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2019 (8) TMI 989 - AT - Income TaxPenalty u/s. 271(1)(c) - inadvertent omission of not excluding the short term loss u/s. 94(7) though the computation of income - HELD THAT - AO has issued various notices u/s 143(2)/142(1), but has not made any enquiry for the disallowance in the case of the assessee u/s. 94(7). AO on the basis of the query for dividend income on 07.12.2017 issued a notice u/s. 142(1) and asked the assessee to file the detail of all dividend / bonus income earned by the assessee in a specified format and filed all the details in the original return of income. In compliance of the same on 13.12.2017 Ld. Counsel for the assessee appeared and took adjournment for 15.12.2017 and examined all details of dividend / bonus income and found that there is an inadvertent clerical error committed by the Chartered Accountant and on the advice of Senior Chartered Accountant, the assessee filed voluntary revised computation of income wherein a Long Term Capital Gain (LTCG) of ₹ 1,43,53,921/- has been increased to ₹ 3,42,05,795/- due to the disallowance of ₹ 1,98,51,874/- u/s. 94(7) at the first opportunity as soon as it came to the notice of the assessee. Assessee has committed this mistake for furnishing of inaccurate particulars in the return due to the inadvertent bonafide error in the claim due to one entry by the accounts staff posted at wrong date due to huge voluminous transactions and dividend coupons for dividend from same security punched at one voucher i.e. entry of two dividend received on same security (₹ 1,98,51,874/- received on 28.1.2015 and ₹ 3,38,62,717/- received on 25.3.2015 made cumulatively on 26.3.2015 i.e. date of sale of investments (26.3.2015) and receipt date of second dividend. AO has completed the assessment on the basis of details furnished by the assessee, hence, under the circumstances assessee has not furnished inaccurate particulars of income. Assessee has paid voluntary taxes on disallowance u/s. 94(7) and not filed the appeal against the assessment order passed by the AO. It is an admitted fact that assessee has not filed any false claim. We further note that the assessee fully disclosed all the information asked for and has nowhere furnished any inaccurate particulars. We find that there is no conclusive proof that the assessee has furnished inaccurate particulars of income. The AO has not brought enough incriminating material for furnishing of inaccurate particulars and there is no material for establishing the same and therefore in the given facts and circumstances of the penalty is not leviable, because all the documents submitted by the assessee were neither rejected by the AO as false or incorrect facts nor AO had clinched any further evidence for furnishing of inaccurate particulars of income. Section 271(1)(c) postulates imposition of penalty for furnishing of inaccurate particulars and concealment of income. On the facts and circumstances of this case the assessee s conduct cannot be said to be contumacious so as to warrant levy of penalty. Levy of penalty in this case is not justified - Decided in favour of assessee.
Issues Involved:
1. Confirmation of penalty under Section 271(1)(c) of the Income Tax Act, 1961. 2. Furnishing inaccurate particulars of income. 3. Validity of notice, proceedings, and order imposing penalty under Section 271(1)(c). Issue-wise Detailed Analysis: 1. Confirmation of Penalty Under Section 271(1)(c): The Assessee's appeal challenged the confirmation of a penalty amounting to ?45,52,613/- under Section 271(1)(c) of the Income Tax Act, 1961. The penalty was imposed by the Assessing Officer (AO) and confirmed by the Commissioner of Income Tax (Appeals) [CIT(A)]. The primary contention was that the penalty was imposed without appreciating the bona fide claim of inadvertent error by the appellant. The Tribunal noted that the AO issued a statutory notice under Section 143(2) and subsequently under Section 142(1) of the Act, to which the Assessee responded by furnishing the required details. The AO observed that the Assessee had received a significant dividend income and, upon scrutiny, found that the Assessee had not considered the provisions of Section 94(7) regarding dividend stripping, leading to an incorrect claim of short-term capital loss. The Assessee acknowledged the mistake and revised the computation of income voluntarily, leading to the AO imposing a penalty for furnishing inaccurate particulars of income. 2. Furnishing Inaccurate Particulars of Income: The Tribunal examined whether the Assessee furnished inaccurate particulars of income. The Assessee argued that the mistake was inadvertent and due to an error by the accounts staff, who posted two dividend entries cumulatively. The AO completed the assessment based on the details furnished by the Assessee, and the Assessee paid the taxes voluntarily without appealing the assessment order. The Tribunal found that the Assessee had disclosed all information and there was no conclusive proof of furnishing inaccurate particulars. The Tribunal relied on the Supreme Court's decision in the case of Reliance Petro Products Ltd., which held that merely making an incorrect claim does not amount to furnishing inaccurate particulars if the claim is bona fide. 3. Validity of Notice, Proceedings, and Order Imposing Penalty: The Assessee raised an additional ground challenging the validity of the notice, proceedings, and order imposing the penalty under Section 271(1)(c). The Assessee argued that the AO's notice was vague and did not specify the exact charge, whether it was for concealment of income or furnishing inaccurate particulars. The Tribunal noted that the AO's assessment order clearly mentioned that the penalty was being initiated for furnishing inaccurate particulars of income. The Tribunal referred to various judicial precedents, including the Supreme Court's decision in the case of Hindustan Steel vs. State of Orissa, which emphasized that penalty should not be imposed unless the conduct is contumacious or dishonest. The Tribunal concluded that the AO's notice and proceedings were valid as the Assessee understood the charge and responded accordingly. Conclusion: The Tribunal found that the Assessee had not furnished inaccurate particulars of income deliberately and that the error was bona fide. The penalty imposed under Section 271(1)(c) was not justified, and the Tribunal set aside the orders of the authorities below, deleting the penalty. The legal ground raised by the Assessee regarding the validity of the notice was dismissed as the penalty was deleted on merits. The appeal filed by the Assessee was partly allowed.
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