2016 (6) TMI 1221 - AT - Income Tax

Levy of penalty under section 271(1)(c) - furnishing of inaccurate particulars of income - Held that - Since assessee disclosed complete facts in the return of income as well as at the assessment stage and all the transactions are carried out through D-Mat Account and banking channel, therefore, it may not a case of furnishing of inaccurate particulars of income so as to levy the penalty against the assessee. The decisions relied upon by ld. counsel for the assessee also support the case of the assessee that it is not a fit case of levy of penalty. AO in the assessment order initiated the penalty proceedings for concealment of income but in the penalty order, Assessing Officer levied the penalty for furnishing inaccurate particulars of income. Therefore, Assessing Officer was not definite in his conclusion and finding as to on which account penalty should be imposed against the assessee. May be the addition on merit have been confirmed considering the long term capital gain to be income from other sources, but the facts clearly disclose that it is not a fit case of levy of penalty under section 271(1)(c) of the Act for furnishing inaccurate particulars of income. - Decided in favour of assessee.

Summary

Issues Involved:
1. Levy of penalty under section 271(1)(c) of the Income Tax Act.
2. Concealment of income or furnishing of inaccurate particulars of income.
3. Treatment of capital gain on purchase and sale of shares as undisclosed income from other sources.
4. Evidence to substantiate the purchase of shares and the role of share brokers.
5. Applicability of precedents and legal principles in penalty proceedings.

Detailed Analysis:

1. Levy of penalty under section 271(1)(c) of the Income Tax Act:
The appeal was directed against the order of the CIT(Appeals)-2 Ludhiana, which confirmed the levy of penalty under section 271(1)(c). The penalty was imposed for the alleged concealment of income and furnishing inaccurate particulars of income. The assessee contended that there was no concealment or furnishing of inaccurate particulars as all transactions were disclosed in the return of income and were conducted through account payee cheques and D-Mat Account.

2. Concealment of income or furnishing of inaccurate particulars of income:
The assessee argued that there was no concealment of income or furnishing of inaccurate particulars. The income from long-term capital gains on the sale of shares was disclosed, and tax was paid accordingly. The transactions were conducted through recognized channels, and all relevant details were provided during the assessment proceedings. The CIT(Appeals) did not accept this contention and upheld the penalty, noting that the assessee received accommodation entries and furnished wrong particulars in the return of income.

3. Treatment of capital gain on purchase and sale of shares as undisclosed income from other sources:
The Assessing Officer treated the long-term capital gain as income from other sources, leading to the addition of ?11,25,000/-. The assessee failed to produce evidence to substantiate the purchase of shares, and the share brokers did not produce their books of account. The shares were not traded through recognized Stock Exchanges during the relevant period, leading to the conclusion that the transactions were not genuine.

4. Evidence to substantiate the purchase of shares and the role of share brokers:
The assessee provided copies of purchase and sale bills, accounts of brokers, and D-Mat Account details. The brokers' failure to produce books of account was not within the control of the assessee. The shares were listed on the Ahmedabad and Madhya Pradesh Stock Exchanges, and the companies were registered with the Registrar of Companies. The CIT(Appeals) and Assessing Officer did not find this evidence sufficient and confirmed the penalty.

5. Applicability of precedents and legal principles in penalty proceedings:
The assessee relied on several judicial precedents, including the Hon'ble Supreme Court's decision in CIT Vs Reliance Petroproducts P. Ltd., which held that merely making a claim that is not sustainable does not amount to furnishing inaccurate particulars. The Hon'ble Punjab & Haryana High Court in CIT Vs Lakhani India Ltd. and the Hon'ble Delhi High Court in CIT Vs Krishnan Thyagarajan Sivarama also supported the assessee's case. The Tribunal considered these precedents and noted that the assessee disclosed all relevant facts and that the change in the head of income by the authorities did not justify the penalty.

Conclusion:
The Tribunal concluded that the assessee disclosed complete facts in the return of income and during the assessment stage. The transactions were conducted through D-Mat Account and banking channels. The penalty proceedings were initiated for concealment of income but levied for furnishing inaccurate particulars, indicating a lack of definite conclusion by the Assessing Officer. Based on the totality of facts and judicial precedents, the Tribunal held that it was not a fit case for levy of penalty under section 271(1)(c) and canceled the penalty.

Order:
The appeal of the assessee was allowed, and the penalty was canceled. The order was pronounced in the Open Court.