ASST CIT 25(3), MUMBAI vs. PANKAJ V. KARANI, MUMBAI

Briefly the facts are, the assessee an individual filed his return of income for the impugned assessment year declaring total income of Rs.5,63,450/-. During the 2 Shri Pankaj V. Karani assessment proceedings, the Assessing Officer while verifying the return of income and the computation of total income filed by the assessee found that the assessee has shown loss arising on the sale of shares amounting to Rs.3,32,96,132/- as short term capital loss and has claimed carry forward of the said loss to the subsequent assessment years. The Assessing Officer, however, did not accept the claim of the assessee and completed the assessment by treating the loss arising from share transaction as business loss. As a result of difference in loss claimed by the assessee, the Assessing Officer initiated proceeding for imposition of penalty u/s. 271(1)(c) of the Act alleging furnishing of inaccurate particulars of income and thereby concealing the income. Though, the assessee objected to the initiation of penalty proceedings on the ground that the assessee has submitted full particulars relating to the share transaction and the difference in treatment of loss in share transaction was on account of a difference of opinion between the assessee and the department, therefore, the provision of section 271(1)(c) are not attracted, however, the Assessing Officer rejecting the explanation of the assessee proceeded to pass an order imposing penalty of Rs.49,94,420/- u/s. 271(1)(c) of the Act alleging furnishing of inaccurate particulars of income.

Being aggrieved of the penalty order passed by the Assessing Officer, the assessee preferred an appeal before the ld. Commissioner of Income Tax (Appeals).

3 Shri Pankaj V. Karani 4. After considering the submissions of the assessee in the context of facts and materials on record, ld. Commissioner of Income Tax (Appeals) found that the assessee has held shares for number of months and some shares acquired in the preceding year was sold in the impugned assessment year. He also found that the assessee has utilized its own funds for investing in shares and has shown it as investment in the balance sheet. On the basis of the fact that declaring income from share transaction was declared as capital gain in the preceding years, the assessee has offered the loss from share transaction as capital loss in the impugned assessment year under a bona fide impression that it is an investment activity. He also found that the assessee has made full and true disclosure of its share transactions and merely on account of change of head of income, it cannot be presumed that there is a deliberate or willful attempt by the assessee to furnish inaccurate particulars of income or suppression of income so as to invoke the provision of section 271(1)(c) of the Act.

We have heard the ld. Departmental Representative and perused the materials on record. As could be seen from the factual matrix of the case, the assessee was carrying on share transaction activities. It is also seen from the record that the assessee has treated the activities in share transactions as investment activities from the preceding assessment years. In fact, as observed by the ld. Commissioner of Income Tax (Appeals), in the balance sheet of the impugned assessment year, the assessee has shown the share transactions as investment. As it appears, in the impugned assessment year the assessee incurred loss in the course of share transaction which was shown as short term capital loss in the computation of income and the assessee claimed carry forward of the same. However, in the course of assessment proceeding, the Assessing Officer did not accepted assessee’s claim and treated the loss from share transaction as business loss and on that basis initiated proceeding for imposition of penalty u/s. 271(1)(c) of the Act, alleging furnishing of inaccurate particulars of income or concealment of income. As could be seen from the aforesaid facts, the difference between the assessee and the Assessing Officer was with regard to the proper head under which the loss from share transaction is to be allowed. There is nothing on record to suggest that the assessee either furnished inaccurate particulars of income or 5 Shri Pankaj V. Karani concealed his income. On the contrary, it is evident that the assessee has furnished full particulars relating to its share transaction. Moreover, considering the fact that from the preceding assessment years the assessee had been treating the activities in share transactions as an investment activity it cannot be disbelieved that under a bonafide impression the assessee has claimed the loss from share transaction as short term capital loss. As rightly held by the ld. Commissioner of Income Tax (Appeals), the assessee has made certain claim under a bonafide impression which was not accepted by the Assessing Officer. However, non acceptance of assessee’s claim by itself will not lead to the conclusion that the assessee has furnished inaccurate particulars of income or concealed his income. In view of the afore-said, we do not find any infirmity in the order of the ld. Commissioner of Income Tax (Appeals) in deleting the penalty. The grounds raised are dismissed.

In the result, the department’s appeal is dismissed. प"रणामतः राज"व क" अपील खा"रज क" जाती है ।