Mis-Declaration of Capital Loss as Business Loss does not lead to Concealments of Income, Penalty u/s 271(1)(c) not sustainable: ITAT [Read Order]

The Ahmedabad Bench of Income Tax Appellate Tribunal (ITAT) consisting of Shri Pramod M Jagtap, vice president and Ms Madhumita Roy, Judicial member has held that misdeclaration of capital loss as business loss does not lead to concealments of income and penalty u/s 271(1)(c) was not sustainable.

Shri S. N. Soparkar appeared on behalf of the assessee and Shri R. R. Makwana appeared on behalf of the revenue.

The AO invoked penalty u/s 271(1)(c) for furnishing inaccurate particulars of income leading to concealment of income to the tune of Rs. 2,56,42,534/-.The appellant claimed loss on sale of Plant and Machinery at Rs. 2,39,54,905/- in the Profit & Loss Account although block of Plant and Machinery was existing. The appellant submitted that he made efforts sought to justify that no deliberate mistake was committed and neither any inaccurate particulars of income were furnished before the authorities.

The AO opinioned that the machines have been sold at their WDV price and there should not be any loss as per Section 50A of the Act and the block of assets does not cease to exist on the balance sheet date.The expenses debited in the Profit & Loss Account were disallowed and added back to the total income of the assessee.

It was observed thata bonafide mistake was on the part of the assessee showing the loss in the sale of assets as a business loss but there was no deliberate attempt on the part of the assessee to furnish inaccurate particulars of income which could lead to the imposition of penalty under Section 271(1)(c) of the Act. 

The Tribunal observed that instead of treating a loss as a capital loss the assessee has treated it as a business loss which cannot be said as not disclosed all the material to the computation of income.  The Tribunal did not find a minimum element of concealment of income by the assesseeand quashed the penalty. The assessee’s appeal was allowed.

To Read the full text of the Order CLICK HERE

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