2015 (10) TMI 1704 - AT - Income Tax

Penalty u/s 271(1)(c) - treating part of income from sale of shares as business income instead of capital gains by the assessee - CIT(A) deleted the penalty - Held that - The bifurcation of the short term capital gain and treating the transaction as investment in the cases where the holding period of more than 30 days and as business transaction in the case where the holding period is less than 30 day, in our considered opinion, is not justified on the part of the CIT(A). Since there cannot be a single criteria for judging the transaction as capital asset or trading asset, the CIT(A) adopted only holding period as a sole criteria for bifurcating the transactions relating to the short term capital gain, which is neither proper and nor justified. Respectfully following the same we have to necessarily dislodge this direction of the Ld. CIT(Appeals). We hold that the entire profits from the purchase and sale of shares have to be assessed under the head capital gains . From the above findings of Hon ble Tribunal we find that assessee has been granted relief in this respect and therefore the penalty imposed by AO does not survive. - Decided in favour of assessee.

Summary

Issues:
Appeal against deletion of penalty under section 271(1)(c) of the Income Tax Act by Ld. CIT(A).

Analysis:
The appeal was filed by the revenue against the deletion of penalty imposed by the AO under section 271(1)(c) of the Income Tax Act by Ld. CIT(A). The penalty was imposed as the AO treated part of the income from the sale of shares as business income instead of capital gains by the assessee. The AO initiated penalty proceedings and issued a notice to the assessee. The Ld. CIT(A) partly allowed the appeal of the assessee, confirming the addition made by the AO to the extent of business income. The assessee replied to the show cause notice, mentioning the decision of the Hon'ble Supreme Court and contending that there was no concealment or inaccurate particulars of income. However, the AO found the reply of the assessee to have no force and proceeded to levy a penalty under section 271(1)(c) of the IT Act.

The Hon'ble Tribunal, in a previous order, had decided in favor of the assessee regarding the treatment of gains from the sale of shares as business profit. The Tribunal disagreed with the CIT(A) and held that the entire profits from the purchase and sale of shares should be assessed under the head of "capital gains." As a result of this decision, the penalty imposed by the AO did not stand, and the appeal filed by the revenue was dismissed. The Tribunal's findings granted relief to the assessee, leading to the dismissal of the revenue's appeal.

In conclusion, the penalty imposed by the AO under section 271(1)(c) of the IT Act was deleted as the Hon'ble Tribunal had previously decided in favor of the assessee regarding the treatment of profits from the sale of shares. The appeal filed by the revenue against the deletion of the penalty was dismissed, as the Tribunal's decision granted relief to the assessee in this matter.