Case Law Details
Sunil Kumar Somani Vs ACIT (ITAT Kolkata)
The ITAT Kolkata reviewed the case of Sunil Kumar Somani vs. ACIT, where the Assessing Officer (AO) disallowed a short-term capital loss (STCL) adjustment of ₹5,53,954 claimed by the assessee for AY 2015-16. The AO found that the loss had already been adjusted in the previous assessment year (2014-15). Upon being informed, the assessee admitted the error and argued that it was inadvertent, not intentional. Despite this, the AO imposed a penalty under Section 271(1)(c) of the Income Tax Act, alleging that the claim was unjustified. The penalty was later upheld by the Commissioner of Income Tax (Appeals) [CIT(A)].
On appeal, the Tribunal examined the evidence and found that the AO’s discovery of the excessive loss claim was based solely on records from the preceding year. There was no independent evidence suggesting an intentional attempt to suppress taxable income. While the Tribunal upheld the AO’s disallowance of the STCL adjustment and the associated tax and interest, it ruled that the penalty lacked justification. The Tribunal emphasized that mistakes arising from oversight, without evidence of malintent, do not warrant penalties under Section 271(1)(c). Accordingly, the penalty was deleted, and the appeal was allowed in favor of the assessee.
This case underscores the distinction between genuine errors and intentional non-compliance in tax matters. While taxpayers are held accountable for accurate claims, penalties should not apply in cases where errors are inadvertent and do not indicate fraudulent intent. The ruling highlights the importance of proportionality in enforcement actions under the Income Tax Act.
FULL TEXT OF THE ORDER OF ITAT KOLKATA
In this case, the Assessing Officer (hereinafter referred to as ld. ‘AO’) had disallowed an adjustment of brought forward short term capital loss amounting to Rs. 5,53,954/- as the same had been already adjusted against the income of the immediately previous year (2014-15). It is a matter of record that on being informed of this wrong claim, the assessee immediately accepted his mistake and pleaded that it was done out of inadvertence and not because of any mala fide intention. However, the ld. AO held that this mistake was discovered by him from the legacy assessment records available with him and hence, he disbelieved the claim of the appellant that he should not be visited with any penalty considering that the action was due to an oversight.
1.1. Since the ld. AO had proceeded to levy the penalty u/s 271(1)(c) of the Act Income Tax Act, 1961 (in short the ‘Act’), the appellant approached the ld. CIT(A) who, however, upheld the action of the ld. AO.
1.2. Aggrieved with the action of ld. CIT(A), the appellant is before us through the following grounds of appeal:
“1 For that Ld CIT(A) erred in upholding the penalty of 171,172/- imposed u/s 271(1)(c) for wrong claiming of set off of brought forward capital loss.
2 For that Ld CIT(A) erred in sustaining the finding of Ld AO that claim of
set off of brought forward loss was intentional and not an error or mistake.
For that Ld CIT(A) ought to have deleted the penalty levied u/s 271(1)(c) of the Act by appreciating the fact that status of brought forward loss was already available with AO.”
2. Since no one had appeared on behalf of the appellant, the ld. D/R assisted us in perusing the impugned order and the order of the ld. AO. The ld. D/R argued that even though the set off of losses could have been mistakenly done, then also the assessee deserved the penalty that was levied on him since it was detected by the ld. AO only.
2.1. We have considered the document before us and the averments of the ld. D/R. It is clear that the information regarding excessive claim of brought forward losses was not gathered from any independent source which could have led us to believe that there was a real intention to hide the facts for suppressing the quantum of the taxable income. It is clear that the excessive claim of losses was detected from the material available with the ld. AO in the shape of previous year’s return of income and computation of income thereon. Accordingly, it is felt that while the ld. AO has justifiably disallowed the excessive loss claimed and levied extra tax and interest on the assessee, but a penalty u/s 271(1)(c) of the Act is not justified considering the totality of facts and circumstances. The penalty levied is hereby deleted.
3. In the result, the appeal filed by the assessee is allowed.
Order pronounced in the open Court on 18th November, 2024.
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