2016 (10) TMI 706 - AT - Income Tax

Levy of penalty u/s 271(1)(c) - inaccurate particulars of income claiming the loss as business loss as the loss is in the nature of speculative loss in terms of Explanation to Section 73 - Held that - AO did not agree with the claim of the assessee that the loss claimed by the assessee as trading loss is actually speculation loss in view of application of Explanation to Section 73 of the Act and this loss of ₹ 50,12,977/- is allowed to be carried forward for set off of speculation profits in any subsequent year. We find that all the facts and figures are available on record and the disallowance of loss is due to wrong interpretation of Explanation to Section 73 of the Act by virtue of which the same is treated as speculation loss. We are of the view that merely treating the business loss as speculation loss by the AO does not automatically warrant inference of concealment of income or furnishing of inaccurate particulars of income, particularly when the assessee has furnished full details of purchase and sales of shares. Even otherwise, we are of the view that the AO himself is not sure of the charge for levy of penalty whether the same is for concealment of income or for furnishing of inaccurate particulars of income. In view of the above, we set aside the orders of the authorities below and delete the penalty imposed on the assessee. - Decided in favour of assessee.

Summary

Issues:
Levy of penalty u/s 271(1)(c) of the Income Tax Act amounting to ?20,04,501 based on treatment of claimed trading loss as speculation loss.

Analysis:
1. The appeal concerns the confirmation of penalty u/s 271(1)(c) of the Act amounting to ?20,04,501 by the CIT (A). The assessee, engaged in investment and share trading, claimed a trading loss as business loss, but the AO treated it as speculation loss under Explanation to Section 73 of the Act, disallowing its set off against current year's income.

2. The assessee contended that the claim was made under a bona fide belief before a specific Tribunal decision. The AO's penalty order suggested uncertainty regarding the charge of furnishing inaccurate particulars of income. The assessee cited a precedent where a similar penalty was deleted on identical facts, emphasizing that full details were furnished.

3. The Tribunal noted that the AO's disagreement with the claim was based on a wrong interpretation of the Act, treating the loss as speculation loss. It observed that such treatment does not automatically imply concealment of income, especially when full details were provided. The Tribunal found the AO's uncertainty on the penalty charge significant and deleted the penalty imposed on the assessee.

4. The Tribunal concluded that the penalty was unjustified, as the treatment of business loss as speculation loss did not conclusively establish concealment or inaccurate particulars of income. Therefore, the penalty was set aside, and the appeal of the assessee was allowed.

In summary, the Tribunal overturned the penalty imposed under section 271(1)(c) of the Income Tax Act, as the treatment of the loss as speculation loss did not indicate deliberate concealment or furnishing of inaccurate particulars of income. The decision emphasized the importance of providing full details and highlighted the significance of the AO's uncertainty regarding the specific charge for the penalty.