2017 (2) TMI 1235 - AT - Income Tax

Penalty under section 271(1)(c) - treating the share trading loss as speculation loss as per Explanation to Section 73 and consequently not entitled for set off against other income - proof of inaccurate particulars or concealed particulars of his income - Held that - As decided in CIT -vs.- Auric Investment & Securities Limited 2007 (7) TMI 276 - DELHI HIGH COURT the penalty imposed by the Assessing Officer under section 271(1)(c) was not sustainable as mere treatment of business loss as speculation loss by the Assessing Officer did not automatically warrant inference of concealment of income and there was nothing on record to show that in furnishing its return of income the assessee had either concealed its income or had furnished any inaccurate particulars of income. No infirmity in the impugned order of the ld. CIT(Appeals) cancelling the penalty imposed by the Assessing Officer under section 271(1)(c) - Decided in favour of assessee.

Summary

Issues:
Challenge to cancellation of penalty under section 271(1)(c) by the ld. CIT(Appeals).

Analysis:
1. The Revenue appealed against the cancellation of a penalty under section 271(1)(c) by the ld. CIT(Appeals). The case involved a Company deriving income from leasing activities. A search and seizure action led to the Assessing Officer disallowing a share trading loss claimed by the Company. The ld. CIT(Appeals) upheld the treatment of the loss as speculative but canceled the penalty imposed under section 271(1)(c) by the Assessing Officer.

2. The ld. CIT(Appeals) based the cancellation of the penalty on the grounds that the share trading loss was not a bogus loss and the Company did not furnish inaccurate particulars of income. The Tribunal accepted the genuineness of the share trading loss but upheld its treatment as speculation loss. The main issue was whether disallowance of the set off of share trading loss against other income attracts penalty under section 271(1)(c).

3. Judicial precedents were cited to support the cancellation of the penalty. In the case of CIT -vs.- SPK Steels Pvt. Limited, it was held that penalty under section 271(1)(c) is not applicable if the assessee did not conceal or furnish inaccurate particulars of income. Similarly, in the case of CIT -vs.- Auric Investment & Securities Limited, the penalty was deemed unsustainable as the mere treatment of business loss as speculation loss did not imply concealment of income.

4. Considering the legal precedents, the Tribunal found no fault in the ld. CIT(Appeals) decision to cancel the penalty imposed under section 271(1)(c). The appeal by the Revenue was dismissed, upholding the cancellation of the penalty. Consequently, the Cross Objection filed by the assessee was also dismissed as it became academic in light of the upheld decision.

In conclusion, the Tribunal upheld the cancellation of the penalty under section 271(1)(c) by the ld. CIT(Appeals) based on the genuineness of the share trading loss and the absence of inaccurate particulars of income, as supported by relevant judicial decisions.