2019 (12) TMI 305 - AT - Income Tax

Penalty u/s 271(1)(c) - false claim of exemption u/s 10(38) towards long term capital gain (LTCG) on sale of shares - HELD THAT - There is no dispute that in the assessment proceedings assessee accepted the fact that the transaction is not genuine and offered the income to tax. In the penalty proceedings, the assessee has contended that the addition made by the AO would not ipso facto attract the provisions of section 271(1)(c) - Assessee has submitted that the assessee produced all the relevant evidence in support of the claim. All these evidences filed by the assessee are not free from manipulation or creating self serving documents. The assessee has not filed a single piece of evidence which can be verified independently and from independent source. There is no dematerialization of the shares and even the return of income for the assessment year 2013-14 was filed only on 23.03.2014 after the alleged transaction of sale of shares. Therefore, the said return of income for the assessment year 2013-14 and showing the shares in the balance sheet will not help the case of the assessee as the said return was filed belatedly only after the alleged transaction of sale. Hence assessee has not produced any tangible material which can be verified independently and free from any manipulation, the same will not constitute a reasonable and bonafide explanation in terms of section 273B. As regards the legal objection raised by the assessee regarding the validity of order passed under section 271(1)(c), it is a clear case of furnishing inaccurate particulars of income by the assessee when the assessee has claimed the long term capital gain exempt under section 10(38) and subsequently this claim of the assessee was found to be wrong. AO in the penalty order has given a definite finding in para 5.2 of the penalty order that the assessee has furnished inaccurate particulars of income and penalty under section 271(1)(c) is leviable. Accordingly, do not find any merit or substance in the legal ground raised by the assessee.

Issues:
1. Jurisdiction and validity of penalty order under section 271(1)(c)
2. Addition of long term capital gain and imposition of penalty
3. Concealment of income and furnishing inaccurate particulars
4. Validity of explanation provided by the assessee
5. Legal objection regarding penalty under section 271(1)(c)

Analysis:

Issue 1: Jurisdiction and validity of penalty order under section 271(1)(c)
The appeal challenged the penalty order under section 271(1)(c) of the IT Act for the assessment year 2014-15. The assessee contended that the penalty order was bad in law and lacked jurisdiction. However, the Tribunal dismissed this argument, upholding the validity of the penalty order.

Issue 2: Addition of long term capital gain and imposition of penalty
The AO added &8377; 9,76,750 as long term capital gain to the assessee's income, leading to the imposition of a penalty of &8377; 2,72,551. The Tribunal noted that the assessee accepted the lack of genuineness in the transaction during assessment proceedings and voluntarily offered the income for taxation. The penalty was imposed based on the claim of long term capital gain being found bogus by the Investigation Wing, Kolkata.

Issue 3: Concealment of income and furnishing inaccurate particulars
The assessee argued that there was no concealment of income or furnishing of inaccurate particulars, as all relevant facts were disclosed regarding the purchase and sale of shares. The Tribunal, however, found that the evidence provided was not free from manipulation or independently verifiable, leading to a lack of bonafide explanation under section 273B of the Act. The AO's finding of inaccurate particulars was upheld.

Issue 4: Validity of explanation provided by the assessee
The assessee's explanation regarding the genuineness of the transaction was deemed insufficient as the evidence presented was not independently verifiable and lacked credibility. The Tribunal emphasized the importance of tangible material that can be verified independently to support a claim of income.

Issue 5: Legal objection regarding penalty under section 271(1)(c)
The legal objection raised by the assessee concerning the validity of the penalty under section 271(1)(c) was rejected by the Tribunal. The AO's definite finding of furnishing inaccurate particulars of income justified the imposition of the penalty, and the legal grounds raised by the assessee were deemed without merit.

In conclusion, the Tribunal dismissed the appeal of the assessee, upholding the penalty imposed under section 271(1)(c) for the assessment year 2014-15. The decision was based on the lack of credible evidence supporting the genuineness of the transaction and the finding of inaccurate particulars furnished by the assessee.

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