2019 (4) TMI 977 - HC - Income Tax

Penalty u/s 271(1)(c) - quantum of addition has been confirmed by the High Court - Speculation loss claim - bonafide claim - assessee had shown certain derivative transactions and claimed a loss arising out of such transactions - Tribunal while deleting the penalty observed that the assessee had raised a claim which was based on bonafide interpretation of the provisions of the Act, was not a case where assessee had made intentionally a wrong claim - HELD THAT - We are broadly in agreement with the view of the Tribunal. The assessee had made a bonafide claim. It may be that such claim was not accepted by the High Court. That by itself would not mean that the penalty should be confirmed. It is well settled that mere rejection of a claim otherwise made bonafide and on arguable legal contentions would not give rise to penalty proceedings. Reference in this respect can be made to the decision of the Supreme Court in case of CIT Vs. Reliance Petro Products Ltd. 2010 (3) TMI 80 - SUPREME COURT - Decided against revenue

Summary

Issues:
1. Challenge to deletion of concealment penalty under Section 271(1)(c) by the Income Tax Appellate Tribunal.

Analysis:
The judgment by the High Court of Bombay pertains to an appeal filed by the revenue challenging the deletion of concealment penalty under Section 271(1)(c) of the Income Tax Act, 1961. The issue arose from the respondent-assessee's return of income for the assessment year 2004-05, where the assessee claimed a loss from derivative transactions. The Assessing Officer considered the transactions speculative and classified the loss as speculation loss under Section 43(5) of the Act. The High Court allowed the revenue's appeal against this classification. However, the Tribunal, in the penalty proceedings, observed that the assessee's claim was based on a bonafide interpretation of the Act and not an intentional wrong claim.

The High Court agreed with the Tribunal's view, emphasizing that the mere rejection of a bonafide claim, even if not accepted by the High Court, does not automatically warrant the imposition of a penalty. Citing the decision in CIT Vs. Reliance Petro Products Ltd. 322 ITR 158 (SC), the court reiterated that penalty proceedings should not arise solely from the rejection of a claim made in good faith and based on arguable legal contentions. Consequently, the appeals challenging the deletion of the concealment penalty were dismissed by the High Court of Bombay.