2015 (9) TMI 318 - HC - Income Tax

Penalty under Section 271(1)(c) - Assessee did not adjust the dividend income against short-term capital gain in view of Section 94(7) - Tribunal held that penalty under Section 271(1)(c) is not leviable when parameters laid in Explanation 1(B) of Section 271(1)(c) stands satisfied - Held that - Order of the Tribunal is based on finding of fact, which is not shown to be perverse as Tribunal held that the respondent-assessee having made complete disclosure in the return of income, the fact that during the assessment proceedings a claim was made by the respondent - assessee to the effect that Section 94(7) would not be applicable in their case, cannot be a ground for imposing penalty. The Tribunal relied upon the decision of the Apex Court in the matter of CIT v. Reliance Petroproducts (P.) Ltd. 2010 (3) TMI 80 - SUPREME COURT wherein it has been held that levy of penalty is not justified merely because a claim made by the assessee has been rejected. The Tribunal also records a finding of fact that all details of loss claimed has been stated in the return of income and making a bona fide claim to be exempted from the provisions of Section 94(7) would not amount to furnishing of inaccurate particulars or concealing income on the part of the respondent - assessee. - Decided in favour of Assessee.

Summary

Issues:
1. Whether penalty under Section 271(1)(c) of the Income Tax Act is leviable when parameters laid in Explanation 1(B) of Section 271(1)(c) are satisfied?

Analysis:
In this case, the respondent-assessee purchased units, received dividend, and sold the units resulting in a loss. The dividend income was exempt under Section 10(33) of the Income Tax Act. The respondent-assessee did not adjust the dividend income against short-term capital gain due to Section 94(7) of the Act. The assessing officer imposed a penalty under Section 271(1)(c) of the Act, which was upheld by the Commissioner of Income Tax (A). However, the Tribunal ruled in favor of the respondent-assessee, emphasizing that complete disclosure was made in the return of income. The Tribunal cited the decision in CIT v. Reliance Petroproducts (P.) Ltd., stating that rejection of a claim does not warrant penalty imposition. The Tribunal found that the respondent-assessee's claim regarding Section 94(7) was made in good faith and did not constitute inaccurate particulars or income concealment.

The High Court upheld the Tribunal's decision, noting that it was based on factual findings that were not proven to be incorrect. The Court found no justification to entertain the proposed question of law. Consequently, the appeal by the Revenue for the assessment year 2003-04 was dismissed with no order as to costs.