2014 (8) TMI 1093 - AT - Income Tax

Penalty u/s.271(1)(c) - dividend striping u/s. 94(7) - assessee is a share broker and a share trader - concealment of income v/s bona fide mistake - Held that - CIT(A) after going through the explanation submitted by the assessee has observed that it was not a case of concealment of income rather of bona fide mistake. The A.O. had not detected any concealment of income but had sought the details of disallowance u/s. 94(7) in ordinary course of assessment proceedings. The ld. CIT(A), therefore held that it was not a fit case for levy of penalty. AR submitted that the assessee has returned a total income of ₹ 12.25 crores. He, further, submitted that the disallowance prescribed u/s.94(7) is a statutory disallowance only. Accordingly, he submitted that there is no concealment of particulars of income on furnishing of inaccurate particulars of income. We find force in the submissions of the ld. AR. There is no infirmity in the order of the ld. CIT(A). - Decided against revenue

Summary

Issues:
Appeal against deletion of penalty under section 271(1)(c) in relation to dividend stripping under section 94(7) of the Income Tax Act, 1961.

Analysis:
The appeal pertains to the Revenue challenging the deletion of a penalty under section 271(1)(c) by the Commissioner of Income Tax (Appeals) in connection with dividend stripping under section 94(7) of the Income Tax Act, 1961. The assessee, a share broker and trader, received a dividend of Rs. 47,16,889 from Indian Companies and Mutual Funds. The Assessing Officer (A.O.) initiated penalty proceedings and imposed a penalty equal to 100% of the tax amount sought to be evaded. The assessee voluntarily offered a disallowance of Rs. 14,07,826 for taxation after realizing an error related to section 94(7) during the assessment proceedings.

During the appeal, the assessee contended that there was no concealment of income as no inaccurate particulars were furnished with the intention of concealing income. The A.O. did not detect any concealment, and the details regarding the disallowance under section 94(7) were provided by the assessee upon realizing the error. The Commissioner of Income Tax (Appeals) deleted the penalty, stating that it was not a case of concealment but a bona fide mistake by the assessee.

The Tribunal observed that the A.O. did not find any concealment of income but sought details of the disallowance under section 94(7) as part of the assessment proceedings. The Tribunal agreed with the Commissioner's decision that there was no concealment and that it was not a suitable case for imposing a penalty. The Tribunal upheld the Commissioner's order, dismissing the Revenue's appeal against the deletion of the penalty.

In conclusion, the Tribunal found no merit in the Revenue's appeal and dismissed it, affirming the decision to delete the penalty under section 271(1)(c) related to dividend stripping under section 94(7) of the Income Tax Act, 1961. The order was pronounced in the open court on August 22, 2014.