2011 (9) TMI 1108 - AT - Income Tax

Summary

Issues Involved:
1. Confirming the penalty of Rs. 48,499/- u/s 271(1)(c) of the Income-tax Act, 1961.

Summary:

Issue 1: Confirming the penalty of Rs. 48,499/- u/s 271(1)(c) of the Income-tax Act, 1961

The assessee filed a return of income for AY 2006-07 declaring Rs. 27,61,760/-. The assessment was completed u/s 143(3) at Rs. 31,44,188/-, with additions including short term capital gains. The assessing officer initiated penalty proceedings u/s 271(1)(c) for concealment and furnishing inaccurate particulars of income. The assessee argued that the mistake in calculating short term capital gains was due to misunderstanding the mutual fund switch in and switch out scheme and was not intentional. The AO rejected this, noting the failure to file a revised return within the time allowed u/s 139(5) and imposed a penalty of Rs. 48,490/-.

Before the CIT (Appeals), the assessee contended that the income was offered for tax voluntarily before any detection by the AO, relying on various judicial decisions. The CIT (A) upheld the penalty, stating that the assessee attempted to conceal and furnish inaccurate particulars of income in the original return.

On appeal, the assessee reiterated that the error was detected and corrected voluntarily, and no notice was issued by the AO before the correction. The assessee argued that the complex nature of mutual fund transactions led to the error and that the explanation was bona fide. The Department argued that the revised computations indicated concealment of income.

The Tribunal noted that the assessee had invested in mutual funds with an automatic switch in and switch out scheme. The AO had not issued a notice pointing out the incorrect computation before the assessee filed the revised computation. The Tribunal referred to the Supreme Court's decision in CIT Vs. Reliance Petro Products P. Ltd., which held that mere making of an incorrect claim does not amount to furnishing inaccurate particulars. The Tribunal found that the assessee's explanation was bona fide and that the mistake was due to the complex nature of the transactions. Therefore, it was not a case of concealment of income.

In conclusion, the Tribunal held that the CIT (A) was not justified in confirming the penalty u/s 271(1)(c) and canceled the penalty imposed. The appeal filed by the assessee was allowed.

The order pronounced in the open court on: 23rd September, 2011.