2024 (9) TMI 352 - AT - Income Tax

Levy of penalty u/s 271(1)(C) - denial of long-term capital loss c/f - Applicability of section 115QA and section 10(34A) - HELD THAT - Provisions of section 115QA of the Act per se cannot be made applicable to the facts of the instant case, the provisions of section 10(34A) also consequentially would not have any application. Hence, the very basis of denial of carry forward long-term capital loss per se made by the AO is legally incorrect. Since the assessee had not challenged the same in the quantum proceedings, the penalty u/s 271(1)(c) of the Act stood levied on the assessee. As we have already held that the denial of long-term capital loss per se is not sustainable in the eyes of law, there cannot be any alleged furnishing of inaccurate particulars thereon. In any event, this is only question of interpretation of law of the relevant provisions of the Act as all the details for determination of long-term capital loss either for its acceptance or denial are already available on record before the AO in the income tax computation sheet itself. Hence, it cannot be construed as furnishing of inaccurate particulars of income by the assessee. At best, it could be construed only as an incorrect claim. Hence, no penalty could be levied on an incorrect claim. Reliance in this regard is placed on the decision of Reliance Petro Products Private Limited 2010 (3) TMI 80 - SUPREME COURT and Price Waterhouse Coopers (P) Ltd. 2012 (9) TMI 775 - SUPREME COURT We direct the ld AO to delete the penalty levied u/s 271(1)(c). Decided in favour of assessee.

Summary

Issues involved:
1. Challenge to the levy of penalty under section 271(1)(C) of the Income-tax Act, 1961.
2. Applicability of section 115QA and section 10(34A) to the case.
3. Denial of carrying forward long-term capital loss by the Assessing Officer.

Detailed Analysis:
The judgment pertains to an appeal against the order of the Commissioner of Income Tax (Appeals) regarding the assessment year 2015-16. The assessee challenged the levy of a penalty under section 271(1)(C) of the Income-tax Act, amounting to Rs. 57,98,464. The Assessing Officer denied the benefit of carrying forward a long-term capital loss of Rs. 2,81,47,885, citing the provisions of section 115QA and section 10(34A) of the Act. The penalty was imposed on the grounds of furnishing inaccurate particulars of income (para 3, 6).

The assessee company was engaged in various business activities and incurred a long-term capital loss due to the buyback of shares held in another company. The Assessing Officer contended that since the income arising from the buyback of shares is exempt under section 10(34A), the corresponding loss should not be allowed to be carried forward. The company claimed ignorance of the provision introduced in 2013, but this was not accepted as a valid excuse for the penalty (para 4, 7).

The Tribunal analyzed the applicability of section 115QA and section 10(34A) to the case. It was observed that the consideration paid for the buyback of shares was less than the issue price, indicating no distribution of income as per section 115QA. Consequently, the provisions of section 10(34A) could not be applied either, as section 115QA was not applicable (para 8, 9, 10).

The Tribunal held that the denial of carrying forward the long-term capital loss by the Assessing Officer was legally incorrect. Since the assessee did not challenge this in the quantum proceedings, the penalty was imposed. However, the Tribunal ruled that the denial of the loss was not sustainable in law, and thus, no penalty for furnishing inaccurate particulars of income could be justified. Citing relevant judicial precedents, the Tribunal directed the Assessing Officer to delete the penalty under section 271(1)(C) (para 11, 12).

In conclusion, the Tribunal partially allowed the appeal of the assessee, directing the deletion of the penalty levied under section 271(1)(C) of the Income-tax Act. The order was pronounced in open court on 29/08/2024 (para 13).