TMI Blog2011 (9) TMI 1108X X X X Extracts X X X X X X X X Extracts X X X X ..... sources ₹ 1,968/-. The assessing officer initiated penalty proceedings u/s 271(1)(c) of the Act. 3. During the course of penalty proceedings it was submitted by the assessee that assessee had declared a sum of ₹ 23,09,770/- as short term capital gains in the return of income, but during the assessment proceedings the assessee realized that the short term capital gain had been wrongly calculated due to misunderstanding the effect of switch in and switch out scheme of the mutual fund. The assessee filed revised computation of income declaring short term capital gain of ₹ 26,61,593/-. It was submitted that the mistake committed was due to calculation mistake and there was no intention of the assessee to conceal the income. The assessing officer rejected the contention of the assessee on the ground that it was the duty of the assessee to furnish correct particulars of his taxable income at the time of furnishing of his original return of income. The law further allows opportunity of furnishing a revised return as per provisions of section 139(5) of the Act, if at all there was any omission while furnishing the original return. But the assessee had not filed revise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecision of Hon ble Rajasthan High Court in the case of Chandra Pal Bagga Vs. ITAT 261 ITR 67 (Raj.) wherein it has been held that if the assessee had claimed any exemption after disclosing the relevant facts and under ignorance of provisions of the Act has not offered that amount for tax, in such cases penalty should not be imposed. In such cases it is the duty of the AO to ask for further details and tax the income if it is liable to tax. Referring to the decision of Hon ble Supreme Court in the case Dharmendra Textile Processors Others (supra) the ld. AR of the assessee submitted that the observations in this decision reemphasizes the shift of burden of proof as brought about by Explanation 1 of section 2712(1)(c). On need for the tax authorities to establish mens rea before penalty can be imposed were contrary to this school of thought and to that extent the larger Bench over-ruled Dilip N. Shroff s case. However, even when liability under section 271(1)(c) is viewed as a civil liability, while the onus is certainly not on the tax authority to establish mens rea of the assessee, the explanation of the assessee is still to be examined by the adjudicating authority on its merits ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . He placed reliance on the decision of Hon ble Supreme Court in the case of Reliance Industries 322 ITR 158 (SC) and the decisions in the cases of Prem Chand Garg (supra) and Shri Chandra Pal Bagga (supra). On the other hand, the ld. Sr. DR submitted that when assessee was confronted he filed revised computation not once, but two times. Therefore, the assessee had concealed the income. Accordingly, penalty under section 271(1)(c) of the Act is exigible. 6. We have heard both the parties and gone through the material available on record. There is no dispute about the fact that the assessee had earned income from mutual funds wherein automatic switch in and switch out scheme was in operation. When the AO has asked the source of investments, the assessee filed revised computation detecting certain income to be omitted to be declared in the original return of income. The AO had not issued notice pointing out that incorrect computation of short term capital gains was declared by the assessee. The Chartered Accountant of the assessee vide letter dated 26th October, 2008 had stated that short term capital gain was declared at ₹ 23,09,770/- on mutual fund investments ignoring of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e particulars regarding the income of the assessee. Such claim made in the return cannot amount to inaccurate particulars. Merely because the assessee claimed deduction of interest expenditure, which has not been accepted by the Revenue, penalty under section 271(1)(c) of the Act is not attracted. Mere making of the claim, which is not sustainable in law, by itself will not amount to furnishing inaccurate particulars regarding the income of the assessee. 9. In CIT Vs. Zoom Communication P. Ltd. 327 ITR 510 (Del.) Hon ble Delhi High court has held that so long as the assessee has not concealed any material facts or the factual information given by him has not been found to be incorrect, he will not be liable to imposition of penalty under section 271(1)(c) of the Income-tax Act, 1961, even if the claim made by him is un-sustainable in law provided that he either substantiates the explanation offered by him or the explanation, even if not substantiated is found to be bonafide. If the explanation is neither substantiated nor shown to be bonafide, Explanation (1) to section 271(1)(c) would come into play and the assessee will be liable to fresh penalty. 10. In the case of Prem Ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I. T. Act] 44,175.15 12. We have gone through the reconciliation of short term capital gains reproduced as above. There are 9 profit and three loss figures that were not taken into account in original return. The assessee has paid security transaction tax of ₹ 52,656.67 which was also to be taken into account at the time of filing of the original return of income. The mistake commutation of profit has been occurred because of switch in and switch out of mutual fund scheme. It is not only the profits that have not been taken into account but loss figures have also been omitted. Therefore, the mistake committed by the assessee is bonafide mistake. The assessee had given explanation for lower returned income from short term capital gains. The explanation offered by the assessee has not found to be false or incorrect. Therefore, it is not a case where income has been concealed, but correct income was not returned as the assessee could not identify the income correctly because of switch in and switch out of mutual fund scheme. Therefore, in our considered opinion, it is not a case of levy of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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