2013 (6) TMI 222 - HC - Income Tax

Penalty u/s 271(1)(c) - debatable issue - taxation of short term capital gains under Section 45(4) - held that - The Tribunal was of the opinion that transaction which had taken place by passing book entries and not by executing any conveyance deed and since this was a debatable issue and when the assessee has acted upon the advice of the Chartered Accountant it cannot be said to be an attempt on the part of the assessee to conceal any material facts. It also relied on the judgment of BTX Chemical P. Ltd. vs. Commissioner of IncomeTax(2006 (7) TMI 155 - GUJARAT High Court) wherein also the question of penalty had arisen before this Court on account of alleged concealment of income and this Court had held that the assessee, who was under a bona fide belief on the basis of the advice received from his Chartered Accountant that the loss occurred as a result of destruction of asset was of revenue nature and claimed the same by way of deduction, the same cannot be held to be a case of concealment coming within the scope of Section 271(1)(c) of the Act. - No penalty - Decided in favor of assessee.

Summary

Issues:
Challenging penalty under Section 271(1)(c) of the Income Tax Act based on deletion by the Tribunal.

Analysis:
The case involved an appeal challenging the order of the Income Tax Appellate Tribunal regarding the deletion of a penalty under Section 271(1)(c) of the Income Tax Act. The Tribunal had deleted the penalty based on the nature of the underlying addition being debatable. The assessee, engaged in trading, had its income finalized after scrutiny assessment for the assessment year 2001-02. The Assessing Officer added a short-term capital gain arising from the transfer of a capital asset to the firm's income, leading to penalty proceedings. The CIT(Appeals) and the Assessing Officer upheld the penalty, but the Tribunal, referring to a previous court decision, BTX Chemical P. Ltd. vs. Commissioner of IncomeTax, deleted the penalty.

In the penalty proceedings, the Assessing Officer imposed a penalty of Rs.1.12 crores, which was later deleted by the Tribunal. The Tribunal's decision was based on the fact that the transaction in question was debatable, and the assessee had acted upon the advice of a Chartered Accountant. The Tribunal found no element of concealment on the part of the assessee and concluded that Section 271(1)(c) was not applicable in this case. The Tribunal's decision was supported by the facts and circumstances of the case, leading to the dismissal of the Tax Appeal.

The Tribunal's decision was based on the principle that the assessee had acted in good faith upon professional advice, and the transaction in question was debatable. The Tribunal's reliance on the BTX Chemical P. Ltd. case was crucial in determining that there was no concealment of income on the part of the assessee. The Court agreed with the Tribunal's analysis, emphasizing that the provision of Section 271(1)(c) was not applicable in this case. The Court found no error in the Tribunal's application of the legal principles and dismissed the Tax Appeal, as no question of law arose from the Tribunal's decision.