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Income Tax Appellate Tribunal, ‘ B’ BENCH : CHENNAI
Before: SHRI N.R.S. GANESAN & SHRI ABRAHAM P. GEORGE]
आदेश / O R D E R
PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER
Assessee in this appeal which is directed against an order dated 31.07.2017 of the ld. Commissioner of Income Tax (Appeals)-3, Chennai, assails levy of penalty of �17,53,268/- made u/s.271(1) (c) of the Income Tax Act,1961 (in short ‘’the Act’’).
Ld. Counsel for the assessee submitted that assessee had during the relevant previous year purchased and sold shares on delivery basis, through his demat account. As per the ld. Authorised Representative, assessee was of the bonafide belief that surplus arising on such transaction would come within the ambit of Section 111A of the Act and was eligible for concessional tax rate of 10%.
However, as per the ld. Authorised Representative, ld. Assessing Officer had considered the surplus as business income and subjected the assessee to tax at maximum margin rate. As per the ld. Authorised Representative, though the Tribunal, on assessee’s appeal had confirmed the treatment of the surplus under the head ‘’income from business’’, it had specifically noted that assessee had disclosed all the transactions and there was only a difference in classification of income. Contention of the ld. Authorised Representative was that penalty levied u/s.271 (1) (c) of the Act was on an erroneous premise that Tribunal had confirmed the assessment. As per the ld. Authorised Representative, assessee had not furnished any inaccurate particulars of income nor concealed any income. Relying on the judgment of Hon’ble Apex Court in the case of CIT vs. Reliance Petroproducts Pvt Ltd 322 ITR 158, ld. Authorised Representative submitted that levy of penalty was not justified.
Per contra, ld. Departmental Representative strongly supported the orders of the lower authorities.
We have considered the rival contentions and perused the orders of the authorities below. Assessee had made profit on buying and selling shares through a recognized stock exchange. In Schedule 9 of its Balance Sheet, filed alongwith the return, assessee had given details of the shares which it had bought and sold. Assessee had claimed gains under the head ‘’capital gains’’ and applied concessional rate of tax available u/s.111A of the Act. However, ld. Assessing Officer had held that the transactions giving rise to the gains in the nature of business and hence the surplus had to be considered under the head business income. No doubt, this treatment was confirmed by this Tribunal, on assessee’s appeal in & 363/Mds/2013, vide its order dated 26.06.2015. Para 6 of this order is reproduced hereunder:-
‘’6. We have considered the rival submissions on either side and also perused the material available on record. The only issue arises for consideration is classification of income. The assessee claims that the profit on sale of shares has to be classified as capital gains. However, the Revenue contends that it has to be classified as income from business activities. If the income was classified as capital gains, then the assessee may be entitled for concessional rate of tax @ 10% ujs lllA of the Act. The Assessing Officer, after going through the Profit & Loss Account and other material available on record, found that the assessee itself disclosed the transaction as opening and closing stock. The Assessing Officer also found that the assessee is in the business of purchase and sale of shares through stock exchange on day-to-day basis. The Assessing Officer found that the transaction of the assessee can be treated as business transaction. When these details were brought to the notice of the assessee, the assessee agreed to offer the same as business income and to pay the tax. In view of this agreement of the assessee to offer the same as business and pay taxes, this Tribunal is of the considered opinion that the C!T(A) has rightly confirmed the order of the Assessing Officer. Accordingly, this Tribunal do not find any infirmity in the order of the lower authority and the same is confirmed’’.
It is clear from the observations of the Tribunal that the dispute between revenue and assessee was on classification of the income arising from purchase and sale of shares. Assessee had claimed it as short term capital gains whereas ld. Assessing Officer considered it to be income from business. In our opinion, there was no concealment of income nor any furnishing any inaccurate particulars. That making an incorrect claim in law would not tantamount to furnishing of inaccurate particulars, is the law laid down by Hon’ble Apex Court in the case of Reliance Petroproducts Pvt Ltd (supra). We are therefore of the opinion that levy of penalty was not warranted. Such levy stands deleted. Orders of the lower authorities are set aside.
In the result, the appeal of the assessee is allowed.
Order pronounced on Monday, the 18th day of June, 2018, at Chennai.