2016 (8) TMI 653 - AT - Income Tax

Levy of penalty u/s 271 (1) (c) - wrong claim of set off of loss of father - loss on account of earlier year s long term capital gains or short term capital gains - Held that - We find from the records that the penalty is levied on wrong claim of set off of earlier year s long term capital gains or short term capital gains, which is a genuine claim but claimed under wrong understanding that henceforth assessee has to claim these losses instead of father of the assessee in whose hands assessee s income used to be clubbed prior to earlier assessment year 2003-04. Moreover, the assessee was under bonafide belief about the claim of this loss, because the AO himself has allowed the claim of loss for assessment year 2003-04 although u/s 143 (1) of the Act. And once the Revenue has itself allowed the claim, the assessee was under bona fide belief that it is allowable loss. Even otherwise, there is no revenue loss to the Department for the reason that both the assessee as well as her father are under same tax bracket/slab of tax as is evident from the above chart. Hence we are of the view that this penalty levied u/s 271(1)(c) of the Act cannot sustain and hence, the same is deleted for both the years

Summary

Issues:
1. Appeal against the order of CIT (A) confirming penalty u/s 271(1)(c) for assessment year 2004-05.
2. Appeal against the order of CIT (A) confirming penalty u/s 271(1)(c) for assessment year 2005-06.

Analysis:

Issue 1:
The first appeal by the assessee challenges the penalty imposed u/s 271(1)(c) for assessment year 2004-05. The appellant contested the action of the assessing officer in levying a penalty related to the set off of brought forward long term and short term capital losses. The appellant argued that the losses were disallowed due to the clubbing provisions u/s 64(1A) of the Income Tax Act. The AO disallowed the claim of losses, leading to the initiation of penalty proceedings. The CIT (A) upheld the penalty, stating that the appellant failed to disclose complete and correct income particulars. The appellant, however, argued that there was no concealment or furnishing of inaccurate particulars. The Tribunal found that the penalty was based on a genuine claim made under a mistaken understanding. Referring to relevant case law, the Tribunal concluded that the penalty was not sustainable, leading to the deletion of the penalty for the year in question.

Issue 2:
The second appeal pertains to the penalty imposed u/s 271(1)(c) for assessment year 2005-06. Similar to the first appeal, the appellant contested the penalty related to the set off of brought forward losses. The AO and CIT (A) upheld the penalty, alleging non-disclosure of crucial information. The appellant argued that there was no concealment or inaccurate particulars provided. The Tribunal, after considering the facts and legal precedents, concluded that the penalty was unjustified. Citing relevant case law, including the decision in CIT v. Reliance Petroproducts, the Tribunal held that there was no concealment of income, resulting in the deletion of the penalty for the year in question.

In both cases, the Tribunal found that the penalties imposed under section 271(1)(c) were unwarranted as the appellants had not concealed income or furnished inaccurate particulars. The appeals were allowed, and the penalties were deleted for both assessment years.