Assessee penalized for concealing income on renounced shares premium. Penalty upheld at 100% tax evaded.

The Tribunal upheld the penalty imposed under Section 271(1)(c) of the Income Tax Act on the assessee for concealing income related to the premium received on renunciation of right shares. The penalty, initially imposed by the Assessing Officer, was reduced to 100% of the tax sought to be evaded by the Commissioner of Income Tax (Appeals). The Tribunal found that the assessee failed to disclose the nature of the premium in the return of income, leading to inaccurate particulars. The appeal by the assessee was dismissed, affirming the penalty decision.

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Issues Involved:
1. Levy of penalty u/s 271(1)(c) of the Income Tax Act.
2. Determination of capital gains on renunciation of right shares.
3. Disclosure of income and furnishing of accurate particulars.

Issue-wise Detailed Analysis:

1. Levy of Penalty u/s 271(1)(c) of the Income Tax Act:

The primary issue in this case is whether the penalty levied under Section 271(1)(c) of the Income Tax Act for concealing income and furnishing inaccurate particulars is justified. The assessee argued that the issue was debatable and all relevant information had been provided. However, the AO and CIT(A) found that the assessee had not disclosed the nature of the premium received on renunciation of right shares in the return of income, thereby furnishing inaccurate particulars. The penalty was upheld by the CIT(A) but reduced to 100% of the tax sought to be evaded.

2. Determination of Capital Gains on Renunciation of Right Shares:

The assessee, a finance and investment company, had renounced 90,450 equity shares for a premium, which was transferred to the 'Reserve Account' in the balance sheet. The AO considered this receipt as taxable short-term capital gains. The assessee contended that the cost of acquisition of the rights shares could not be determined, relying on the Supreme Court decision in B.C. Srinivasa Shetty, and alternatively argued that there would be a capital loss based on the diminution in value of the original shares as per the Supreme Court decision in Miss Dhun Dadabhoy Kapadia. The AO rejected these arguments, and the CIT(A) confirmed the AO's findings based on information from the Bombay Stock Exchange.

3. Disclosure of Income and Furnishing of Accurate Particulars:

The assessee did not disclose the receipt of the premium on renunciation of right shares in the return of income or the computation of income. The balance sheet showed the amount under 'Reserves & Surplus' without specifying its nature. The Tribunal found that the assessee had failed to make a proper disclosure of material facts regarding the taxability of the capital gains on renunciation of right shares. The Tribunal held that the explanation provided by the assessee was not bona fide and that the mere mention in the balance sheet could not be considered a proper disclosure.

Conclusion:

The Tribunal concluded that the assessee had concealed particulars of income and furnished inaccurate particulars by not disclosing the premium received on renunciation of right shares in the return of income. The penalty levied by the AO, which was reduced to 100% of the tax sought to be evaded by the CIT(A), was upheld. The alternative plea for further reduction of the penalty was dismissed. The appeal filed by the assessee was ultimately dismissed.

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