Appeal granted, penalty canceled under I.T. Act. Genuine belief, investment not business.

The Tribunal allowed the appeal, canceling the penalty imposed under section 271B of the I.T. Act, 1961. The decision was based on the genuine belief of the assessee that the transactions with India Bulls Securities Ltd. were investment transactions, not business transactions, supported by audited accounts under section 44AB. The Tribunal held that the penalty was not justified as the assessee did not claim losses on share transactions in the return of income due to this belief.

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Issues:
Penalty imposed under section 271B of the I.T. Act, 1961 for non-disclosure of transactions in the return of income.

Analysis:

1. The appeal was filed against the order confirming a penalty of Rs. 1,00,000/- imposed by the Assessing Officer (AO) under section 271B of the I.T. Act, 1961 for the assessment year 2007-08. The AO observed that the assessee, engaged in wall painting, banners, hoarding business, and share trading, did not disclose certain transactions in the return of income based on information received from AIR. The transactions included contractual receipts, payments to CITI Bank Credit card, and share transactions with M/s India Bulls Securities Ltd.

2. The AO found that the assessee had made business receipts from sales of Future and Options amounting to Rs. 4,56,10,252.40, which were not included in the return of income. The AO initiated penalty proceedings under section 271B due to the default under section 44AB for not submitting a tax audit report for these business receipts. The penalty was levied as the assessee did not file any reply, and the CIT(A) confirmed it.

3. The assessee contended that the transactions with India Bulls Securities Ltd. were investment transactions, not business transactions, and thus, not claimed as business loss. The counsel referred to relevant case laws to support the argument that the penalty was not justified. The assessee had obtained a tax audit report for the year under appeal, which did not include the losses from share transactions.

4. The Tribunal considered the submissions and held that the penalty under section 271B was not applicable in the present case. It was noted that the assessee did not claim loss on share transactions in the return of income due to a bona fide belief that these were investment transactions. The Tribunal observed that the accounts were audited under section 44AB, and the penalty cannot be imposed merely because a specific income item was not included in the tax audit report.

5. Therefore, the Tribunal allowed the appeal, canceling the penalty levied under section 271B. The decision was based on the assessee's genuine belief regarding the nature of transactions with India Bulls Securities Ltd. and the audited accounts under section 44AB. The judgment was pronounced on 14-11-2014.

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