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2016 (1) TMI 457 - ITAT MUMBAI

2016 (1) TMI 457 - ITAT MUMBAI - TMI - Penalty levied u/s 271(1)(c) - concessional rate provided u/s 111A of the Act is not applicable to the STCG declared by the assessee - mistake in computation of tax on the STCG pointed - Held that:- The assessee has committed a bonafide mistake in computation of tax on the STCG. Further, there is no allegation that the assessee has concealed any particulars of income or furnished inaccurate particulars of income relating to STCG. The assessee has explained .....

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etter duly accepting the mistake and has also requested the assessing officer to raise the tax demand. The foremost important point is that the income returned by the assessee has been accepted by the assessing officer as it is, without making any adjustment. Hence, in view of the judgments referred above, the mistake committed in computation of tax cannot be considered to be a case of concealment of particulars of income or furnishing of inaccurate particulars of income. Even if it is considere .....

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1)(c) of the Act. Accordingly, we set aside the order of Ld CIT(A) and direct the AO to delete the impugned penalty. - Decided in favour of assessee. - I.T.A. No.5647/Mum/2013 - Dated:- 19-11-2015 - SHRI B.R.BASKARAN, AM AND PAWAN SINGH, JM For The Appellant : Shri Vimal Punmiya For The Respondent : Shri A K Dhondial ORDER Per B R Baskaran, AM: The appeal filed by the assessee is directed against the order dated 18.7.2013 passed by the ld. CIT(A)-4, Mumbai confirming the penalty levied by the AO .....

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tax payable on the total income, the assessee applied concessional rate of tax on STCG as per the provision of section 111A of the Act. It is pertinent to note that the concessional rate of tax under section 111A on STCG arising on sale of shares shall be applicable only if the transactions had suffered Security Transaction Tax. At the time of assessment proceedings, it was noticed by the AO that the shares sold by the assessee did not suffer security transaction tax and hence, the concessional .....

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ished any inaccurate particulars of income, the AO was not satisfied with the same and accordingly levied penalty of ₹ 76.91 u/s 271(1)(c) of the Act. The ld. CIT(A) also confirmed the same and hence the assessee has filed this appeal before us. 3. We heard the parties and perused the record. The ld. AR submitted that the question of concealment of particulars of income or furnishing in accurate particulars of income does not arise in this case since the income returned by the assessee and .....

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eedings and explained all the details. Accordingly, he submitted that the assessee cannot be considered to have concealed particulars of income or furnished inaccurate particulars of income. He submitted that the penalty levied on identical reasoning has been deleted by the Co-ordinate Bench of the Tribunal in the following cases: a) Asia Attractive Dividend Stock Fund Mother Fund V/s Dy.Director of Income Tax (International Transaction) in ITA No.3908/Mum/2012 (AY-2008-09); b) ACIT V/s Smt.Ceci .....

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was computed at concessional rate. He further submitted that the details furnished by the assessee with regard to the STCG was not found to be factually incorrect and hence, incorrect claim in law on computation of tax will not lead to levy of penalty u/s 271(1)(c) as held by the Hon ble Supreme Court in the case of CIT vs. Reliance Petroproducts (2010) 322 ITR 158 (SC). 4. On the contrary, the ld. DR submitted that the assessee has furnished inaccurate particulars of income by computing tax at .....

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8377; 544.09 lakhs. A perusal of paper book filed by the assessee would show that the said observation made by the ld. CIT(A) is not in accordance with the facts available on record. The income of ₹ 31.31 lakhs pertains to business income declared by the assessee and the assessee has also declared STCG arising on sale of shares and the aggregate amount of both the incomes have been declared in the return of income filed by the assessee and the same income has also been assessed by the asse .....

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AO has computed the tax at the normal rate since the assessee is not entitled to concessional rate of tax on the STCG arising on sale of shares. Since the said shares did not offered security transaction tax. 7. We notice that the assessee has offered explanations before the assessing officer in the penalty proceedings by stating that the calculation error has been committed by the clerk feeding the data. However, the assessee has furnished all the proofs, documents and details relating to the S .....

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t a lower rate and the same was unearthed as a result of scrutiny assessment. Further the assessee did not correct the mistake by filing revised return of income suo moto. Accordingly, the AO held that it was a fit case for levying penalty u/s 271(1)(c) of the Act. It is pertinent to note that the assessing officer did not state, neither in the assessment order nor in the penalty order, about the nature of default, i.e., whether it is a case of concealment of particulars of income or furnishing .....

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g tax at concessional rate of 10%. During the pendency of assessment proceedings, the assessee filed another revised return and again computed tax at normal rate of 20%. The AO did not consider the second revised return of income and levied penalty for short computation of tax. While adjudicating the issue, the co-ordinate bench first considered the question as to whether offering the tax at a concessional rate applicable to a different category of income would amount to furnishing of inaccurate .....

