2013 (9) TMI 329 - AT - Income Tax

Tribunal upholds penalty for incorrect long-term capital gains exemption claim

The Tribunal upheld the CIT(A)'s order confirming the penalty imposed by the AO under section 271(1)(c) for the addition made on account of long-term ... Penalty u/s 271(1)(c) – Claim of exemption u/s 10(38) where no STT was paid - long term capital gain from sale of shares - Penalty was questioned to the extent it was in respect of addition made on account of long term capital gains - Held that:- The assessee has not been able to show satisfactorily that the so called mistake committed by him while making a wrong claim for exemption u/s 10(38) is a bonafide and genuine mistake and the assessee having not disclosed fully and truly all the material facts relevant to the said claim, we are of the view that it is a fit case to impose penalty u/s 271(1)(c). In that view of the matter, we uphold the impugned order of the learned CIT(Appeals) confirming the penalty imposed by the AO u/s 271(1)(c) and dismiss this appeal of the assessee. - Decided against the assessee. Issues Involved:1. Sustaining the penalty imposed under section 271(1)(c) for the addition made on account of long-term capital gains.2. Whether the exemption under section 10(38) was claimed inadvertently due to a genuine and bonafide mistake.3. Applicability of judicial precedents to the case.Detailed Analysis:1. Sustaining the Penalty Imposed Under Section 271(1)(c):The appeal was directed against the order of CIT(A)-29, Mumbai, which sustained the penalty imposed by the AO under section 271(1)(c) concerning the addition of Rs. 66,59,023/- made on account of long-term capital gains. The assessee, a partnership firm engaged in trading equity shares and other activities, had claimed an exemption under section 10(38) for long-term capital gains arising from the sale of shares. The AO noted that the gains from shares sold before 1st October 2004 were not eligible for this exemption as no Securities Transaction Tax (STT) was paid. Consequently, the AO brought the gains to tax and initiated penalty proceedings under section 271(1)(c).2. Whether the Exemption Under Section 10(38) Was Claimed Inadvertently Due to a Genuine and Bonafide Mistake:The assessee argued that the exemption under section 10(38) was claimed inadvertently due to a genuine and bonafide mistake, as it was the first year of the provision's introduction. The CIT(A) did not accept this explanation, emphasizing that the assessee failed to offer a bonafide explanation and had filed inaccurate particulars of income. The CIT(A) upheld the penalty, stating that the assessee's wrongful claim could have escaped taxation if not for the AO's action.The Tribunal further examined the assessee's contention that the mistake was bonafide, supported by several other errors in the computation of total income, and the fact that the mistakes were acknowledged by the assessee in a letter to the AO. However, the Tribunal found that the provisions of section 10(38) were clear and simple, and the assessee's claim did not meet the stipulated conditions. Therefore, the Tribunal concluded that the wrong claim was not a result of a genuine and bonafide mistake.3. Applicability of Judicial Precedents to the Case:The assessee cited several judicial precedents to support its case, including CIT vs. Sidhartha Enterprises, PricewaterhouseCoopers (P) Ltd. vs. CIT, and a decision by the Tribunal in the case of Asia Attractive Dividend Stock Fund. The Tribunal distinguished these cases on facts, noting that in those cases, the mistakes were either committed by the counsel, were rectified by the assessee, or were supported by full and true disclosure of relevant particulars. In contrast, the assessee in this case did not satisfactorily demonstrate that the mistake was genuine and bonafide, nor did it disclose all material facts fully and truly.Conclusion:The Tribunal upheld the CIT(A)'s order confirming the penalty imposed by the AO under section 271(1)(c). The appeal of the assessee was dismissed, as the Tribunal found that the assessee failed to show that the mistake in claiming exemption under section 10(38) was genuine and bonafide and had not disclosed all relevant facts fully and truly. The Tribunal concluded that it was a fit case for imposing a penalty under section 271(1)(c).