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2012 (11) TMI 509 - AT - Income TaxPenalty u/s 271(1)(c) - revised return admitting nil income claiming set off of losses - Held that:- As gain and loss of sale of PSL shares are concerned, there are more or less cancel each other. As far as the loss of LNG project is concerned, AO himself accepted the claim even though assessee has not originally claimed but, offered along with the capital gain on MISEZ shares. Out of two major amounts of disallowance, one was expenses of Rs. 30/- lakhs disallowed on adhoc basis. This amount cannot be a basis for levy of penalty as it was adhoc disallowance. The other amount is disallowance under section 14A and the disallowances under section 14A was considered by the Hon'ble Supreme Court in the case of CIT v. Reliance Petroproducts (P.) Ltd. [2010 (3) TMI 80 - SUPREME COURT] wherein furnishing of 'inaccurate particulars' was examined and cancellation of penalty was upheld. Therefore, disallowance under section 14A also does not call for penalty. Capital gain on the sale of MISEZ shares - there is a bonafide belief on the part of assessee that the capital gains arising on sale of MISEZ shares are exempt from taxation as the application under section 10(23G) was pending with CBDT. The argument of the learned DR that the provision itself was withdrawn from 1/4/2007 cannot be accepted as relevant provisions was applicable for the year under consideration and assessee did make an application in time which was pending by the time the return was filed. In fact the application is still pending as no decision has been taken as yet by CBDT. Since the entire amount of capital gain ultimately brought to tax was arising out of sale of shares in MISEZ alone, there is a bona fide belief on the part of assessee in not offering capital gains. Therefore, section 271(1)(c) cannot be attracted and accordingly allowing the grounds of assessee. The order of AO does not indicate whether this loss was set off in earlier years or still available for set off. There is no mention about the carry forward losses. However, after setting off to the capital gain, as net computation under the head business was a loss, the total income determined at Rs. 4,43,14,513/- was only arising out of the long term capital gain, out of which if the amounts of disallowances were excluded the net amount of Rs. 2,98,97,272/- comprises only of long term capital gain - in favour of assessee.
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