2018 (10) TMI 1290 - AT - Income Tax

Levying penalty u/s 271(l)(c) - assessee wrongly declared the business income arisen on wrong trades executed on behalf of the clients as short term capital gains on sale of shares, claiming concessional rate of income-tax on short term capital gains on shares within provisions of Section 111A as against chargeability of business income at normal rates of income-tax, clearly causing prejudice to Revenue by way of short payment of income-tax - Held that - Assessee has made bald statement before us but no details of the chartered accountant who made these mistakes and under what circumstances these glaring mistakes were committed by chartered accountant is not brought on record. No affidavit of the said chartered accountant nor any affidavit of the assessee is filed on record to substantiate that what is averred before us is true and correct but only bald statements are made. These mistakes are glaring mistakes committed in return of income filed with Revenue having direct impact on legitimate expectation of Revenue in depriving Revenue in collection of legitimate income-tax dues payable to them within mandate of the 1961 Act. No bonafide of committing such glaring mistakes are brought on record and these bald pleas cannot be accepted. No hesitation in confirming the penalty levied by the AO u/s 271(1)(c) which was later confirmed by learned CIT(A). The assessee fails in this appeal. - Decided against assessee.

Summary

Issues Involved:
1. Levy of penalty under Section 271(1)(c) of the Income-tax Act, 1961.
2. Treatment of short term capital gains as business income.
3. Wrong declaration of short term capital gains as exempt long term capital gains.
4. Bona fides of the assessee's claim and the role of the Chartered Accountant.

Detailed Analysis:

1. Levy of Penalty under Section 271(1)(c):
The primary issue is whether the penalty of ?2,18,189 levied under Section 271(1)(c) for concealment of income was justified. The assessee argued that the penalty should not have been confirmed by the CIT(A), as the errors were due to mistakes by the Chartered Accountant.

2. Treatment of Short Term Capital Gains as Business Income:
The assessee declared short term capital gains of ?12,83,843, which the AO treated as business income, as these gains arose from wrong trades executed on behalf of clients. This treatment was accepted by the assessee and attained finality. The AO noted that declaring this business income as short term capital gains led to a lower tax rate under Section 111A, causing prejudice to the Revenue.

3. Wrong Declaration of Short Term Capital Gains as Exempt Long Term Capital Gains:
The AO observed that the assessee declared short term capital gains of ?16,24,981 as exempt long term capital gains by wrongly stating the holding period of shares. This was claimed as exempt under Section 10(38), which led to no taxes being paid on these gains, causing further prejudice to the Revenue. The AO levied a penalty for this misrepresentation, which was confirmed by the CIT(A).

4. Bona Fides of the Assessee's Claim and the Role of the Chartered Accountant:
The assessee contended that the mistakes were due to errors by the Chartered Accountant and should not result in a penalty. However, no details or affidavits from the Chartered Accountant were provided to substantiate this claim. The tribunal noted that these were glaring mistakes with a direct impact on the Revenue's legitimate tax collection and did not accept the assessee's plea of bona fide error.

Conclusion:
The tribunal upheld the penalty of ?2,18,189 under Section 271(1)(c), concluding that the assessee's actions led to significant tax discrepancies. The tribunal found no bona fide reasons for the mistakes, and the appeal was dismissed. The tribunal distinguished this case from the Supreme Court's decision in Price Waterhouse Coopers Private Limited v. CIT, noting that the facts were different and the mistakes in the present case were not inadvertent errors but significant misrepresentations affecting tax liability.