2015 (5) TMI 1089 - AT - Income Tax

Penalty u/s. 271(1)(c) - change of head of income - speculative loss assessed under the head business loss - Held that - We are of opinion that mere change of head of income should not result in automatic levy of concealment penalty. The detail about the speculative loss was available on the record. Therefore, it cannot be held that assessee had filed inaccurate particulars of income or had concealed the particulars of income.Even if a unsubstantiated claim is made in the return of income, it cannot be held that the assessee is liable for levy of penalty u/s.271(1)(c). Difference of opinion between the AO and the assessee about head of income under which particular item is to be assessed was and would remain a bone of contention between the AO and the assessee. But such differences should not and cannot result invoking the penal provision of chapter XXI of the Act. See COMMISSIONER OF INCOME-TAX Versus AURIC INVESTMENT AND SECURITIES LTD. 2007 (7) TMI 276 - DELHI HIGH COURT - Decided in favour of assessee.

Summary

Issues involved:
Challenge to cancellation of penalty under section 271(1)(c) of the Income-tax Act for allegedly concealing income and furnishing inaccurate particulars.

Analysis:

Issue 1: Challenge to cancellation of penalty under section 271(1)(c)
The case involved the AO levying a penalty of Rs. 7.45 lakhs under section 271(1)(c) of the Income-tax Act on the assessee for allegedly concealing income and furnishing inaccurate particulars. The AO contended that the treatment of business loss as speculation loss warranted the inference of concealment of income. The FAA, however, deleted the penalty relying on the judgment in the case of Reliance Petro Products Ltd. The FAA held that the change in the treatment of loss did not amount to concealment of income. The Tribunal further emphasized that a mere change in the head of income should not automatically result in the levy of a concealment penalty. It was noted that the details about the speculative loss were available on record, and unsubstantiated claims in the return of income did not necessarily lead to penalty under section 271(1)(c). The Tribunal referred to the judgment in Auric Investments and Securities Ltd. where it was held that the treatment of loss under a different head of income did not justify the imposition of a penalty for concealment of income.

Issue 2: Interpretation of legal provisions and precedents
The Tribunal analyzed the legal provisions under section 271(1)(c) of the Income-tax Act and the precedents set by various court judgments. It was observed that the mere treatment of business loss as speculation loss by the AO did not automatically imply concealment of income. The Tribunal referred to the decision of the Hon'ble Delhi High Court in Auric Investments and Securities Ltd., where it was held that the disallowance of a claim for business loss did not constitute concealment of income. The Tribunal, following the legal principles established in the aforementioned case, decided the effective ground of appeal against the AO and dismissed the appeal filed by the AO.

Conclusion:
The Tribunal, in its judgment, upheld the decision of the FAA to delete the penalty imposed by the AO under section 271(1)(c) of the Income-tax Act. It emphasized that a mere change in the head of income, without evidence of concealment of income or furnishing inaccurate particulars, should not lead to the automatic imposition of a penalty. The Tribunal's decision was based on legal interpretations and precedents that highlighted the distinction between treatment of income under different heads and actual concealment of income.