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Issues Involved:
1. Whether the addition of Rs. 51,61,875, disallowed as speculation loss, constitutes concealment of particulars of income for the purpose of levying penalty under section 271(1)(c) of the Income-tax Act, 1961. 2. The applicability of Explanation 6 to section 271(1)(c) regarding the adjustment made under section 143(1)(a) and the levy of additional tax. 3. The bona fide nature of the assessee's transactions and whether they constitute a colorable device to reduce tax liability. 4. The relevance of the Tribunal's finding that the transactions were genuine but speculative in nature. 5. The impact of judicial precedents on the assessment of the transaction as speculative and the consequent penalty. Issue-wise Analysis: 1. Concealment of Particulars of Income: The revenue argued that the addition of Rs. 51,61,875, disallowed as speculation loss, should be treated as concealment of particulars of income, warranting penalty under section 271(1)(c). The assessee purchased and sold units of UTI, resulting in a loss claimed in the return. The Assessing Officer disallowed this loss, considering it a speculative transaction aimed at reducing tax liability. The Tribunal confirmed the loss as speculative but genuine, leading to the penalty proceedings. 2. Applicability of Explanation 6 to Section 271(1)(c): The CIT(A) deleted the penalty, citing Explanation 6 to section 271(1)(c), which exempts adjustments made under section 143(1)(a) from penalty. The revenue contended that the penalty was imposed based on the order under section 143(3), not section 143(1)(a). The Tribunal noted that the prima facie adjustment was canceled, and the loss was disallowed during regular assessment under section 143(3), making Explanation 6 inapplicable. 3. Bona Fide Nature of Transactions: The assessee argued that the transactions were bona fide, with units transferred in its name, and dividends received and offered for taxation. The Assessing Officer viewed the transactions as a device to reduce tax liability, citing discrepancies in the timing of resolutions and lack of interest charged by the bank. The Tribunal found the transactions genuine but speculative, based on the timing of purchases and sales, and the bank's contradictory statements on interest. 4. Tribunal's Finding on Genuine but Speculative Transactions: The Tribunal held that the transactions were genuine but speculative, as the assessee knew the price trends and planned the transactions accordingly. The Tribunal emphasized that the transactions were aimed at reducing tax liability, with the assessee claiming deductions under section 80M and for the loss. The Tribunal's finding that the transactions were speculative but genuine influenced the penalty proceedings. 5. Impact of Judicial Precedents: The assessee cited judicial precedents supporting the genuineness of "dividend stripping transactions," arguing that such transactions were not considered colorable devices before the amendment of section 94(7). The Tribunal acknowledged these precedents but focused on the speculative nature of the transactions. The Tribunal emphasized that the assessee disclosed all relevant information and substantiated its claim, differentiating between a bona fide belief and furnishing inaccurate particulars. Conclusion: The Tribunal concluded that the penalty under section 271(1)(c) was not leviable. The assessee disclosed all necessary particulars and substantiated its claim, and the difference in perception between the assessee and the revenue did not constitute concealment of income. The Tribunal upheld the CIT(A)'s decision to delete the penalty, albeit on different grounds, emphasizing the bona fide nature of the assessee's explanation and the lack of falsehood in the disclosed particulars. The appeal was dismissed.
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