2014 (5) TMI 624 - AT - Income Tax

Levy of penalty u/s 271(1)(c) of the Act - Income from sale of shares shown as as capital gain but assessed as business income Shares in D-MAT form - No trading on the floor of stock exchange Held that - The assessee had offered the income from purchase and sale of shares may be as capital gain - The assessee has disclosed the purchase of shares - The purchase of shares is duly recorded in the books of account and has been shown in her Balance Sheet as on 31.03.2003 - The sale of the shares has also been disclosed by the assessee and the same is found recorded in the D-Mat account of the assessee - the assessee has duly disclosed all primary facts i.e. purchase and sale of shares, details of payments made for purchase and payment received for sale of shares - Profit arising from sale of shares was duly disclosed - it cannot be said that the assessee is guilty of concealment of income because the assessee had disclosed the income as capital gain, and department assessed it under some other head Relying upon CIT vs Reliance Petrochemicals Ltd. 2010 (3) TMI 80 - SUPREME COURT - it is not a fit case for levy of penalty u/s 271(1)(c) Decided in favour of Assessee.

Summary

Issues involved:
1. Levy of penalty under Section 271(1)(c) of the Income Tax Act based on the assessment of income from undisclosed sources instead of capital gains.

Detailed Analysis:
Issue 1:
The primary issue in this case pertains to the levy of a penalty under Section 271(1)(c) of the Income Tax Act based on the assessment of income from undisclosed sources rather than capital gains by the Assessing Officer. The appellant contested the penalty, arguing that the Assessing Officer had incorrectly assessed the income under a different head, leading to the penalty imposition. The appellant maintained that all relevant facts regarding the purchase and sale of shares, payments made and received, and the resulting profit were duly disclosed. The appellant relied on Board Circulars to support their case, emphasizing the recording of shares in the D-Mat account and the entry of the sale of shares. However, the ITAT found discrepancies in the transfer of shares to the D-Mat account and questioned the source of credit in the account. Despite the discrepancies, the ITAT concluded that the appellant had disclosed all primary facts regarding the transactions, and the penalty under Section 271(1)(c) was not justified. The ITAT referenced the decision of the Hon'ble Supreme Court in a similar case to support its decision, ultimately canceling the penalty.

Separate Judgment:
In a related appeal concerning another assessee, the issue of penalty under Section 271(1)(c) was raised, amounting to Rs. 3 lakh. Both parties acknowledged the similarity of facts with the earlier case and agreed that the outcome of the appeal for the first assessee would be applicable. Following the decision in the previous case, the penalty under Section 271(1)(c) for the second assessee was also canceled, leading to the allowance of both appeals.

In conclusion, the ITAT Delhi, in its judgment, analyzed the discrepancies in the assessment of income from undisclosed sources instead of capital gains, emphasizing the importance of disclosing primary facts and the applicability of relevant legal precedents in determining the imposition of penalties under Section 271(1)(c) of the Income Tax Act.