2011 (2) TMI 858 - HC - Income Tax

Penalty under Section 271(1)(c) - Setting off of brought forward business losses against the capital gains - The Tribunal held that making incorrect claim would not tantamount to furnishing of inaccurate particulars unless it was established that the assessee had acted with mala fide intention or had claimed deductions being aware of the well settled legal position - Further, a perusal of the findings recorded by the Tribunal shows that the assessee had claimed deductions on account of set off of unabsorbed business losses against the income from the capital gains, which was held not to be mala fide - The Tribunal had observed that the assessee had disclosed all the particulars along with the return of income and, it was not a fit case for levy of penalty.

Summary

Issues involved:
1. Whether the Tribunal was justified in deleting the penalty under Section 271(1)(c) of the Income Tax Act, 1961?
2. Whether the claim of the assessee for set off of business losses against capital gains amounted to deliberate concealment or furnishing of inadequate particulars?

Analysis:

Issue 1:
The appeal was filed by the Revenue against the order of the Income Tax Appellate Tribunal Delhi Bench regarding the deletion of penalty under Section 271(1)(c) of the Income Tax Act for the assessment year 1994-95. The primary question was whether the Tribunal was correct in deleting the penalty of Rs. 6,30,930/- imposed by the Assessing Officer. The Tribunal had remitted the case to the CIT(A) for a decision on the levy of penalty, which was later confirmed by the CIT(A) but eventually deleted by the Tribunal.

Issue 2:
The core issue revolved around whether the claim of the assessee for setting off unabsorbed business losses against capital gains constituted deliberate concealment or furnishing of inadequate particulars. The Tribunal found that the assessee had made a bona fide claim for setting off the losses and had disclosed all relevant particulars, including the sale of business assets and utilization of the proceeds for business purposes. The Tribunal cited case laws to support its decision, emphasizing that making an incorrect claim in law does not necessarily amount to furnishing inaccurate particulars. The Tribunal concluded that the assessee's claim was not mala fide and that it was not a fit case for the levy of penalty under Section 271(1)(c) of the Act.

In summary, the High Court upheld the Tribunal's decision to delete the penalty, emphasizing that the assessee had acted in good faith and had provided all necessary details in support of their claim for setting off business losses against capital gains. The Court found no merit in the Revenue's appeal and dismissed it accordingly.