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TMI Blog2015 (11) TMI 1065X X X X Extracts X X X X X X X X Extracts X X X X ..... g penalty the burden is on the revenue to prove that the particular amount is profit not from speculation income but income from other sources against which speculation loss cannot be adjusted. No doubt the findings during assessment proceeding for determining or computing the income is conclusive and it is also a good piece of evidence for initiating penalty proceeding but before penalty could be imposed the entirety of circumstances must reasonably point to the conclusion that the disputed amount represented income that the assessee has concealed the particulars of income or has deliberately furnished inaccurate particulars of income. Here none of the case is present. In view of the above, we are of the considered view that the penalty u/s. 271(1)(c) of the Act in the given facts and circumstances is not leviable. Accordingly, we delete the penalty and allow this issue of assessee’s appeal.- Decided in favour of assessee. Short term capital loss disclosed by assessee claimed to have been carried forward for setting off - Held that:- AO’s levy of penalty is entirely based on the assessment order that the assessee is unable to prove the profit declared in speculation income receive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ital loss and (iii) disallowance of expenses relating to exempt income u/s. 14A of the Act. 3. At the outset, Ld. Counsel for the assessee drew our attention to the assessment order wherein AO made additions in respect to these three items and initiated penalty proceedings u/s. 271(1)(c) of the Act in respect to these three items by observing that "penalty proceedings u/s. 271(1)(c) of the Act is separately initiated". The common initiation of penalty in respect to all the three items was done by AO accordingly. Ld. Counsel for the assessee stated that the CIT(A) also confirmed the levy of penalty even though a specific ground before him was raised that there is no specific charge either of concealment of income or furnishing inaccurate particulars of income and as such penalty imposed by AO itself is bad in law. Ld. Counsel for the assessee also stated that there is no satisfaction recorded by the AO for initiating penalty proceedings merely writing a line in the assessment order that penalty proceedings u/s. 271(1)(c) of the Act is initiated is not sufficient. For this, first he relied on the decision of Hon'ble Gujarat High Court decision in the case of New Sorathia Engineering ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Atul Mohan Bindal (2009) 9 SCC 589." 5. On the issue of initiation of penalty and recording of satisfaction, we have heard both the sides and gone through facts and circumstances of the case. We have noticed that the AO has initiated penalty proceedings u/s. 271(1)(c) of the Act for furnishing of inaccurate particulars of income and has recorded this fact stating that "penalty proceedings u/s. 271(1)(c) is separately initiated" in the very assessment order. In view of the decision of Hon'ble Supreme Court in the case of Mak Data P. Ltd., supra, we are of the considered view that there is no need for the AO to reduce in writing his satisfaction but merely reached to a satisfaction and initiate penalty proceedings. In the present case, the AO has initiated penalty proceedings and there is no further requirement under the Act to reduce it into writing. This view of ours is fully supported by the decision of Hon'ble Supreme Court in Mak Data P. Ltd., supra. Accordingly, this jurisdictional issue is decided against the assessee and in favour of revenue. 6. Coming to the merits of the case. The first aspect added by the AO is bogus speculation income. Briefly stated facts are that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e items the AO initiated penalty proceedings and penalty was also levied only on the basis that the assessee did not offer any written explanation in response to the notice issued and no evidence was filed contrary to the observation of the AO made in the assessment order in respect to all these three items. Accordingly, AO levied penalty u/s. 271(1)(c) of the Act for furnishing inaccurate particulars of income as under: "On the basis of the above discussion, total penalty u/s. 271(1)(c) on the issues as discussed above, is computed as under. Penalty imposed as per discussion in para 2.0 Rs.17,60,912/- Penalty imposed as per discussion in para 3.0 Rs. 3,82,940/- Penalty imposed as per discussion in para 4.0 ₹ 1,02,511/- Total penalty imposed Rs.22,46,363/-" 10. Aggrieved, assessee preferred appeal before CIT(A). The CIT(A) in respect to bogus speculation income observed that this is income from other sources and not speculation income as claimed by the assessee and, therefore, the loss claimed against this alleged speculation income is actually income from other sources and hence, disallowance of loss is actually concealment of income by filing inaccurate