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TMI Blog2022 (12) TMI 336X X X X Extracts X X X X X X X X Extracts X X X X ..... 2000 (2) TMI 10 - SUPREME COURT] that the scheme of the Act is to levy and collect tax in accordance with the provisions of the Act and this task is entrusted to the Revenue. If due to an erroneous order of the AO, the Revenue is losing tax lawfully payable by a person, it will certainly be prejudicial to the interest of Revenue. In the case before us the Ld. AO has collected tax and interest relatable to the impugned addition. Assessment and penalty proceedings are distinct and separate. To our mind, when the Ld. AO has dropped the penalty proceedings after due consideration of facts and circumstances of the case, the direction of the Ld. Pr. CIT to consider levying penalty under section 271(1)(c) afresh was not in order. We are of the view that in the case before us the twin conditions to assume jurisdiction suo moto by the Ld. Pr. CIT, namely that the order of the Ld. AO is erroneous in so far as it is prejudicial to the interest of Revenue are not satisfied. In CIT vs. Subhash Kumar Jain [ 2010 (9) TMI 772 - PUNJAB AND HARYANA HIGH COURT] held that where failure to levy penalty was because the assessee surrendered an income, subject to no penalty being levied, there can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... abhi Chemicals and Investment Ltd. is not a genuine company and a penny stock company the trading of which was suspended by the SEBI. 5. In response the assessee contended that the transactions made by him with the said company were genuine and all documentary evidence has been filed during assessment proceedings. However, to purchase peace of mind and to avoid any litigation, the assessee vide letter dated 27.11.2015 surrendered the capital gain amount of Rs. 17,46,906/-. 6. The Ld. AO completed the assessment on total income of Rs. 21,58,206/- including therein Rs. 17,46,906/-, the amount of capital gain surrendered, on 05.12.2017 under section 143(3) of the Act and initiated penalty proceedings under section 271(1)(c) of the Act. 7. The Ld. AO issued penalty notice dated 05.12.2017 under section 271(1)(c) of the Act for concealment of income and furnishing inaccurate particulars thereof. 8. In response the assessee filed a detailed reply on 25.01.2018 which is reproduced below:- To, The Income Tax Officer Ward-2(1) Ghaziabad In the matter of Sh. Sandeep Gupta Prop. M/s. Sandeep Traders 152, Chanderpuri Ghaziabad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epository Participant M/s. Motilal Oswal Securities Ltd. and the shares were sold through Bombay Stock Exchange which is a recognized stock exchange. The contract notes and ledger account issued by the broker were also filed during the assessment proceedings. The fact that the equity shares sold on the recognized stock exchange were subject to levy of security transaction tax upon sale of shares and the shares were held for more than 365 days is uncontroverted and hence accepted by the department. Further the claim u/s 10(38) of the Act being made by assessee was also a valid claim as the conditions stipulated in section 10(38) were duly meet by the assessee and the same was also accepted by the department as no adverse inference was made in respect of same. The details of capital gain were duly disclosed in the Income Tax Return and there was nowhere any concealment of income on the part of the assessee. However at a later stage assessee came to know that certain investigations has been undertaken by the SEBI and Income Tax Department according to which it has been ascertained that the company M/s. Surabhi Chemicals Investment Ltd. was engaged in some unwanted / wrong activ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld the finding of the Hon ble High Court and Tribunal wherein it was observed that when the department had not discharged its burden of proving concealment and had simply rested its condusion on the act of voluntary surrender done by the assessee in good faith and that penalty could not be levied. [(2001) 119 Taxman 433(sc)l. (e) In the case of Commissioner of Income Tax v. Nath Bross. Exim International Ltd. (288 ITR 670), Hon ble High Court of Delhi observed that. Where assessee had claimed dividend income as its business income and according to assessee, it was entitled to a deduction under clause (bba) of Explanation to section 80HHC (4C'), merely because assessing officer held that assessee s claim was wrong, penalty for concealment of income could not be imposed . (f) Hon ble High Court of Bombay in the case of Director of Income Tax (IT)-I, Mumbai v. Administrator of the Estate of Late Mr, E.F. Dinshaw (35taxmann.com 95) (2013) has observed that penalty for concealment of income cannot be levied for claim being rejected by the revenue, where full details were disclosed in return. (g) Hon ble High Court of Allahabad in the case of J.K. Synthetics Ltd, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nipulated