TaxTMI 
TaxTMI 
2012 (8) TMI 61
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....tal loss of Rs. 8,64,15,538/-, which subsequently was assessed as LTCG of Rs. 11,03,15,638/- and Short-term capital gain (STCG) of Rs. 2.39 crores. 2. The facts leading to levy of penalty are that the return was field on 24.11.2006 declaring total income of Rs. 58,43,535/-. Assessment u/s 143(3) was completed on 26.12.2006 at total income of Rs. 38,50,75,969/-. In this assessment the gain in respect of sale of 23,90,000 shares of Hotel Queen Road Pvt. Ltd. ("HQR" for short) was enhanced by adopting the sale consideration at Rs. 185.68 per share in place of the actual sale price of Rs. 20/- share. The gain was held to be STCG against the claim made in the course of assessment proceedings that it was LTCG. The result was that this gain was not allowed to be set off against Long-term capital loss incurred in respect of another sale of 898181 shares of HQR whose sale consideration was also adopted at Rs. 185.68 per share. Further the assessee had claimed deduction of interest amounting to Rs. 20,03,822/- against interest income. This deduction was also not allowed. Both these matters were subject matter of appeal before the ITAT. T....
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....show that the shares were in existence prior to 31.5.1998. Even if the money belonging to the assessee was appropriated to share deposit account of the company that by itself will not amount to allotment of shares. The reason being that the shares can be issued only after company passes a resolution deciding to allot shares. The assessee could not establish that the shares were allotted to the earlier than 31.5.1988. Therefore, its finding that the date of issue of share certificates was the date of allotment was upheld by the Hon'ble Court. As in that case, in this also there is no evidence regarding the holding of board meeting to consider allotment of shares to the assessee in terms of its conditional offer dated 11.11.2003. The computation of gain as short-term capital gains by the assessee. In the return of income by assessee itself negates the content of letter dated 4.4.2004. We are of the view that such a computation was in accordance with the judgment in the case of S.N. Zubin George (supra). We may add that the assessee has not produced copies of record from the office of Registrar regarding allotment of shares and shareholders' register showing the dates on which these s....
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....expenditure in computing interest income taxable under the residuary head." 2.2 The AO had also initiated penalty proceedings u/s 271(1)(c). These proceedings were disposed off on 31.1.2011 and penalty of Rs. 2,03,30,842/- was levied. In appeal, the assessee has been given part relief with the result that the penalty in respect of STCG on sale of 2390000 shares of HQR and disallowance of Rs. 22,03,822/- has been confirmed. Aggrieved by this order, both the parties are in appeal before us. 3. Before us, the Ld. Counsel for the assessee referred to the details regarding sale of shares of HQR furnished alongwith the return of income. The details show that 898181 shares of HQR were sold on 10.5.2005 @ Rs. 20 per share. These shares were acquired @ Rs. 10/- per share. Another lot of 2390000 shares was also sold on the same date @ Rs. 20/- per share. These shares were also acquired @ Rs. 10 per share. The total cost of these shares was Rs. 32,88,181/- and the sale price was Rs. 6,57,63,620/-. In the return income under the head STCG was shown as loss of Rs. 8,64,15,538/-. It was mentioned that this loss will not be set off against any other h....
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....s that the claim of LTCG was bonafide and it is crucially dependent of this correspondence. It may be mentioned that these letters have been signed by Shri R.P. Mittal or Mrs. Sarla Mittal, his wife. These persons had been holding the position of Managing Director and Director in HQR and the assessee company. It is an admitted fact that shares holders register shows that the name of the assessee was entered therein on 27.7.2004 and intimation to the registrar of companies was also made that the assessee company became a member in the HQR on 27.7.2004. The case of the revenue is built upon data available in official record which is open to public and which according to it shows that the state of affairs depicted in the correspondence is quite contrary to the actual state of affairs. 3.2 The Ld. Counsel drew our attention to page No. 2, paragraph No. 4 of the penalty order, which contains the submissions of the assessee that - (i) the disallowance / addition and confirmation of such action by the Tribunal does not attract penalty; (ii) penalty proceedings are different from assessment proceedings and findings in the assessment proceedings are not conclusive for levy of penalty, (iii....
