2019 (8) TMI 181 - AT - Income Tax

Levy of penalty u/s 271(1)(c) - disallowance of loss claimed in the return of income - as alleged satisfaction is not properly recorded in the assessment order for levy of penalty - HELD THAT - Assessee has declared the transaction in question in the computation of income and return of income. AO examined the issue of long term capital gains and long term capital loss claimed by the assessee. The assessee conducted the entire transaction through banking channel through stock exchange. AO on the basis of the evidences produced by the assessee on record presumed that the transactions are bogus. These facts clearly show that assessee disclosed the entire facts to the Revenue Department and did not conceal anything to the AO. The assessee never claimed profit in the matter but claimed short term capital loss. The issue is, therefore, covered by order of ITAT Delhi Bench in the case of Deepti Agarwal vs. ITO 2018 (9) TMI 709 - ITAT DELHI in which in the similar circumstances penalty was cancelled. It may also be noted that the AO before levy of the penalty has issued show cause notice dated 16.12.2016 (PB-1) which is reproduced above in which AO has not mentioned as to for which the limb of section 271(1)(c) whether for concealment of particulars of income or furnishing inaccurate particulars of income, show cause notice has been issued. AO did not mention anything in the notice as to for which offence penalty is liable to be imposed against the assessee. AO in the assessment order mentioned both the limbs of section 271(1)(c) of the Act for levy of penalty. Therefore, satisfaction is not properly recorded in the assessment order for levy of penalty. The issue is, therefore, covered by order of ITAT Delhi Bench in the case of Ms. Vijay Laxmi Rajput vs. ITO 2019 (6) TMI 397 - ITAT DELHI .The show cause notice issued before levy of the penalty itself is invalid and bad in law and, as such, the resultant proceedings are vitiated. - Decided in favour of assessee

Summary

Issues:
Challenge to levy of penalty u/s 271(1)(c) of the Act for AY 2014-15.

Analysis:
1. The assessee filed a return of income declaring a total income of ?29,16,710/-, which was later scrutinized by the AO. The AO disallowed a short-term capital loss claimed by the assessee as a bogus transaction to set off long-term capital gains, resulting in additions to the total income.
2. The penalty proceedings were initiated by the AO under section 271(1)(c) of the Act, alleging concealment of income by the assessee. The AO concluded that the surrender of income was made only after being confronted with facts, indicating an intention to hide the real nature of transactions.
3. The assessee argued that all transactions were legitimate, conducted through proper channels, and disclosed in the return of income. The AO's failure to specify the limb of section 271(1)(c) under which the penalty was initiated rendered the notice invalid, as per judicial precedents.
4. The ITAT considered the facts and found that the assessee had disclosed all relevant details to the Revenue Department, did not conceal any information, and did not claim any profit. The absence of proper recording in the assessment order for the penalty, combined with the invalid show cause notice, led to the cancellation of the penalty.
5. The ITAT ruled in favor of the assessee, citing previous judgments where penalties were canceled due to similar circumstances of disclosure and procedural irregularities. The decisions relied upon by the Revenue were deemed insufficient to support the penalty imposition in this case.
6. Ultimately, the ITAT set aside the orders of the lower authorities and canceled the penalty, concluding that it was not leviable in the matter.

This detailed analysis covers the issues involved in the challenge against the penalty under section 271(1)(c) for the assessment year 2014-15, highlighting the arguments presented by both parties and the reasoning behind the ITAT's decision to cancel the penalty.