2015 (2) TMI 534 - AT - Income Tax

Penalty u/s 271(1)(c) - assessee had claimed STT in its profit and loss account and has thereby reduced its income by concealing the particulars of income - disallowance made on account of section 94(7) and u/s 14A - Held that - Held that - There is no reason to doubt the bonafide of the assessee in making the claim as there was no gain to the assesee as STT could not be utilized as rebate and secondly there was no tax sought to be evaded. In both the situation i.e tax payable on return income and tax position in the assessed income, the tax liability was Nil. So far as other addition / disallowance made on account of section 94(7) and u/s 14A there is no reason to doubt the explanation of the assessee. Besides, the additions/disallowances on which penalty in question has been levied, have been made undisputedly on the basis of disclosure made by the assessee available on record. Hence it cannot be said beyond doubt in the present case that there was concealment of particulars of income or furnishing inaccurate particulars thereof on the part of the assesee to attract penal action u/s 271(1)(c) of the Act on the disallowances / additions as discussed above. Nor is it the case of the revenue that the assessee has failed to disclose fully and truly all the material facts relating to particulars of income, the only mistake committed by the assessee was that while computing the payable income and an amount which should have been disallowed due to provisions of section 40(a) (ib) of the Act was not disallowed or added back by the assessee. The reasons behind the other additions / disallowances has also been explained by the assesee on which there is no reason to doubt its bonafide. No penalty u/s 271 (1) (c) can be levied on the disallowances/additions made by the AO which were based on the disclosure of the related facts by the assesee only. - Decided in favour of assessee.

Summary

Issues involved:
Levy of penalty under section 271(1)(c) of the Income Tax Act, 1961 on the assessee for including Security Transactions Tax (STT) in the value of credit shares, disallowance under sections 94(7), 14A, and disallowance of STT.

Analysis:

1. Penalty under section 271(1)(c) for including STT in the value of credit shares:
The AO added the STT amount to the income of the assessee, leading to a penalty under section 271(1)(c). The assessee contended that claiming STT in the profit and loss account was a genuine error and not an attempt to conceal income. The assessee argued that no tax was sought to be evaded, and the STT deduction was a bonafide mistake. The AR emphasized that the tax liability was nil due to the rebate under section 88E, proving no advantage to the assessee by claiming STT as an expense. The Tribunal agreed that there was no concealment of income or furnishing of inaccurate particulars, setting aside the penalty.

2. Penalty on other additions/disallowances:
Regarding the penalty on additions under sections 94(7), 14A, and STT disallowance, the AR argued that there was no justification for the penalty. The Tribunal found that the explanations provided by the assessee for these additions were reasonable and made based on disclosed facts. It was noted that there was no concealment or inaccurate particulars furnished by the assessee, leading to the penalty being set aside.

3. Overall decision and conclusion:
After considering the arguments from both sides, the Tribunal concluded that there was no mala fide intent on the part of the assessee in claiming the benefits, and no tax was sought to be evaded. The Tribunal found that the additions/disallowances were made based on disclosed facts, and there was no concealment of income. Therefore, the penalty under section 271(1)(c) was unjustified, and the AO was directed to delete the penalty amount. The appeal was allowed in favor of the assessee.

This detailed analysis of the judgment highlights the key arguments, legal provisions, and the Tribunal's reasoning behind setting aside the penalty imposed on the assessee.