2017 (3) TMI 672 - AT - Income Tax

Penalty u/s. 271(1)(c) - disallowance on account of loss incurred on purchase and sale of securities and units as per provision u/s 94(7) - Adjustments to book profit by AO u/s 115JB - Held that - Under the scheme of the Act, the total income of assessee is first computed under the normal provisions of the Act and tax payable on such total income is compared with the prescribed percentage of the book profits computed under section 115JB of the Act. The higher of the two amounts is regarded as total income and tax is payable with reference to such total income. If the tax payable under the normal provisions is higher, such amount is the total income of the assessee, otherwise, book profits are deemed as the total income of the assessee in terms of sec. 115JB of the Act. In the case before them the assessee was assessed u/s. 115JB of the Act and not under normal provisions. No doubt there was concealment but that had its repercussions only when the assessment was done under the normal procedure. The assessment as per the normal procedure was, however, not acted upon. On the contrary, it is the deemed income assessed u/s. 115JB of the Act which has become the basis of assessment as it was higher of the two. Tax is thus paid on the income assessed u/s. 115JB of the Act. Hence, when the computation was made u/s. 115JB, the concealment had no role to play and was totally irrelevant. Therefore, the concealment did not lead to tax evasion at all. Therefore, penalty u/s. 271(1)(c) of the Act could not be imposed. Also it is on record as appearing in the Ld. CIT(A) s order that assessee has filed total dividend claimed as exemption u/s. 10(35) of the Act. That further in the order itself in the assessee s own submission as on record, it is clear that complete and true details in relation to claim made in the return were furnished, details of dividend as well as statement of transactions of mutual fund were duly filed before the AO as and when required. See Nalwa Sons Investments Ltd. 2012 (5) TMI 150 - SUPREME COURT OF INDIA - Decided in favour of assessee

Summary

Issues Involved:

1. Confirmation of penalty under Section 271(1)(c) of the Income-tax Act, 1961.
2. Disallowance under Section 94(7) of the Income-tax Act, 1961.
3. General grounds of appeal.

Detailed Analysis:

1. Confirmation of Penalty under Section 271(1)(c):

The primary issue is whether the penalty of ?96,020/- imposed under Section 271(1)(c) of the Income-tax Act, 1961, was justified. The assessee argued that there was no concealment of income nor inaccurate particulars filed. The assessee relied on the Supreme Court decision in CIT Vs. Reliance Petro Products Pvt. Ltd. (2010) 322 ITR 158 (SC), which held that unless the case is strictly covered by the provision, penalty cannot be invoked. The assessee also cited CIT Vs. Nalwa Sons Investments Ltd. (2010) 327 ITR 543 (Del), where it was held that when computation was made under Section 115JB of the Act, the concealment did not lead to tax evasion, and therefore, penalty under Section 271(1)(c) could not be imposed.

The Tribunal noted that the assessee had filed total dividend claimed as exemption under Section 10(35) of the Act and provided complete and true details of the transactions during the assessment proceedings. The Tribunal observed that the penalty under Section 271(1)(c) could not be imposed as there was no concealment or inaccurate particulars furnished, and the tax was paid under Section 115JB, which was accepted by the AO. The Tribunal relied on the decision of the Hon'ble Delhi High Court in Nalwa Sons Investments Ltd., which was confirmed by the Supreme Court, and the jurisdictional Tribunal's decision in Salasar Stock Broking Ltd., to conclude that the penalty imposed was not justified and thus deleted it.

2. Disallowance under Section 94(7):

The assessee's appeal also involved the disallowance under Section 94(7) amounting to ?1,05,743/-. The AO had disallowed the loss claimed on the purchase and sale of securities and units, stating that the assessee did not disclose the receipt of dividends which were higher than the loss on transactions. The AO imposed a penalty under Section 271(1)(c) for furnishing inaccurate particulars of income. However, the Tribunal found that the assessee had disclosed all relevant details during the assessment proceedings and that the tax was computed under Section 115JB, which negated any concealment or furnishing of inaccurate particulars.

3. General Grounds of Appeal:

The third ground was general in nature, and the Tribunal did not find it necessary to adjudicate on it.

Conclusion:

The Tribunal allowed the appeal of the assessee, deleting the penalty imposed under Section 271(1)(c) of the Act. The Tribunal emphasized that the requirements of the statute must be strictly complied with for imposing a penalty, which was not met in this case. The Tribunal's decision was based on the judicial pronouncements in CIT Vs. Nalwa Sons Investments Ltd. and the jurisdictional Tribunal's decision in Salasar Stock Broking Ltd.