Penalty Imposed U/s 271A On Wrongful Consideration Of Facts Merits To Be Deleted: Jaipur ITAT

The Bench comprising of Sandep Gosain (Judicial Member) and Dr. M. L. Meena (Accountant Member) observed that, “when the assessee has filed a return on account of short-term capital loss duly accepted by the ld. AO, then there wouldn't be any question of business activity being carried out by the assessee, meaning thereby the provisions of section 44AA of the Act would not arise in the case of the appellant assessee and no penalty u/s 271A would be initiated.” (Para 4)

As per the brief facts of the case, the assessee company has preferred the appeal challenging by the action of the CIT(A) in confirming the penalty of Rs.25000/- u/s 271A in arbitrary manner. However, there is no dispute in the fact on record that the AO has accepted the income disclosed in the return of income as short term capital loss of Rs. (-) 52,476/- after satisfying itself on due verification of the documentary evidence.

The Bench noted that the CIT(A) has observed that the penalty has not been imposed for violation of section 44AA on account of income being more than 1,50,000/- but the appellant has violated the provisions of section 44AA on account of non-keeping of books of account.

The Bench further noted that though the turnover exceeded the limit given u/s 44AA, ignoring the finding of the AO as regarding the acceptance of the return of income under the short term capital loss of Rs.(-) 52,476/- declared with the supporting documentary evidences as stands verified during the assessment proceedings.

The Bench observed that the CIT(A) has not addressed the fact that the assessee was not engaged in the business activity of share trading rather he was an investor in the shares and incurred a capital loss.

The Bench further observed that the CIT(A) has merely mentioned that the appellant had submitted statements of share trading toward appellate proceedings where total turnover has been worked out as Rs.22,81,746/-.

The Bench stated that however, the statement shares reveals that there is not frequent trading of shares in the account of assessee to presume in the nature of business amounting to purchase of shares worth of Rs. 1,000,1,798/-.

Therefore, on finding that the CIT(A) decision is perverse to the facts on record, the ITAT allowed the assessee's appeal.

Counsel for Appellant/Taxpayer: Arun Trivedi

Counsel for Respondent/Department: Monisha Chaudhary

Case Title: Manisha Gahlot verses ACIT

Case Number: I.T.A. No. 683/JPR/2023

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