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cts in the case of the assessee are not in dispute as the assessee filed its original return of income on 31.07.2009 and offered the Long Term Capital Gain on sale of paintings to tax at the normal rate of 20% as applicable on such Long Term Capital Gain. Subsequently, the assessee has filed a revised return on 8.09.2009 and offered the tax at a concessional rate of 10% under the proviso to section 112(1) of the Income Tax Act. It is pertinent to note that the concessional rate of tax @ 10% as p .....

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either to take the benefit of indexed cost or apply concessional rate of tax at 10% whichever is beneficial to the assessee. Therefore, there is no ambiguity or scope of any misunderstanding about the applicability of section 112 of the Income Tax Act only on the Long Term Capital Gain arising from sale of such Listed Shares, Securities, Bonds etc. In the case in hand, the Long Term Capital Gain arose on sale of paintings, therefore, the income from Long Term Capital Gain from sale of paintings .....

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he assessee wherein the concessional rate of tax was claimed on the Long Term Capital Gain. The amount of Long Term Capital Gain remains same in all the three return of income filed by the assessee and the only change and difference in the original return of income and first revised return of income is the rate of tax applied by the assessee. Though, by applying concessional rate of tax at 10% on the ground that the assessee has not taken the benefit of indexed cost for computation of Long Term .....

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in the source of income and the category of income which is specified as capital gain from sale of paintings then even if the assessee has applied incorrect rate of tax in the revised return, it would not constitute that the assessee has changed the class/nature of income eligible for concessional tax u/s 112(1) of the Income Tax Act. When there is no attempt on the part of the assessee to show the Long Term Capital Gain in a different category then merely because a concessional rate of tax was .....

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x Act particularly in view of the fact that the assessee did not claim the benefit of indexed cost while computing the Capital Gain in question. This is not a case that the Long Term Capital Gain in question is not eligible for benefit of indexed cost. The claim of concessional tax applied on the Long Term Capital Gain, though, is against the provisions of Income Tax Act, however, it is based on the fact that the benefit of indexed cost was available to the Capital Gain in question which was not .....

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ome. 9. In the case of Asia Attractive Dividend Stock Fund (supra) relied upon by the assessee, the co-ordinate bench of Tribunal has considered an identical issue. The assessee in the above said case also worked out the tax payable on Short term capital gain at concessional rate u/s 111A of the Act, whereas it was liable to pay tax on STCG under normal rate. During the course of assessment proceedings, the assessee accepted the said fact and submitted that it was a bonafide clerical error. The .....

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we observe that assessee stated that there was a clerical error in the computation of tax liability, which was discovered while preparing for appearance for scrutiny assessment pursuant to notice u/s.142(1) dated 20.10.2010 and as soon as error was discovered, it was suo moto brought to the notice of AO vide first written submission filed on 23.11.2010. Assessee stated that it was not the intention of the assessee to defraud the revenue. We also observe that the returned income was accepted whi .....

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filed was processed by the department. The Hon'ble Supreme Court in the case of Reliance Petro Products (P) Ltd (supra) has held that if all the facts relating to claim are disclosed and the information given in the return is not found incorrect or inaccurate, assessee cannot be held guilty of furnishing inaccurate particulars of income. Their Lordships also held that mere making of a claim which is not sustainable in law by itself, will not amount to furnishing inaccurate particulars regar .....

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not, admittedly, paid STT on the share transactions. AO has not disputed that total capital gain as disclosed by the assessee was found to be correct and assessed. We are of the considered view that such a mistake to state lower rate of tax applicable in the return of income cannot constitute furnishing inaccurate particulars of income particularly when assessee has furnished all the relevant materials in the return filed. The Hon'ble Kolkata High Court in the case of Udayan Mukherjee(supra) .....

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y lower rate of tax on the disclosed income cannot amount to furnishing inaccurate particulars nor concealment of income and same does not come within the purview of section 271(1)(c) of the Act. The ITAT Mumbai in the case of Hindalco Industries Ltd vs ACIT, 41 SOT 254(Mum) held that when assessee furnished full details and particulars of its income and assessee was under bonafide belief regarding allowability of short term capital loss on sale of securities in terms of provisions of section 94 .....

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find that the penalty under section 271(1)(c) was levied on the ground that the assessee violated of provisions of section 94(7) of the Act by not ignoring losses while computing short-term capital gains on transactions related to section 94(7) of the Act. It is important to state here that the Assessing Officer made the addition only on the basis of material and in formations furnished by the assessee. The Apex Court in the case of Reliance Petroproducts (P.) Ltd. (supra) regarding the word  .....

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rther, we noticed that there were no such specific requirements in the return form applicable to the year under consideration. Such requirement of the column in the return has been inserted by amendment in return form, ITR-6, at page 17, "Schedule CG capital gain" S. N. 3(d) which is applicable from assessment year 200 7-08. In the case of Reliance Petro products Ltd. (supra) the Hon'ble Supreme Court held that where there is no finding that any details supplied by the assessee in .....

