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2015 (5) TMI 927 - AT - Income TaxPenalty u/s 271(1)(c) - inaccurate particulars of income by the assessee relating to capital gains - CIT(A) deleted penalty levy - Held that - During the course of assessment the Assessing Officer observed that the assessee has credited profits on sales of shares directly to capital reserve and not credited the same to the profit and loss account. The assessee though included the capital gain derived from sale of shares in the normal computation but not included the same while computing book profit u/s 115JB of the Act; therefore in the opinion of the Assessing Officer non inclusion of the capital gain while computing book profit u/s 115JB amounts to furnishing of inaccurate particulars of income by the assesse. We find that the Assessing Officer was not justified in holding that the inaccurate particulars of income relating to capital gain was furnished by the assessee. No inaccuracy in any of the particulars in respect of capital gain earned by the assessee was found by the Assessing Officer and the addition to the book profit was made because of difference in the opinion in respect of presentation of such capital gain whether such capital gain should have been credited in the profit and loss account or directly to capital reserve in the balance-sheet. The assessee was of the opinion that such capital gain could have been directly credited to capital reserve account in the balance-sheet whereas as per the Assessing Officer such capital gain should have been credited in the profit and loss account only. The Hon ble Supreme Court in the case of CIT vs. Reliance Petroproducts Pvt Ltd reported in 2010 (3) TMI 80 - SUPREME COURT wherein held a mere making of a claim which is not sustainable in law by itself will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such a claim made in the return cannot amount to furnishing inaccurate particulars. - Decided in favour of assesse.
Issues Involved:
1. Deletion of penalties levied under Section 271(1)(c) of the Income-tax Act for Assessment Years 2003-04 and 2004-05. Issue-wise Detailed Analysis: 1. Deletion of Penalties Levied under Section 271(1)(c): Background: The appeals were filed by the Revenue against the order of the Commissioner of Income Tax (Appeals) [CIT(A)], Valsad, which deleted the penalties levied by the Assessing Officer (AO) under Section 271(1)(c) of the Income-tax Act for Assessment Years 2003-04 and 2004-05. The penalties were imposed for furnishing inaccurate particulars of income. Facts of the Case: - The assessee-company sold shares of Bilag Industries Pvt Ltd and other companies, earning substantial profits. These profits were credited to the capital reserve account in the balance sheet instead of the profit and loss account, thereby reducing the book profit for the respective assessment years. - The AO added these profits to the book profits computed under Section 115JB of the Act, which was confirmed by the CIT(A). - Subsequently, the AO levied penalties for furnishing inaccurate particulars of income. CIT(A)'s Observations: - The CIT(A) noted that penalties under Section 271(1)(c) are imposed when there is concealment of income or furnishing inaccurate particulars of income. The CIT(A) highlighted that the assessee had provided all necessary details and explanations regarding the computation of income. - The CIT(A) emphasized that the assessee's actions did not amount to concealment of income or furnishing inaccurate particulars. The assessee had acted transparently and in a bona fide manner, believing that the profits from the sale of shares received as gifts were not includable in the computation under MAT. - The CIT(A) concluded that the non-inclusion of capital gains in the MAT computation was a matter of perception and not a definite concealment of income. The assessee had disclosed all relevant facts in the return of income, and the issue was one of legal interpretation rather than factual inaccuracy. Departmental Representative's Submissions: - The Departmental Representative argued that the assessee's action of crediting the profits directly to the capital reserve account and not routing them through the profit and loss account led to the furnishing of inaccurate particulars of income. - It was contended that the assessee's actions were against the provisions of the Companies Act and the intention of the legislature, thereby justifying the imposition of penalties. Assessee's Submissions: - The Authorized Representative of the assessee argued that full disclosure of the particulars of income was made in the return and audited financial statements. The assessee's actions were based on a bona fide belief and were not intended to conceal income or furnish inaccurate particulars. - The assessee relied on various judicial precedents, including the Supreme Court's decision in CIT vs. Reliance Petroproducts Pvt Ltd, which held that making a claim that is not sustainable in law does not amount to furnishing inaccurate particulars of income. Tribunal's Findings: - The Tribunal found that the AO's addition to the book profit was due to a difference in opinion regarding the presentation of capital gains, not due to any inaccuracy in the particulars furnished by the assessee. - The Tribunal upheld the CIT(A)'s order, noting that the assessee's actions were based on a bona fide belief and full disclosure was made in the return of income. The Tribunal emphasized that a mere difference in legal interpretation does not amount to furnishing inaccurate particulars of income. Conclusion: - The Tribunal dismissed the Revenue's appeals and upheld the CIT(A)'s order deleting the penalties for both assessment years. - The Tribunal reiterated that making a claim based on a bona fide belief, even if ultimately found to be legally unacceptable, does not amount to furnishing inaccurate particulars of income. Order Pronouncement: - The order was pronounced in the Court on May 8, 2015, at Ahmedabad.
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