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....n of tax liability, the liability can be fastened on the assessee. Penalty u/s 271(1)(c) can be levied if the assessee furnishes inaccurate particulars of income or has concealed its true particulars. This conclusion is arrived at on the basis of facts discovered by the AO. If he is satisfied that the assessee has concealed particulars of income or has furnished inaccurate particulars of income, then the explanation of the assessee is obtained in the matter. The same is considered and if it is found that the assessee has failed to substantiate the explanation or it is found to be not bonafide, the case falls under the second limb. On facts, the case of the assessee is covered in the second limit of the 'mens-rea' and, therefore , penalty has been levied. 3.4 Our attention has also been drawn towards the findings of the Ld. CIT(A) in which it is mentioned that the assessee has not spelt out the circumstances in which profit of Rs. 2.32 crores had been set off against the loss of Rs. 11,03,15,538/-. The person who did so has not been identified. Therefore, the plea of inadvertence caused by clerical or typographical error has not been explained. It is further mentioned t....
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.... and the sundry creditors and debtors were to be dealt with by the ITDC. On this basis the value of assets, took over by the assessee from the ITDC represented by 8,98,166 shares, was about Rs. . 16.49 crores which represented 99.97% of the paid up capital. The rest of the shares were acquired from other share holders at about Rs. 1.65 crores. Therefore, the cost of acquisition per share was about Rs. 183.63 per share. Some other expenses were incurred, which were added to the cost of acquisition leading to the cost per share at Rs. 185.68. This value was adopted by the AO for working out capital gains against the consideration actually received. The AO examined the transaction and came to the conclusion that the sale to Shri R.P. Mittal was a colourable transaction as Shri R.P. Mittal and Smt. Sarla Mittal, the husband and wife duo, controlled the assessee company. Since the HQR was wholly owned subsidiary company of the assessee company, it was also controlled by the husband and wife . In order to arrive at this conclusion, reliance has been placed on the decision in the case of CIT vs. L. N. Dalmia (1994) 207 ITR 89, in which it has been held that sale of....
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....by the assessee company on 27.7.2004. On the basis of this date of acquisition, the gain has to be qualified as STCG, which cannot be set off against other loss in the form of LTCG. The question is whether the assessee is liable to be penalised u/s 271(1)(c) on these facts ? 5.1 In order to support his case, Ld. Counsel has relied on the decision in the case of CIT vs. Reliance Petro Products Pvt. Ltd. (2010) 322 ITR 158 (Sc.) . The court mentioned that it is not concerned with mens- rea. However, it has to see whether the assessee has furnished inaccurate particulars. In this connection, it referred to Webster's dictionary which furnishes the meaning of the word "accurate " to be "not accurate, not exact or correct ; not according to truth ; erroneous ; as an inaccurate statement, copy or transcript". In this case, the penalty was levied on issue of disallowance u/s 14A and it was argued on behalf of the revenue that the AO had correctly reached the conclusion that since the assessee had claimed excessive deduction knowing that it is incorrect it amounted to concealment of income, which can take either of the two forms - (i) a receipt may be suppressed fr....
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.... in which it has been held that where a bogus claim of payment of commission to Director has been made and it is found that the Director has not rendered any services ; and assessee fails to offer any explanation in respect of the disallowance, penalty can be levied ; (ii)CIT vs. Zoom Communication Pvt. Ltd. (2010)327 ITR 510 (Del)- in which it has been held that if a prime facie bogus claim in respect of payment of income tax or loss on sale of asset is made and such claim is not found to be bona fide, then penalty can be levied ; (iii) CIT vs,. Splender Construction 2011 - TIOL- 54 - HC - Del - IT - in which the substantial question of law was admitted because the issue whether an asset is long - - capital asset or short - capital asset is such a question ; iv) Ravindranath S. Doddi (HUF) vs. ACIT (2011) 12 txmann.com - 117 (Mum.) - in which levy of penalty was upheld in respect of higher claim of cost of acquisition of shares and the assessee failed to show that the claim was bonafide. 5.4 We have considered these cases also. Reverting to the facts, the question is - whether, the claim based upon correspondence between the husband and wife on beh....