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rated that their claim was bona fide claim. In the light of above discussion, we don't find that the case under consideration is a fit case for levy penalty under section 271(1)(c) of the Act we therefore cancelled the penalty levied." 13. The Hon'ble Apex Court in the case of Reliance Petroproducts Pvt Ltd. (supra)(322 ITR 158) held that there can be no dispute that everything would depend upon the return filed because that is the only document, where assessee can furnish the parti .....

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was not sustainable in law, by itself, would not amount to furnishing inaccurate particulars regarding the income of the assessee. Such a claim made in the return cannot amount to furnishing inaccurate particulars. Not only this, we observe that Hon'ble Jurisdictional High Court in Income Tax Appeal No.3899/M/2010 (CIT VS. Aditya Birla Nova Limited) vide order dated 14th August, 2012, after considering the decision of the Hon'ble Apex Court in the case of Union of India & Ors. Vs. D .....

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wed on the ground that the shares were held as investments, and profits and losses on the sale thereof were to be considered under the head "capital gains". Therefore, the quantum proceeding was concluded against the assessee. The Assessing Officer levied penalty under Section 271(1)(c) of the Act. The Hon'ble jurisdictional High Court held that it was not the case of the department that the assessee withheld any information or furnished any false information. The facts necessary f .....

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wrongly applied charging of rate of tax on short term capital gains disclosed by the assessee. Therefore, we are of the considered view that applying wrong rate of tax at which short term capital gains disclosed by the assessee does not amount to furnishing inaccurate particulars of income and that too when assessee rectified the said mistake suo moto before assessment proceedings were completed and stated that said mistake had occurred inadvertently while computing the income. Not only this, t .....

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ently, reassessment proceedings were initiated on the ground that assessee made provision of ₹ 23,70,306 for payment of gratuity. AO stated that in the reasons recorded that the provisions is not allowable under section 40A(7) of the Act and was required to be added back. Soon after the assessee was communicated the said reasons for reopening the assessment, assessee stated that it realized the mistake and, accordingly, by a letter dated 20.1.2005 informed the AO that there was no willful .....

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ought to be evaded by the assessee by furnishing inaccurate particulars. Ld CIT(A) upheld the imposition of penalty. On appeal, the Tribunal upheld the levy of penalty but reduced the same to 100%. Assessee approached the Hon'ble High Court, which also dismissed the appeal. Hence, assessee filed appeal before the Hon'ble Supreme Court. The Supreme Court after hearing ld counsel for the parties observed that assessee is undoubtedly a reputed firm and has great expertise available with it. .....

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but still assessee made computation of the assessee in its return of income. The Hon'ble Apex Court held that all that has happened is that through a bonafide and inadvertent error by the assessee while submitting his return and failed to add provision of gratuity to its total income. The caliber and expertise of the assessee has little or nothing to do with the inadvertent error. The Apex Court also stated that assessee should have been careful cannot be doubted, but the absence of due car .....

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ove case and facts of the case before us, we are of the considered view that above decision of Hon'ble Apex Court squarely applies to the facts of the case. Therefore, we hold that assessee has committed an inadvertent error in the return of income to charge the tax @ 10% instead of applicable rate of tax @ 30% on short term capital gains shown by the assessee as assessee has not paid STT on share transactions. Hence, assessee has not concealed its income or furnished wrong particulars of fa .....

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on the disclosed income cannot amount to furnishing of inaccurate particulars of income nor concealment of income and the same does not come within the purview of sec. 271(1)(c) of the Act. Further the Tribunal has also followed the decision rendered by Hon ble Apex Court in the case of Reliance petroproducts Pvt Ltd (supra) and held that the question of furnishing of inaccurate particulars of income does not arise, when the assessee has furnished all the details in its return of income. The Hon .....

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ssee furnished its reply through its letter dated 18-10-2011, wherein the assessee, inter alia, furnished the details of STCG. A copy of the reply is attached in the paper book filed by the assessee. A perusal of the same would show that the assessee has furnished the details of STCG by segregating the STCG into two categories, viz., (a) STCG on which STT was not paid and (b) STCG on which STT was paid. Thus it is noticed that the assessee has furnished all the relevant details relating to STCG .....

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a clerk while computing the tax. The various letters furnished before the AO during the course of assessment proceedings, in our considered view, support the explanations of the assessee that it was a bonafide mistake. The Hon ble Supreme court in the case of Price waterhouse coopers (P) Ltd (348 ITR 306) has held that the bonafide mistakes would not lead to concealment of income. 13. The co-ordinate bench of Tribunal has considered the validity of levying penalty on the bonafide mistakes commi .....

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e Act. The Tribunal deleted the penalty by following the decisions rendered by Hon ble Punjab & Haryana High Court in the following cases:- (a) Sidhdharth Enterprises (322 ITR 80)(P & H) (b) Arisudana Spinning Mills Ltd (326 ITR 429)(P&H) In the case of Sidhdharth Enterprises (supra), the Tribunal had deleted the penalty by holding that the furnishing of inaccurate particulars of income was a silly mistake and not a deliberate attempt to evade tax. The High Court held that the view t .....

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