Sarita Jain Vs ACIT (Madras High Court)
Madras HC Upholds Penalty as Capital Gains Were Claimed as Exempt Despite Taxability; Penalty Sustained Because Exemption Claim on Unlisted Share Sale Was Found Intentional; Madras HC Rejects Bona Fide Mistake Defence Because Exemption Claim Was Deliberate; Penalty Confirmed Because Capital Gains Non-Disclosure Came to Light Only During Scrutiny.
The Madras High Court dismissed the appeal filed by an assessee challenging the levy of penalty under Section 271(1)(c) of the Income Tax Act for concealment of income arising from the sale of shares. The assessee had sold shares in an Indian company to a U.S.-based company for a consideration of ₹5.51 crore and had paid advance tax on the capital gains. However, while filing her return for Assessment Year 2006-07, she claimed exemption under Section 10(34) and sought a refund of ₹1.22 crore.
During scrutiny assessment, the Assessing Officer found that the shares sold were of an unlisted company and that no Securities Transaction Tax (STT) had been paid, making the exemption claim inapplicable. The gains were therefore taxed as capital gains, and penalty proceedings for concealment of income were initiated. The assessee contended that there was no concealment because the transaction had been disclosed and advance tax had been paid. She maintained that the exemption claim was made under a bona fide belief and that any error in the Chartered Accountant’s report was inadvertent.