partic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... profit of ₹ 53,39,463/- other than a certificate purportedly received from Nakamichi Securities Ltd. We find that the entire basis of penalty is the denial letter issued by Nakamichi Securities Ltd. dated 21.12.2011 and there is no other evidence available with revenue which suggests that the assessee has concealed the particulars of income. Once the very basis for levy of penalty is no doubt, it cannot be said that the assessee has concealed the particulars of income or furnished inaccurate particulars of income, as the case may be. Here in the present case, the assessee has disclosed income from speculation profit only and the case is that he could not prove that this is speculation income or any other income for the want of evidence and merely he has not challenged the quantum addition. Hon'ble Rajasthan High Court in the case of CIT Vs. G. Nemichand (1976) CTR (Raj) 193 held that an assessee may file an appeal against an order of imposition of penalty even though he might not have filed an appeal against the order of assessment. The assessment proceedings are quite distinct and different from penalty proceedings. Although the order of assessment is a good evidence but it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion income from shares in Balarampur Chini Mills Limited in NSE for FY 2008-09 relevant to AY 2009-10. According to them, it does not have any transaction with the assessee. The assessee's main claim was that this letter of Nakamichi Securities Ltd. was never confronted to the assessee during the course of assessment proceedings or during the penalty proceedings. Even during first appeal, this letter of Nakamichi Securities Ltd. was never confronted to the assessee. When a specific query was put to Ld. Sr. DR he categorically stated that this statement was never confronted to the assessee. When a query was put from the bench whether any details or evidence were filed by the assessee in respect to speculation profit of ₹ 53,39,463/- other than a certificate purportedly received from Nakamichi Securities Ltd. We find that the entire basis for levy of penalty is the denial letter issued by Nakamichi Securities Ltd. dated 21.12.2011 and there is no other evidence available with revenue which suggests that the assessee has concealed the particulars of income. Once the very basis for levy of penalty is in doubt, it cannot be said that the assessee has concealed the particulars of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee has filed complete details in respect to all three items under dispute i.e. -(i) speculation profit, (ii) short term capital loss, and (iii) disallowance of expenses relating to exempt income u/s. 14A of the Act. There is no charge by revenue that details supplied by the assessee in its return of income are found to be incorrect or erroneous or false and in such eventuality there is no question of inviting penalty u/s. 271(1)(c) of the Act. A mere making of a claim, which is not sustainable in law, by itself will not amount to furnishing of inaccurate particulars of income regarding those items of income of the assessee. Such a claim made in the return of income cannot be treated as furnishing of inaccurate particulars of income. The provisions of section 271(1)(c) of the Act clearly defined that there has to be concealment of the particulars of income by the assessee and secondly the assessee must have furnished inaccurate particulars of his income. Hon'ble Supreme Court in the case of CIT Vs. Reliance Petro Products Pvt. Ltd. (2010) 322 ITR 158 (Supreme Court) has interpreted the meaning of the word 'particulars' as used in section 271(1)(c) of the Act that the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions knowing that they are incorrect ; it amounted to concealment of income. It was tried to be argued that the falsehood in accounts can take either of the two forms ; an item of receipt may be suppressed fraudulently ; (ii) an item of expenditure may be falsely (or in an exaggerated amount) claimed, and both types attempt to reduce the taxable income and, therefore, both types amount to concealment of particulars of one's income as well as furnishing of inaccurate particulars of income. We do not agree, as the assessee had furnished all the details of its expenditure as well as income in its return, which details, in themselves, were not found to be inaccurate nor could be viewed as the concealment of income on its part. It was up to the authorities to accept its claim in the return or not. Merely because the assessee had claimed the expenditure, which claim was not accepted or was not acceptable to the Revenue, that by itself would not, in our opinion, attract the penalty under section 271(1)(c). If we accept the contention of the Revenue then in case of every return where the claim made is not accepted by the Assessing Officer for any reason, the assessee will invite penalty un ..... X X X X Extracts X X X X X X X X Extracts X X X X
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