2017 (2) TMI 333 - AT - Income Tax

Penalty u/s 271(1)(c) - addition u/s 14A - Held that - We do not see any concealment or furnishing of inaccurate particulars in respect of the disallowance made under Section 14A of the Act. Disallowance came to be made by invoking the provisions of Rule 8D. Here the assessee proved that it has own funds much more than investments and therefore there is no question of disallowance under 8D 2(ii). Coming to administrative expenses disallowed under Rule 8D 2(iii) we find that during the assessment proceedings, the assessee itself given the computation u/s 14A for disallowance of estimated expenditure under Rule 8D 2(iii). This expenditure came to be disallowed by the operation of law but not on account of the reason that the assessee furnished inaccurate particulars or concealment of income. Hence no penalty is attracted for such disallowance. Addition made towards short term capital gains - Held that - The bonafide explanation of the assessee that it is an inadvertent mistake and bonafide error while computing the capital gains is not proved to be false by the assessing officer. The assessing officer could not prove that the explanation of the assessee was not genuine. The assessee computed long term capital gain taking the sale proceeds of entire investments which were shown in the profit and loss account may be by oversight or inadvertence. It is only a change in the head of income. It is not complete non disclosure by the assessee. Therefore, the explanation of the assessee since not proved to be non genuine, in our view, there is no concealment of income or furnishing of inaccurate particulars by the assessee in respect of computation of capital gains, thus we delete the penalty levied by the assessing officer on the addition of capital gains. Assessee appeal allowed.

Summary

Issues:
Penalty under Section 271(1)(c) for disallowance under Section 14A and short term capital gains.

Analysis:
1. The appeals were filed against the order of the Ld. CIT (Appeals)-9, Mumbai for the assessment year 2008-09, where penalty under Section 271(1)(c) was partly deleted for disallowance under Section 14A and short term capital gains.

2. The disallowance under Section 14A was contested by the assessee, claiming disclosure of exempt income expenditure in the tax audit report. The assessing officer disallowed a higher amount, including interest and indirect expenditure. The Ld. CIT (Appeals) partly sustained the disallowance and deleted the penalty under Rule 8D2(ii) but confirmed it under Rule 8D2(iii.

3. Regarding short term capital gains, the assessee admitted an inadvertent error in classification, corrected during assessment. The assessing officer levied a penalty, alleging non-disclosure. The Ld. CIT (Appeals) upheld the penalty, but the ITAT found no concealment or inaccurate particulars, deleting the penalty.

4. The ITAT found no concealment or inaccurate particulars in the disallowance under Rule 8D2(iii) or short term capital gains. The explanation provided by the assessee for the error in capital gains computation was considered genuine, leading to the deletion of the penalty.

5. The ITAT dismissed the revenue's appeal and allowed the assessee's appeal, emphasizing the absence of concealment or inaccurate particulars in both instances.

6. The judgment was delivered on February 3, 2017, by the Appellate Tribunal ITAT Mumbai, with detailed analysis and reasoning provided for each issue involved.