Law & Society

Advent Computer Services Ltd vs Addl. CIT

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During the course of assessment proceedings, the Assessing Officer noticed that assessee’s investments have come down from 25 lakhs as on 31.03.2006 to Nil as on 31.03.2007, but the assessee has not admitted any capital gains on transfer of investments, therefore called upon the assessee to explain. In response, the assessee stated that it has transferred its investments to Mr. Rehman, Founder / Director of M/s. iTheories Business Factory India Pvt. Ltd., to settle its outstanding liability. The Assessing Officer was of the opinion that the assessee ought to have computed capital gain from transfer of shares, and hence, computed long term capital gain after reducing indexed cost of acquisition of sale. Subsequently, penalty proceedings u/s.271(1)(c) was initiated and called upon the assessee to explain as to why penalty shall not be levied for concealment of income.
One can infer that by inadvertent mistake and human error, the capital gain derived from transfer of equity shares has not been reported in the return of income filed for the relevant year appears to be bonafide. In the instant case, even after computation of long term capital gain from transfer of equity shares the assessed income for the impugned year results into net loss. Chennai ITAT is of the considered view that there is no deliberate attempt from the assessee to conceal particulars of income or evade payment of taxes. Hence, Assessing Officer  was directed to delete the penalty levied u/s.271(1)(c). In the result, the appeal filed by the assessee is allowed.

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