2016 (5) TMI 23 - AT - Income Tax

Levy of penalty u/s 271(1)(c) - Held that - In the instant case it cannot be said that the assessee withheld any relevant information regarding the receipts and income from the AO. The figure added back by the AO pertaining to the loss on sale of shares was a figure disclosed by the assessee itself. With regard to the provisions of section 271(1)(c ) of the Act pertaining to penalty, the Hon ble Apex court has authoritatively laid down that making of a claim by the assessee which is not sustainable will not tantamount to furnishing inaccurate particulars. Thus, in CIT vs. Reliance Petroproducts Pvt. Ltd. (2010 (3) TMI 80 - SUPREME COURT) - Decided in favour of assessee

Summary

Issues:
1. Levy of penalty under section 271(1)(c) of the Act.

Analysis:
1. The appellant contested the levy of penalty under section 271(1)(c) of the Act concerning the disallowance of a short-term capital loss claimed on the sale of shares. The Assessing Officer (AO) deemed the loss as a speculation loss due to the nature of the transaction, resulting in an addition to the assessee's income. The CIT(A) and ITAT upheld this decision based on the assessee's frequent buying and selling of securities, indicating a business of dealing in shares. The ITAT further noted discrepancies in the sale transaction, leading to the conclusion that the loss claimed was not genuine.

2. Subsequently, a penalty was imposed on the assessee for furnishing inaccurate particulars of income. The AO alleged that the assessee willfully provided misleading information by claiming the loss on shares as a short-term capital loss. The CIT(A) affirmed the penalty, leading to an appeal before the ITAT. The assessee argued that the disallowance was based on technical grounds and subjective judgment, not indicative of concealed income. The assessee maintained that all details were disclosed, and the penalty should be revoked.

3. The ITAT, after considering the submissions and legal precedents, ruled in favor of the assessee. Citing the Supreme Court's decision in CIT vs. Reliance Petroproducts Pvt. Ltd., the ITAT emphasized that making an incorrect claim, even if unsustainable, does not amount to furnishing inaccurate particulars. As the assessee had disclosed the figures in question and did not withhold any relevant information, the penalty under section 271(1)(c) was deemed unjustified. Consequently, the ITAT deleted the penalty, allowing the appeal of the assessee.

In conclusion, the judgment addressed the issue of penalty imposition under section 271(1)(c) in the context of a disputed short-term capital loss on share transactions. The ITAT's decision highlighted the distinction between inaccurate particulars and incorrect claims, ultimately leading to the deletion of the penalty based on legal principles and factual considerations.