Giri Raj Gupta v. Income-tax Officer, Ward 19(2), New Delhi
[Citation -2007-LL-0309-17]

Citation 2007-LL-0309-17
Appellant Name Giri Raj Gupta
Respondent Name Income-tax Officer, Ward 19(2), New Delhi
Court ITAT-Delhi
Relevant Act Income-tax
Date of Order 09/03/2007
Assessment Year 1996-97
Judgment View Judgment
Keyword Tags confessional statement • concealment of income • unaccounted income • undisclosed income • long-term capital • bona fide belief • share broker
Bot Summary: Since the assessee also had purchased andsold the shares through Maheshwari Sons, the Assessing Officer was of the viewthat amount shown as sale proceeds of shares was nothing but the undisclosedincome of the assessee brought into the books as sale proceeds of shares. The assessee finally stated in the letter as under: However,this case is time barring and lengthy procedure for peace of mind weare agree to surrender the said amount of Rs. 2,72,650 for taxation subject to that no penalty undersection 271(1)(c ) of the ITAT belevied on the assessee. Examination of the scripts supplied by M/s. Nilamber Holdings Ltd.,there is little doubt left that the assessee had not made any genuine gains onany sale of shares of M/s. Nilamber Holding Ltd. and the whole transactionsenacted by the assessee were sham. 5.In reply to the penalty notice, the assessee replied that he had disclosed allthe facts relating to the transaction, but did not include the resultant incomein the return on the bona fide belief that the income was eligible forexemption under section 54F and from the mere fact that the assessee's claimwas negatived by the Assessing Officer it does not follow that the assessee concealedhis income or furnished inaccurate particulars thereof and that the mere factthat the assessee had agreed to be assessed on an income higher than thereturned income is not proof of admission of concealment. Maheshwari Sons, the share broker did notmention the assessee's name in their confessional statement said to have beenmade before the investigating authorities and thus there was nothing to linkthe assessee with the alleged malpractices perpetrated by the share-brokingfirm. As regards the recording ofthe satisfaction, the Ld. Sr. DR again relied on the last paragraph of theassessment order where the Assessing Officer has clearly stated that there isno doubt that the assessee had not made any genuine gains on the sale of sharesand that the entire transaction enacted by the assessee was sham. The factthat the assessee surrendered the income may prime facie appear to goagainst the assessee, but that is limited only to the assessment proceedingsand was made only to put an end to the protracted proceedings and to buy peaceof mind.


DELHI BENCH G INCOME TAX OFFICER, GIRI RAJ GUPTA v. WARD 19(2), NEW DELHI March 9, 2007 JUDGMENT Per R.V. Easwar, Vice President. - This appeal by theassessee is directed penalty of Rs. 61,288 imposed on assessee undersection 271(1)(c) of Income-tax Act andconfirmed by CIT (Appeals). 2.The appeal relates to assessment year 1996-97. assessee is anindividual deriving salary income, dividend, interest from banks and savingsetc. He filed return which was examined under section 143(3) of Act. Inthe return, he declared Rs. 2,70,510 as long-termcapital gains on sale of 7,000 shares of Nilamber Holdings Ltd. shares werepurchased on 7-4-1994 for Rs. 25,200 (paid in cash) and were sold for Rs. 2,97,850 during year under appeal. After indexation ofthe costs, capital gains were shown at Rs. 2,70,510.In support of earning of capital gains, assessee filed following: 1.Copies of purchase bill No.1507 dated 6-4-1994. 2.Copies of scrips of NilamberHoldings Ltd. showing distinctive numbers folio numbers, certificate numbersand number of shares. 3.Copy of bill No. 3207 dated25-5-1995 from M/s. Maheshwari Sons confirming payment of Rs. 2,97,850 bycheque to assessee. TheAssessing Officer considered evidence, but did not make any adverse commentabout same. However, he referred to certain investigations carried out bythe Directorate of Income-tax, Gurgaon in case of Maheshwari Sons, thebroker firm and statement made by several persons in that connection,including chartered accountant of firm and came to conclusion thatthe broker firm was indulging in certain mal practices and obliging assesseeswho wanted to bring into their books their unaccounted income in guise ofcapital gains on sale of shares. Since assessee also had purchased andsold shares through Maheshwari Sons, Assessing Officer was of viewthat amount shown as sale proceeds of shares was nothing but