2013 (3) TMI 684 - AT - Income Tax

Summary

Issues involved: Appeal against order confirming penalty u/s 271(1)(c) for non-exemption of long term capital gain u/s 10(38).

Summary:
1. The appellant filed return declaring income for AY 2005-06. AO treated share transactions as income from other sources, later directed to tax under capital gains. CIT (A) upheld this but disallowed exemption u/s 10(38) for non-STT payment. Penalty u/s 271(1)(c) was levied by AO for non-exemption of long term capital gain.

2. Assessee claimed STT not paid by broker, withdrew claim upon knowledge, citing bonafide reasons. AO initiated penalty for different issue, CIT (A) upheld penalty stating transactions were dubious, no STT paid, and intention to evade tax evident. Assessee's claim of bonafideness rejected.

3. Assessee contended penalty was based on non-allowance of exemption u/s 10(38) by CIT (A), not AO's original issue. No inaccurate particulars furnished, reliance on SC principles. DR supported AO and CIT (A).

4. ITAT found AO's penalty based on CIT (A)'s direction irrelevant, no examination by AO on exemption issue. Penalty cancelled due to bonafide claim, no variation in income amounts. AO's penalty calculation questioned but ultimately cancelled. Assessee's appeal allowed.