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2018 (12) TMI 1214 - AT - Income TaxPenalty u/s 271(1)(c) - loss on sale of shares - change in head of income by AO - claim of the business loss made by the assessee has been rejected by the AO and held the same as long-term capital loss as the assessee in earlier years has not treated the shares as stock-in-trade - Held that - The Assessing Officer has changed the head of income from business loss to long-term capital loss. As decided in CIT Vs Amit Jain 2013 (1) TMI 340 - DELHI HIGH COURT merely change of head of income cannot characterize furnishing inaccurate particulars or suppression of facts and thus no penalty can be levied in such circumstances. Thus penalty to be deleted. - Decided in favour of assessee.
Issues:
Penalty under section 271(1)(c) of the Income-tax Act, 1961 - Whether loss claimed on sale of shares was business loss or long-term capital loss. Analysis: 1. The appeal was against the order confirming a penalty under section 271(1)(c) of the Income Tax Act for the assessment year 2006-07. The Assessing Officer considered the loss claimed on the sale of shares as long-term capital loss instead of business loss, leading to the penalty imposition. 2. The Assessing Officer observed that the shares were treated as stock-in-trade by the assessee, but no separate balance sheet or profit loss account was maintained. The issue was whether the shares were held as stock-in-trade or investment, as the group companies' shares were considered investments. The Assessing Officer concluded the loss was long-term capital loss due to lack of evidence supporting the shares as stock-in-trade. 3. The Tribunal directed the assessee to demonstrate the valuation of shares at market or cost price on specific dates. The Assessing Officer, upon review, found the loss claimed as business loss was actually long-term capital loss. Penalty proceedings under section 271(1)(c) were initiated, upheld by the CIT(A), and disputed by the assessee. 4. The assessee argued that the disclosure of share sale was made, differing only in the treatment of loss as business or capital. Citing legal precedents, the counsel contended that such differences do not warrant penalty under section 271(1)(c). 5. The Department, however, supported the lower authorities' findings, advocating for upholding the penalty imposed by the CIT(A) based on the business loss claim being deemed false. 6. The Tribunal noted the discrepancy in treating the shares as business loss instead of long-term capital loss by the Assessing Officer, leading to the penalty imposition. The Tribunal referred to legal judgments emphasizing that such differences in treatment do not necessarily indicate concealment or inaccurate particulars. 7. Citing the case law of CIT Vs. Praveen Gada (HUF), the Tribunal highlighted that treating a sum as business loss instead of capital loss does not automatically attract penalty under section 271(1)(c) without evidence of concealment or inaccurate reporting. 8. Referring to the case of CIT vs. Aretic Investment Private Limited, the Tribunal reiterated the distinction between assessment and penalty proceedings, emphasizing that a bona fide claim in the return cannot be penalized solely based on differing interpretations. 9. Drawing from the case of CIT Vs. Amit Jain, the Tribunal emphasized that changing the head of income does not constitute furnishing inaccurate particulars or suppression of facts, warranting penalty. The Tribunal, in line with the legal precedents, set aside the penalty imposed by the CIT(A) in the present case. 10. Ultimately, the Tribunal allowed the appeal, deleting the penalty sustained by the CIT(A) as the issue mirrored the legal principles discussed in the referenced cases. The decision was in favor of the assessee, aligning with established legal interpretations. This comprehensive analysis of the judgment highlights the key legal arguments, precedents, and the Tribunal's decision regarding the penalty under section 271(1)(c) in the context of the treatment of loss on the sale of shares as business loss or long-term capital loss.
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