2014 (12) TMI 48 - AT - Income Tax

Penalty u/s 271(1)(c) deleted - Whether the assessee has filed inaccurate particulars of income - Held that - The assessee is engaged in the share transactions - except change of the head, there is no addition of single penny - CIT(A) was of the opinion that mere change of head cannot be said to filing of the inaccurate particulars of income in COMMISSIONER OF INCOME-TAX Versus RELIANCE PETROPRODUCTS PVT. LTD. 2010 (3) TMI 80 - SUPREME COURT - it must be shown that the conditions u/s 271(1)(c) must exist before the penalty is imposed - everything would depend upon the Return filed because that is the only document, where the assessee can furnish the particulars of his income - there is no finding that any details supplied by the assessee in its Return were found to be incorrect or erroneous or false - Such not being the case, there would be no question of inviting the penalty under Section 271(1)(c) of the Act - a mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such claim made in the Return cannot amount to the inaccurate particulars the AO was not justified at all for levying the penalty merely because he is having different opinion on the plea of the assessee in respect of the head under which the income is to be assessed - merely because the legal claim made by the assessee is rejected by the AO that will not attract the penalty - CIT(A) has rightly deleted the penalty and no interference is called for the order of the CIT(A) is upheld Decided against revenue.

Summary

Issues Involved:
1. Deletion of penalty under Section 271(1)(c) of the Income Tax Act, 1961.
2. Classification of income from share transactions as business income vs. capital gains.
3. Compliance with Section 249(4)(a) regarding payment of tax due on returned income.
4. Interpretation of "furnishing inaccurate particulars of income."

Issue-wise Detailed Analysis:

1. Deletion of Penalty under Section 271(1)(c):
The Revenue challenged the deletion of a penalty amounting to Rs. 1,57,82,879/- imposed under Section 271(1)(c) of the Income Tax Act, 1961. The penalty was originally levied by the Assessing Officer (AO) on the grounds that the assessee furnished inaccurate particulars of income by classifying income from share transactions as capital gains instead of business income. The Ld. CIT(A) deleted the penalty, stating that the issue of classification of income is subjective and debatable, and merely having a different opinion does not justify the imposition of a penalty. The Tribunal upheld this view, confirming that the AO was not justified in levying the penalty merely due to a difference in opinion.

2. Classification of Income from Share Transactions:
The assessee declared income from share transactions as capital gains, which included Long Term Capital Gain (LTCG) of Rs. 1,53,11,448/- and Short Term Capital Gain (STCG) of Rs. 4,73,30,889/-. The AO reclassified this income as business income based on the frequency, volume, and systematic nature of the transactions. The Tribunal noted that the AO's reclassification was based on a different interpretation of the facts and that this difference in classification does not amount to furnishing inaccurate particulars of income.

3. Compliance with Section 249(4)(a):
The assessee's appeal before the Ld. CIT(A) was initially dismissed for non-payment of tax due on the returned income, as required under Section 249(4)(a). However, the Tribunal set aside this order, directing the Ld. CIT(A) to consider the appeal on merits after the assessee paid the due tax. The Tribunal referenced the Karnataka High Court judgment in K. Satish Kumar Singh, which supports the view that the CIT(A) should entertain the appeal if the tax is paid subsequently.

4. Interpretation of "Furnishing Inaccurate Particulars of Income":
The Tribunal referred to the Supreme Court's judgment in Reliance Petroproducts Pvt. Ltd., which clarified that merely making an incorrect claim in law does not amount to furnishing inaccurate particulars of income. The Tribunal emphasized that there was no concealment of income or furnishing of inaccurate particulars in the assessee's case. The AO's basis for the penalty was the reclassification of income, not any false or incorrect details provided by the assessee. The Tribunal concluded that the penalty under Section 271(1)(c) was not applicable, as the issue was one of legal interpretation rather than factual inaccuracy.

In conclusion, the Tribunal dismissed the Revenue's appeal, upholding the Ld. CIT(A)'s decision to delete the penalty. The Tribunal reiterated that differences in legal interpretation regarding the classification of income do not constitute furnishing inaccurate particulars of income and do not warrant the imposition of a penalty under Section 271(1)(c).