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2015 (4) TMI 50 - ITAT CUTTACKPenalty under section 271(1)(c) - enhancement of income on the assets held to be taxed as capital gains - Held that:- As per the assessment orders the incomes have been offered for taxation as agreed amount in so far as they have been rendered to tax as investments from tax paid incomes in the earlier years. It is nobody's case that the incomes which accrue or arise but remaining in the hands of the mutual funds or trust as investments whether could be computed on the basis of provisions of the Income-tax Act as earned for taxation or increase in capital. Unfortunately the assets that have been brought to tax as income in the hands of the assessee are increase in wealth were not to be disclosed in the form of financial assets in the balance-sheet. The computation was confronted to the assessee in so far as the holders of the funds on behalf of the assessee informed the assessee that the funds have accumulated to such an extent. It was therefore nobody's case that the assessee should have incorporated the enhancement of income on the assets held by it to be taxed as capital gains when no such decision could take place by the assessee. The crux of the issue therefore results in giving a finding that the amount was agreed upon by the assessee on the Assessing Officer giving a finding that the assessee's funds as held by the holders of the funds had informed the assessee that the funds have increased in value whether he agreed to encash the enhancement or not. The investment was noted by the AO in the assessment year 2005-06 and again after a gap of one year, i.e., 2007-08 when the assessee cannot be said to be paying tax again on the so-called enhancement by the mutual fund company being the portfolio manager who keep changing the net asset value of the units in various other forms giving high or low rate of return. The assessee remained secured in so far as he had parted with the funds which funds belonged to him in the first place were reinvested in the hope that they will generate more income than the rate of interest available from a scheduled bank. Therefore it was a clear case of valuation of tax paid capital which the assessee had already paid tax on till such time when the enhancement was brought to the notice by the Assessing Officer on the basis of information made available to and by the assessee was readily agreed upon by the assessee to be taxed in the impugned assessment year. The short-term capital gains never accrued to the assessee and in fact is a loss in the capital was not considered in so far as the Assessing Officer had brought more income to tax quantum-wise in 2005-06 leading to duplication of income taxed in the assessment year 2007-08. It was enhancement in the capital which stood tax paid was therefore to be taxed at the time of receipt or transfer and not because the holder of the capital informs that the capital has increased. The crux therefore that the assessee agreed to the proposition that the holder of the asset is informing that his capital investment was worth more was accepted by the Assessing Officer as concealment in the hands of the assessee is not at all justified. The surrendered investment therefore cannot be considered for levy of penalty in so far as penalty should not be made if there is no conscious breach of law (Hindustan Steel Ltd. v. State of Orissa [1969 (8) TMI 31 - SUPREME Court]. Thus penalty so levied under the provisions of section 271(1)(c) for the both assessment years under consideration is fit for cancellation - Decided in favour of assessee.
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