2016 (1) TMI 1086 - AT - Income Tax

Penalties deleted for notional income and capital loss - Tribunal finds no deliberate concealment

The penalties imposed under Section 271(1)(c) for notional income from house property and short-term capital loss on the sale of a car were deemed ... Penalty order u/s 271(1)(c) - Income from house property - Held that:- Section 271(1)(c) refers to imposition of penalty if the assessee has concealed the particulars of his income or furnished inaccurate particulars of such income. Examining the facts of the case of assessee in this aspect we find that income from house property was certainly disclosed by the assessee in its return of income on estimate basis because the house property was not rented during the year and assessee has disclosed his income at ₹ 500/-. The AO further estimated this income at ₹ 27,500/- and finally ld. CIT(A) reduced the addition from ₹ 27,500/- to ₹ 1,900/-. Certainly there was no deliberate concealment on the part of the assessee and the addition confirmed is only on the basis of estimate arrived at by taking value from other sources, which in this case was the municipal ratable value and certainly such type of addition do not come under the clutches of section 271(1)(c) of the Act. We, therefore, delete the penalty u/s 271(1)(c) of the Act calculated on the sustained concealed income of ₹ 1,900/-. - Decided in favour of assessee Short term capital loss on sale of car - Held that:- From going through the facts and judicial pronouncement we find that assessee was possessing only one car and the same was sold during the financial year 2000-01. There was no other asset in the block of asset relating to motor car and, therefore, after deduction of sale value from the purchase value there arose a short term capital loss. There is no dispute on the part of the Revenue on the value of purchased car and sale value of car. Assessee has claimed the short term capital loss at ₹ 3,21,440/- against the business income. Certainly all the facts relating to these transactions of purchase and sale of car were duly disclosed in the books of account of the assessee and the addition made by the Assessing Officer was on account of merely wrong claim made by the assessee. Penalty u/s 271(1)(c) of the Act is imposable where the assessee has concealed particulars of his income or furnished inaccurate particulars of such income. Hon’ble Supreme Court in the case of CIT vs. Reliance Petroproducts (P) Ltd. (2010 (3) TMI 80 - SUPREME COURT ) has held that mere making a claim which is not sustainable in law in itself will not amount to furnishing of inaccurate particulars regarding income of the assessee. - Decided in favour of assessee Issues Involved:1. Penalty on notional income of Rs. 1,900 from house property.2. Penalty on set off of short-term capital loss on sale of car against regular income.Issue-wise Detailed Analysis:1. Penalty on Notional Income of Rs. 1,900 from House Property:The assessee was penalized under Section 271(1)(c) of the Income Tax Act for notional income of Rs. 1,900 based on municipal ratable value. The assessee had shown Rs. 500 as income from house property in his return, while the Assessing Officer (AO) estimated it at Rs. 27,500, later reduced by the CIT(A) to Rs. 1,900 based on municipal valuation. The Tribunal noted that the income was disclosed by the assessee on an estimate basis, as the property was not rented during the year. The penalty was deemed unjustified as there was no deliberate concealment; the addition was based on an estimate from municipal valuation. Thus, the penalty on the notional income of Rs. 1,900 was deleted.2. Penalty on Set Off of Short-term Capital Loss on Sale of Car Against Regular Income:The assessee claimed a short-term capital loss of Rs. 1,35,297 on the sale of a car, which was set off against regular income. The AO disallowed this set-off, leading to a penalty under Section 271(1)(c). The CIT(A) upheld the penalty, arguing that the law clearly prohibits adjusting capital loss against other income sources, and the assessee's claim was incorrect. However, the Tribunal found that the assessee had disclosed all relevant facts and the penalty was imposed due to a difference of opinion on the applicability of the law, not due to concealment or inaccurate particulars. Citing various judgments, including the Supreme Court's decision in Reliance Petroproducts, the Tribunal held that making an incorrect claim does not amount to furnishing inaccurate particulars. Consequently, the penalty on the short-term capital loss was also deleted.Conclusion:The Tribunal concluded that the penalties imposed under Section 271(1)(c) for both the notional income from house property and the short-term capital loss on the sale of the car were unjustified. The penalties were deleted, and the appeal filed by the assessee was allowed. The order was pronounced on January 22, 2016.