2015 (6) TMI 1266 - AT - Income Tax

Levy of penalty u/s 271(1)(c) - exemption u/s 10(38) for the said LTCG on account of sale of shares denied - HELD THAT - In the case of levy of penalty it should be proved on the file that the particulars furnished by the assessee were inaccurate particulars of income or that there was concealment of income. Every case of confirmation of disallowance cannot be regarded as a case of furnishing of inaccurate particulars of income or concealment of income. Even it cannot be said that this case of the assessee was a case of no evidence at all. The assessee has submitted evidence in the shape of contract note purchase bills sale bills bank statement D-mat account statement reflecting the sale of shares etc. The evidence produced on the file by the assessee has not been proved wrong or false. As decided in the case of CIT vs. Upendra V. Mithani 2009 (8) TMI 1159 - BOMBAY HIGH COURT has observed in the matter of levy of penalty u/s 271(1)(c) that if the assessee gives an explanation which is unproved but not disproved i.e. it is not accepted but circumstances do not lead to the reasonable and positive inference that the assessee s case is false then no penalty can be imposed in such cases. When the facts of the case in hand the levy of penalty cannot be held to be justified in this case. The same is accordingly ordered to be deleted. Appeal of the assessee allowed.

Summary

Issues:
Levy of penalty under section 271(1)(c) of the Income Tax Act for alleged concealment of income and inaccurate particulars of income related to long term capital gains on sale of shares.

Analysis:
1. Background: The appeal was filed against the Commissioner of Income Tax (Appeals) order confirming the penalty of Rs. 308,500 under section 271(1)(c) of the Income Tax Act for assessment year 2006-07.

2. Facts of the Case: The Assessing Officer observed discrepancies in the purchase of 9000 shares of a company, leading to the addition of Rs. 9,44,638 as unexplained cash credit. The AO initiated penalty proceedings under section 271(1)(c) as the genuineness of the long term capital gains was not proven.

3. CIT(A) Decision: The CIT(A) upheld the penalty, considering the ITAT's confirmation of additions under section 68 of the Act, indicating a false claim of tax-exempt long term capital gains through sham transactions.

4. Appellant's Arguments: The appellant contended that all transactions were disclosed, no concealment or inaccurate particulars were furnished, and the AO's disbelief in evidence was unjustified.

5. Arguments Before ITAT: The appellant's representative argued that lack of satisfaction by the AO on long term capital gains claim did not warrant penalty. The AO did not conclusively prove the transactions were non-genuine.

6. ITAT Decision: The ITAT found the assessee had provided evidence of transactions through a broker, with bills and contract notes. The Tribunal noted that while the AO's additions were upheld, the Revenue failed to disprove the genuineness of transactions.

7. Legal Precedent: Referring to the case law "CIT vs. Upendra V. Mithani," the ITAT emphasized that unproved explanations, not disproved, do not warrant penalty under section 271(1)(c). The evidence submitted by the assessee was not proven false or wrong.

8. Conclusion: Considering the lack of concrete proof of inaccurate particulars or income concealment, the ITAT allowed the appeal, ordering the deletion of the penalty. The decision aligned with legal precedents and established that not every disallowance confirms concealment of income.

This detailed analysis highlights the key aspects of the judgment, focusing on the issues of penalty under section 271(1)(c) for alleged concealment of income and inaccurate particulars in the context of long term capital gains from share transactions.