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2016 (6) TMI 563 - HC - Income TaxPenalty levied u/s. 271(1)(c) - assessee had credited the profit on sale of shares claimed to have been received as a gift by way of family arrangement directly in to the capital reserve account instead of routing it through the profit and loss account which amounts to furnishing inaccurate particulars of income by the assessee and resulting in reduction of book profit U/s. 115JB - Held that - Undisputed facts are that, all necessary declarations were made by the assessee with respect to the receipt in question. Regarding the tax liability of such receipt, there was a difference of opinion between the assessee and Assessing Officer. That by itself would not give rise to penalty proceedings. We are not concerned with the quantum addition. We are only concerned whether the facts give rise to applicability of Section 271(1)(c) of the Act. Reference can be made to the decision of Supreme Court in case of CIT vs. Reliance Petroproducts Pvt. Ltd . 2010 (3) TMI 80 - SUPREME COURT and in case of Price Waterhouse Coopers Pvt. Ltd. vs CIT and anr reported in 2012 (9) TMI 775 - SUPREME COURT .
Issues:
- Appeal against ITAT judgement deleting penalty under Section 271(1)(c) of the Income Tax Act for not crediting profit on sale of shares in profit and loss account. - Dispute over reduction of book profit under Section 115JB due to direct credit to capital reserve account. - CIT (Appeals) deletion of penalty based on accurate furnishing of facts. - Tribunal's reliance on Supreme Court decisions in similar cases. Analysis: 1. Appeal against ITAT Judgement: The Revenue appealed against the ITAT judgement deleting the penalty under Section 271(1)(c) of the Income Tax Act. The primary issue was whether the ITAT was justified in deleting the penalty when the assessee had not shown the profit on the sale of shares in the profit and loss account but directly credited it to the capital reserve account. This action was deemed as furnishing inaccurate particulars of income, leading to a reduction in book profit under Section 115JB. 2. Reduction of Book Profit: The Assessing Officer noted that the assessee had sold shares claiming to have received them as a gift through a family arrangement. However, the profit from the sale was not reflected in the profit and loss account but was directly credited to the capital reserve account. This action was seen as reducing the book profit, which was significant as the case fell under Section 115JB of the Income Tax Act, 1961. 3. CIT (Appeals) Deletion of Penalty: CIT (Appeals) deleted the penalty imposed by the Assessing Officer by emphasizing that all relevant facts material to the computation of total income were duly furnished by the assessee. The absence of deficiencies in furnishing such facts led to the conclusion that there was no cause of action for triggering deeming fiction under Section 271(1)(c) based on the conduct of the assessee. The CIT (Appeals) highlighted that even if there was a wrong legal claim, it did not automatically warrant the imposition of a penalty under Section 271(1)(c). 4. Tribunal's Reliance on Supreme Court Decisions: The Tribunal, in its judgement, relied on a Supreme Court decision in a similar case to support its conclusion. It noted that the inaccurate particulars of income regarding capital gain were not furnished by the assessee, and the addition to the book profit was due to a difference in opinion on the presentation of the capital gain. The Tribunal emphasized that the penalty under Section 271(1)(c) should not be imposed merely due to a divergence in opinion between the assessee and the Assessing Officer. In conclusion, the High Court dismissed the tax appeal, affirming the decisions of the CIT (Appeals) and the Tribunal. The Court emphasized that the divergence in opinion between the assessee and the Assessing Officer on tax liability did not automatically lead to penalty proceedings under Section 271(1)(c) of the Act. The Court referenced relevant Supreme Court decisions to support its ruling, highlighting the importance of accurate furnishing of facts in determining the applicability of penalties under the Income Tax Act.
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