undisclosedincome of assessee brought into books as sale proceeds of shares. TheAssessing Officer further made enquiries from Nilamber Holdings Ltd. regardingthe shares held by assessee. directors appeared before AssessingOfficer and stated that shares which assessee claimed to be its ownwere actually issued first to M/s. Swift Investment Ltd. and VindhyanchalMercantile Ltd. and were transferred to several persons thereafter andultimately to M/s. Ultimate Investment Ltd. on 3- 4-1995. letter was alsofiled by director of M/s. Ultimate Investment Ltd. and it was thebeneficial owners of 7,000 shares till date. attempt of AssessingOfficer was to show that assessee never held any shares in NilamberHoldings Ltd. 3.When information gathered by Assessing Officer was put to assessee,he stated that shares, when they were purchased, were sent to companyfor registering transfer, that company had acknowledged receipt ofthe shares by letter which was also placed before Assessing Officer, thatafter effecting transfer, shares were sent back to assessee by thecompany under covering letter and that denial by company of theshares transfer might be due to fact that company may have issuedduplicate shares which were floating around in market, that in suchcircumstances company might have deliberately omitted transfers fromits record and for such omission company should be proceeded against and that in any case assessee was not concernedwhether transfer of shares in his name has been registered by companyor not. All these were stated by letter dated 5-3-2004 addressed to AssessingOfficer. Having said so, assessee finally stated in letter as under: "However,this case is time barring and lengthy procedure, however, for peace of mind weare agree to surrender said amount of Rs. 2,72,650 (two lakhs seventy twothousnads six hundred fifty only) for taxation subject to that no penalty undersection 271(1)(c ) of ITAT belevied on assessee." Inthe last paragraph of assessment order Assessing Officer observed as under: "Aftergoing through facts of case summarized above i.e., report of DDIT(Inv.), Gurgaon; thestatements of Sh. Shankar Hari Maheshwari & Sh. Praveen Mittal and statementof directors of M/s. Nilamber Holdings Ltd. and M/s. Ultimate InvestmentLtd. and, examination of scripts supplied by M/s. Nilamber Holdings Ltd.,there is little doubt left that assessee had not made any genuine gains onany sale of shares of M/s. Nilamber Holding Ltd. and whole transactionsenacted by assessee were sham. I therefore treat receipts of Rs.2,97,850 as assessee's income from undisclosed sources initiating penaltyproceedings under section 271(1)(c)." 4.The assessee would appear to have filed appeal to CIT (Appeals) againstthe aforesaid addition, but did not press same. 5.In reply to penalty notice, assessee replied that he had disclosed allthe facts relating to transaction, but did not include resultant incomein return on bona fide belief that income was eligible forexemption under section 54F and from mere fact that assessee's claimwas negatived by Assessing Officer it does not follow that assessee concealedhis income or furnished inaccurate particulars thereof and that mere factthat assessee had agreed to be assessed on income higher than thereturned income is not proof of admission of concealment. 6.The Assessing Officer however did not accept assessee's explanation andimposed minimum penalty of Rs. 61,288 for wilfully filing inaccurateparticulars and thereby concealing income. 7.The assessee's appeal to CIT (Appeals) being unsuccessful, he is in furtherappeal before Tribunal. 8.Before us, Ld. Representative for assessee put forth following contentions: (a)the surrender letter(pages 10 & 11 of paper book) was conditional on Assessing Officernot levying penalty for concealment of income. (b)By letter dated 5-12-2003 (page 12 of paperbook), assessee had placed all facts regarding purchase and sale ofthe shares and no further queries were raised by Assessing Officer. (c)The Assessing Officer hasreferred to result of enquiries conducted by Directorate ofInspection, Gurgaon into affairs of M/s. Maheshwari Sons, share brokers, inwhich assessee did not participate nor was he aware of such enquiries ofthe results thereof. (d)Both purchase and sale of shareswere supported by evidence. purchase of shares was disclosed in thebalance sheet as on 31-3-1995 relevant to assessment year 1995-96 which wasnot questioned. (e)It is case of entire evidence adduced bythe assessee not being believed by Assessing Officer, for which no penaltyfor concealment can be imposed. (f)Maheshwari