2012 (9) TMI 1206 - AT - Income Tax

Summary

Issues Involved:
1. Confirmation of penalty levied u/s 271(1)(c) of the Income Tax Act.
2. Interpretation of Section 94(7) regarding the disallowance of short-term capital loss.

Summary:

Issue 1: Confirmation of Penalty Levied u/s 271(1)(c)
The assessee appealed against the CIT(A)'s order confirming the penalty levied by the Assessing Officer (AO) u/s 271(1)(c) for the assessment year 2003-04. The AO had levied a penalty of Rs. 30,56,747/- for furnishing inaccurate particulars of income and concealing income. The assessee contended that the mistake was bonafide and there was no intention to conceal income. The CIT(A) disagreed, stating that the assessee made a false claim and deliberately concealed income, thus triggering Explanation 1 to Section 271(1)(c).

Issue 2: Interpretation of Section 94(7)
The assessee purchased units of SUN F & C Money Value Fund and received exempt dividend income u/s 10(33). The units were later sold at a loss, and the assessee claimed this short-term capital loss. The AO disallowed the loss to the extent of the dividend received as per Section 94(7). The assessee argued that the units were redeemed, not sold, and thus not covered by Section 94(7). The Tribunal held that redemption constitutes a transfer under Section 2(47), and the assessee's claim was not bonafide. However, the Tribunal noted that the assessee disclosed all relevant details and there was no intention to conceal income. Citing precedents, the Tribunal concluded that merely making an incorrect claim does not amount to furnishing inaccurate particulars. Therefore, the penalty u/s 271(1)(c) was not justified.

Conclusion:
The Tribunal allowed the appeal, canceling the penalty levied u/s 271(1)(c), as the assessee's incorrect claim was bonafide and did not amount to furnishing inaccurate particulars of income. The decision was pronounced in the open court on 28th Sept., 2012.