TaxTMI 
TaxTMI 
2014 (1) TMI 1178
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....abad Stock Exchange for coming to the conclusion that the transactions in respect of M/s. Buniyad Chemicals and M/s. Talent Infoway Ltd. are mainly accommodation entries and they are not genuine; The assessee has converted his unaccounted money in the grab of long term capital gains. Therefore, the same was sought to be taxed as 'income from other sources'. During the course of assessment proceedings for A.Y. 2006-07 the assessee explained, in response to the show cause notice dated 11.12.2008, that they are not accommodation entries and each year is a separate year and for the year under consideration the assessee having submitted proof and evidence of purchase and sale of shares it cannot be concluded that they are sham transactions and, at best, the AO can disallow the exemption under section 10(38) of the Act as STT is not paid. 3. Though the assessee submitted confirmation from the broker stating that the impugned shares were sold 'off market' and no STT is paid, the fact remains that the assessee claimed exemption under section 10(38) of the Act eventhough the assessee knows very well that the transactions are off market transactions. Elaborate discussion was made in the ass....
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....t he was not aware of the same. By claiming to have paid STT, when the same was not actually paid, the assessee has wilfully furnished inaccurate particulars of income before the Department in order to avoid tax by claiming false exemption under section 10(38) and thus provisions of section 271(1)(c) are attracted. The AO levied penalty on the limited ground that the assessee wilfully tried to make false exemption under section 10(38) of the Act, which would amount to furnishing of inaccurate particulars of income. Consequent thereto penalty is levied under section 271(1)(c) of the Act. 6. Aggrieved, assessee contended before the first appellate authority that all relevant particulars relating to the transactions were produced before the AO and hence it cannot be stated that the assessee furnished inaccurate particulars. It is the action of the broker, who has not paid STT, which resulted in assessee' loosing exemption under section 10(38) of the I.T. Act. Reliance was placed upon the decision of the Apex Court in the case of Reliance Petro Products Ltd. 322 ITR 156 to submit that so long as the assessee furnishes particulars, merely because addition has to be made, penalty should....
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....company is shown as the contact person of these two companies. This also highlights that the assessee has intention to claim false exemption of LTCG, particularly when the nature of transactions were found to be bogus by the AO and STT was not payable on off market transactions. The Department ordinarily selects less than two percent cases for scrutiny and there are 98 percent chances of escaping from taxation of real income chargeable to tax, if a person decides to make false claim. Under these circumstances if penalty is not levied in a case where assessee makes false claims of exemption then there cannot be any case where penalty can be levied and every tax payer would take a chance by making false claim as there is nothing for him to loose. The learned CIT(A) had also taken into consideration that in the preceding year, i.e. A.Y. 2005-06 the assessee has claimed exemption under section 10(38) on LTCG, therefore repetitive claim would not prove the bonafide, particularly in the second year. In other words, the assessee cannot plead ignorance of non-payment of STT. On the contrary it highlights that the assessee wilfully intended to evade tax. Therefore the decision in the case o....
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....brokers, i.e. M/s. Alliance Intermediaries & Network P. Ltd. and the shares were purchased through M/s. Mahasagar Securities P. Ltd., both located at the same address. In response to notice under section 133(6) of the Act, sent to the share brokers, it was stated that the shares were listed in the Ahemadabad Stock Exchange but the transaction was off market one. A further scrutiny reveals that the transaction had not taken place on the floor of the Ahmedabad Stock Exchange but it was an off market transaction on which no STT was paid/payable. Assessee claimed exemption from payment of tax under section 10(38) of the Act. Since the facts and circumstances in the case of Shri Ravindrakumar Toshniwal, husband of the assessee, were identical wherein detailed enquiry was made and the modus operandi was also identical not only in the case of the assessee but also in the case of other family members. Therefore the AO concluded that the transactions were bogus and brought to tax the same under the head 'income from other sources'. Penalty proceedings were initiated separately. 10. Aggrieved by the said order the assessee preferred appeal before the first Appellate Authority who agreed wit....
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....tions were through Stock Exchange but later on admitted that these transactions were 'off market'. However, with regard to the contention of the assessee that she was under the bonafide belief that STT is being paid, the learned CIT(A) highlighted that assessee's husband is Chairman & Managing Director of a listed company and it cannot be said that they would have purchased shares of an unknown and unlisted company which, on verification, was presently not traceable and thus concluded, in the same lines in which he has referred to in the case of her husband, that she ought to know that on an off market transaction no STT is payable and thus the claim of bonafide belief is not correct. He has also taken into consideration the fact that not only she but her husband and different family members have made similar claims for more than one year which could only prove that the intention was only to avoid payment of tax under the garb of exemption under section 10(38) of the Act and in the peculiar circumstances of the case the decision of the Hon'ble Delhi High Court in the case of Zoom Communications P. Ltd. is applicable and the facts of the present case is distinguishable from the deci....
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.... the assessees were not aware of the fact that there is no liability to pay STT with regard to off market transactions. It was, therefore, emphatically submitted that the earlier decisions of the Tribunal were rendered on the limited ground of genuineness of transactions is not in dispute and none of the decisions have referred to the issue as to whether the claim of exemption under section 10(38) is bonafide. In both the cases the assessees have not raised the issue that the notice issued by the AO under section 271(1)(c) or the subsequent proceedings thereto were not with reference to the claim of wrong exemption under section 10(38). On the contrary, penalty was levied specifically on the issue that exemption was wrongly claimed by furnishing inaccurate particulars of income. Therefore proviso to section 271(1)(c) would automatically gets attracted and in the light of the decision of the Hon'ble Delhi High Court (supra) penalty levied by the AO is in accordance with law. He, therefore, relied upon the orders passed by the learned CIT(A). 16. We have carefully considered the rival submissions and perused the record. We have also carefully gone through the orders passed by the IT....
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....not able to convince ourselves with regard to the findings given therein, particularly having regard to the factual matrix of the case which was placed before us. It is noticed that the assessees were given sufficient opportunity before levying penalty wherein the assessees were show caused as to why penalty should not be levied for furnishing inaccurate particulars in claiming a wrong exemption under section 10(38) of the Act. Therefore it cannot be stated that the assessees were not given an opportunity before levying penalty. In fact the AO has applied his mind to the issue of levying of penalty, for furnishing inaccurate particulars by the assessees herein, for making a claim of exemption under section 10(38) of the Act. The learned CIT(A) also has considered the issue in detail to highlight that the claim lacks bonafides and it is a clear case where the assessees herein had taken a chance by making a wrong claim from year to year and similar claims were made by all the family members, which would further establish the fact that the claim lacks bonafides. On the contrary, the Tribunal proceeded on the assumption, in the case of Shri Ravindrakumar Toshniwal, that the AO has not ....