2011 (1) TMI 625 - HC - Income Tax

Penalty levied u/s 271(1)(c)- Since the assessee had furnished all the particulars in regard to purchase and sale of the shares which are not found to be incorrect, and since the only dispute is that the appellant has treated the same as business loss/trading loss whereas the Assessing Officer treated the said loss incurred as capital loss, we are in agreement with the findings recorded by both the appellate authorities below that shifting of loss from one head to another head does not amount to concealment or guilt on the part of the assessee that the assessee had furnished inaccurate particulars of facts or inaccurate particulars of income warranting imposition of penalty under section 271(1)(c) of the Act - Decided in favour of assessee.

Summary

Issues:
1. Challenge to order deleting penalty under section 271(c)(c) of the Income Tax Act.
2. Dispute over treatment of loss on sale of shares as capital loss or business loss.
3. Whether rejection of claim for business loss amounts to concealment of income.

Analysis:

1. The Revenue challenged the order deleting the penalty under section 271(c)(c) of the Income Tax Act. The assessing officer disallowed a loss claimed by the assessee on the sale of shares, treating it as a capital loss instead of a business loss. The penalty was levied for furnishing inaccurate particulars of income. The Commissioner (Appeals) held that there was no concealment of income and deleted the penalty. The Tribunal dismissed the Revenue's appeal, leading to the present appeal.

2. The dispute centered around the treatment of the loss on the sale of shares as either a capital loss or a business loss. The assessing officer contended that since the shares were shown as an investment in earlier years, the loss should be treated as a capital loss. However, the assessee claimed it as a business loss. The Commissioner (Appeals) found that the transactions and loss were genuine, and rejecting the assessee's claim for business loss did not establish concealment. The rejection of the claim for business loss did not indicate any intention to hide income to avoid tax.

3. The High Court noted that the rejection of the assessee's claim for business loss did not amount to concealment or guilt on the part of the assessee for furnishing inaccurate particulars of income. The court emphasized that shifting the loss from one head to another did not warrant a penalty under section 271(1)(c) of the Act. Since all particulars were disclosed, and the dispute was regarding the classification of the loss, the court upheld the findings of the appellate authorities that no concealment or inaccurate particulars were involved. Consequently, the court dismissed the appeal, finding no substantial question of law warranting interference.

In conclusion, the judgment revolved around the treatment of a loss on the sale of shares and whether rejecting a claim for business loss amounted to concealment of income. The court upheld the decision to delete the penalty, emphasizing that the mere disagreement over the classification of the loss did not indicate any intent to conceal income.