2015 (2) TMI 908 - HC - Income Tax

Penalty u/s 271(1)(c) - re-imbursement of expenses and claim for long term capital loss rejected ITAT deleted penalty levy - Held that - As far as issue of reimbursement is concerned, the ITAT noticed that the above was based only on account of letter dated 28.10.2009 addressed to the assessee by AO. After noticing the materials on record the ITAT held that the amount had in fact been disclosed in AY 2007-08 and they were directed to be deleted in appellate proceedings. Given these set of facts the ITAT felt that at least penal action was not warranted even though in quantum proceedings the assessee might have failed. We see no infirmity in the findings which are based upon pure appreciation of facts. Penalty imposed on quantum of capital loss made by the assessee this Court noticed that all that the assessee did was to say that the transaction was reversed inasmuch as the amount received from Mr. Rana Iqbal Singh Jolly was returned to him. Whether that transaction was shrouded or suspicious or not, the fact remains that the capital loss was claimed on account of the subsequent sale to M/s Patel Estate (P) Ltd. Having regard to these facts, the ITAT noticed -and rightly so - that the assessee could not be accused of having furnished inaccurate particulars or concealed income or amounts which were liable to be taxed in its return so as to call for penal action under Section 271(1)(c) based upon binding rules of the Supreme Court including CIT V. Reliance Petroproducts Pvt. Ltd. (2010 (3) TMI 80 - SUPREME COURT ) was justified and warranted. - Decided in favour of assessee.

Summary

Issues:
1. Deletion of penalty amounts based on erroneous reasons.

Analysis:
The High Court considered the appeal against the order of the Income Tax Appellate Tribunal (ITAT) regarding penalty amounts. The assessee's claims for reimbursement of expenses and long-term capital loss were rejected by the ITAT, leading to penalty proceedings initiated by the Assessing Officer (AO) under Section 271(1)(c). The ITAT, however, accepted the assessee's contentions, stating that there was no concealment of material particulars or inaccurate disclosure of facts in the returns. The High Court upheld the ITAT's decision, emphasizing that the penalty was not warranted as the assessee had disclosed the relevant details in the appropriate assessment year, and the capital loss claim was legitimate despite certain suspicions surrounding the transaction. The Court found no grounds for penal action under Section 271(1)(c) based on the Supreme Court's precedents, ultimately dismissing the appeal.

In the first issue of reimbursement, the ITAT observed that the amount in question had been disclosed in the correct assessment year and directed its deletion in the appellate proceedings. The Court agreed with the ITAT's findings, stating that penal action was not justified even if the assessee had failed in the quantum proceedings. Regarding the penalty imposed for the capital loss, the Court noted that the transaction was reversed, and the claim was based on subsequent legitimate sale. Despite suspicions surrounding the initial transaction, the Court agreed with the ITAT that there was no inaccurate disclosure or concealment of income, aligning with established legal principles. The decision was deemed justified, and no substantial question of law was found to arise, leading to the dismissal of the appeal.