2018 (4) TMI 173 - AT - Income Tax

Penalty u/s 271(1)(c) - addition on account of denial of benefit u/s 10(38) in respect of LTCG and addition on account of discrepancies in valuation of closing stock - whether the assessee has concealed particulars of income or has furnished inaccurate particulars of income? - Held that - Following the law laid down by Hon ble Supreme Court in Reliance Petro Products Pvt. Ltd. (2010 (3) TMI 80 - SUPREME COURT ), in case any claim put forth by the assessee is found to be not allowable, it would not amount to concealment of income rather it is a case of interpretation of the provisions which issue is otherwise a debatable one as of now the appeal having been admitted in the Hon ble High Court. So, finding no illegality or perversity in the findings returned by the ld. CIT (A), present appeal filed by the Revenue is dismissed.

Summary

Issues Involved:
1. Deletion of penalty u/s 271(1)(c) of ? 36,32,553/- imposed on confirmation of addition of ? 68,23,535/- on account of denial of benefit u/s 10(38) in respect of LTCG and addition of ? 30,27,182/- on account of discrepancies in valuation of closing stock.

Analysis:
The Appellant, DDIT, Circle 1(1), New Delhi (referred to as 'the Revenue') filed an appeal seeking to set aside the order passed by the Commissioner of Income-tax (Appeals)-XXIX, New Delhi deleting the penalty levied u/s 271(1)(c) of the Income-tax Act, 1961 for the assessment year 2006-07. The penalty was imposed due to the disallowance of benefit u/s 10(38) in respect of long term capital gains and discrepancies in the valuation of closing stock. The AO/CIT (A) affirmed that the assessee had converted personal investment in shares into stock-in-trade, making them ineligible for the benefit of section 10(38), leading to the penalty of ? 36,32,553/-.

The assessee appealed before the CIT (A) who deleted the penalty, prompting the Revenue to challenge the decision before the Tribunal. The Tribunal considered the arguments of both parties and reviewed the orders of the revenue authorities. The additions made by the AO were upheld by the CIT (A) and the Tribunal, forming the basis for the penalty.

The main issue for determination was whether the assessee concealed particulars of income or furnished inaccurate particulars during the assessment proceedings. Regarding the claim of benefit u/s 10(38) of ? 68,23,535/-, the assessee argued it was a bonafide mistake with tax-neutral effects, especially since the appeal was admitted by the High Court. The Tribunal noted that the issue was debatable, and hence, penalty could not be levied.

Regarding the discrepancy in the valuation of the stock, the assessee claimed it was due to a clerical mistake in an excel formula. The AO observed that despite the accounts being audited, the revision of the computation twice indicated a lack of bonafide mistake. However, the CIT (A) found that Explanation 1 to section 271(1)(c) was not applicable as the mistake was explained and could be attributed to human error.

The Tribunal referenced the decision of the Hon'ble Supreme Court in Reliance Petro Products Pvt. Ltd. where it was clarified that making an incorrect claim does not necessarily amount to furnishing inaccurate particulars. The Tribunal concluded that if a claim is found to be not allowable, it does not constitute concealment of income but rather an interpretation issue, especially when the matter is debatable. Therefore, finding no illegality in the CIT (A)'s decision, the appeal filed by the Revenue was dismissed.