2018 (2) TMI 95 - AT - Income Tax

Penalty u/s 271(1)(c) - excess claim of set off of brought forward capital loss against the capital gain for the year under consideration - Held that - Explanation of the assessee that the new Chartered Accountant who had filed her return of income for A.Y. 2011-12 had claimed the set off of the brought forward capital loss of A.Y. 2006-07 against the capital gain in the hands of the assessee for A.Y. 2011-12, merely going by the fact that there was unabsorbed capital loss in the hands of the assessee in A.Y. 2006-07, without realizing that the same to the extent of ₹ 16,80,280/- had been set off against the capital gain of the assessee in A.Y. 2008-09 carries substantial force. It is difficult for us to comprehend that the assessee had failed to come forth with a duly substantiated explanation which would go to irrefutably prove the bonafides of her aforesaid claim. We are unable to persuade ourselves to subscribe to the view of the lower authorities that the assessee had furnished a false explanation as regards raising of an excess claim of set off of brought forward losses for A.Y. 2006-07 against her income for the year under consideration, viz. A.Y. 2011- 12 - Decided against revenue

Summary

Issues Involved:
1. Confirmation of penalty under section 271(1)(c) of the Income Tax Act, 1961.
2. Specification of the nature of default in the penalty order.
3. Grant of consequential reliefs.

Detailed Analysis:

1. Confirmation of Penalty under Section 271(1)(c):
The primary issue revolves around whether the penalty of ?3,68,827/- imposed under section 271(1)(c) for furnishing inaccurate particulars of income is justified. The assessee claimed an excess set off of brought forward capital losses amounting to ?16,80,280/- against the capital gains for the assessment year (A.Y.) 2011-12. This claim was made due to an inadvertent clerical error by the assessee's Chartered Accountant, who was unaware that the capital loss for A.Y. 2006-07 had already been set off against the capital gains for A.Y. 2008-09. The assessee argued that this mistake was not deliberate and was due to the unavailability of relevant records. The Tribunal found merit in the assessee's explanation, noting the serious health condition of the assessee's husband, who previously handled tax matters, and accepted the error as a bona fide mistake. Consequently, the Tribunal quashed the penalty imposed by the Assessing Officer (A.O.).

2. Specification of the Nature of Default in the Penalty Order:
The assessee contended that the A.O. did not specify whether the penalty was for "concealment of income" or "furnishing inaccurate particulars of income," which are distinct defaults under section 271(1)(c). The Tribunal did not delve deeply into this issue, as the primary ground for quashing the penalty was the bona fide nature of the error.

3. Grant of Consequential Reliefs:
The assessee also sought any other or further consequential reliefs deemed fit by the Tribunal. Given the Tribunal's decision to quash the penalty, the assessee was granted the relief of having the penalty of ?3,68,827/- deleted.

Conclusion:
The Tribunal allowed the appeal, setting aside the order of the CIT(A) and quashing the penalty imposed by the A.O. The decision was based on the finding that the error in claiming the excess set off of brought forward losses was due to a bona fide mistake by the Chartered Accountant, and not due to any deliberate act of concealment or furnishing inaccurate particulars of income. The order was pronounced in the open court on 20.12.2017.