2012 (1) TMI 212 - AT - Income Tax

Levying penalty u/s 271(1)(c) - treating income from sale and purchase of shares as capital gain - Held that - The penalty has been levied by the reason of treatment of capital gain declared by the assessee as business income which clearly shows that as far as the quantum on account of capital gain or expenditure no mistake was found by the Assessing Officer but there was a difference of view and opinion as the assessee declared said income as short term capital gain which was treated by the Assessing Officer as business income. Accordingly the claim of the assessee treating the income from sale and purchase of shares as capital gain cannot be treated as impossible view or absolutely illegal and incorrect treatment of income. Even for the subsequent year i.e. AY 2006-07 the income admitted by the assessee as capital gain was accepted by the Assessing Officer. Therefore the issue of treatment of the income is a debatable issue and the view taken by the assessee in treating the same as capital gain though was not acceptable but could not ipso facto lead to the conclusion that the assessee concealed the particulars of income or furnished inaccurate particulars of income. Accordingly the penalty is not justified in the facts of the present case. Appeal filed by the assessee is allowed.

Summary

Issues:
- Whether the CIT(A) was justified in confirming the penalty under section 271(1)(c) of the Income Tax Act for the Assessment Year 2005-06.

Detailed Analysis:
The appeal before the Appellate Tribunal ITAT Mumbai concerned the penalty order passed under section 271(1)(c) of the Income Tax Act for the Assessment Year 2005-06. The only issue for consideration was whether the CIT(A) was correct in upholding the penalty of Rs. 37,85,400 imposed by the Assessing Officer. The assessee had declared income from the sale of shares as short-term capital gain, but the Assessing Officer treated it as business income. The Tribunal had previously upheld the Assessing Officer's decision regarding the treatment of income as business income. The penalty was imposed due to the disparity in the treatment of income by the assessee and the Assessing Officer.

The Tribunal analyzed the facts and circumstances of the case, noting that the assessee had declared income as short-term capital gain, which was treated by the Assessing Officer as business income. The Tribunal observed that there was a divergence of views between the assessee and the Assessing Officer regarding the nature of income. The Tribunal referred to its earlier decision where it upheld the treatment of income as business income. It was highlighted that in a subsequent assessment for the following year, the Assessing Officer accepted the income as capital gain, indicating the debatable nature of the issue. The Tribunal cited the decision of the Hon'ble Supreme Court in the case of Reliance Petroproducts P Ltd, emphasizing that a mere difference in opinion on the treatment of income does not automatically lead to the conclusion of concealment or furnishing inaccurate particulars of income.

Based on the analysis, the Tribunal concluded that the penalty imposed was not justified in the present case. Therefore, the penalty levied by the lower authorities was deleted, and the appeal filed by the assessee was allowed. The judgment was pronounced on January 11, 2012, in favor of the assessee.