of the penalty imposed in the assessment order, as under: In this connection, it is respectfully submitted that, no penalty would be Leviable, as the appellant had not furnished inaccurate particulars of income. The appellant surrendered an amount of ₹ 37,00,000/- from Long-Term Capital Gains[shown as Income from Other Sources in a revised calculation for computation of income before the Deputy Director of Income-Tax (Investigation)- II, Ludhiana. Moreover, in the instant case, there is no question of levy of penalty, since, the appellant, voluntarily surrendered an amount of ₹ 37,00,000/-earned as Long-Term Capital Gains shown under the head Income from Other Sources before any further investigation by the Investigation wing. Referenced drawn to the decision of the Hon'ble High Court of Punjab Haryanain the case of Rajiv Garg Vs. Commissioner of Income-Tax, Karnal [2009] 313 ITR 256 (Punjab Haryana), which has held as under: The revised return filed by the assessee was accompanied by a note in which he had submitted that he had surrendered the entire amount of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evised computation of income before the Deputy Director of Income-Tax (Investigation), Ludhiana, and, moreover, the disclosed amount was found to be accepted as such by the Ld. Assessing Officer in its order dated 04.08.2016 passed U/s 143(3) of the Income-Tax Act, 1961. Furthermore, during the course of assessment proceedings for the relevant assessment year under consideration, the explanation furnished by the appellant regarding the calculation of Long-Term Capital Gains was, neither, turned down, nor, was held to be malafide. The Ld. Assessing Officer had failed to point out any discrepancy in the explanation provided by the appellant, and, had proceeded to assess the . income in the hands of the appellant on the basis of surrender made by the appellant. Therefore, there was no merit in levying penalty U/s 271(l)(c) of the Income-Tax Act, 1961. Moreover, it is submitted that the transaction of Purchase and Sale of Equity Shares was a genuine one. The sales of the securities took place through a registered broker on the recognised stock exchange in accordance with the prescribed regulatory procedures, rules and, applicable laws. The transactions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 271(1) authorizes imposition of penalty when the Assessing Officer is satisfied that the assessee has either concealed the particulars of his income; or furnished inaccurate particulars of such income. It was not the case of furnishing inaccurate particulars of income, as in the income-tax return, particulars of income had been duly furnished and the surrendered amount of income was duly reflected in the income-tax return. The question was whether the particulars of income were concealed by the assessee or not. It would depend upon the issue as to whether concealment had reference to the income-tax return filed by the assessee, viz., whether concealment was to be found in the income-tax return. The revenue relying upon the expression 'in the course of any proceedings under this Act' occurring in sub-section (1) of section 271 contended that even during survey -when it was found that the assessee had concealed the particular of his income, it would amount concealment in the course of 'any proceedings'. Such contention could not be accepted. The words 'in the course of any proceedings u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation and Infotech (P.) Ltd. reported at [2011] 336 ITR 257 (Punjab Haryana) has held as under: In every case, where surrender is made, inference of concealment of income cannot be drawn under section 58 of Evidence Act. III. The Hon'ble High Court of Punjab and Haryana in the case of Commissioner of Income Tax-II, Ludhiana Vs. Rajnish Nath Aggarwal reported at [2008] 219 CTR 590 (Punjab Haryana) has laid as under: From the judicial pronouncements, it is crystal clear , hat the department has to prove mens rea before levying penalty under section 211(1) (c) and it cannot be made out that the assessee has concealed income or furnished inaccurate particulars merely because he has surrendered certain amounts to avoid litigation and to buy peace of mind. The High Court, in case of CIT v. Suraj Bhan [2007] 159 Taxman 26 (Punjab Haryana), held that penalty cancan be imposed merely on account of higher income having been,, subsequently, declared. Similarly, the Apex Court, in the case of CIT v. Suresh Chandra Mittal [2001] 251 ITR 9/119 Taxman 433, observed that when an assessee files a revised return showing higher and gives ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reply did not submit any written submission with regard to the taxability of this share transaction with M/s Turbo Tech Engineering Limited, upon which, the assessee had claimed Long Term Capital Gain as exempted. The Ld.CIT(A) also observed that meanwhile the assessee received notice from the Investigation Wing and voluntarily surrendered Long Term Capital Gain originally claimed as exempt u/s 10(38) of the Act, after having the knowledge that the Department was already in possession of the data, wherein it was clear that the assessee had taken entry from a penny stock company; namely M/s Turbo Tech Engineering Limited to bring her unaccounted money into books of account and that the first notice u/s 143(2) for selection of scrutiny had already been served on the assessee on 19.9.2015. Thereafter the surrender was made by the assessee n 12.10.2015 before the Investigation Wing. Therefore, the assessee had not surrendered the Long Term Capital Gain voluntarily, she came forward only when was enquired by the Investigation Department, Ludhiana. The Ld.CIT(A) sustained the penalty levied by the A.O. u/s 271(1)(c) of the Act amounting to ₹ 12,57,630 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sh Aggarwal, Shri Amit Dalmia (designated director of M/s Intellect