TaxTMI 
TaxTMI 
2022 (12) TMI 336
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....etails as called for from time to time. 3. The Ld. Assessing Officer ("AO") found that during the year, the assessee has sold 17000 number of shares of M/s. Surabhi Chemicals and Investment Ltd. a listed entity on Bombay Stock Exchange for Rs. 17,80,906/- which were purchased from M/s. Sarvottam Advisory Pvt. Ltd. for Rs. 50,000/- through S. K. Khemka, Share broker and were transferred in the name of the assessee on 17.06.2013. The shares were reflected in the De-mat account on 04.09.2014. These shares were sold on 11.12.2014, 15.12.2014, 23.12.2014 and 24.12.2014, through Motilal Oswal Securities Ltd. in support of which the assessee filed the copy of contract notes. The assessee also filed copy of share transfer form, copy of share certificate. The assessee also filed copy of bank statement reflecting the payment receipts through banking channel of Rs. 17,80,261/-. The assessee claimed profit on sale of shares of Rs. 17,80,261/- as exempt under section 10(38) of the Act. 4. During assessment proceedings, the Ld. AO confronted the assessee with the fact that the company M/s. Surabhi Chemicals and Investment Ltd. is not a genuine company and a penny stock company the trading of w....
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.... to purchase peace and avoid penal proceedings the assessee surrendered an amount of long term capital gain claimed to be exempt for taxation purpose. Considering the assessee submissions the income was assessed as under:- Returned Income Rs. 4,11,300 Capital Gain income Rs. 17,46,906 (Long term capital gain) Rs. 21,58,206 That during the year under consideration assessee had earned Gain on sale of equity shares of M/s. Surabhi Chemicals and Investment Ltd. for Rs. 17,46,906/-. Initially 2500 No. of shares of Surabhi Chemicals and Investment Ltd. were purchased for Rs. 50,000 from M/s. S.K. Khemka and later on these shares were converted into 25,000 of face value of Re. 1 each bearing distinctive no. 177908161 to 177933160.. The details of such shares was filed during the assessment proceedings. The aforementioned shares were later on dematerialized with Depository Participant M/s. Motilal Oswal Securities Ltd. and the shares were sold through Bombay Stock Exchange which is a recognized stock exchange. The contract notes and ledger account issued by the broker were also filed during the assessment proceedings. The fact that the equity shares sold on the recognized stoc....
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....T v, Susai Kalyanamandapam (P) Ltd. [2004] 271 ITR 138/(20051 142 Taxman 555 (Mad.), India Cine Agencies v. Dy. CIT(2005] 275 ITR 430 (Mad.), Bharat Rice Mill v. CIT {2005] 148 Taxman 145 (All.) CIT VS. S.M Construction, Bombay High Court, CIT VS. Reliance Petroproduct Pvt. Ltd. 322 ITR 158. (b) Penalty proceedings are penal in nature. Elementary principles of criminal law will apply. It is a quasi-criminal proceedings. There should be conscious concealment - Dy, CIT v. Mahadik Bros. [2003] 84 ITD 1 (Pune). (c) The apex court in the case of CIT v. Reliance Petroproducts Pvt. Ltd. 322ITR 158 reiterated that disallowance of claim of expenditure does not amount to furnishing incorrect particulars of income as such, no concealment penalty can be levied based on that. (d) In the case of CIT v, Suresh Chandra Mittal the Hon'ble Supreme Court upheld the finding of the Hon'ble High Court and Tribunal wherein it was observed that when the department had not discharged its burden of proving concealment and had simply rested its condusion on the act of voluntary surrender done by the assessee in good faith and that penalty could not be levied. [(2001) 119 Taxman 433(sc)l. (e) In the c....
