KUSUM LATA Vs. ASSISTANT COMMISSIONER OF INCOME TAX
INCOME TAX APPELLATE TRIBUNAL
ASSISTANT COMMISSIONER OF INCOME TAX
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(1.) THE only ground raised by the assessee in this appeal is against the levy of penalty of Rs.2,50,000 under Section 271(1)(c) of the Income Tax Act.
(2.) AT the time of hearing before us, it is submitted by ld. Counsel that for the year under consideration, the assessee disclosed the income of Rs.7,34,206 under the head 'capital gains'. That the Assessing Officer did not accept the assessee's contention on the ground that the shares were not being traded on the floor of M.P. Stock
Exchange at the relevant time. The Assessing Officer assessed the sum of Rs.7,34,206 as assessee's income from undisclosed sources. That the assessee filed appeal
before the CIT(A) and then finally before the ITAT against the above change of head. That before the ITAT, the assessee contended that on these facts, Board Circular
No. 704 dated 28.4.1995 and 768 dated 24.06.1998 would be applicable. The ITAT agreed that the shares in question were recorded in D -Mat account of the assessee
with NSDL and the entry of sale of shares on 3.7.2003 is recorded therein. However, the ITAT held that the above Board Circular is not applicable because the ITAT was
not satisfied as to when the shares were transferred to D -Mat account. He submitted that the assessee duly disclosed all primary facts regarding purchase and sale of
shares, payment made and received and the profit arising therefrom. That the Assessing Officer instead of assessing the income under the head 'capital gain', assessed
the same as 'income from undisclosed sources'. That merely because the Assessing Officer had changed the head under which the income was offered by the assessee, it
cannot be said that either the assessee concealed the income or furnished inaccurate particulars of income. He therefore submitted that the penalty levied under Section
271(1)(c) and sustained by the CIT(A) may be cancelled. Ld. DR, on the other hand, relied upon the order of Assessing Officer and he pointed out that the CIT(A) has dealt with this issue in detail and has held that the explanation furnished by the assessee was not bona fide and he relied upon various decisions including the decision of
Hon'ble Apex Court which has upheld the penalty levied under Section 271(1)(c). He therefore submitted that the order of the CIT(A) should be sustained.
(3.) WE have carefully considered the arguments of both the sides and perused the material placed before us. It is not in dispute that the assessee disclosed the income from sale of shares as capital gains. The Assessing Officer did not accept the same on the ground that there was no trading on the floor of M.P. Stock Exchange at the
relevant time. The assessee submitted the photocopy of the newspaper 'Hindustan' dated 21.6.2003 so as to show that the market rate of the shares was Rs. 70 on that
day. However, the Assessing Officer did not accept the assessee's contention and assessed the sum of Rs.7,34,206 as income from undisclosed sources. When the
matter reached the ITAT, the assessee relied upon the two Board Circulars i.e. Circular 704 dated 28.4.1995 and Circular No. 768 dated 24.6.1998. The ITAT came to
the conclusion that these Circulars are not applicable. The relevant portion of the decision of ITAT reads as under: -
"6. In the light of these facts noted by us above, now we examine the applicability of two boards circular numbers 704 dated 28.4.95 and N. 768 dated 24.6.98. As per
the circular No. 704 dated 28.4.95, in case the transactions taking place directly between the parties and not though stock exchanges, the date of contract of sale as
declared by the parties shall be treated as the date of transfer provided it is followed up by actual delivery of shares and the transfer deeds. In the present case, nothing
is brought on record regarding actual delivery of shares and transfer deeds by the alleged seller i.e. Diwakar Securities Ltd. We admit that shares in question are treated
to the D -Mat account of the assessee on 3.7.2003 and entries appearing in the copy of D -Mat account of the assessee with NSDL are reproduced below: -
Trx. Date Trs. No. Description Client Client ID Mkt. Type Sett No. Credit Debit Balance
ISIN Code: INE918D01019 BETSY GROWTH -EQ
Beneficiary Opening Balance 0.000
3.7.2003 1464821 By Off. Kkt Hldg IN300888 14528754 10500.00 10500.00 Recpt - Corp
5.7.2003 1473508 To Off Mk HldgCorp IN300888 14528754 10500.000 0.000 Delv - C
Closing Balance 0.000
7. From the above, it can be seen that on 3.7.2003, 10500 shares were traded and such credit is on account of market receipt from the same client ID No. 14528754 and the same were debited on 5.7.2003 and the client ID is same i.e. 14528754. It means form the same account, these shares were transferred to the assessee on
3.7.2003 to the same D -Mat account. These shares were transferred back from the assessee on 5.7.2003. It means that even if the assessee has purchased these shares on 17.6.2002, the delivery must have been received by the assessee in physical form only because there was no existence of the D -Mat account of the assessee
prior to 5.7.2003. If the assessee gets such physical shares transferred into her name and then get it dematerialized, the credit in D -Mat account of the assessee will not
be on account of transfer of shares from a particular client ID as in the present case.
