AMIN SHAHABUDDIN ALIBHAI,THANE vs. CIT(A) 55,

This appeal by assessee is arising out of the order of CIT(A)-55, Mumbai n Appeal No. CIT(A)-55/Income Tax Officer(IT)-1(1)/IT-98/2014-15, dated 30/03/2015. Assessment was framed by ITO-Ward(IT)-1(1), Mumbai for the AY 2011-12, vide his order dated 29/03/2014 under section 143(3) of the Income Tax Act, 1961 (hereinafter ‘the Act’). The penalty under dispute was levied by the AO under section 271(1)(c) of the Act vide order dated 22/09/2014.

The only issue in this appeal of the assessee is against the order of Ld. CIT(A) confirming the action of the AO levying penalty under section 271(1)(c) of the Act for furnishing inaccurate particulars of income in respect to declaring Long Term Capital Loss as against the Short Term Capital Loss.

Brief facts related to the issue are that the assessee is nonresident having sources of income in India i.e; income from house property, income from capital gain and income from other sources. The assessee sold one property at Everest, Andheri Mumbai. The assessee claimed Long Term Capital Loss to the tune of Rs. 5,89,116/- after taking indexation benefit. According to AO the assessee as per agreement purchased this property on 31/08/2009 and sold the same on 16/08/2010, which shows that the property was sold within one year. According to AO, since asset is not held for more than 36 months, this is a Short Term Capital Asset and income derived from the same would be Short Term Capital Loss and indexation benefit on cost of acquiring is to be disallowed. Accordingly the AO disallowed the claim of LTCL claimed by assessee amounting to Rs.5,89,116/- under section 74 of the Act. The AO initiated penalty proceeding under section 271(1)(c) of the Act for furnishing of inaccurate particulars of income. During the penalty proceedings, the assessee filed explanation that the assessee being a NRI of USA and having no knowledge of India Taxation Laws, appoint an expert to obtain legal advise for filing his Income Tax return. According to assessee, he has completely relied upon advice offered by his tax consultant having no clue or doubt on his proficiency in taxation matter. According to the Ld. Counsel, the claim of Long Term Capital Loss was made in good faith without having any knowledge of wrong claim made by his consultant while filing of return of income. However, the Assessing Officer was not convinced by the reply of the assessee and he levied penalty under section 271(1)(c) of the Act for furnishing of inaccurate particulars of income. Aggrieved assessee preferred appeal before CIT(A), who also confirm the action of the AO by observing in para 5 as under:

I find from the above facts that the assessee has filed complete particulars before the AO during the course of assessment proceeding and in his return of income also. The AO assessed Short Term Capital Gain on sale of residential property i.e; Everest Andheri, Mumbai for a sum of Rs. 3,66,840/-. In view of these facts, whether this tantamounts to concealment or not. I am of the view that as per rule of evidence there is distinction between set of facts not proved and facts disproved and facts proved. Benefit of principle that mere non satisfactory nature of explanation furnished cannot amount to proof of falsity of explanation furnished can apply, in case the fact finding authority reaches to a stage where it can only conclude that the fact alleged is not proved, which would result, that, except rejection of the explanation furnished by the assessee, there is no material to sustain the plea of concealment. Hon’ble Supreme Court in the case of CIT Vs. Reliance Petro Products Pvt. Ltd. [2010] 322 ITR 158 (SC) has held that where there is no finding that any detail supplied by the assessee in his return of income are found to be incorrect or erroneous or false, there is no question of levying penalty under section 271(1)(c) of the Act . A mere making of claim, which is not sustainable in law, by itself will not amount to furnishing of inaccurate particulars of income of the assessee. In view of the decision of Hon’ble Supreme Court, in the present case also the assessee has filed complete particulars relating to sale of property and made a claim of Long Term Capital Gain instead of the same as Short Term Capital Gain. In my view, this is not a fit case for levy of penalty under section 271(1)(c) of the Act for furnishing of inaccurate particulars of income. Accordingly, I delete the penalty and allow the appeal of the assessee.

In the result, appeal of the assessee is allowed.