2017 (11) TMI 1939 - AT - Income Tax

Penalty u/s 271(1)(c) - furnishing of inaccurate particulars of income by the assessee with regard to computation of book profit under section 115JB - non-inclusion of long term capital gain from sale of equity shares while computing the books profit under section 115JB - HELD THAT - A perusal of the return of income filed by assessee for the impugned assessment year,nd computation of income accompanying such return clearly indicate that the assessee has disclosed full particulars relating sale of equity shares and the long term capital gain derived therefrom - a perusal of the assessment order also reveals that the information relating to earning of long term capital gain from sale of equity shares by the assessee and non-inclusion of the same for computing book profit under section 115JB came to the notice of the Assessing Officer from the statement of total income filed by the assessee along with the return of income and not from any other source. Thus,assessee has furnished full particulars of the income derived from sale of equity shares. Though, it may be a fact that long term capital gain from sale of shares is not exempt for computing book profit under section 115JB, however, such exemption claimed by the assessee appears to be for the reason that assessee was under a bona fide belief that, since, long term capital gain as per section 10(38) is exempt from taxation under the normal provisions of the Act, the same would also apply for computing book profit. The explanation of the assessee that non-inclusion of long term capital gain for computing book profit was due to bona fide reasons cannot be brushed aside lightly. In any case of the matter, the factual matrix clearly reveals that the assessee has made full disclosure of facts relating to earning of long term capital gain from sale of equity shares in the return of income as well as in the computation of income. Non-inclusion of long term capital gains by computing book profit under section 115JB , in our view, is a mere computational error due to a bona fide belief entertained by the assessee that such income is exempt from taxation. That being the case, the ratio laid down by in the case of Pricewaterhouse Cooper Pvt. Ltd. 2012 (9) TMI 775 - SUPREME COURT will clearly apply to the facts of assessee s case. Thus assessee s explanation that it excluded long term capital gain from sale of equity shares while computing book profit under section 115JB entertaining a belief that it is also exempt from taxation, appears to be plausible. Therefore, in our considered opinion, the assessee cannot be charged with the offence of furnishing inaccurate particulars of income so as to levy penalty under section 271(1)(c) - Decided in favour of assessee.

Summary

Issues:
Penalty under section 271(1)(c) for furnishing inaccurate particulars of income by not including long term capital gain in book profit calculation under section 115JB.

Detailed Analysis:
1. The appellant, a company, filed its return of income for A.Y. 2010-11 declaring Nil income but claimed exemption of long term capital gain under section 10(38) of the Income Tax Act, 1961 while computing income under normal provisions and book profit under section 115JB. The Assessing Officer, finding the exclusion incorrect, initiated penalty proceedings under section 271(1)(c) for inaccurate particulars of income.

2. The appellant argued that the non-inclusion was a bona fide error as the long term capital gain was exempt under section 10(38), and all relevant details were disclosed. The appellant cited various legal precedents to support the contention that penalty imposition was unwarranted due to inadvertent omission.

3. The Departmental Representative contended that the appellant's claim was incorrect, and even after being notified by the Assessing Officer, the appellant did not rectify the error, leading to the conclusion of inaccurate particulars of income.

4. The Tribunal analyzed the case, acknowledging the appellant's disclosure of all relevant details in the return of income and the Assessing Officer's awareness of the long term capital gain from the submitted documents. The Tribunal noted that the exclusion was due to a bona fide belief in the exemption's applicability to book profit calculation, considering the legal provisions.

5. Ultimately, the Tribunal held that the appellant's omission was a computational error based on a genuine belief, not a deliberate attempt to furnish inaccurate particulars of income. Relying on legal precedents and distinguishing the cited case law, the Tribunal concluded that the penalty under section 271(1)(c) was unjustified and deleted it.

6. Consequently, the Tribunal allowed the appellant's appeal, stating the order in open court on 03.11.2017, thereby ruling in favor of the appellant against the penalty imposed for not including long term capital gain in the book profit calculation under section 115JB.