stock broking Ltd), at the time of search/ surveys proceedings in their respective cases, they admitted that they have provided accommodation entities of long-term capital gain/loss by prearranging trading in shares. The investigation wing had also enquired M/s Calcutta stock exchange as a broker and as a whole who had pleaded to be involving in such bogus penny stocks which included trading in M/S Turbo Tech Engineering Limited amounting to ₹ 1,79,38,678/- Further in the case of M/SGateway financial services Ltd., who had also disclosed ₹ 25 crore on account of trading in such penny stocks also admitted to be trading in M/S Turbo Tech engineering Ltd amounting to ₹ 242,00,37,441/-. Similar was the case with M/S Intellect stock broking Ltd. Accordingly the Assessing Officer has in detail mentioned that during various search/ survey proceedings, against penny stock companies different directors of different companies and brokers had admitted to be providing accommodation entry through various concerns including the M/S Turbo Tech Engineering Limited . in the penalty order, the Assessing Officer has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,s claim for voluntary surrender before the investigation wing cannot prevent the assessee from the penalty action as that notice dated 18/09/2015 under section 143(2) for selection of scrutiny had already been served to the assessee on 19/09/2015, thereafter the surrender was made by the assessee on 12/10/2015 before the investigation wing. Therefore it is undoubted fact that the assessee had not surrendered the long term capital gain voluntarily, but when the assessee was enquire by the investigation Department Ludhiana then only the assessee came forward with the surrender. Accordingly this cannot be termed as voluntary surrender. . .. 4.7 Accordingly as discussed, Going by the above facts it is evident that going by the duty of probability, the Assessing Officer has rightly relied upon the decisions is of Hon. Apex Court in the cases of Durga Parsad More 82 ITR 540 and CIT Vs. Sumati Dayal 214 ITR 801. It has been held by various High Courts in large number of cases [Vadilal Ichhachand v. CIT 32 ITR 569 (Bom), Calicut Trading Co. v. CIT, 178 ITR 430 (Ker), Special Leave petition dismissed by Sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prove the mens rea of a quasi-criminal offence. But it was because of the view taken in this and other judgments that the Explanation to section 271 was added. By reason of the addition of that Explanation, the view taken in this case can no longer be said to be applicable. Accordingly, in this case, even though the assessee had surrendered the income, levy of penalty was upheld by the Hon'ble Supreme Court. 8. Now the assessee is in appeal. The Ld. counsel for assessee reiterated the submissions made before the authorities below and further submitted that the assessee suo moto surrendered the amount before any omission on the part of the assessee was pointed out either by the A.O. or the Investigation Wing. It was submitted that the assessee filed return of income on 4.11.2014 and the A.O. issued notice u/s 143(2) of the Act on 18.9.201`5 but no information was called for in the said notice. As such, no information was filed by the assessee. However, a Power of Attorney was filed on 5.10.2015 in compliance to the notice issued on 18.9.2015. Thereafter the assessee herself vide letter dated 12.10.2015 submitted to the D.D.I.T., Ludhiana, surre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pon by the Ld. counsel for assessee, it was submitted that in the said case, the enquiry made by the Investigation Wing was not communicated to the assessee but in the present case it was in the knowledge of the Department that the assessee had not disclosed true and correct income, so there was concealment of the income by the assessee, the penalty was rightly levied by the A.O. u/s 271(1)(c) of the Act and the Ld.CIT(A) was fully justified in sustaining the same. Reliance was also placed on the following decision: Prempal Gandhi Vs. CIT, ITA No.335 ITR 23 (P H). 9. I have considered the submissions of both the parties and perused the material available on record. In the present case, it is noticed that the Investigation Wing of the Department summoned the assessee u/s 131(1A) of the Act vide summon dated 29.9.2015, the assessee was asked to attend on 12.10.2015 and produce the following documents: - Personal appearance. - Brief Note on business activities carried out by you. - Photocopies of copies of ITRs, Computation chart and audited balance sheet for the A.Y. 2011-12 to A.Y. 201516. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cs had escaped assessment. On the contrary, the assessee herself surrendered the amount of ₹ 37 lacs and paid the due taxes interest on the said surrendered income on 12.10.2015 much before the discrepancy, if any, was pointed out by any of the departmental authorities. On a similar issue, the Hon'ble Jurisdiction; High Court in the case of CIT Vs. Rajiv Garg (2009) 313 ITR 256 (supra) held as under: that the Tribunal had recorded a pure finding of fact to the effect that the Revenue had not placed on record any material or evidence to discharge its burden of proving concealment. No such finding was recorded in the assessment order. The Tribunal further held that the additional income so offered by the assessee was done in good faith and to buy peace. The burden shifts to the assessee only if he fails to offer any explanation for the undisclosed income or offers an explanation which is found to be false by assessing authority. The revised return of income was filed in which the entire income was surrendered with an explanation. The revised return was regularized by the Revenue. The assessing authority had failed to take any objection that the declaratio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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