2011 (4) TMI 1440 - AT - Income Tax

Summary

Issues Involved:
1. Imposition of penalty u/s 271(1)(c) for furnishing inaccurate particulars of income.
2. Whether the misclassification of short-term capital gain as long-term capital gain was a bonafide mistake.

Summary:

1. Imposition of penalty u/s 271(1)(c) for furnishing inaccurate particulars of income:
The appeal was filed by the assessee against the order of the Commissioner of Income-tax (Appeals)-14, Mumbai, confirming the penalty of Rs. 10,00,000/- imposed by the Assessing Officer (AO) u/s 271(1)(c) of the Income Tax Act. The AO disallowed the exemption claimed u/s 10(38) for Rs. 71,14,710/- as it was a short-term capital gain incorrectly included in the long-term capital gain. The AO issued a notice to show cause why penalty u/s 271(1)(c) should not be imposed for furnishing inaccurate particulars of income. The assessee argued that the mistake was inadvertent and cited various judicial pronouncements to support that penalty should not be levied for such bonafide mistakes. However, the AO held that the assessee had furnished inaccurate particulars of income and imposed the penalty.

2. Whether the misclassification of short-term capital gain as long-term capital gain was a bonafide mistake:
The assessee contended that the misclassification was due to high turnover of staff and was a bonafide human error. The CIT(A) confirmed the penalty, stating that the mistake was detected during scrutiny and not voluntarily by the assessee. The CIT(A) referenced the Supreme Court decision in Union of India & Others v/s. Dharmendra Textiles Processors & Others 306 ITR 277, emphasizing the responsibility of the assessee to furnish correct particulars of income. The Tribunal upheld the CIT(A)'s decision, noting that the details furnished by the assessee lacked the dates of transactions, making it impossible to ascertain the nature of the capital gain. The Tribunal concluded that the wrong claim for exemption was detected due to the AO's enquiry and was not a voluntary act by the assessee. The Tribunal found no evidence to support that the misclassification was a bonafide mistake and upheld the penalty imposed by the AO.

Conclusion:
The Tribunal dismissed the appeal, confirming the penalty u/s 271(1)(c) for furnishing inaccurate particulars of income by misclassifying short-term capital gain as long-term capital gain. The Tribunal found no justification to consider the mistake as bonafide and upheld the penalty imposed by the AO and confirmed by the CIT(A).