2023 (12) TMI 240 - AT - Income Tax

Penalty u/s 271(1)(c) - disallowance of claim of loss - AO received information from DDIT (Investigation), exhibiting the fact that certain entry providers and hawala operators involved in providing entries of bogus LTCG, STCL and bogus business loss and AO issued notice u/s 148 - HELD THAT - A perusal of the assessment order would reveal that AO has nowhere demonstrated as to how the loss claimed by the assessee is bogus. He only issued a show-cause notice and the Assessee withdrew its claim just in order to avoid litigation with Department. But when the Department intended to impose a penalty upon the assessee u/s 271(1)(c), the assessee has contested the issue in the penalty proceeding. AO instead of entertaining the arguments on merit summarily rejected it on the ground that all these issues must have been raised during the assessment proceedings and must have been rejected. He observed that this penalty proceeding cannot take the character of assessment and cannot sit in judgment. It is pertinent to observe that the addition is only on the admission of the assessee that it withdrew its claim. Nowhere, it has been demonstrated that the claim of the assessee was false or bogus. Explanation 1 to section 271(1)(c) provides that, if the assessee fails to offer an explanation or offers an explanation which is found by AO to be false, but now in the present case, the assessee has an explanation and it has buttressed this explanation with the following documentary evidence, i.e.Trading of shares was done through broker in a recognized stock exchange, Payment and receipt is through banking channel, Documentary evidence for transactions like contract note, demat statement, and bank statement are enclosed. Assessee offered the loss voluntarily to avoid litigation and requested the Assessing Officer to not initiate penalty proceedings u/s 271(1)(c), paid the tax due and challan copy is enclosed. No appeal is filed. These documents have not been held as false either by the AO during the assessment proceeding or during penalty proceeding. Therefore, the assessee does not deserve to be visited with penalty. Assessee appeal allowed.

Summary

Issues involved:
The judgment involves an appeal against the levy of penalty under section 271(1)(c) of the Income Tax Act for furnishing inaccurate particulars of income.

Summary:

Issue 1: Levy of Penalty under section 271(1)(c) of the Income Tax Act

The assessee contested the penalty imposed by the ld. Assessing Officer for furnishing inaccurate particulars of income. The ld. Assessing Officer initiated penalty proceedings based on the disallowance of a claimed loss amounting to Rs.5,24,170. The assessee argued that it engaged in genuine trading of shares through a recognized stock exchange with transactions conducted via banking channels and supported by documentary evidence. The ld. Assessing Officer imposed a penalty of Rs.1,94,760 despite the assessee's explanations and evidence. The ld. CIT(Appeals) upheld the penalty.

Separate Judgment:
In a detailed analysis, the Tribunal found that the ld. Assessing Officer failed to demonstrate that the claimed loss was bogus. The assessee voluntarily admitted the loss to avoid litigation but contested the penalty proceedings. The Tribunal noted that the ld. Assessing Officer summarily rejected the assessee's arguments without proper consideration. The Tribunal highlighted that the assessee provided genuine documentary evidence to support its trading activities, including transactions through a broker, banking channels, and various statements. The Tribunal concluded that the penalty was unjustified as the ld. Assessing Officer did not prove the falsity of the assessee's explanations or evidence.

In conclusion, the Tribunal allowed the appeal of the assessee, emphasizing the lack of evidence to support the imposition of the penalty. The order was pronounced in open court on October 10, 2023.