ITAT rejects Assessee’s Plea of ‘Wrong Legal Opinion’ since She is a Director of a Company [Read Order]

The Hyderabad bench of Income Tax Appellate Tribunal rejected the Assessee’s Plea of ‘wrong legal opinion’ since she is a Director of a Company.

The assessee had invested in Port Folio Management Scheme, which earned a gain of Rs.19,47,391/-. Since securities transaction tax was paid assessee was advised that no capital gain has to be paid. The AO during the assessment found that assessee didn’t offer the interest income earned from bank account and Assessee claimed deduction under Section 54F of the Income Tax Act being the entire Long Term Capital Gain.

AO re-worked out the deduction proportionately and restricted the same to Rs. 1,30,66,800/-thereby disallowing the claim to an extent of Rs. 20,41,230/-. All these are considered for levy of penalty u/s. 271(1) (c) for concealment of income.

The explanation for not offering interest income was that she was under the impression that the bank interest was exempt and the explanation of assessee was that the legal opinion given by the Counsel that there is no capital gain on the STT paid transactions, was not accepted by AO stating that she is a promoter of a company and has a battery of legal advisors and her husband also has legal knowledge.

Before the CIT (A), the same submissions were made and relied on the case law. CIT (A) did not accept them and dismissed the contentions.

Shri B. Ramakotaiah, accountant member while considering both the contentions and opinioned that penalty proceedings are not attracted on the claim made u/s. 54F and also added that Mere disallowance of claim does not attract penalty u/s. 271(1)(c) either as concealment of income or furnishing of inaccurate particulars.

The tribunal brings notice of the decision held on a case by Supreme Court in CIT Vs Reliance Petro products Limited [322 ITR 158]. Thus, the penalty u/s. 271(1)(c) on disallowance of claim partly u/s. 54F cannot be considered for levying of penalty.

Since the assessee invested in portfolio and promoter of that company, then the reason brought by counsel of assessee is not plausible in the given circumstances, the bench said.

Finally the tribunal pronounced that there is no valid reason to make exemption on interest income and thus, to the extent of penalty on short term capital gains amount and interest income.