Sons, share broker did notmention assessee's name in their confessional statement said to have beenmade before investigating authorities and thus there was nothing to linkthe assessee with alleged malpractices perpetrated by share-brokingfirm. (g)the assessee also didnot participate in enquiry conducted by Assessing Officer from thedirectors of Nilamber Holdings Ltd. on 23-2-2004. (h)A general statement made by Maheshwari Sons,without mentioning transactions entered into with assessee as boguscannot be relied upon as authentic or of sufficient weight to hold that theassessee is guilty of concealment of income, as held by Hon'ble Delhi HighCourt in United Electrical Co. (P.) Ltd. v. CIT [2002]258 ITR 317. (i)At best, it can only beconcluded that assessee could not prove earning of capital gains in themanner required by Assessing Officer which is not sufficient to imposepenalty for concealment as held by Gujarat High Court in NationalTextiles v. CIT [2001] 249 ITR125. (j)A surrender of income by assessee merelyto put end to protracted litigation and to buy peace of mind cannot beconsidered to be decisive for levying penalty for concealment as held by theSupreme Court in case of S.C. Mittal, 259 ITR 9 (sic) and bythe Delhi High in CIT v. Aggarwal Pipe Co. [1999] . (k)No satisfaction that assessee has concealedhis income or furnished inaccurate particulars thereof has been recorded in theassessment order which is jurisdictional defect which cannot be cured as heldby Hon'ble Delhi High Court in case of CIT v. Ram CommercialEnterprises Ltd. [2000] 246 ITR 568 and Diwan Enterprises v. CIT[2000] . (l)The Assessing Officer cannot accept theassessee's surrender of income and at same time reject claim forimmunity from penalty as held by Pune Bench of ITAT in Kantilal& Bros. v. Asstt. CIT[1995] 51 TTJ (Pune) 513. Onthe basis of above submissions, it was fervently pleaded that no penaltyfor concealment of income or furnishing inaccurate particulars thereof wasimposable in present case. Ld. Representative for assessee has alsodrawn our attention to evidence compiled in paper book consisting of 54pages as also orders of various Benches of Tribunal and has filed agist thereof in 4 pages. In addition, two orders of Delhi Benches of theTribunal have also been filed (in cases of Nanu Ram Goel & Co. &Mr. Attar Singh). 9.On other hand, Ld. Sr. DR submitted that last paragraph of theassessment order (quoted earlier) disclosed that Assessing Officer has notrelied on surrender made by assessee while making addition of Rs. 2,97,850, but has relied on evidence collected by theDDIT(Inv.), Gurgaon, statements of Shanker Hari Maheshwari and PraveenMittal, chartered accountant as well as statements of directors ofNilamber Holindgs Ltd. & M/s. Ultimate Investment Ltd. It is therefore, notcorrect to say that Assessing Officer had accepted surrender andtherefore he also ought to have accepted condition that no penalty forconcealment of income would be imposed. He submitted further that assesseecould not justify claim of long-term capital gains on basis of anyevidence and Assessing Officer had successfully demonstrated that theshares were never transferred to assessee, which in turn means thatwhatever was shown as sale proceeds of shares was merely unaccountedmonies of assessee brought in under guise of capital gains. As regardsthe surrender he pointed out that it was made only when assessee wascornered by results of investigation carried out in case ofMaheshwari Sons and after recording statements from directors of NilamberHoldings Ltd. to effect that shares were never transferred to theassessee and thus it was not voluntary surrender. It was not bona fideand was rightly not acted upon by Assessing Officer. According to Ld.Sr. DR, Assessing Officer consciously chose not to assess income on thebasis of surrender made by assessee and preferred to add amount onthe basis of evidence collected by him. It was argued that in thesecircumstances, concealment was clearly proved. As regards recording ofthe satisfaction, Ld. Sr. DR again relied on last paragraph of theassessment order where Assessing Officer has clearly stated that there isno doubt that assessee had not made any genuine gains on sale of sharesand that entire transaction enacted by assessee was sham. Thesefindings or observations made by Assessing Officer amount to clearrecording of requisite satisfaction according to learned Sr. DR. Healso pointed out that facts in decisions cited on behalf of theassessee were also distinguishable and hence those decisions were notapplicable to assessee's case. On basis of these submissions, Ld.Sr. DR contended that penalty was rightly imposed by Assessing Officerand confirmed by CIT (Appeals). 