2011 (1) TMI 879 - HC - Income Tax

Court rules against assessee's tax treatment, upholding penalty for inaccurate income particulars

THE COMMISSIONER OF INCOME TAX Versus SPLENDER CONSTRUCTION

THE COMMISSIONER OF INCOME TAX Versus SPLENDER CONSTRUCTION - [2013] 352 ITR 0588 Issues involved:1. Whether the treatment of short term capital asset as a long term capital asset by the assessee was a colorable device to pay lower tax rates.2. Whether the Assessing Officer was justified in imposing a penalty under Section 271(1)(c) for inaccurate income particulars declared by the assessee.Analysis:1. The appeal was admitted based on the question of law regarding the treatment of short term capital asset as a long term capital asset by the assessee. The assessee had converted land from 'stock in trade' to 'investment' before selling it, claiming long term gains. However, the Assessing Officer considered the gain as short term capital gain due to the period of holding. The Tribunal held that the issue was debatable, but the High Court disagreed, stating that the change in asset classification was a tactic to pay lower taxes. The Court ruled in favor of the Revenue, setting aside the Tribunal's decision and restoring the Assessing Officer's order on the penalty issue.2. The Assessing Officer imposed a penalty under Section 271(1)(c) for inaccurate income particulars declared by the assessee. The Tribunal had earlier deleted the penalty, considering the issue debatable as an appeal was admitted. However, the High Court found that the issue was not debatable, as all authorities upheld the Assessing Officer's decision, and the Court dismissed the appeal at the admission stage. The Court ruled in favor of the Revenue, setting aside the Tribunal's decision on the penalty issue and restoring the Assessing Officer's order.