2022 (6) TMI 950 - AT - Income Tax

Penalty u/s 271(1)(c) - bogus short-term capital loss - revised computation filed post assessment proceedings seeking short-term capital loss may be treated as a speculative loss - HELD THAT - CIT(Appeals) has rightly confirmed the penalty imposed by the Ld. Assessing Officer. The assessee had made bogus claim of short-term capital loss in the return of income. When, after due investigation, the same was detected by the Ld. Assessing Officer during the course of assessment proceedings, the assessee filed revised computation and requested that the short-term capital loss may be treated as a speculative loss . No reason for this revised stand/position was given by the assessee Assessing Officer confirmed additions in respect of this bogus short-term capital loss and the assessee did not file appeal against the above addition in quantum proceedings. The Ld. CIT(Appeals) has correctly pointed out that it is only when the incorrect claim of bogus short term capital loss was detected by the Ld. Assessing Officer that the assessee offered to pay tax in respect of the same. Accordingly, the Ld. CIT(Appeals) confirmed the penalty u/s 271(1)(c) correctly - Decided against assessee.

Summary

Issues Involved:
1. Imposition of penalty under Section 271(1)(c) for concealment of income and furnishing inaccurate particulars of income.
2. Validity of the show cause notice under Section 274.
3. Condonation of delay in filing the appeal.

Issue-wise Detailed Analysis:

1. Imposition of Penalty under Section 271(1)(c):

The primary issue revolves around the imposition of penalty under Section 271(1)(c) of the Income Tax Act for concealment of income and furnishing inaccurate particulars of income. The assessee claimed a bogus short-term capital loss of ?35,33,650, which was later detected by the Assessing Officer (AO) during assessment proceedings. The assessee admitted the mistake and submitted a revised statement of income, requesting the loss to be treated as a "speculative loss." The AO, however, added the bogus short-term capital loss to the income of the assessee and initiated penalty proceedings under Section 271(1)(c). The AO held that the assessee intentionally concealed the particulars of income, relying on precedents like Snita Transport Private Limited v. ACIT and Bharatkumar G. Rajani v. DCIT. The AO imposed a penalty of ?10,60,095, being 100% of the tax sought to be evaded.

The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the penalty, noting that the revised computation was filed only after the AO detected the wrong claim. The CIT(A) stated that the assessee's act could not be treated as voluntary disclosure and emphasized that the concealment was detected through departmental proceedings. The CIT(A) dismissed the appeal, affirming that the assessee furnished inaccurate particulars and concealed income by claiming a wrong deduction.

2. Validity of the Show Cause Notice under Section 274:

The assessee contended that the show cause notice issued under Section 274 was defective as it did not specify whether the penalty was for "furnishing inaccurate particulars of income" or "concealing particulars of such income." The assessee argued that the notice's ambiguity rendered the penalty order invalid. However, this argument was not upheld by the CIT(A), who focused on the intentional concealment and the incorrect claim detected by the AO.

3. Condonation of Delay in Filing the Appeal:

The appeal was time-barred by 825 days. The assessee filed a condonation application, attributing the delay to the tax consultant's negligence and the office clerk's personal emergency. The Tribunal, however, found the reasons unconvincing and noted the absence of an affidavit from the tax consultant. Citing precedents like Tractors & Farm Equipments Ltd. and T. Kishan, the Tribunal emphasized that the delay must be beyond the control of the party and due to no negligence. The Tribunal concluded that the assessee acted negligently and failed to provide a persuasive reason for the delay, thus dismissing the application for condonation of delay.

Conclusion:

The Tribunal dismissed the appeal, affirming the CIT(A)'s order. The Tribunal held that the assessee's bogus claim of short-term capital loss, detected during assessment proceedings, justified the penalty under Section 271(1)(c). The Tribunal also dismissed the application for condonation of delay, citing negligence and lack of convincing reasons for the delay in filing the appeal. The appeal was thus dismissed on both procedural and substantive grounds.