2015 (12) TMI 1238 - AT - Income Tax

Penalty u/s. 271(1)(c) - AO was of the firm belief that the stock of shares was nothing but investment and the investment was made out of borrowed funds, thus disallowed the entire claim of expenditure and the income from business was assessed at Rs. Nil. - CIT(A) deleted the penalty - Held that - Applying the ratio of the Hon ble Supreme Court in the case of Reliance Petro Products 2010 (3) TMI 80 - SUPREME COURT on the facts of the present case as mentioned elsewhere on the date of the filing of the return of income, the assessee had assessment order for A.Y. 2008-09 wherein business of trading in shares and securities was accepted by the Revenue authorities even if that order was made u/s. 143(1) of the Act. Till date neither the assessment of A.Y. 2008-09 has been reopened nor any revisionary action u/s. 263 of the Act have been taken by the Commissioner. Considering all these facts in totality, we do not find any reason to interfere with the findings of the Ld. CIT(A). Appeal filed by the Revenue is accordingly dismissed. - Decided in favour of assessee.

Summary

Issues:
Appeal against deletion of penalty under section 271(1)(c) of the Income Tax Act for assessment years 2009-10 and 2010-11.

Issue 1: Penalty Deletion for A.Y. 2009-10
The Revenue appealed against the deletion of a penalty of Rs. 6,30,28,304 imposed under section 271(1)(c) of the Act. The Assessing Officer (AO) disallowed the expenditure claim of an assessee company engaged in trading in shares and securities, treating the stock of shares as investment made out of borrowed funds. The AO initiated penal proceedings, which were upheld by the First Appellate Authority. However, the assessee contended that it did not conceal income or furnish inaccurate particulars. The AO relied on Supreme Court decisions but the CIT(A) found that the assessee had not concealed any particulars or submitted inaccurate particulars. The CIT(A) deleted the penalty based on legal and debatable issues, supported by judicial decisions. The Revenue challenged this decision.

Issue 2: Penalty Deletion for A.Y. 2010-11
In the subsequent assessment year, the assessee withdrew the expenditure claim after knowing the view taken for the preceding year. The facts were similar to the previous year, and the Revenue appealed against the penalty deletion. The Tribunal noted that the distinguishing fact should not impact the decision, as the assessee revised the return based on the view taken by authorities. The Tribunal declined to interfere with the CIT(A)'s findings for this year as well.

Analysis:
In the case of A.Y. 2009-10, the Tribunal examined the conduct of the assessee in relation to the claim of business income versus capital gains from share trading. The Tribunal found that the assessee's conduct was not indicative of concealing income or furnishing inaccurate particulars, especially considering the accepted business claim in the previous year. The Tribunal applied the Supreme Court's principle that incorrect legal claims do not equate to inaccurate particulars. The Tribunal upheld the CIT(A)'s decision to delete the penalty. Similarly, for A.Y. 2010-11, the Tribunal maintained consistency in its approach, emphasizing that the revised return filed by the assessee after knowing the authorities' view did not amount to inaccurate particulars. The Tribunal dismissed the Revenue's appeals in both years, affirming the CIT(A)'s decisions.

This judgment highlights the importance of assessing the conduct of the assessee at the time of filing returns and considering legal interpretations in penalty proceedings. The Tribunal's reliance on judicial precedents and the distinction between business income and capital gains played a crucial role in deciding the penalty deletions for both assessment years.