2019 (5) TMI 176 - AT - Income Tax

Penalty u/s 271(1)(c) - change of head of income - assessee offered the loss under the head capital gains which, in the opinion of Ld. AO, was assessable under the head business income - HELD THAT - We find that penalty was levied by Ld. AO for mere change of head of income being no change in overall returned loss and assessed loss. The issue, as rightly noted by Ld. CIT(A) was highly debatable one and subject matter of numerous litigations. The basic condition viz. furnishing of inaccurate particulars / concealment of particulars of income so as to attract the provisions of Section 271(1)(c), in our opinion, have remained unfulfilled in the present case. The same is evident from the fact that penalty proceedings u/s 271(1)(c) for AY 2010-11, on identical facts, was dropped by Ld. AO himself vide order dated 24/05/2013, a copy of which is on record. Therefore, penalty was not justified on this count, as rightly held in the impugned order. Penalty on interest reflected in AIR information but which was not offered to tax - HELD THAT - The explanation as furnished by the assessee that the same was human error since the interest was never received, was plausible one and the penalty was rightly deleted against the same also. Finding the stand of Ld. CIT(A) in the impugned order to be quite fair logical, we dismiss the appeal. - Decided in favour of assessee.

Summary

Issues involved:
- Contesting the deletion of penalty by Ld. CIT(A) for Assessment Year 2009-10
- Dispute regarding treatment of capital losses as business losses
- Imposition of penalty under section 271(1)(c) for furnishing inaccurate particulars of income
- Appeal by revenue against the deletion of penalty by Ld. CIT(A)

Analysis:

1. The appeal by the revenue for Assessment Year 2009-10 challenged the order of the Ld. Commissioner of Income-Tax (Appeals) regarding the deletion of penalty. The primary contention was that the Ld. CIT(A) erred in deleting the penalty without considering that the addition made by the Assessing Officer in the quantum appeal was confirmed. The revenue sought to set aside the Ld. CIT(A)'s order and restore that of the Assessing Officer.

2. The dispute arose from the treatment of capital losses as business losses by the Assessing Officer. The resident individual assessee had reported Short Term Capital Losses and Long-Term Capital Losses related to dealing in shares and securities. The Assessing Officer concluded that the losses under Capital Gains should be treated as Business losses. Additionally, an interest amount not offered to tax was also added to the assessee's income. These decisions were upheld by the Ld. first appellate authority.

3. Penalty proceedings under section 271(1)(c) were initiated based on the inaccurate particulars of income furnished by the assessee. The Assessing Officer imposed a penalty of ?50.03 Lacs on the assessee. However, the Ld. CIT(A) overturned the penalty imposition in the impugned order dated 12/12/2017. The penalty was deleted concerning the change of head of losses as it was considered a debatable issue and there was no change in the returned or assessed loss.

4. The Ld. CIT(A) found that the penalty for changing the head of losses was unjustified as there was no alteration in the overall loss figures. The assessee's explanation that it was a mere change in the head under which the loss was offered was accepted. The penalty related to the addition of ?7,863 was also deleted as it was deemed a human error and the interest was not received by the assessee. The revenue's appeal against the deletion of penalties was dismissed by the Appellate Tribunal.

5. The Appellate Tribunal observed that the penalty imposition was not justified as there was no concealment of particulars of income. The issue of treating capital losses as business losses was considered debatable and subject to various litigations. The Tribunal noted that the basic condition for attracting section 271(1)(c) was not fulfilled in this case. The penalty for the year 2010-11 on similar grounds was dropped by the Assessing Officer himself, further supporting the decision to dismiss the penalty for the current year.

6. The explanation provided by the assessee regarding the addition of ?7,863 as a human error was deemed plausible, and the penalty was rightly deleted. The Appellate Tribunal found the Ld. CIT(A)'s decision fair and logical, leading to the dismissal of the revenue's appeal. Consequently, the appeal was dismissed by the Appellate Tribunal on 23rd April 2019.