TaxTMI 
TaxTMI 
2014 (5) TMI 76
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....Rs.1 crore & Rs.2 crores respectively in the units of ING Vyasa Mutual Funds on 19.11.2003 and were allotted bonus units afterwards. The assessee sold the original units on 20.11.2003 which resulted in a loss as by issue of bonus units, the net asset value of units had decreased. The assessee valued the bonus at NIL value. The Assessing Officer observed that assessee had deliberately booked losses on the sale of original units and had valued the bonus units at nil vale which otherwise had the value as the same were sold in the next year. The Assessing Officer held that loss thus incurred by the assessee from the transaction of purchase and sale of these units was not a loss which could be set off of against the business income of the assessee and was to be treated as cost of bonus units. Therefore, the Assessing Officer issued penalty notices u/s 271(2)( c) by holding as under:- "In view of the above discussion, I am of the opinion that the assessee has concealed the particulars of income in the form of not following the provisions of section 94(7) of the Income Tax Act, 1961 claiming wrong exemption u/s 10 of the Act on....
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....inaccurate particulars of assessee's income and it is the case wherein the view taken by the assessee was not accepted by revenue. Reliance in this respect was placed on the following cases:- 1. Smt. Priti N. Agarwal decided by Hon'ble Delhi High Court reported in 309 ITR 140 which was further dismissed by Hon'ble Supreme Court vide judgment dated 6.4.2009. 2. CIT v. Reliance Petro Products Pvt. Ltd. 322 ITR 158 3. Caplin Point Laboratories Ltd. (Mad.) 293 ITR 524 4. T Ashok Pai v. CIT 292 ITR 11. 5. The Ld CIT(A), however, did not agree with the contentions of the assessee and upheld the penalty order by holding as under:- "In view of the facts discussed above, it is noted that the entire exercise was carried out by the appellant to generate loss to be adjusted/set off against the other income and as such, to reduce the tax liability. Further the long term capital gain of Rs.39,91,649/- earned on sale of bonus units in the assessment year 2006-07 has been claimed exempt. The plea of th....
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.....1,21,99,059.65 and thereby incurred a loss of Rs.78,00,940.33. The assessee was allotted 774331.15 units as bonus units which was sold in the next year and capital gain or Rs.79,69,744/- earned thereon was claimed exempt. The assessee claimed the loss as business loss and carried forward the bonus units at Nil and sold them subsequently. The loss was disallowed by the Assessing Officer and confirmed by the CIT(A). The Assessing Officer levied penalty u/s 271(1)(c ) of the Act which is challenged by the appellant vide appeal under consideration. The facts in the case under consideration are, as such same as in the case of Shri Anil Dutt wherein the penalty u/s 271(1)(c ) levied by the Assessing Officer has been confirmed. Following the order of this office in the case of Shri Anil Dutt, penalty levied in this case by the Assessing Officer is also confirmed." 6. Aggrieved, the assessees filed appeals before this Tribunal. 7. At the outset, the Ld AR submitted that Ld CIT(A) has confirmed the penalty holding that the assessee had generated loss to reduce tax liability only as in the succeeding year the assessees had sold these units at a profit. In this respect the Ld AR submitted ....
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....d upon the order of Assessing Officer and Ld CIT(A). 10. We have heard the rival submissions of both the parties and have gone through the material available on record. Section 271(1)( c) of the Act has a direct bearing on the controversy and therefore it is salutary upon us to take note of the relevant provisions of section 271(1)( c) along with Explanation-1 which reads as under:- "271. Failure to furnish returns, comply with notices, concealment of income, etc. (1). If the Assessing Officer or the Commissioner (Appeals) or the CIT in the course of any proceedings under this Act, is satisfied that any person (a) and (b)******** (c) has concealed the particulars of his income or furnished inaccurate particulars of such income. He may direct that such person shall pay by way of penalty. (i) and (Income-tax Officer,)******** (iii) in the cases referred to in Clause (c) or Claus....
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....ssessee fails to offer an explanation or the explanation offered by the assessee is found to be false by the Assessing Officer or Learned CIT(Appeals); and, (b) where in respect of any fact, material to the computation of total income under the provisions of the Act, the assessee is not able to substantiate the explanation and the assessee fails to prove that such explanation is bona fide and that the assessee had disclosed all the facts relating to the same and material to the computation of the total income. Under first situation, the deeming fiction would come to play if the assessee failed to give any explanation with respect to any fact material to the computation of total income or by action of the Assessing Officer or the Learned CIT(Appeals) by giving a categorical finding to the effect that explanation given by the assessee is false. In the second situation, the deeming fiction would come to play by the failure of the assessee to substantiate his explanation in respect of any fact material to the computation of total income and in addition to this the assessee is not able to prove that such explanation was given bona fide and all the facts relating to the same and material....
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....me Tax Act available under the head business and profession for valuation of such bonus units., Sub clause (a) of section 145A provides for valuation of inventory for the purpose of determining income chargeable under the head profits & business which says that valuation will be cone in accordance with method of accounting regularly employed by the assessee. The Ld CIT(A) in the quantum proceedings has rejected the valuation made by assessee and valued the bonus units on the basis of accounting practices whereby cost of original units becomes the cost of total units of original units and bonus units and therefore after assigning the value to bonus units had arrived at the figure of profit instead of loss and allowed the value of bonus units to be carried forward to next year which was to be set off against sale proceeds of bonus units. By this act the Ld CIT (A) has only shifted the amount of loss or profit to succeeding year in which such units were sold. If Ld CIT (A) had agreed to the loss claimed by assessee, all amounts received from sale of bonus units in next year would have been income of the assessee as there was nil value of bonus units as per claim of the assessee. There....