1.  ITO Vs. M/s Indian & Overseas Trading Co., I.T.A. No. 195/LKW/2011, Date of Order: 25.08.2014, ITAT - Lucknow

Penalty u/s 271(1)(c) of the Income–tax Act, 1961 should not be levied on the amount which was voluntary surrender by the assessee during the course of survey.

Assessee, a partnership firm engaged in business of manufacturing trading of bristles and brushes filed its return of income showing nil income for A.Y. 2002-03.  A survey was conducted at the premises of the assessee and found that assessee create some spurious creditor. During the course of survey assessee surrender certain amounts which included the amount standing as spurious creditor. Thereafter assessment was completed and AO initiate penalty proceeding on the surrender amount in respect of creditor u/s 271(1)(c) of the Act. Assessee object the same on the basis that he made a voluntary surrender during the course of survey proceeding to buy peace and filed return accordingly. Therefore penalty u/s 271(1)(c) of the Act should not be levied on the surrender amount. However AO not convinced with the above explanation and initiate penalty for the reason that assessee has filed appeal against the addition made on account of creditor which means assessee did not surrender any amount voluntarily.

Hon’ble ITAT held that surrender was made during the course of survey by the assessee. Nothing has been brought out on record by the AO that the surrender was made when the assessee was cornered by the AO. Though the AO has mentioned in the order that the additions, on which penalty was levied, were challenged before the ld. CIT(A), but the facts are otherwise. The assessee has made voluntary surrender on account of sundry creditors.
Appeal of revenue is dismissed.

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2.  ACIT Vs. Sh. Amarjeet Singh Sethi, I.T.A. No. 3123/Del /2013, Date of Order: 10.10.2014, ITAT - Delhi

A.O. cannot disallow the loss on account of share trading merely on the facts that assessee did not mention the same business activity in Form 3CD.

Assessee an individual, engaged in the business of providing services in the field of Aviation Industries, retail trading of Fabrics and dealing in sale and purchase of shares. During the A.Y. assessee suffered loss on account of share trading. Assessee treats the same as business loss and debited to P&L Account. AO during scrutiny assessment notice that assessee did not mention about share trading business in Form 3CD therefore loss on account of share trading business cannot be allowed as business loss and same is disallowed.

Hon’ble ITAT held that assessee was also engaged in share trading business in A.Y. 2007-08 and disclosed profit on same as business income and department accepted the same consequently department cannot take an inconsistent stand in the current assessment year for identical item of income. Mere non mentioning of all business carried on by the assessee in Form 3CD may not lead the A.O., forming an opinion that the dealing in shares was not amounting to business activity. If this omission of non mentioning of business activity in tax audit report is to be taken as a grave, then the A.O. cannot have contrary view by holding “loss from shares” as non business income, while continuing to tax income from “trading fabric’ as business income when both the activities were not mentioned in Form 3CD report.
In the result, the appeal of the Revenue is dismissed.

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