2017 (9) TMI 1224 - AT - Income Tax

Penalty u/s. 271(1)(c) - addition on account of disallowance of capital loss - Held that - Since, the case of assessee is at parity with sister concern Nath Seeds Ltd. (supra), we find no reason to take contrary view. Accordingly, we direct the cancellation of penalty on disallowance of capital loss as held Assessee discharged the initial or preliminary onus cast him in so far as furnishing of correct particulars. We don t find any inaccuracy in matters of furnishing of details/particulars. Thus, it is not the case of deemed concealment by way of furnishing of particulars. Hence, it is not the fit case of levy of concealment penalty u/s.271(1)(c) - Decided in favour of assessee.

Summary

Issues:
Levy of penalty under section 271(1)(c) of the Income Tax Act, 1961 for disallowance of capital loss.

Analysis:
The Appellate Tribunal ITAT Pune heard an appeal against the order of the Commissioner of Income Tax (Appeals) confirming the penalty under section 271(1)(c) for disallowance of capital loss. The assessee, a subsidiary of a company, had trading and capital losses disallowed during scrutiny assessment. The penalty was imposed by the Assessing Officer, which was partially confirmed by the Commissioner of Income Tax (Appeals). The appeal before the Tribunal focused on the penalty related to the disallowance of capital loss amounting to ?2.43 crores.

During the proceedings, the assessee's representative argued that the capital loss claimed was genuine as it was incurred on the sale of shares to sister concerns. It was highlighted that the assessee did not claim this loss against any capital gains in subsequent years, indicating no tax benefit was sought. The representative also pointed out a similar penalty imposed on a sister concern was deleted by the Tribunal, providing a relevant order copy for reference.

On the contrary, the Department's representative defended the penalty, stating that the assessee failed to provide adequate documentation to support the claimed loss. The Assessing Officer considered the claim fake and fictitious, although acknowledging a related penalty was deleted for a sister concern by the Tribunal.

After considering the arguments and reviewing the orders, the Tribunal noted that the facts of the case were similar to the one involving the sister concern where the penalty was deleted. The Tribunal emphasized the need for incriminating evidence to prove malafide intentions for imposing penalties under section 271(1)(c). It was observed that the transactions were genuine, recorded in the books of accounts, and lacked evidence of being fake or fictitious.

Consequently, the Tribunal found no reason to uphold the penalty on the disallowance of capital loss, as the case was at parity with the precedent involving the sister concern. Therefore, the Tribunal set aside the Commissioner's decision to confirm the penalty and allowed the assessee's appeal, directing the cancellation of the penalty on the disallowed capital loss.

In conclusion, the Tribunal's detailed analysis emphasized the importance of substantiating malafide intentions for penalty imposition, ensuring a fair assessment of the genuineness of transactions and the accuracy of particulars provided, ultimately leading to the cancellation of the penalty in this case.