2018 (1) TMI 1040 - AT - Income Tax

Levy of penalty u/s. 271(1)(c) - Long Term Capital Gain exemption from computation under Section 115JB - mere making of a claim - Held that - Assessee was on the bonafide impression that Long Term Capital Gain was also exempt from computation under Section 115JB as well, as there is no dispute that the Long Term Capital Gain was exempt from levy of income tax under the normal provisions, thus there can be a bonafide mistake. Moreover, as seen from the penalty order, AO himself stated that assessee has made a wrong claim. Making a claim which is not allowable under the provisions of the Act does not attract the provisions of penalty u/s. 271(1)(c), as it cannot be considered as either concealment of income or furnishing of inaccurate particulars . See CIT Vs Reliance Petroproducts Limited (2010 (3) TMI 80 - SUPREME COURT) It is a mere claim of exemption which is allowed in the normal computation, but not allowable u/s. 115JB and there cannot be any penalty for a wrong claim. In view of that, we are of the opinion that the provisions of Section 271(1)(c) are not attracted. Accordingly, we cancel the penalty. - Decided in favour of assessee.

Summary

Issues:
Levy of penalty u/s. 271(1)(c) of the Income Tax Act.

Analysis:
1. The appellant, a company, filed its return of income declaring NIL taxable income, having earned Long Term Capital Gain and dividend exempt from taxation. However, during scrutiny assessment, it was found that the Long Term Capital Gain was not exempt under Section 115JB. The Assessing Officer (AO) assessed the income under Section 115JB and initiated penalty proceedings u/s. 271(1)(c).

2. The appellant contended that they were wrongly advised by their counsel regarding the exemption of Long Term Capital Gain under MAT provisions. They voluntarily filed revised computations and paid taxes. The AO, however, levied the penalty stating that the appellant made a wrong claim and did not rectify it despite similar instances in previous assessment years.

3. The Ld.CIT(A) upheld the penalty, distinguishing case laws cited by the appellant. The appellant further argued that the mistake was due to the counsel's advice and relied on relevant judgments. The Ld.DR argued that penalty was warranted as the appellant filed a NIL return despite the 115JB liability.

4. The Tribunal noted that the AO did not find concealment or furnishing of inaccurate particulars but stated that the appellant made a wrong claim. Considering the bonafide mistake due to wrong advice, the Tribunal referred to the Supreme Court's decision in CIT Vs Reliance Petroproducts Limited, emphasizing that a mere incorrect claim does not attract penalty u/s. 271(1)(c).

5. Consequently, the Tribunal canceled the penalty, stating that the claim of exemption, though incorrect under Section 115JB, did not amount to furnishing inaccurate particulars. The Tribunal relied on legal precedents to support the decision, emphasizing that penalty provisions were not applicable in this case.

6. Therefore, the appeal of the assessee was allowed, and the penalty u/s. 271(1)(c) was canceled based on the bonafide mistake in claiming exemption under Section 115JB.