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TMI Blog2018 (9) TMI 1853X X X X Extracts X X X X X X X X Extracts X X X X ..... t, 1961 ('the Act' for short) amounting to Rs. 35,00,000/-. 3. The grounds of appeal raised in this regard reads as under: 1. In the facts & circumstances of the case and in law, the Ld. CIT(A) has erred in upholding the penalty by not appreciating the legal infirmities wherein the AO, did not clearly specify, in the notice u/s 274 and show cause notice, the exact limb on which penalty proceeding was initiated. 2. In the facts & circumstances of the case and in law, the Ld. CIT(A) has erred by ignoring that the Long term capital gains of Rs. 1,16,59,967/- was shown in the return filed and taxed at special rate of 10% whereas the AO taxed the same @ 30% as undisclosed, hence no change in income was found and it was only an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0% on this income. The Assessing Officer has further noted that on the basis of detailed enquiries conducted at the time of assessment proceedings, it was established that shares related to M/s Eltrol Ltd. was a Penny Stock and the price of the penny stock was ramped up by circular trading involving operators for price raging. That there was a manipulation of purchase date for completion of 12 months for making transactions eligible for long term capital gains. The Assessing Officer has further observed that the findings given in the assessment order has been confirmed by the ITAT. Accordingly, the Assessing Officer found that the assessee had furnished inaccurate particulars of her income in the return. Upon being satisfied that the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n account of preponderance of the probability that the assessee's claim has been rejected. Hence, the ld. Counsel of the assessee submitted that there is no case of the assessee furnishing inaccurate particulars of income or the concealment of income. In this regard, he referred to the ITAT decision in the quantum addition where the ITAT had observed that "In our view, the genuineness of the transactions is far from proved, if not actually disproved". Referring to this finding of the ITAT, the ld. Counsel of the assessee referred to the decision of the Hon'ble Bombay High Court in the case of CIT vs. Upendra vs. Mithani (in Appeal No.1860 of 2009 vide order dated 05.08.2009), the Hon'ble jurisdictional High Court has held that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of head of income from capital gains, the income from other sources, penalty u/s. 271(1)(c) is not leviable. Furthermore, the ld. Counsel of the assessee submitted that the assumption of jurisdiction for the levy of penalty by the A.O. in this case is also bad in law inasmuch as the A.O. did not clearly specify in the notice u/s. 274 and show cause notice the exact limb on which the penalty proceeding was initiated. In this regard, the ld. Counsel of the assessee placed reliance upon the decision of the Hon'ble Karnataka High Court in the case of M/s. SSA's Emerald Meadows (in ITA No. 380 of 2015 vide order dated 23.11.2015) wherein the decision of the same court in the case of CIT vs. Manjunatha Cotton and Ginning Factory [2013] 359 ITR 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nderance of probability, the A.O. rejected the claim of the long term capital gain and charged the same @ 30% as income from other sources as undisclosed income. In this regard, the submission of the assessee is that all the documents in support of the genuineness of the transactions were submitted. The assessee has duly offered the gain to tax. Hence, it is the assessee's submission that there is no concealment of income or furnishing of inaccurate particulars of income. In this regard, we find it gainful to refer to the decision of the ITAT in the quantum addition wherein while confirming, the ITAT had held that the genuineness of the transaction was not proved if not actually disproved. 11. From the above, it is clear that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he penalty u/s. 271(1)(c) cannot be sustained as firstly the addition is based upon the theory of preponderance of probability and defect in the documentation for claim of long term capital gain, per se have not been found to be defective. The ITAT in fact in the quantum addition has held that the genuineness of the transaction is far from proved if not actually disproved. Hence, on the touch stone of the Hon'ble jurisdictional High Court decision in the case of Upendra vs. Mithani (supra) penalty u/s. 271(1)(c) is not leviable. Furthermore, as held by the Hon'ble Bombay High Court in the case of Bennett Coleman & Co. Ltd. (supra) mere change of head of income from capital gains, income from other sources cannot lead to levy of pena ..... X X X X Extracts X X X X X X X X Extracts X X X X
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