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....er section 263 of the Act and issued a show cause notice on 03.1.2020 to which the assessee furnished written submission dated 11.02.2020, the gist of which the Ld. Pr. CIT has incorporated in his order in para 3.1 thereof. The Ld. Pr. CIT has recorded his findings in para 3.2 and 3.3 of his order which are reproduced below: "3.2 I have given a careful consideration to the written submission filed by the assessee and perused the assessment records. It is difficult to deny that the assessee was not aware that Income Tax Department was investigating a large number of beneficiaries during the same period who had booked bogus long term capital gain or penny stocks for converting their unaccounted money. The investigation revealed that the share prices of these penny stock companies were manipulated by syndicate of operators. As per the details available on the website of the Securities and Exchange Board of India (hereinafter referred to as 'SEBI'), it conducted an investigation into the trading activities in the scrip of Surabhi Chemicals & Investments Ltd. during the period 01.08.2012 to 06.01.2015 for possible violation and ultimately suspended the trading in the scrip on 07.01.20....
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....evenue and there was no application of mind by the Assessing Officer for dropping the penalty. It is also reiterated that the ratio of decision in the case of MAK data Pvt. Ltd. vs. CIT (2014) 358 ITR 593 (SC) is very much applicable to the assessee's case. In. this regard, the surrender of the assessee cannot be said to be voluntary' but was made only after the AO confronted him with the facts about the bogus claim of exemption on penny stock." 11. Accordingly the Ld. Pr.CIT directed the Ld. AO to re-decide the penalty proceedings initiated under section 271(1)(c) of the Act vide show cause notice dated 05.12.2017. He also directed the Ld. AO to re-compute the income tax and interest payable as per provisions of section 115BBE of the Act. 12. Aggrieved, the assessee is before the Tribunal challenging the order of the Ld. Pr. CIT on the following grounds:- "1.(i) That on facts and circumstances of the case, the Id, CIT has erred in assuming jurisdiction u/s 263 of the Act even though the order passed by the learned AO u s. I43(3) of the Act is neither erroneous nor prejudicial to the interest of the revenue. (ii) That the show cause notice issued u/s 263 is illegal and wi....
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....s per section 115BBE of the Act, the Ld. AR submitted that no show cause notice relating thereto was issued by the Ld. Pr. CIT and therefore the assessee was denied the opportunity to present his case on this aspect of the matter. Reference was made to the decision of Hon'ble Bombay High Court in Pr. CIT vs. M/s. Universal Music India Pvt. Ltd. (ITA No. 238 of 2018 dated 09.04.2022). The Ld. AR submitted before us a Paper Book containing therein order sheet entry dropping penalty under section 271(1)(c) of the Act, copy of notice under section 274 r.w.s 271(1)(c) dated 05.12.2017 and copy of reply filed on 25.01.2018 during penalty proceedings. 14. The Ld. DR supported the order of the Ld. Pr. CIT. He drew our attention to Explanation 2 inserted by the Finance Act, 2015 w.e.f 01.06.2015 following which the Ld. Pr. CIT assumed jurisdiction under section 263 of the Act in the case. He argued that there was complete non application of mind by the Ld. AO in dropping the penalty proceedings. He however, conceded that in this case the Ld. AO has himself applied the provisions of section 115BBE of the Act. Hence, only penalty part of the impugned order is to be considered. In rejoinder t....
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....he investigation conducted by the SEBI into the scrip of Surabhi Chemicals And Investment Ltd. during the period 01.08.2012 to 06.01.2015 from details uploaded on the website of SEBI and local news. There is no allegation that the assessee was connected in any way in the wrong doing of the above company which was a listed company with a duly recognised stock exchange. The contention of the assessee is that he was confronted about the above investigation during the course of assessment proceedings and it was then that the assessee surrendered the benefit of exemption claimed under section 10(38) of the Act and offered the income for taxation subject to the condition that no penal action would be initiated against him. This contention of the assessee has been brushed aside by the Ld. Pr. CIT merely on the basis of surmises and conjectures. We, therefore, hold that assumption of jurisdiction under section 263 of the Act by the Ld. Pr. CIT on the ground that while dropping the penalty, the Ld. AO did not appreciate the decision of the Hon'ble Supreme Court in MAK data Pvt. Ltd. (supra) is not sustainable. 17. The next ground taken by the Ld. Pr. CIT for assumption of jurisdiction unde....