No penalty for mere change in head of income

We are of the considered opinion that the transaction in respect of the share trading was duly disclosed at the time of filing of the return. Some of the income was shown as long-tern capital gain and part of the income was also shown as speculative business in shares/scripts trading. As per the annexures, the assessee has disclosed the names of the companies, description of the shares, date of transfer of shares, sale consideration, cost of acquisition and the index cost.

On the basis of the said calculation, the assessee has considered that the gain was long-term capital gain. However, that explanation of the assessee was not found satisfactory by the AO, therefore treated the same as speculative business. But the fact remained that there was no allegation of concealment of facts or dealing in sham transaction. Even this fact has also not been denied that some part of the trading in scripts/shares was disclosed by the assessee itself as speculative transaction. Meaning thereby the addition was made merely because of change in the head of income. On this issue, there are several decisions in favor of the assessee, as cited supra, wherein it was held that in the absence of any inaccuracy in the particulars of income or concealment of facts the penalty must not be levied. Respectfully following these decisions, we hereby reverse the findings of the authorities below and direct to delete the penalty.

ITAT “D” BENCH, AHMEDABAD

BEFORE SHRI MUKUL Kr.SHRAWAT, JUDICIAL MEMBER And
SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER

I.T.A. No. 2768/Ahd/2012
Assessment Year: 2008-09

M/s.Crown Tradelink Pvt. Ltd.

Vs.

The Asst. CIT (OSD)

Date of Hearing : 31/01/13
Date of Pronouncement: 31/01/13

ORDER

PER SHRI MUKUL Kr. SHRAWAT, JUDICIAL MEMBER:

This is an appeal filed by the Assessee arising from the order of ld.CIT(A)-XXI, Ahmedabad dated 23/10/2012 passed for A.Y. 2008-09 against the confirmation of penalty levied u/s.271(1)(c) of the IT Act of Rs. 1,63,093/-.

2. Facts in brief as emerged from the corresponding penalty order passed u/s.271(1)(c) of the IT Act dated 28/04/2011 and the assessment order made u/s.143(3) of the Act dated 31/10/2010 were that the assessee- company is in the business of trading of shares and securities. The assessee has furnished the return declaring loss of Rs.(-)18,72,866/-. The assessee had disclosed long-term capital loss at Rs.(-)10,56,605/-. This loss was disclosed after taking the benefit of indexation. Without claim of indexation benefit, the loss as per AO was at Rs. 5,61,019/-. Therefore, loss on sale of shares was treated as speculation business. Further, in respect of trading of scripts; loss from speculative business was assessed by the AO. Finally, the assessment was competed by determining a total loss at Rs.(-) 12,56,620/- after treating the long-term capital gain and trading in scripts as speculative business loss. On account of the impugned addition, the AO has levied a penalty of Rs. 1,63,093/-. When the matter was carried before the First Appellate Authority, the ld.CIT(A) has held that the appellant had furnished inaccurate particulars of income, therefore the AO had correctly imposed the penalty, relevant portion is reproduced below:-

“4.1.3. I have carefully gone through the penalty order u/s.271(1)(c) of the I.T.Act passed by the AO and the submissions made by the appellant in this regard. The AO has pointed out that no further appeal against the order u/s.143(3) of the Act has been preferred by the appellant. The AO has elaborately brought out the fact that the appellant has furnished inaccurate particulars of its income on which additional taxes were levied vide order u/s.143(3) of the Act. Regarding argument of the appellant that mens-rea was absent in his case and his case was not that of willful concealment, it may be pointed out that mens-rea is no longer essential for imposition of penalty u/s.271(1)(c) of the I. T.Act. It is also noticeable that appellant’s case is outside the ambit of CIT Vs. Reliance Petro Products Pvt.Ltd. (2010) (322 ITR 158) (SC), as this decision of the Hon ’ble Apex Court deals with statutory deductions. Considerign the facts and circumstances of the case and the discussion as above, I am of the view that the AO has correctly imposed the penalty of Rs.1,63,093/- u/s.271(1)(c) of the I. T.Act. The same is accordingly confirmed.”

3. On the date of hearing from the side of the assessee, ld.AR Ms.Arti N.Shah appeared and from the side of the Revenue ld.Sr.DR Mr.T.Shankar appeared who has placed reliance on the decision of ITAT “B” Bench Ahmedabad in ITA Nos.951 & 952/Ahd/2010 for A.Ys.2003- 04 & 2004-05 titled as “The ACIT vs. Kevin Process Technologies Pvt.Ltd.” order dated 14/12/2012. Ld.AR has informed that the complete information bout the share transactions was duly placed on record by filing return of income along with the annexures disclosing the facts and figures of the share transaction. The ld.AR Ms.Arthi N.Shah has drawn our attention on the return filed and the annexures of the said return. She has contested that there was change in the head of income but there was no allegation of sham transaction. For this legal proposition, she placed reliance on the following decisions:-(i) Pradeep Agarwal Joint Venture vs. ITO [39 DTR (Del)(Trib) 202](ii)CIT v. Shyam Tex International Ltd. [43 DTR (Del) 19]

(iii) Pfizer Pharmaceuticals Ltd. Vs. DCIT [49 DTR (Mum)(Tri) 16]

4. Having heard the submissions of both the sides and on due consideration of the facts of the case, we are of the considered opinion that the transaction in respect of the share trading was duly disclosed at the time of filing of the return. Some of the income was shown as long-tern capital gain and part of the income was also shown as speculative business in shares/scripts trading. As per the annexures, the assessee has disclosed the names of the companies, description of the shares, date of transfer of shares, sale consideration, cost of acquisition and the index cost. On the basis of the said calculation, the assessee has considered that the gain was long-term capital gain. However, that explanation of the assessee was not found satisfactory by the AO, therefore treated the same as speculative business. But the fact remained that there was no allegation of concealment of facts or dealing in sham transaction. Even this fact has also not been denied that some part of the trading in scripts/shares was disclosed by the assessee itself as speculative transaction. Meaning thereby the addition was made merely because of change in the head of income. On this issue, there are several decisions in favor of the assessee, as cited supra, wherein it was held that in the absence of any inaccuracy in the particulars of income or concealment of facts the penalty must not be levied. Respectfully following these decisions, we hereby reverse the findings of the authorities below and direct to delete the penalty.