In such case, the credit will be on account of D -Mat request. Since in the present case the shares sold by the assessee for Rs.73,406/ - where on account of these shares
which are received by the assessee in her D -Mat account on 3.7.2003 being transferred from client ID 14528754, we are of the considered opinion that these are not
those shares which revenue expenditure stated to be purchased by the assessee on 17.6.2002 because had it been those shares credited in D -Mat, such credit in D -Mat
account could have been on account of D -Mat request by the assessee and not on account of transfer from a different client ID. The assessee has not explained the
source of credit in D -Mat account on 3.7.2003 being transferred from client ID 14528754 and under these facts, we are of the considered opinion that these board's
circulars relied upon the ld. AR of the assessee are of no help to the assessee because the credit in D -Mat account of the assessee remained unexplained and hence we
feel that no interference is called for in the orders of the authorities below on this issue we confirm the same. These grounds of assessee are rejected. "
From the above, it is evident that the ITAT has admitted that the shares in question were in the D -Mat account of the assessee and on 3.7.2003 (i.e. date of sale of shares), the entry is appearing in the copy of the D -Mat account of the assessee with NSDL. Thus, there was a prima facie evidence of the sale of shares. However, the
ITAT found that the shares were purchased on 17.6.2002. At that time, it must have been taken by the assessee in physical form because there was no D -Mat account
of the assessee at the relevant time. Thus, as per ITAT, the assessee could not explain the source of credit in D -Mat account on 3.7.2003 being transferred from client
ID. It was explained by the ld. Counsel that after the purchase of shares, the same remained with the broker and were transferred to D -Mat account only when the
assessee was to sell those shares. Be that as it may, the fact remains that the assessee had offered the income from purchase and sale of shares may be as capital gain.
The assessee has disclosed the purchase of shares. The purchase of shares is duly recorded in the books of account and has been shown in her Balance Sheet as on
31.03.2003. The sale of the shares has also been disclosed by the assessee and the same is found recorded in the D -Mat account of the assessee. Thus, the assessee has duly disclosed all primary facts i.e. purchase and sale of shares, details of payments made for purchase and payment received for sale of shares. Profit arising from
sale of shares was duly disclosed. On these facts, it cannot be said that the assessee is guilty of concealment of income because the assessee had disclosed the income
as capital gain, and department assessed it under some other head. On these facts, the decision of Hon'ble apex court in the case of CIT vs Reliance Petrochemicals Ltd.
322 ITR 158(S.C.) would be squarely applicable. Considering the totality of the facts and the submissions of both the sides and the decision of Hon'ble apex court in the case of Reliance Petrochemicals Ltd., we are of the opinion that it is not a fit case for levy of penalty under Section 271(1)(c). The same is directed to be deleted.
ITA NO.229/Del/2Q13 - Shri Lokesh Kumar Singhal;
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