2015 (2) TMI 669 - HC - Income Tax

Penalty under section 271(1)(c) - ssessee filed the return of income without computing the correct tax liability under section 115JB read with section 10(38) - ITAT deleted penalty - Held that - Vide the Finance Act, 2006, a proviso was inserted in section 10(38) of the Act, with effect from April 1, 2007, and prior to the insertion of the aforesaid proviso under section 10(38) of the Act, the long-term capital gains on shares was not required to be included while determining the book profits under section 115JB of the Act. According to it, the long-term capital gains on shares is to be included while determining the book profits. It was for the first time that for the assessment year 2007-08 onwards, the aforesaid provision became applicable. The plea of the assessee regarding the bona fides has been accepted by the Tribunal. There is nothing to doubt the veracity of the aforesaid findings recorded by the Tribunal. - Decided in favour of assessee.

Summary

Issues:
- Penalty under section 271(1)(c) of the Income-tax Act, 1961
- Interpretation of proviso to section 10(38) of the Act
- Application of judgment in CIT v. Reliance Petroproducts P. Ltd. [2010] 322 ITR 158 (SC)

Analysis:

Issue 1: Penalty under section 271(1)(c) of the Income-tax Act, 1961
The appeal was filed by the Revenue challenging the deletion of penalty under section 271(1)(c) by the Income-tax Appellate Tribunal. The case involved the assessee filing a revised computation of income after detection of concealment by the Assessing Officer. The Assessing Officer had initiated penalty proceedings under section 271(1)(c) and imposed a penalty. The Commissioner of Income-tax (Appeals) allowed the appeal and deleted the penalty, a decision upheld by the Tribunal. The Revenue contended that the penalty should not have been deleted, citing the proviso to section 10(38) of the Act and the timing of the revised computation filed by the assessee.

Issue 2: Interpretation of proviso to section 10(38) of the Act
The key contention revolved around the proviso to section 10(38) of the Act, inserted with effect from April 1, 2007. This proviso required long-term capital gains on shares to be included while computing the book profit and tax liability under section 115JB of the Act. The Tribunal accepted the assessee's argument that they were unaware of this amendment and filed the revised computation under a bona fide belief. The Tribunal emphasized that the assessee had not concealed income particulars and had promptly rectified the computation upon becoming aware of the amendment.

Issue 3: Application of judgment in CIT v. Reliance Petroproducts P. Ltd. [2010] 322 ITR 158 (SC)
The Revenue argued that the Tribunal erred in relying on the judgment in CIT v. Reliance Petroproducts P. Ltd., contending that the facts of that case were distinct and not applicable in the present scenario. However, the Tribunal upheld its decision, emphasizing that the assessee's actions did not amount to concealing income or furnishing inaccurate particulars, as per the interpretation of the proviso to section 10(38) of the Act.

In conclusion, the High Court dismissed the appeal by the Revenue, finding no substantial question of law to consider. The Court upheld the Tribunal's decision, emphasizing the bona fide belief of the assessee regarding the proviso to section 10(38) and the absence of concealment of income particulars.