Concealment penalty due to penny stocks.

[RAJESH SANGHVI]

The assessee submitted LTCG from shares in his return. The AO treated the same as penny stock  and treated the LTCG as unexplained cash credit. The CIT(A) upheld the same. Matter is in ITAT pending. AO levied penalty u/s 271(1)(c). Before CIT(A), assessee contention is that after LTCG was shown, hence withut prejudice, it is only change of heading from LTCG to unexplaine dcash credit. No addition in terms of quantum is made. Can concealment penalty be made. Cases relied upon are Reliance Petro products

[DR.MARIAPPAN GOVINDARAJAN]

Whether you have got clarified in the said issue? If not please inform.

[RAJESH SANGHVI]

The CIT(A) deleted the penalty u/s 271(1)(c) NOT due to change of heading in Penny stocks case but due to issue of legality of Initiation, notice deficiency u/s 274 , initiated due to concealment and levied due to inaccurate particulars following Manjunatha Judgement karnataka HC and Samson Perinchery judgement Mum ITAT. So the change of heads issue in penny stocks is unaddressed

AI Summary

Concealment penalty recharacterisation of long term capital gains as unexplained cash credit raises admissibility and procedural defect issues. AO reclassified declared long term capital gains from share sales as unexplained cash credit treating them as penny stocks and levied penalty under 271(1)(c). CIT(A) deleted the penalty on procedural grounds relating to initiation legality and notice deficiencies following cited precedents, leaving unresolved whether reclassification of disclosed LTCG into unexplained cash credit by itself warrants concealment penalty; matter is pending before the tribunal.