2005 (11) TMI 47

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..... nsideration the Assessing Officer had taken the view that income arising from the sale of debentures could be brought to tax as business income. The assessee had shown the income arising from the sale of debentures as capital gains relying upon the assessment for the previous year in which similar income had been so treated. The Commissioner was therefore of the view that the change in the opinion by the Assessing Officer as regards the income being capital gains or business income could not make out a case for levy of a penalty upon the assessee. The Commissioner has relying upon the decision of the Supreme Court in Hindustan Steel Ltd. v. State of Orissa [1972] 83 ITR 26 deleted the penalty in the following words: "This change of opinion .....

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..... onnection observed as under: "We have duly considered the rival contentions and the material on record. We have perused the assessment order for the assessment year 1995-96. We find that gains arising under identical circumstances have been treated as capital gains by the Assessing Officer. Therefore, the assessee was under a bona fide belief that this year also the same treatment should be given. But the Assessing Officer thought otherwise and changed his stand. We fail to understand where the assessee went wrong. We are not commenting on whether the gains should be treated as capital gains or as business income. But we are on the issue as to how the assessee can be faulted because of the change of opinion on the part of the Assessing Off .....

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..... ficer he committed a mistake which ought to have been corrected by the Tribunal. There is no doubt that no explanation was offered by the assessee before the Assessing Officer. The order passed by the Assessing Officer imposing a penalty specifically records that the assessee has not come forward to offer any explanation. The result was an order levying penalty upon the assessee. To that extent no fault could be found with the order of assessment but that did not prevent the assessee from challenging the order and offering an explanation before the Commissioner in appeal who exercised the very same powers as were exercisable by the Assessing Officer. The question however is whether upon such an explanation being offered before the Commissi .....

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