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TMI Blog2016 (1) TMI 1086X X X X Extracts X X X X X X X X Extracts X X X X ..... grossly erred for levying penalty on set off of car loss against the regular income. 4. The AO and ld. CIT(A) not considered that the short term capital loss arose on sale of car as it was the only depreciable asset in the block and the same has been set off against the regular income. The same treatment was also given in original return filed by the assessee. 5. The AO as well ld. CIT(A) has not made any proper justification for imposing penalty or considered the fact properly. The penalty imposed on both income were not earned by the assessee. One is the notional income while another is the difference of opinion for set off of different types of losses. 6. The relief as claimed by the appellant may kindly be allowed in toto. 7. The appellant reserves to the right to add, amend, alter or substitute any other grounds upto and at the time of hearing of this appeal. 2. Since all the grounds are inter related, they are taken together for disposal. Briefly stated facts are that assessee is an individual and a search proceedings u/s 132 of the Act was carried out at his residence at Surat on 22.12.2004. During the course of search certain documents were found and seized. Notic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied and on the other house property income of Rs. 500/- was shown in the return of income by the assessee. However, during assessment proceedings income from house property of this rented house was estimated by Assessing Officer at Rs. 27,500/- thereby making an addition at Rs. 27,000/-. However, in appeal before ld. CIT(A) it was held that the income of this rented house should be taken by adopting municipal valuation of the property which was calculated by Assessing Officer at the time of giving appeal effect at Rs. 2,400/- and because of this appeal effect the original addition made by Assessing Officer at Rs. 27,000/- was reduced to Rs. 1,900/-. 8. The issue before us is whether assessee is liable to pay penalty u/s 271(1)(c) of the Act on this concealed income of Rs. 1,900/-. Section 271(1)(c) refers to imposition of penalty if the assessee has concealed the particulars of his income or furnished inaccurate particulars of such income. Examining the facts of the case of assessee in this aspect we find that income from house property was certainly disclosed by the assessee in its return of income on estimate basis because the house property was not rented during the year and as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s when the sale has been adjusted against the block of assets and thus confirmed the addition of Rs. 1,35,297/-. The appellant has not filed any appeal against the order of the CIT(A) as mentioned in the penalty order itself. The appellant's contention that there is a difference of opinion that the short term capital loss on the sale of car can be adjusted against other income in the same year or not, is devoid of facts and merits. Itis settled law that the loss on account of capital gains cannot be adjusted against any other source of income as per the provisions of section 74 of the IT Act. Hence the law is very clearand there is no question of having two opinions on this provision. The appellant h.js relied on several case laws in support of its contention. The various case law has been examined and the facts and circumstances of the case are different from the case laws on which the appellant has relied, hence not applicable. 6.1.1 The position of law with regard to levy of penalty u/s 271(1)(c) has undergone a substantial change after the insertion of Explanation (1) to section 271(1)(c) w.e.f 01.04.1976. Explanation (1) to section 271(1)(c) raises a presumption that as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in Viswakarma Industries Vs. GIT (1982) 135 ITR 652. 6.1.5 Similar view has been expressed by the Kerala High Court in the case of CIT Vs. K.P. Madhusudana reported in 246 ITR 218. This decision has been affirmed by the Supreme Court in 251 ITR 99, Affirming the aforesaid decision, the Hon'ble Supreme Court has further held that after insertion of explanation its earlier decision in the case of Sir ShadiLal Sugar and General Mills Ltd. Vs. CIT reported in 168 ITR 705 (SC) was no longer applicable. The Kerala High Court at page 244 has observed as under: "The question of onus is of primary and added importance in legal acrimony. In CIT Vs. Amvar AH (1970) 76 ITR 696, the apex court laid down that, before a person could be visited with a penalty for concealment, etc., the Revenue must prove that the amount in question was the income of the assessee and that he had concealed it with a motive. It was further held that penalty could not be imposed merely because any explanation given by the assessee in regard to the items in question was not believed to be true. The position of law on or after April 1, 1976, is that where in respect of any item of credit. (a) the assessee fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... March 31, 2010 by observing as under: "5. We have considered the rival contentions, carefully gone through the orders of the authorities below and also deliberated upon the various case laws cited by the learned AR and discussed by lower authorities in their respective orders. From the record, we found that assessee has claimed set off of unabsorbed business loss against the capital gains earned during the year. As a result of AO's action for decline of such set off, penalty was imposed u/s 271(1)(c). Contention of the assessee was that claim was made in bona-fide way for setting of carry forward business loss against the income arising on sale of business assets. Along with the return of income, the assessee has also submitted director's report duly disclosing the fact of sale of building and utilization of the amount for the purpose of business. Thus, we found that assessee has furnished all the particulars of income which is evident from the computation of income, director's report etc. filed along with return of income. In the quantum order, the AO declined assessee's claim of set off. Nowhere AO has alleged that assessee's claim is mala-fide. Thus, it was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge and other income against which it had claimed share trading loss, the AO found that loss was speculative in nature and could not be adjusted against assessee's normal income, accordingly the AO held that assessee has furnished inaccurate particulars of income to the extent of making a wrong claim of share trading loss against the normal income and imposed penalty u/s 271(1)(c) of the Act. The Hon'ble High Court held that mere treatment of business loss as a speculation loss by the AO did not automatically warrant inference of concealment of income, accordingly penalty was not leviable. 7. Recently, Hon'ble Jurisdictional High Court in the case of Shahabad Coop. Sugar Mills Limited (supra) observed that where the assessee is found to have made wrong claim u/s 80P and wrong claim of depreciation on guest house, making a wrong claim is not at par with concealment or giving of inaccurate information, it will not call for levy of penalty u/s 271(1)(c). Accordingly, order of the ITAT Chandigarh Bench deleting penalty imposed u/s 271(1)(c) was upheld by the Hon'ble Court. 8. Hon'ble Madhya Pradesh High Court in the case of CIT Vs. S.P.K. Steels Pvt. Ltd. - 270 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing of inaccurate particulars was simply a mistake and not a deliberate attempt to evade tax, the view taken by the Tribunal cannot be held to be perverse." 10. In view of the above judicial pronouncements, we can reasonably conclude that assessee has disclosed all the particulars along with the return of income, therefore it was not a fit case for levy of penalty merely by declining assessee's claim for set off of business loss against other heads of income. " 12 The issue in appeal is in regard to imposition of penalty u/s 271(1)(c) of the Act on income concealed by way of taking wrong claim of short-term capital loss on sale of car against business income. From going through the facts and judicial pronouncement we find that assessee was possessing only one car and the same was sold during the financial year 2000-01. There was no other asset in the block of asset relating to motor car and, therefore, after deduction of sale value from the purchase value there arose a short term capital loss. There is no dispute on the part of the Revenue on the value of purchased car and sale value of car. Assessee has claimed the short term capital loss at Rs. 3,21,440/- against the bus ..... X X X X Extracts X X X X X X X X Extracts X X X X
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