2017 (3) TMI 194 - AT - Income Tax

Penalty u/s 271(1)(c) - loss from trading of commodities through MCX exchange, a Speculation loss wrongly been set off by the assessee against his business income - Held that - We find that it is a matter of record that the addition made by the A.O in the quantum proceedings by observing that the loss suffered by the assessee on trading of commodities through MCX exchange, being in the nature of speculation loss was thus not entitled to the set off against his business income, had been set aside by the CIT(A) with a clear direction to the A.O to treat the said loss as a business loss and allow set off of the same against the business income of the assessee. We further find that as the appeal of the department against the aforesaid order of the CIT(A) had been dismissed by the Tribunal, therefore, the same had attained finality. Thus as now when the very quantum addition in itself had been deleted on merits by the CIT(A), and the said order on having been dismissed by the Tribunal had thereafter got the stamp of finality, the penalty pertaining to the said addition therefore cannot survive - Decided in favour of assessee

Issues:
1. Appeal against CIT(A) order upholding penalty under section 271(1)(c) of the Income Tax Act, 1961.
2. Disallowance of set off of loss from trading of commodities against business income.
3. Validity of penalty imposed by Assessing Officer.

Issue 1: Appeal against CIT(A) order upholding penalty under section 271(1)(c) of the Income Tax Act, 1961:

The appellant challenged the order passed by the CIT(A)-33, Mumbai, dated 23.09.2014, which upheld the penalty imposed by the Assessing Officer under section 271(1)(c) of the Income Tax Act, 1961. The grounds of appeal included contentions regarding reliance on certain decisions, concealment of income, and lack of notice of hearing. The appellant argued that the CIT(A) erred in confirming the penalty without appreciating that there was no concealment of income or furnishing of inaccurate particulars. The appellant also disputed the reliance on specific cases and asserted that all income particulars were disclosed. The Tribunal noted the arguments presented and ultimately set aside the penalty imposed by the Assessing Officer, thereby allowing the appeal of the assessee.

Issue 2: Disallowance of set off of loss from trading of commodities against business income:

The Assessing Officer disallowed the set off of a loss of &8377; 18,92,790 from trading commodities against the business income of the assessee, considering it as speculation loss. However, the CIT(A) later directed the Assessing Officer to treat the loss as a business loss and allow set off against the business income. The Tribunal observed that the department's appeal against this order was dismissed, making it final. Consequently, as the quantum addition was deleted on merits, the penalty imposed under section 271(1)(c) could not be sustained. The Tribunal agreed with the appellant's argument that since the quantum addition was overturned, the penalty should also be set aside. Therefore, the order of the CIT(A) upholding the penalty was overturned, and the penalty imposed by the Assessing Officer was vacated.

Issue 3: Validity of penalty imposed by Assessing Officer:

The Assessing Officer imposed a penalty of &8377; 6,43,360 under section 271(1)(c) for allegedly furnishing wrong particulars in the return of income by claiming set off of the loss from trading commodities against business income. The CIT(A) upheld this penalty, leading the appellant to appeal. During the proceedings, it was established that the quantum addition was deleted on merits, rendering the penalty unsustainable. Both parties acknowledged this fact, but the Departmental Representative argued that penalty proceedings are distinct from assessment proceedings. However, the Tribunal concluded that since the quantum addition was overturned and the department's appeal was dismissed, the penalty could not be maintained. Therefore, the penalty imposed by the Assessing Officer was set aside, and the appeal of the assessee was allowed.

This detailed analysis of the legal judgment highlights the key issues, arguments presented, and the Tribunal's decision on each matter, ensuring a comprehensive understanding of the case.

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