2014 (2) TMI 368 - AT - Income Tax

Penalty u/s 271(1)(c) - Held that - The issue of long term capital gains vs. business income is a debatable issue and, there is no concealment of the income or furnishing of inaccurate particulars which are the main ingredients to levy the penalty under section 271(1)(c) of the Act - On debatable issue no penalty u/s 271(1)(c) can be levied - The mere fact that a claim made by the appellant has been disallowed by the AO ipso-facto does not lead to the imposition of penalty - All the details given in the return of income were correct and there was a no concealment of income nor were any inaccurate particulars of such income were furnished - The same amount of income as returned by the assessee has been assessed albeit under a different head - The only dispute therefore was the head under which the income returned should be taxed - Decided against Revenue.

Summary

Issues:
1. Whether penalty u/s 271(1)(c) was correctly deleted by CIT (A) for assessment year 2008-2009 based on the nature of income declared by the assessee as long term capital gains or business income.

Analysis:
The appeal filed by the Revenue challenged the CIT (A)'s order deleting the penalty u/s 271(1)(c) amounting to Rs. 40,00,000/- for the assessment year 2008-2009. The Revenue contended that the CIT (A) erred in concluding that the addition was a consequence of a difference of opinion without appreciating the impact of offering income under "Business & Profession" or "Capital Gain" on the tax liability. The Revenue argued that the nature of income declared by the assessee as long term capital gains or business income significantly affects the tax rate. The CIT (A) granted relief to the assessee, considering the taxability of gains under "business income" or "capital gains" as a debatable issue, and deleted the penalty levied by the AO. The CIT (A) relied on various decisions while deciding the issue and emphasized that the issue of long term capital gains vs. business income is debatable.

During the proceedings before the Tribunal, the Revenue relied on the AO's order, highlighting that the assessee agreed to the taxability of gains as business income, contrary to the claim of capital gains. The Revenue argued that the issue of taxability under different heads is debatable, as discussed by the CIT (A) in para 2.10 of the impugned order. The Tribunal noted that the issue of long term capital gains vs. business income is indeed debatable. The Tribunal concluded that there was no concealment of income or furnishing of inaccurate particulars by the assessee, which are essential elements for levying the penalty under section 271(1)(c) of the Act. Therefore, the Tribunal upheld the CIT (A)'s decision to delete the penalty, stating that there was no infirmity in the order and dismissed the appeal of the Revenue.

In summary, the Tribunal upheld the CIT (A)'s decision to delete the penalty u/s 271(1)(c) for the assessment year 2008-2009, as the issue of taxability under different heads was debatable, and there was no concealment of income or furnishing of inaccurate particulars by the assessee. The Tribunal found that the CIT (A) rightly adjudicated the issue, leading to the dismissal of the Revenue's appeal.