2013 (10) TMI 375 - HC - Income Tax

Penalty u/s 271(1)(c) of the Income Tax Act Held that - Reliance has been placed upon the judgment in the case of Commissioner of Income Tax v- Reliance Petroproducts Private Ltd. reported in 2010 (3) TMI 80 - SUPREME COURT , wherein it has been held that 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). A mere making of a claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such a claim made in the return cannot amount to furnishing inaccurate particulars Decided against the Revenue.

Summary

Issues:
1. Treatment of short-term capital gain as business profit.
2. Imposition of penalty under Section 271(1)(c) read with Section 274 of the Income Tax Act.

Issue 1: Treatment of short-term capital gain as business profit

The appeal challenged a judgment by the Income Tax Appellate Tribunal regarding the treatment of short-term capital gains during the assessment year 2005-2006. The Assessing Officer had treated the short-term capital gain as business profit due to quick succession in share transactions, indicating an intention for adventure rather than investment. However, short-term capital gain was allowed for some shares held as an opening balance. The Tribunal observed that the Assessing Officer unjustly treated some shares' transactions as short-term capital gain and others as business income without sufficient reasoning. The Tribunal emphasized the need for consistency and definiteness in the Revenue's approach to maintain the integrity of assessments, citing relevant legal precedents. The Tribunal found no infirmity in its order, and no legal question was raised.

Issue 2: Imposition of penalty under Section 271(1)(c)

The Assessing Officer had imposed a penalty under Section 271(1)(c) read with Section 274 for furnishing inaccurate particulars. The Commissioner of Income Tax reversed this penalty, leading to an appeal by the Revenue to the Tribunal. The Tribunal, considering settled legal principles, held that a mere unsustainable claim in the return does not amount to furnishing inaccurate particulars. Citing a Supreme Court judgment, the Tribunal emphasized that unless details in the return are found to be incorrect, erroneous, or false, penalty under Section 271(1)(c) cannot be imposed. The Tribunal, based on these principles, deleted the penalty imposed by the Assessing Officer. The questions raised by the Revenue regarding the treatment of surplus earned by the assessee and the deletion of the penalty were answered in the affirmative, leading to the disposal of the appeal.

In conclusion, the High Court upheld the Tribunal's decision, emphasizing the importance of consistency in the Revenue's approach and adherence to legal principles in assessing tax matters. The judgment provided clarity on the treatment of short-term capital gains and the imposition of penalties under the Income Tax Act, ensuring fairness and adherence to established legal standards in tax assessments.