2015 (12) TMI 1231 - AT - Income Tax

Tribunal upholds CIT(A)'s penalty deletion decision under section 271(1)(c) based on accurate disclosure

The ACIT, Circle-8, Ahmedabad Versus M/s Torrent Finance Ltd (Amalgamated With Torrent Pvt Ltd)

The Tribunal upheld the CIT(A)'s decision to delete the penalty under section 271(1)(c), as the Assessee accurately disclosed all relevant facts and the ... Levy of penalty u/s. 271(1)(c) - Assessee was not entitled to adjust the dividend income against the business loss - CIT(A) deleting addition - Held that:- CIT(A) while deleting the penalty has given a finding that Assessee had disclosed all the relevant facts regarding the computation of income, the income from business and the dividend earned on shares in the return of income and none of the particulars furnished by the Assessee were found to be false or inaccurate. He has further noted that the issue is debatable as the matter had traveled up to ITAT, again set aside to the file of A.O and that the question of law being admitted by Hon'ble Gujarat High Court shows that the issue is debatable. These findings of ld. CIT(A) have not been controverted by Revenue. We further find that on merits, on identical issue as to whether the dividend income can be set off against the speculation loss, the Hon'ble Gujarat High Court in the case of CIT vs. Sphere Stock Holding Pvt. Ltd. (2011 (8) TMI 1124 - GUJARAT HIGH COURT) has upheld the view of ld. CIT(A) as well as Tribunal that the irrespective of provisions contained in Section 56 of the Act and Explanation to 73, loss should be adjusted against such business income. In view of the aforesaid facts and in the absence of any contrary binding decision brought to our notice by Revenue, we find no reason to interfere with the order of ld. CIT(A) and thus the ground of Revenue is dismissed. - Decided in favour of assessee. Issues:1. Penalty under section 271(1)(c) for adjusting dividend income against business loss.Analysis:The appeal before the Appellate Tribunal ITAT Ahmedabad involved the Revenue's appeal and the Assessee's Cross-Objection against the order of CIT(A)-XIV, Ahmedabad for the assessment year 1997-98. The case revolved around the treatment of dividend income and business loss by the Assessing Officer (A.O). The A.O. had taxed the dividend income under 'income from other sources' and treated the business loss as speculation loss, disallowing the set off of dividend income against the loss. This led to the imposition of a penalty under section 271(1)(c) on the Assessee for allegedly furnishing inaccurate particulars of income.The CIT(A) deleted the penalty, stating that the Assessee had disclosed all relevant facts accurately in the return of income and that the issue of adjusting dividend income against business loss was debatable. The CIT(A) also highlighted that the matter had reached the ITAT and was admitted in the High Court, indicating a clear debate on the issue. Additionally, the CIT(A) referenced a decision by the Hon'ble Gujarat High Court that supported the Assessee's position on adjusting dividend income against business loss.During the Tribunal proceedings, the Departmental Representative (D.R.) supported the CIT(A)'s order, while the Assessee's Representative (A.R.) further substantiated the Assessee's stance with the High Court decision. The Tribunal noted the debatable nature of the issue and the supporting High Court decision, ultimately dismissing the Revenue's appeal. The Tribunal also dismissed the Assessee's Cross-Objection as the grounds were not pressed by the Assessee.In conclusion, the Tribunal upheld the CIT(A)'s decision to delete the penalty imposed under section 271(1)(c), emphasizing that the Assessee had provided accurate information and that the issue of adjusting dividend income against business loss was subject to debate, supported by a relevant High Court decision. The Tribunal's ruling favored the Assessee, resulting in the dismissal of both the Revenue's appeal and the Assessee's Cross-Objection.