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2013 (8) TMI 811 - AT - Income TaxPenalty u/s 271(1)(a) of the Income Tax Act Claim of loss on account of transfer of units of US-64 and and also carry forward and set-off of loss in subsequent years - Disallowance of the loss on the transfer of units of US-64 - Conversion of the units into tax-free bonds by the UTI, the issuer, at a per unit price of Rs.12/- as against the face value (cost) of Rs.10/- per unit - Assessee had in its return of income filed a note with its computation of income disclosing all details about the sale of US 64 units, the loss and resultant carry forward Held that - Reliance is placed upon the judgment in the case of Sandvik Asia Ltd. vs. CIT 2004 (1) TMI 45 - BOMBAY High Court and it was held that at the highest it can be said that the assessee s claim is not sustainable in law, and which would not make it susceptible to penalty, and which is without doubt the ratio of the decision in the case of Reliance Petroproducts Pvt. Ltd. 2010 (3) TMI 80 - SUPREME COURT . Further, decision by the hon ble high court in the case of Nalin P. Shah & Othrs. 2013 (8) TMI 496 - ITAT MUMBAI is rendered in an identical fact situation, wherein it has been held that the impugned claim is not liable to be visited with penalty u/s. 271(1)(c) as there is under the circumstances no furnishing of inaccurate particulars of income. The fact situation in the instant case being identical, therefore, constrained on the ground of consistency to adopt the same view as has found approval by the hon ble jurisdictional high court Decided in favor of Assessee.
Issues Involved:
1. Levy of penalty under Section 271(1)(c) of the Income Tax Act, 1961. 2. Disallowance of loss on the transfer of units of US-64. 3. Interpretation and applicability of Section 10(33) of the Income Tax Act. 4. Applicability of the decision in CIT v. Reliance Petroproducts Pvt. Ltd. [2010] 322 ITR 158 (SC). Detailed Analysis: 1. Levy of Penalty under Section 271(1)(c): The appeal was directed against the order confirming the levy of penalty under Section 271(1)(c) of the Income Tax Act, 1961, for the assessment year 2004-05. The penalty was levied due to the disallowance of the loss on the transfer of units of US-64, which the assessee claimed in its return of income. The penalty amount was Rs. 102 lacs, marginally over the minimum penalty of 100% of the tax sought to be evaded, which was Rs. 101.47 lacs. 2. Disallowance of Loss on Transfer of Units of US-64: The assessee claimed a loss of Rs. 461.25 lacs on the conversion of units of US-64 into tax-free bonds by UTI at a per unit price of Rs. 12 against the face value of Rs. 10 per unit. The basis of the claim was that only the income arising by way of dividend on the units was exempt under Section 10(33) of the Act, not the income (or loss) on their transfer. The assessee claimed a carry forward of the loss as part of the total loss under the head 'long term capital gains' (LTCG) at Rs. 643.14 lacs. The Assessing Officer (A.O.) found this explanation unacceptable and levied the penalty, invoking Explanation 1 to Section 271(1)(iii). 3. Interpretation and Applicability of Section 10(33): The Tribunal observed that Section 10(33) of the Act does not exempt dividend income on units of US-64 but only the income arising from their transfer. The language of the provision is precise and unambiguous, leaving no scope for an argument in favor of the assessee's claim. The Tribunal highlighted that the facts furnished by the assessee contradicted its claim, and the explanation provided was false. The explanation given by the assessee was that Section 10(33) refers only to 'income' while the assessee incurred a 'loss'. The Tribunal rejected this explanation, stating that loss is only negative income and bears the same character as income. 4. Applicability of the Decision in CIT v. Reliance Petroproducts Pvt. Ltd.: The Tribunal noted that the decision in CIT v. Reliance Petroproducts Pvt. Ltd. emphasized that merely making a wrong claim does not amount to furnishing inaccurate particulars of income if all facts material to the computation of income are furnished. However, in this case, the assessee's claim was found to be baseless and false, attracting the penalty under Section 271(1)(c). The Tribunal distinguished this case from Reliance Petroproducts, stating that the latter did not cover situations where a legal claim was negated by a specific provision of law. Tribunal's Decision: The Tribunal referred to a co-ordinate bench decision in a similar case involving the assessee's family members, where the penalty was deleted based on the disclosure of primary facts and the decision in Reliance Petroproducts. The Tribunal also noted that the Hon'ble jurisdictional High Court upheld this decision, finding nothing amiss in the Tribunal's application of Reliance Petroproducts. Conclusion: While the Tribunal found the assessee's claim to be ex facie inadmissible and without any basis, it was constrained by the principle of consistency to follow the decision of the Hon'ble jurisdictional High Court in an identical fact situation. Consequently, the Tribunal set aside the levy of the impugned penalty, allowing the assessee's appeal. Order Pronounced: The assessee's appeal was allowed, and the order was pronounced in the open court on July 05, 2013.
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