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2020 (3) TMI 217 - AT - Income TaxPenalty u/s 271(1)(c) - disallowance u/s 94(7) - short-term capital loss on sale of shares where dividend has been received - transactions in certain securities - HELD THAT - The assessee in the return of income claimed such short term capital loss and adjusted the same against short-term capital gain on sale of the motor cars. When the Assessing Officer pointed out this error to the assessee the assessee agreed to the said amount for tax. The contention of the assessee that this was a bonafide error on the part of the assessee whereas contention of the Revenue is that had this error not pointed out of by the Assessing Officer this would have remained unnoticed and the assessee would have taken benefit of the error. It is evident that in the return of income the assessee claimed short term capital loss which was not allowed in terms of section 94(7) of the Act. This is also a matter of fact that this error came to light only when the Assessing Officer asked for justification of the claim of certain capital loss in view of the clear provisions of section 94(7) of the Act. In our opinion there is no doubt that in the return of income particulars filed by the assessee in respect of short-term capital loss which has been adjusted against the short-term capital gain are inaccurate. Excess claim of expenses and prepaid expenses - assessee admitted that it has wrongly claimed deduction of the whole of the amount of 6, 73, 440/- instead of 1, 12, 240/- pertaining to the year under consideration - HELD THAT - Obviously the assessee has filed inaccurate particulars of income in the return of income filed though later on assessee has accepted its mistake. AO cannot absolve the assessee for filing inaccurate particulars in the return of income and pardon him if the assessee except the mistake and pay the tax on the same. This action of the assessee cannot be said to be voluntary. Further the learned Counsel could not substantiate before us as how two opinion exists on the issue of prepaid expenses of corporate entrance fee disallowed by the learned Assessing Officer. CIT(A) has relied on the decision of Mak Data Ltd. 2013 (1) TMI 574 - DELHI HIGH COURT wherein it is held that the statute does not recognize defences on account of voluntary disclosure buy peace avoid litigation amicable settlement etc. to explain away of its conduct under the Explanation -1 to Section 271(1)(c) - voluntary disclosure does not release the assessee from the mischief of the penal proceedings under section 271(1)(c) of the Act and the law does not provide that when assessee makes voluntary disclosure of his concealed income he has to be absolved from the penalty. Also see NG TECHNOLOGIES LTD. 2014 (12) TMI 481 - DELHI HIGH COURT - Decided against assessee.
Issues Involved:
1. Validity of penalty under section 271(1)(c) of the Income-tax Act, 1961. 2. Disallowance under section 14A. 3. Disallowance under section 94(7). 4. Disallowance of prepaid expenses. 5. Disallowance of excess expenses claimed. Issue-wise Detailed Analysis: 1. Validity of Penalty under Section 271(1)(c): The primary issue in this case is the imposition of penalty under section 271(1)(c) of the Income-tax Act, 1961, for furnishing inaccurate particulars of income. The assessee contended that the errors were unintentional and due to calculation mistakes. However, the Revenue argued that the errors were only corrected after being pointed out by the Assessing Officer, indicating that the inaccuracies were not voluntarily disclosed. 2. Disallowance under Section 14A: The assessee challenged the addition under section 14A of the Act before the Ld. CIT(A), who subsequently deleted the addition. This issue was not pursued further in the appeal. 3. Disallowance under Section 94(7): The assessee claimed a short-term capital loss of ?1,20,304 under section 94(7), which was adjusted against short-term capital gains on the sale of motor cars. The Assessing Officer pointed out that this claim was not allowable under the provisions of section 94(7). The assessee admitted the mistake and offered the amount for taxation. The Tribunal noted that the error was only corrected after being identified by the Assessing Officer, indicating that the particulars filed were inaccurate. 4. Disallowance of Prepaid Expenses: The assessee made a one-time payment of ?6,73,440 for corporate entrance fees for five years but claimed the entire amount as an expense in the year of payment. The Assessing Officer disallowed the prepaid amount of ?5,61,200, which was not allowable as per the mercantile system of accounting. The assessee admitted the mistake but argued that there were two possible opinions regarding the claim. The Tribunal, however, found that the assessee's claim was inaccurate and not supported by any substantial evidence of two existing opinions. 5. Disallowance of Excess Expenses Claimed: The assessee claimed excess expenses totaling ?67,500 due to calculation errors in voucher entries. The Assessing Officer identified the inaccuracies, and the assessee admitted the mistakes. The Tribunal noted that the errors were only corrected after being pointed out by the Assessing Officer, indicating that the particulars filed were inaccurate. Conclusion: The Tribunal upheld the penalty imposed by the Assessing Officer and confirmed by the Ld. CIT(A), citing binding precedents from the Hon'ble Delhi High Court and the Hon'ble Supreme Court. The Tribunal emphasized that voluntary disclosure of errors does not absolve the assessee from penalty under section 271(1)(c) if the inaccuracies were initially filed in the return of income. The appeal of the assessee was dismissed, and the penalty order was confirmed.
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