DEEPTY AGARWAL,MEERUT vs. ITO, WARD- 1(2), MEERUT

The Representatives of both the sides agreed that facts of may be taken into consideration in the disposal of the appeals. On such concessions I have heard both the Representatives on the facts of ITA No. 1302/Del/2018.

The solitary grievance in both the appeals relate to the levy of penalty u/s. 271(1)(c) of the Act though quantum may defer. The roots for the levy of penalty lie in the assessment order dated 22.12.2016 framed u/s. 143(3) of the I.T. Act. During the course of scrutiny assessment proceedings, the AO noticed that the appellant has claimed long term capital gains on the sale of shares as exempt u/s. 10(34) of the Act. The Assessee was asked to furnish the necessary details alongwith supporting evidences. The Assessee filed details in respect of shares sold as supporting evidences. Not convinced with the submissions of the assessee, the AO proceeded by presuming that the entire transactions related to penny stock and the capital gains so generated is bogus. Being frustrated by the repetitive queries of the AO the Assessee surrendered the claim of exemption and offered the entire capital gains for taxation. The assessment was completed accordingly. However, the AO initiated penalty proceedings u/s. 271(1)© of the Act stating that the assessee has furnished inaccurate particulars of income and has introduced her own unexplained money in the guise of bogus long term capital gain on sale of penny stocks.

I have given the thoughtful consideration to the orders of the authorities below. I find that in the computation of income the assessee has duly disclosed all the particulars of her income and under the head “Income with full exemption” the assessee has claimed dividend income as exempt and also long term capital gain on which STT is paid which is also exempt from tax. I further find that during the course of scrutiny assessment proceedings the AO has proceeded by the assumption that the shares purchased and sold by the assessee comes into the category of penny stock companies. The AO has drawn support from outside information. In my considered opinion the surrender of exemption by the assessee on repetitive queries would not amount to furnishing of inaccurate particulars of income. The assessee has claimed exemption as per the provisions of law, though surrendered during the course of assessment proceedings. In my considered opinion, on the facts of the case, no penalty is leviable u/s. 271(1)© of the Act. I accordingly set aside the finding of the Ld. CIT(A) and direct the AO to delete the penalty so levied.

In the result, appeals of both the Assessees are allowed.