by syndicate of operators. As per the details available on the website of the Securities and Exchange Board of India (hereinafter referred to as SEBI ), it conducted an investigation into the trading activities in the scrip of Surabhi Chemicals Investments Ltd. during the period 01.08.2012 to 06.01.2015 for possible violation and ultimately suspended the trading in the scrip on 07.01.2015. It is also difficult to believe the assessee s version that he only came to know during assessment proceedings that the share of the company in which he had booked LTCG was a penny stock despite knowing that the percentage gain in the stock was abnormally high compared to other stocks. Thus, it cannot be denied that the assesee used the tool of penny stock as one-off investment to claim bogus exemption u/s 10(38) of the Act. The AO had rightly initiated penalty u/s 271(1)(c) of the Act while finalizing the assessment order as the assessee had filed inaccurate particulars in his return and by claiming false exemption on LTCG had also concealed the true income on which he agreed to pay tax only after being confronted with the fact that the LTCG claim was bogus. Thus, the AO had initiat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before the Tribunal challenging the order of the Ld. Pr. CIT on the following grounds:- 1.(i) That on facts and circumstances of the case, the Id, CIT has erred in assuming jurisdiction u/s 263 of the Act even though the order passed by the learned AO u s. I43(3) of the Act is neither erroneous nor prejudicial to the interest of the revenue. (ii) That the show cause notice issued u/s 263 is illegal and without jurisdiction as the same has been issued in respect of assessment proceedings whereas the subject matter of revisionary proceedings as per show cause notice relates to penalty proceedings u/s 271(l)(c) of the I.T. Act, 1961. (iii) That the show cause notice u/s 263 being in respect of unconnected proceedings, the same is invalid and bad in law. 2(i) That on facts and circumstances of the case, the id. CIT failed to appreciate that the order passed by the learned A.O. u/s 271(l)(c) dropping the penalty proceedings was neither erroneous nor prejudicial to the interest of the revenue therefore, the revision order passed by the learned CIT u/s 263 is bad in law. (ii) That the assessing officer having dropped the penalty proceedings u/s 271(1X0 vide speaki ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted by the Finance Act, 2015 w.e.f 01.06.2015 following which the Ld. Pr. CIT assumed jurisdiction under section 263 of the Act in the case. He argued that there was complete non application of mind by the Ld. AO in dropping the penalty proceedings. He however, conceded that in this case the Ld. AO has himself applied the provisions of section 115BBE of the Act. Hence, only penalty part of the impugned order is to be considered. In rejoinder the Ld. AR refuted the allegation of non application of mind by the Ld. AO for dropping the penalty proceedings. 15. We have given careful thought to the rival submission and perused the material on records. Perusal of the impugned order under section 263 of the Act would reveal that the primary reason for assuming jurisdiction under section 263 by the Ld. Pr. CIT is that while dropping the penalty proceedings the Ld. AO has not appreciated the ratio of the decision of the Hon ble Supreme Court in the case of MAK Data Pvt. Ltd. vs. CIT 358 ITR 593 (SC). We have gone through the decision (supra). In that case the Hon ble Supreme Court observed that offer of surrender was made in view of detection made by the Assessing Officer in search conduc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee has been brushed aside by the Ld. Pr. CIT merely on the basis of surmises and conjectures. We, therefore, hold that assumption of jurisdiction under section 263 of the Act by the Ld. Pr. CIT on the ground that while dropping the penalty, the Ld. AO did not appreciate the decision of the Hon ble Supreme Court in MAK data Pvt. Ltd. (supra) is not sustainable. 17. The next ground taken by the Ld. Pr. CIT for assumption of jurisdiction under section 263 of the Act is that there is failure on the part of the Ld. AO to make proper enquiries before dropping the penalty proceedings. This, in fact is contrary to the material available in the records. In response to show cause notice dated 05.12.2017, the assessee submitted detailed reply on 25.01.2018 running into four pages which has earlier been reproduced and duly acknowledged by the Ld. AO in the ordersheet entry dated 23.02.2018. It is also evident from the notesheet that the Ld. AO considered the facts of the case as also the written submission furnished by the assessee and then he arrived at his decision to drop the penalty proceedings initiated under section 271(1)(c) of the Act. As per the Ld. Pr. CIT the noting of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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