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2016 (6) TMI 1080 - AT - Income TaxPenalty u/s 271(1)(c) - quantum addition deleted by the tribunal - Additions were made on account of interest and short term capital gain - Held that - there are series of decisions of the Tribunal wherein it has been held that if the quantum addition is deleted by the Tribunal then in such cases assessee should not be visited with penalty u/s 271(1)(c) of the Act for concealment of income or furnishing of inaccurate particulars of income. In appeal before us, we observe that out of total addition of ₹ 62,78,505/-, penalty on the addition of ₹ 50,185/- has already been deleted by us and for the remaining amount of addition i.e. ₹ 62,28,320/- (Rs. 8,79,320/- ₹ 53,49,000/-) as the quantum addition has been deleted by the Tribunal for Asst. Year 2002-03 vide order dated 21.06.2013, and so no penalty is to be sustained u/s 271(1)(c) of the Act. Accordingly, we do not find any reason to interfere with the order of ld. CIT(A), we uphold the same. - Decided in favour of assessee
Issues Involved:
1. Deletion of penalty levied under Section 271(1)(c) of the Income Tax Act, 1961. 2. Validity of additions made on account of accrued interest on OFCPNs of Nirma Industries Ltd. 3. Validity of additions made on account of short-term capital gain on sale of DDBs of Nirma Ltd. 4. Validity of additions made on account of short-term capital gain on the transaction of strips of TATA Finance Ltd. Analysis of Judgment: Deletion of Penalty under Section 271(1)(c): The primary issue in this case is the deletion of the penalty of ?22,41,425/- levied under Section 271(1)(c) by the Assessing Officer (A.O.). The Revenue challenged the order of the Commissioner of Income Tax (Appeals) [CIT(A)], which had deleted the penalty. The Tribunal upheld the CIT(A)’s decision, emphasizing that the penalty cannot be sustained when the quantum additions have been deleted. Accrued Interest on OFCPNs of Nirma Industries Ltd.: The A.O. had added ?50,185/- on account of accrued interest on OFCPNs of Nirma Industries Ltd., which was not included in the assessee’s income as the assessee follows the cash method of accounting. The Tribunal observed that since the interest was not received, there was no concealment of income or furnishing of inaccurate particulars. Consequently, the penalty related to this addition was rightly deleted by the CIT(A). Short-term Capital Gain on Sale of DDBs of Nirma Ltd.: The A.O. had treated the gain of ?8,79,320/- from the sale of Deep Discount Bonds (DDBs) of Nirma Ltd. as a short-term capital gain, while the assessee had claimed it as a long-term capital gain. The Tribunal referred to its earlier decision in the case of Shri Karsanbhai P Patel (HUF) and concluded that the holding period should be counted from the date of allotment, not the date of listing. Since the holding period exceeded 12 months from the date of allotment, the gain was correctly classified as a long-term capital gain, and the assessee was entitled to the deduction under Section 54EC. As the quantum addition was deleted, the penalty on this addition was also not sustainable. Short-term Capital Gain on Transaction of Strips of TATA Finance Ltd.: The A.O. had also treated the gain of ?53,49,000/- from the transaction of strips of TATA Finance Ltd. as a short-term capital gain. The Tribunal noted that the assessee had acquired the strips before the Board’s Circular No. 2 dated 15.02.2002, which was not applicable retrospectively. The Tribunal referred to several decisions, including those in the cases of ITO vs. Kulgam Holdings Pvt. Ltd. and Navin Associates vs. ACIT, which supported the assessee’s position. Consequently, the gain was correctly classified as a long-term capital gain, and the assessee was entitled to the deduction under Section 54EC. With the quantum addition deleted, the penalty on this addition was also not sustainable. Conclusion: The Tribunal dismissed the Revenue’s appeal, upholding the CIT(A)’s order that deleted the penalty under Section 271(1)(c). The Tribunal emphasized that penalty cannot be imposed when the quantum additions are deleted. The appeal of the Revenue was dismissed, and the order was pronounced in the open court on 3rd June 2016.
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