10.We have carefully considered facts and rival contentions. We are inagreement with Ld. Sr. DR on question of satisfaction having beenrecorded in assessment order. last paragraph before computation ofthe income in assessment order contains observations sufficient to holdthat Assessing Officer was satisfied that assessee concealed his incomeor furnished inaccurate particulars thereof. Assessing Officer has observedthat gains shown on sale of shares was not genuineand transaction enacted by assessee was sham. Irrespective of themerits of these findings, for limited purpose of showing that AssessingOfficer has recorded requisite satisfaction, these observations serve thepurpose. As regards question of surrender and whether Assessing Officercan levy penalty despite accepting conditional surrender made by theassessee, we are again in agreement with Ld. Sr. DR that AssessingOfficer did not act on assessee's surrender but brought income to taxby independently referring to evidence gathered by him. This is also clearfrom last paragraph of assessment order. Therefore, assessee'scontention that having accepted surrender, Assessing Officer can notimpose penalty is withoutforce. 11.However, on merits of levy of penalty, we are inclined to accept thecontentions of Ld. Representative for assessee. All evidence gatheredby investigating wing of department by examining partner of M/s.Maheshwari Sons and its chartered accountant refers to transactions inshares and modus operandi adopted by that firm in accommodatingassessees to bring into their books their undisclosed income in guise ofsale of shares. But none of statements made by them refers to assesseespecifically or pointedly by name or even by necessary implication nor is thereanything in statement to link assessee with manipulative practicesalleged to have been adopted by share broker firm. There is, therefore, nodirect evidence to show that assessee also made use of services ofMaheshwari Sons for purpose of bringing into accounts his undisclosedincome in guise of sale of shares. assessee also did not participate inthe enquiry made from directors of Nilamber Holdings Ltd. in course ofwhich they denied having transferred shares in assessee's name. Theassessee was no doubt confronted with statements of directors, but theassessee placed reliance on documentary evidence in his possessionregarding transaction of shares including evidence to show that thecompany itself had acknowledged receipt of shares from assessee as wellas covering letter sent by company N along with share certificatesduly transferring shares in assessee's name. Further, purchase ofthe shares declared in assessee's balance sheet as on 31-3-1995 has notbeen enquired into or found false in assessment for assessment year1995-96. other evidences compiled in paper book of 54 pages such as thebroker's notes, bills, quotations, statement of account of assessee in thebooks of broker, letters written by broker to assessee, allhave not been found to be false. If anything, therefore, it can only be statedthat evidence from both sides may be evenly matched. In such asituation, benefit of doubt will have to be given to assessee. factthat assessee surrendered income may prime facie appear to goagainst assessee, but that is limited only to assessment proceedingsand was made only to put end to protracted proceedings and to buy peaceof mind. Further if evidence in his favour is objectively considered, onegets impression that it has not been serously dented. In suchcircumstances, we are unable to say that assessee either concealed hisincome or furnished inaccurate particulars therefore. We cannot also helpoberdriving that there is no definite finding of concealment in penaltyorder except conclusion that assessee wilfully filed inaccurateparticulars and concealed income. It is will settled that findingscontained in assessment order may constitute good evidence but not decisionevidence for purpose of leyving penalty. At best, it can only be statedthat assessee could not succeed in proving, in manner required by theIncome-tax authorities that amount received by him represented saleproceeds of shares but it can not be asserted positively, having regard to theevidence on record, that assessee's claim stood disproved. We, therefore,cancel penalty and allow appeal with no order as to costs. *** Giri Raj Gupta v. Income-tax Officer, Ward 19(2), New Delhi
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