2015 (10) TMI 1886 - AT - Income Tax

Penalty u/s 271(1)(c) - Assessee has concealed the particulars of income or furnished inaccurate particulars of income in so far as its claim of Long Term Capital Loss on redemption of units of mutual funds - only ground as to why the penalty was applied against the assessee because certain claim in his return of income was not accepted by the Revenue - Held that - The assessee company has disclosed full details and particulars of its claim of carry forward of long term capital loss in the return of income. The claim of indexation was a bona fide claim as made by the assessee in respect of units of mutual funds. There was no indexation claimed by the company in respect of bonds of Konkan Railway Corporation Ltd. It is rightly held by the Hon ble Jurisdictional High Court in Administrator of Estate of Late E.F. Dinshaw (2015 (9) TMI 318 - BOMBAY HIGH COURT) that where all details of loss claimed by the assessee was stated in the return of income but was rejected by the Revenue, it would not amount to furnishing of inaccurate particulars or concealment of income on the part of the assessee and, therefore, penalty for concealment of income could not be levied. Similar finding also given in the decision of the Hon ble Supreme Court in Reliance Petroproducts Pvt. Ltd. (2010 (3) TMI 80 - SUPREME COURT) wherein it has been held that merely because a claim made by the assessee is rejected by the Revenue, levying of penalty under section 271(1)(c) is not justified. - Decided in favour of assessee.

Summary

Issues:
1. Confirmation of penalty under Section 271(1)(c) of the Income Tax Act, 1961.
2. Alleged concealment of income or furnishing inaccurate particulars regarding Long Term Capital Loss on redemption of mutual fund units.
3. Interpretation of indexation benefits for mutual fund units and bonds.
4. Upholding or canceling the penalty imposed by the Assessing Officer.

Analysis:

Issue 1: Confirmation of penalty under Section 271(1)(c) of the Income Tax Act, 1961:
The appeal was directed against the order confirming a penalty of Rs. 50,00,000 imposed by the Assessing Officer under Section 271(1)(c) of the Income Tax Act, 1961. The Tribunal analyzed whether the penalty was justified based on the grounds raised by the assessee.

Issue 2: Alleged concealment of income or furnishing inaccurate particulars regarding Long Term Capital Loss on redemption of mutual fund units:
The assessee claimed that the Long Term Capital Loss on redemption of mutual fund units was a bona fide claim and all relevant facts were disclosed. The dispute arose from the treatment of units of mutual funds as bonds or debentures for indexation purposes. The Assessing Officer disallowed the claim, leading to the imposition of the penalty. However, the Tribunal found that the assessee had not concealed income or furnished inaccurate particulars, as all details were disclosed in the return of income.

Issue 3: Interpretation of indexation benefits for mutual fund units and bonds:
The disagreement between the assessee and the Revenue centered on whether units of mutual funds should be treated as bonds or debentures for indexation purposes. The Tribunal referred to judicial opinions distinguishing between units and bonds, concluding that the claim for indexation on mutual fund units was bona fide and not subject to penalty.

Issue 4: Upholding or canceling the penalty imposed by the Assessing Officer:
The Tribunal considered relevant case law, including decisions of the Supreme Court and High Court, to determine the validity of the penalty under Section 271(1)(c). It was established that the rejection of a claim by the Revenue does not automatically warrant a penalty for concealment of income. As the assessee had disclosed all details in the return of income, the Tribunal canceled the penalty imposed by the Assessing Officer and upheld the appeal.

In conclusion, the Tribunal allowed the assessee's appeal, canceling the penalty confirmed by the Commissioner (Appeals) under Section 271(1)(c) of the Income Tax Act, 1961.