2012 (9) TMI 232 - AT - Income Tax

Penalty u/s 271(1)(c) business income or capital gain - AO treat the gain as short term capital gain and initiated penalty proceeding u/s 271(1((c) - Assessee accepted the decision of the AO and went with the tax authorities by not contesting the issue and by paying the tax as required by the AO Held that - merely making a wrong claim in the return of income cannot a ground for imposing penalty u/s 271(1)(c) of the Act as it neither amounts to furnishing inaccurate particulars nor amounts to concealment of income. - Where there is no finding that any details supplied by the assessee in its return are found to be incorrect or erroneous or false there is no question of inviting the penalty under section 271(1)(c). - decision in Reliance Petro Products (P) Ltd. (2010 (3) TMI 80 - SUPREME COURT) followed. - In favor of assessee.

Summary

Issues:
- Appeal against deletion of penalty u/s 271(1)(c) of the Income Tax Act, 1961
- Justification of CIT(A) in following decisions of courts cited by the assessee

Analysis:

1. Background and Assessment Proceedings:
The appeal was filed by the Revenue against the order of CIT(A) deleting the penalty u/s 271(1)(c) of the Income Tax Act for AY 2008-09. The assessee declared total income of Rs. 78,83,303, and scrutiny assessment revealed discrepancies in the treatment of income from the sale of stock options. The AO concluded that the gain should be treated as short term capital gain, leading to penalty proceedings against the assessee.

2. AO's Findings and Penalty Order:
The AO disallowed the assessee's claim of long term capital gain, initiating penalty proceedings u/s 271(1)(c). Despite the assessee's explanations, the AO passed a penalty order, citing incriminating material and clear concealment of income. The CIT(A) later deleted the penalty, relying on the reasoning provided by the assessee and court decisions.

3. Arguments and Submissions:
The Revenue contended that the penalty was justified due to inaccurate particulars furnished by the assessee. They argued that the CIT(A) erred in not considering the AO's findings and in following court decisions cited by the assessee. In response, the assessee's representative explained the treatment of stock proceeds as long term capital gain, supported by consultations with tax authorities and a chartered accountant.

4. Judgment and Legal Precedents:
The ITAT considered the main dispute of assessing stock proceeds as long term or short term capital gain. Referring to the Supreme Court's judgment in CIT vs Reliance Petro Products, the ITAT emphasized that incorrect claims do not necessarily constitute inaccurate particulars. The ITAT also cited the Bombay High Court's decision, stating that a wrong claim in the return does not amount to concealment.

5. Conclusion and Decision:
The ITAT found no concealment or inaccurate particulars in the assessee's return. The assessee's acceptance of the AO's assessment and willingness to pay tax as determined indicated no intention to evade. Therefore, the CIT(A) rightly deleted the penalty, as there was no basis for imposing it. The ITAT dismissed the Revenue's appeal, upholding the CIT(A)'s decision based on legal precedents and the facts of the case.

In conclusion, the ITAT's detailed analysis focused on the correctness of the assessee's claims, the absence of concealment or inaccurate particulars, and the legal principles governing penalty imposition under the Income Tax Act.