Appellate Tribunal rules in favor of taxpayers on penalty for inaccurate income particulars

The Appellate Tribunal overturned the penalty imposed under section 271(1)(c) of the Income Tax Act on two appellants who had claimed long term capital gains on the sale of shares as exempt under section 10(34) of the Act. The Tribunal found that surrendering the claim did not amount to furnishing inaccurate income particulars, leading to the deletion of the penalty. The Tribunal emphasized that the appellant had disclosed all income particulars and that the surrender of exemption during assessment proceedings was not misleading. Consequently, the penalty was deemed not leviable, and the appeals were allowed on 10.09.2018.

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Issues:
Levy of penalty under section 271(1)(c) of the Income Tax Act based on the claim of long term capital gains on the sale of shares as exempt under section 10(34) of the Act.

Analysis:
The Appellate Tribunal ITAT Delhi heard appeals by two appellants against separate orders of the Ld. CIT(A), Meerut for the assessment year 2014-15. The facts in both cases were deemed identical, leading to a common order for convenience. The grievance in both appeals related to the penalty imposed under section 271(1)(c) of the Act, even though the quantum differed. The penalty was initiated due to the appellant's claim of long term capital gains on the sale of shares as exempt under section 10(34) of the Act. The AO, unsatisfied with the submissions, deemed the transactions as involving penny stocks and considered the capital gains as bogus. The appellant eventually surrendered the claim of exemption, leading to the penalty under section 271(1)(c) of the Act. The Counsel for the Assessee argued against the penalty, stating that surrendering the claim did not amount to furnishing inaccurate particulars of income. The Appellate Tribunal considered the submissions and found that the surrender of exemption did not constitute inaccurate particulars of income. As per the provisions of law, the penalty under section 271(1)(c) of the Act was deemed not leviable, leading to the direction to delete the penalty.

The Tribunal carefully reviewed the orders of the lower authorities and noted that the appellant had disclosed all income particulars in the computation. The AO's assumption that the shares were penny stocks was based on external information. The surrender of exemption during assessment proceedings did not equate to furnishing inaccurate particulars of income. The appellant had initially claimed exemption as per the law, which was later surrendered. Consequently, the Tribunal set aside the CIT(A)'s findings and directed the AO to delete the penalty imposed under section 271(1)(c) of the Act.

In conclusion, the appeals of both Assessees were allowed, and the penalty under section 271(1)(c) of the Act was directed to be deleted. The order was pronounced on 10.09.2018.

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