2015 (9) TMI 1235 - AT - Income Tax

Appeal granted, penalty canceled under Section 271(1)(c) of Income Tax Act. Errors deemed inadvertent, not deliberate.

The Tribunal allowed the appeal, canceling the penalty imposed under Section 271(1)(c) of the Income Tax Act. The errors were deemed inadvertent, not a ... Penalty U/s. 271(1)(c) - furnishing of inaccurate particulars - concealment of income - claim of exemption u/s 10(38) whereas sale of shares was not through stock exchange - company adopted LIFO method where as AO adopted FIFO method for valuation of shares - Long Term Capital Gains claimed as ‘Short Term Capital Gain’ and setting off to the business loss claimed - Held that:- The principles laid down by the Hon'ble Supreme Court in the case of Price Waterhouse Coopers Pvt. Ltd., Vs. CIT [2012 (9) TMI 775 - SUPREME COURT] certainly applies to the facts of the case. Since AO has re-computed the computation by following FIFO method as against the average cost price method adopted by assessee, it cannot be stated that assessee is guilty of furnishing inaccurate particulars. Mere making of a claim by way of wrong method of computation by itself will not amount to furnishing of inaccurate particulars of income and said method claimed in the return of income cannot amount to furnishing inaccurate particulars of income. As already stated, assessee had admitted the mistake it committed in claiming exemption, by filing revised computation and setting off to business loss, on the very first date of hearing itself before the same was noticed by the AO. Therefore, assessee has neither furnished inaccurate particulars nor concealed income. In fact it is not the case of Revenue that assessee has concealed any income. this is not a fit case for levying penalty. - Decided in favour of assessee. Issues Involved:1. Levy of penalty under Section 271(1)(c) of the Income Tax Act.2. Determination of the nature of capital gains.3. Adoption of the correct method for computing capital gains.4. Alleged furnishing of inaccurate particulars of income.Issue-wise Detailed Analysis:1. Levy of Penalty under Section 271(1)(c):The appeal was filed by the assessee against the order confirming the penalty under Section 271(1)(c) of the Income Tax Act, levied by the Assessing Officer (AO). The AO initiated penalty proceedings for furnishing inaccurate particulars of income in respect of capital gains on the sale of equity shares. The assessee contended that the mistake was inadvertent and there was no willful intention to furnish inaccurate particulars or conceal income. The AO, however, did not agree and imposed a penalty of Rs. 9,79,000/-.2. Determination of the Nature of Capital Gains:The assessee initially claimed the capital gains as Long Term Capital Gains (LTCG) and sought exemption under Section 10(38). Upon scrutiny, it was revealed that the shares were not sold through a recognized Stock Exchange and were not subjected to Securities Transaction Tax, thus reclassifying them as Short Term Capital Gains (STCG). The AO recalculated the capital gains to Rs. 31,68,275/- from the initially claimed Rs. 6,04,090/-.3. Adoption of the Correct Method for Computing Capital Gains:The assessee adopted the market price as on the date of dematerialization as the cost of acquisition, which the AO found incorrect. The AO applied the First-in-First-out (FIFO) method, as mandated by Section 45(2A) and Circular No. 768 of the CBDT, to determine the cost of acquisition. The assessee argued that the adoption of the FIFO method was a difference of opinion and not a deliberate act of furnishing inaccurate particulars.4. Alleged Furnishing of Inaccurate Particulars of Income:The AO concluded that the assessee furnished inaccurate particulars by:- Claiming the capital gains as long term.- Claiming the capital gains as exempt under Section 10(38).- Incorrectly computing the capital gains at Rs. 6,04,090/- instead of Rs. 31,68,275/-.The CIT(A) upheld the AO's decision, stating that the errors were not inadvertent but deliberate.Judgment Analysis:The Tribunal analyzed whether the assessee furnished inaccurate particulars of income. Referring to the Supreme Court's judgment in CIT Vs Reliance Petroproducts Limited [322 ITR 158], it was noted that merely making an incorrect claim does not amount to furnishing inaccurate particulars. The Tribunal observed that the assessee had revised the computation on the first date of the scrutiny hearing, indicating an inadvertent mistake rather than deliberate concealment.The Tribunal also examined the applicability of Section 45(2A) and the FIFO method. It was found that the entire block of shares in the demat account was sold, and the FIFO method was not applicable to a single transfer of shares en bloc. The Tribunal concluded that the assessee's method of adopting the average price of shares on the date of dematerialization, though incorrect, was not an act of furnishing inaccurate particulars.The Tribunal held that the assessee had neither furnished inaccurate particulars nor concealed income. The penalty imposed was deemed inappropriate and was canceled. The appeal was allowed in favor of the assessee.Conclusion:The Tribunal allowed the appeal, canceling the penalty imposed under Section 271(1)(c) of the Income Tax Act, as the errors were deemed inadvertent and not a deliberate act of furnishing inaccurate particulars or concealing income. The judgment emphasized the distinction between making an incorrect claim and furnishing inaccurate particulars, aligning with the principles laid down by the Supreme Court.