2009 (3) TMI 638 - AT - Income Tax

Penalty levied u/s 271(1)( c ) - For concealment of income - business of hire purchase leasing finance and investment in shares and securities - claimed loss from trading shares - Whether penalty u/s 271(1)( c ) r/w the Explanation 1 of section 271(1) is applicable? - AO treated the said loss under Explanation to section 73 and treated the said loss as deemed speculation loss and levied penalty u/s 271(1)( c ) - CIT(A) cancelled the penalty holding that the assessee has disclosed all the material facts and it was only under a deeming provisions that the loss was to be treated as speculative loss. HELD THAT - CIT(A) has cancelled the penalty after considering the facts on merit of the case. He has not cancelled the penalty on the ground of wilful concealment or on the ground of mens rea . Thus the law laid down by the Apex Court in the case of Dharamendra Textiles Processors 2007 (7) TMI 307 - SUPREME COURT does not help to the revenue. As said above that the CIT (A) has decided the case on facts and we also decide this case considering the totality of the case with reference to above discussions we find that it is simple case of fighting in between duty and rights which automatic do not amount to a case of concealing particulars or furnishing inaccurate particulars of income neither there is finding of the Assessing Officer that explanation furnished by the assessee is found to be false. In our considered view it is not a fit case for levy of penalty u/s 271(1)( c ). Therefore we uphold the order of CIT(A) on this count.

Issues Involved:
1. Deletion of penalty levied under section 271(1)(c) of the Income-tax Act, 1961.
2. Treatment of loss from trading shares as deemed speculation loss under Explanation to section 73.
3. Apportionment of interest and other expenses attributable to speculation business income.

Detailed Analysis:

1. Deletion of Penalty under Section 271(1)(c):
The primary issue in this case was whether the penalty levied under section 271(1)(c) of Rs. 10,36,000 was justified. The assessee, a public limited company engaged in hire purchase, leasing, finance, and investment in shares and securities, had claimed a loss from trading shares. The Assessing Officer (AO) treated this loss as a deemed speculation loss under Explanation to section 73 and allowed it to be carried forward. Subsequently, the AO levied a penalty on the grounds that the assessee had treated shares as stock-in-trade for trading purposes but as investments for calculating long-term capital gains, thus allegedly concealing particulars of income.

The CIT(A) canceled the penalty, observing that there was no deliberate concealment by the assessee. The CIT(A) noted that the assessee had disclosed all material facts and that the loss was treated as speculative under a deeming provision, which did not amount to concealment of income. The Tribunal upheld this view, emphasizing that the penalty provisions under section 271(1)(c) require a clear case of concealment or furnishing of inaccurate particulars, which was not evident here.

2. Treatment of Loss from Trading Shares:
The assessee claimed a loss of Rs. 24.09 lakhs from trading shares, which the AO treated as a deemed speculation loss under Explanation to section 73. The AO also apportioned interest and other expenses attributable to speculation business income, adding Rs. 10.73 lakhs to the speculation loss, resulting in a total carry-forward speculation loss of Rs. 34.82 lakhs. The CIT(A) partly allowed the assessee's appeal, and the Tribunal upheld this decision, noting that the loss treatment was based on a deeming provision and not due to any concealment or furnishing of inaccurate particulars by the assessee.

3. Apportionment of Interest and Other Expenses:
The AO had apportioned interest and other expenses attributable to speculation business income at Rs. 10.73 lakhs, which was added to the speculation loss. The assessee argued that the apportionment of interest could not be applied to a deeming provision and that there could be no penalty on an estimate basis. The Tribunal agreed, noting that the assessee had neither concealed particulars of income nor furnished inaccurate particulars. The Tribunal emphasized that the duty of the AO is to assess the correct income, and differences in the interpretation of provisions or heads of income do not automatically amount to concealment or furnishing of inaccurate particulars.

Conclusion:
The Tribunal concluded that the penalty under section 271(1)(c) was not justified as the assessee had disclosed all material facts, and the loss was treated as speculative under a deeming provision. The Tribunal upheld the CIT(A)'s order canceling the penalty and dismissed the revenue's appeal, emphasizing that the case involved a legitimate difference in the interpretation of tax provisions rather than any deliberate concealment or furnishing of inaccurate particulars by the assessee.

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