2016 (4) TMI 168 - HC - Income Tax

Penalty u/s 271(1) (c) - change of the head of income for purposes of taxation - Held that - We find that in the present facts the Tribunal has rendered a finding of fact that the Respondent-Assessee has furnished all details of income in its Return of Income filed. Further on the basis of details furnished by the Respondent, the Assessing Officer had only changed the head of income. The view taken by the Tribunal in the impugned order that mere change of the head of income for purposes of taxation does not warrant a penalty is no longer res integra. This Court in Commissioner of Income Tax v/s. Bennett Coleman and Co.Ltd. (2013 (3) TMI 373 - BOMBAY HIGH COURT ) holds that no penalty under Section 271(1)(c) of the Act is not imposable on account of change of head of income. In the above case, the Tribunal held that premium received on redemption of debentures claimed as income from other sources by the Assessee was held by the authorities under the Act as appropriately classifiable as income from capital gains at the instance of the Revenue could not result in imposition of penalty. - Decided in favour of assessee

Summary

Issues:
1. Appeal against the order of the Income Tax Appellate Tribunal under Section 260A of the Income Tax Act, 1961.
2. Correctness of canceling penalty under Section 271(1)(c) of the Act imposed by the Assessing Officer and confirmed by the Commissioner of Income Tax (Appeals).

Analysis:
1. The appellant, the Revenue, challenged the order of the Income Tax Appellate Tribunal dated 30th April, 2013, related to Assessment Year 2007-08, under Section 260A of the Income Tax Act, 1961. The main question raised was whether the Tribunal was correct in canceling the penalty under Section 271(1)(c) of the Act imposed by the Assessing Officer and confirmed by the Commissioner of Income Tax (Appeals).

2. The respondent-assessee was engaged in trading shares and providing financial consultancy during the subject assessment year. The Assessing Officer held that the short term capital gains claimed by the assessee were profits and gains of business. The assessee appealed to the Commissioner of Income Tax (Appeals) and then to the Tribunal. The Tribunal dismissed the appeal, stating that the amount claimed as short term capital gains should be classified as profits and gains of business.

3. Meanwhile, the Assessing Officer initiated penalty proceedings under Section 271(1)(c) of the Act and imposed a penalty on the assessee for furnishing inaccurate particulars of income. The Commissioner of Income Tax (Appeals) upheld the penalty. The Tribunal, in its order dated 30th April, 2013, found that the assessee had furnished all details of income and the classification of income as short term capital gains was debatable. The Tribunal cited a previous case to support its decision that a mere change in the head of income does not automatically lead to penalty imposition.

4. The High Court noted that the Tribunal had found that the assessee had provided all income details in its return and that the change in the head of income by the Assessing Officer did not justify a penalty. The Court referred to a previous judgment to support this reasoning and concluded that the penalty was not warranted. The Court dismissed the appeal, emphasizing that the issue was debatable and no penalty should be imposed in this case.

5. In conclusion, the High Court upheld the Tribunal's decision, stating that the penalty under Section 271(1)(c) of the Act was not justified in the present case. The Court cited previous judgments and found that the penalty was not warranted based on the facts and circumstances of the case.