9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2018 (6) TMI 896 - AT - Income TaxLevy of penalty u/s 271(1)(c) - furnishing inaccurate particulars of income in respect of loss claimed on account of write off of investments - claim of expenditure which was not accepted or was not acceptable to the revenue - Held that - Assessee has furnished necessary details in respect of claim of loss on account of write off of investments in shares in return of income - assessee has claimed set off of such loss against long term capital gain derived from sale of agricultural land - the said long term capital gain has been withdrawn by filing revised statement of total income during the course of assessment proceedings. The AO made addition towards long term capital gain; however, on appeal before ITAT, the ITAT deleted addition made by the AO towards long term capital gain computed on transfer of agricultural land. Since the assessee has made a claim of set off of loss on account of write off of investments in shares against along term capital gain derived from transfer of land and such long term capital gain has been finally deleted by the ITAT, we are of the considered view that the claim made by the assessee is a bonafide claim and hence, the AO was erred in levying penalty u/s 271(1)(c) for furnishing inaccurate particulars of income - hence AO is directed to delete the penalty - Decided in favor of assessee.
Issues Involved:
1. Validity of penalty proceedings under Section 271(1)(c) for furnishing inaccurate particulars of income. 2. Legitimacy of the claim of long-term capital loss on account of write-off of investments in shares. 3. Applicability of Accounting Standard-13 (AS-13) in the context of write-off of investments. 4. Determination of whether the assessee's claim was bona fide or an attempt to evade taxes. Issue-wise Detailed Analysis: 1. Validity of Penalty Proceedings under Section 271(1)(c): The core issue was whether the assessee had furnished inaccurate particulars of income warranting penalty under Section 271(1)(c). The AO initiated penalty proceedings on the grounds that the assessee claimed a loss on investments to offset capital gains from land sale, which was deemed as furnishing inaccurate particulars. The AO relied on judicial precedents, including the Supreme Court decision in UOI vs Dharmendra Textile Processors, to argue that the assessee's actions would have caused a loss to the revenue if not detected during scrutiny. 2. Legitimacy of the Claim of Long-term Capital Loss: The assessee claimed a long-term capital loss of ?3,70,50,000 due to the write-off of investments in M/s Niru Jewels Pvt Ltd, which was set off against capital gains from land sale. The AO disallowed this claim, stating there was no effective transfer of shares. The CIT(A) upheld this disallowance, noting the lack of documentary evidence and the ongoing liquidation process of the company, which meant the loss could not be recognized in the relevant assessment year. 3. Applicability of Accounting Standard-13 (AS-13): The assessee argued that the claim was based on AS-13 issued by ICAI, which mandates charging a permanent decline in the value of long-term investments to the P&L Account. The assessee contended that the underlying assets of M/s Niru Jewels Pvt Ltd had become nil due to bank attachment under the SRFAESI Act. The Tribunal found merit in this argument, noting that the claim was based on mandatory accounting principles and expert advice, which indicated a bona fide claim rather than an attempt to evade taxes. 4. Determination of Bona Fide Claim: The Tribunal examined whether the assessee's claim was made with a bona fide intent. The assessee had disclosed all relevant details in the return and provided explanations based on AS-13 and expert advice. The Tribunal noted that the ITAT had previously deleted the addition made by the AO towards long-term capital gain from land sale, further supporting the bona fide nature of the claim. The Tribunal concluded that the mere disallowance of a claim by the AO does not automatically imply furnishing inaccurate particulars of income. Conclusion: The Tribunal held that the assessee's claim of long-term capital loss was bona fide and based on mandatory accounting principles. The AO's decision to levy penalty under Section 271(1)(c) was deemed incorrect as the assessee had not furnished inaccurate particulars of income. The Tribunal directed the AO to delete the penalty, allowing the appeal filed by the assessee. Order Pronounced: The appeal filed by the assessee was allowed, and the penalty levied under Section 271(1)(c) was deleted.
|
