Case Law Details
Sanchit Vinod Jain Vs National Faceless Assessment Centre (ITAT Mumbai)
Sanchit Vinod Jain filed an appeal against the order that confirmed the AO’s (Assessing Officer) decision to impose a penalty under section 271(1)(c) of the Income Tax Act, 1961. This penalty, amounting to Rs.11,088, arose due to discrepancies between the assesse’s reported income and the assessed value.
Transaction Scrutiny: The AO observed an investment in the penny stock scrip of M/s Sun Asian during assessment proceedings. Upon further examination, a transaction was detected where the assessee sold 2800 shares of M/s Sun Asian, resulting in a total transaction value of Rs.13,60,884. The assessee clarified this transaction by stating that even though a LTCG of Rs.12,90,844 was earned, they had offered a higher amount (Rs.13,25,000) as per the IDS. However, the AO identified that the full sale amount wasn’t covered under the IDS, thus treating the entire sale proceeds as bogus.
Assessee’s Standpoint: The assessee contested the AO’s claim by arguing that they had genuinely disclosed the LTCG from the penny stock sale under the IDS. They pointed out that the AO only added the difference of Rs.35,884 to the assessed income, which was the discrepancy between the total sale proceeds and the amount disclosed under the IDS.
ITAT Mumbai’s Verdict: Upon evaluating the presented facts, the ITAT Mumbai highlighted that the assessee had rightfully declared the LTCG in their income return. Furthermore, they acknowledged the disclosure of the LTCG under the IDS scheme, which exceeded the actual amount. Given this voluntary disclosure, the tribunal found no reason to charge the assessee with the concealment of material particulars. Consequently, the penalty levied against the assessee, amounting to Rs.35,884, was ruled as untenable.
Conclusion: In this landmark judgment, ITAT Mumbai establishes the sanctity of voluntary disclosures under schemes like the IDS. It sends out a clear message that when taxpayers act in good faith and adhere to amnesty schemes, unnecessary penalties and charges should not be imposed.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
This is an appeal preferred by the assessee against the order of the Ld. Commissioner of Income Tax (Appeals)/NFAC, Delhi dated 21.02.2023 for AY. 2014-15 confirming the action of the AO levying penalty u/s 271(1)(c) of the Income Tax Act, 1961 (hereinafter “the Act”) of Rs.11,088/-.
2. Brief facts regarding penalty levied is that the assesse had filed the return of income of Rs.11,64,790/-. The assessment was completed u/s 143(3) of the Act at an income of Rs.12,00,671/- after making an addition u/s 68 of the Act to the tune of Rs.35,884/-. The addition of Rs.35,884/- was because during the course of assessment proceedings, it was observed by AO that assessee had invested in alleged penny stock scrip of M/s Sun Asian; and has derived income by way of sale of the such scrip of M/s Sun Asian of 2800 shares for a total consideration of Rs.13,60,884/-.On being asked, the assessee submitted that even though he earned Long Term Capital Gain (LTCG) of Rs.12,90,844/- from sale of scrips in question, he has offered more amount of Rs.13,25,000/- for taxation as per the amnesty scheme announced by Government [Income Disclosure Scheme (IDS)] which amount according to assessee was the capital gains claimed as exempt u/s 10(38) by her. On verification by AO, it was found that assessee has offered Rs.13,25,000/- under IDS, but not the full sale consideration of Rs.13,60,884/-. Thus the AO treated the entire sale proceeds pertaining to the penny stock scrip as bogus by holding that the scrips traded by the assessee and exit entry providers are directly linked to assessee [since they purchased the shares from assessee on the stock exchange], which establishes the direct relation with the transaction. Thus, according to AO, he has sufficient cogent tangible proof to show that long term capital gain booked by the assessee in her books were pre-arranged method to evade taxes and launder money. Hence, the difference, amount of Rs.35,884/- (Rs.13,60,884/- minus Rs.13,25,000/-) was added u/s 68 of the Act. Aggrieved by the assessment order, the assessee preferred an appeal before the Ld. CIT(A) who confirmed quantum addition made by AO of Rs.35,884/-. Thereafter, the AO issued notice u/s 271(1)(c) of the Act to the assessee and pursuant thereto, the assessee filed her reply which was not acceptable for the AO who was pleased to levy penalty of Rs.11,088/- for concealment of particulars of income. Aggrieved, the assessee preferred penalty appeal before the Ld. CIT(A) who was pleased to confirm the same. Aggrieved, the assessee is before us.
3. We have heard both the parties and perused the records. We note that the assessee has already offered the Long Term Capital Gain (LTCG) on the alleged penny stock (M/s. Sun Asian) of Rs.12,90,884/- on sale of share of M/s. Sun Asian (wherein assessee offered more amount of Rs.13,25,000/-) under the Income Disclosure Scheme (IDS). The AO taking note of the aforesaid fact has added the difference amount of Rs.35,884/- which was the purchase consideration of the M/s. Sun Asian shares which was not offered in the IDS. And since the total sale proceeds was to the tune of Rs.13,60,884/-, and assessee only offered Rs.13,25,000/- under IDS, the AO in the quantum assessment added Rs.35,884/- u/s 68 of the Act which has been confirmed by Ld. CIT(A); and it is noted that against the action of Ld. CIT(A), the assessee has not preferred an appeal before this Tribunal. Be that as it may, the fact that the assessee has made claim of LTCG in the return of income filed by her wherein she has made the claim u/s 10(38) of the Act in respect of earning of LTCG regarding the share transaction of M/s. Sun Asian is not disputed. It is also un-disputed that assessee has claimed LTCG of Rs.12,90,884/- which has been settled in the IDS scheme by offering Rs.13,25,000/-. However, the AO has added the purchase consideration of this scrip of Rs.35,884/- in the quantum assessment, which has already been shown by the assessee in the return of income filed by assessee, so the question of concealment of material particulars cannot be charged/faulted against the assessee; and so the charge/fault levied against assessee fails; and resultant penalty fastened on the assessee of Rs.35,884/- is unsustainable. Therefore, we are inclined to delete the penalty.
4. In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on this 24/07/2022.
