43 Sections 10(38), 45 and 271(1)(c) – Penalty – Concealment of income – Capital gain – Exemption – Assessee claiming exemption u/s. 10(38) with a note that it reserved its right to carry forward loss – Bona fide belief of assessee that loss not required to be considered u/s. 10(38) – Penalty rightly cancelled by Tribunal

DIT
(International Taxation) vs. Nomura India Investment Fund Mother Fund.; 404 ITR
636 (Bom); Date of order : 15^th June, 2017 A. Y.: 2008-09

The
assessee earned long-term capital gain as well as long-term capital loss on
purchase and sale of shares. For the A. Y. 2008-09, while computing the total
income, it did not set off the long-term capital loss of Rs. 80.64 crores
against the long-term capital gain of Rs. 697.70 crores, which was exempted
u/s. 10(38) of the Act and in its return had put a note reserving the right to
carry forward the long-term capital loss. The Assessing Officer rejected the
claim of the assessee to carry forward the long-term capital loss and held that
it was not admissible and also levied penalty u/s. 271(1)(c) for concealment of income.

The
Tribunal cancelled the penalty.

On appeal
by the Revenue, the Bombay High Court upheld the decision of the Tribunal and
held as under:

“i)  The provisions of section 271(1)(c) could only
be invoked upon satisfaction of the conditions laid down therein. The assessee
had claimed exemption u/s. 10(38) with a note that it reserved its right to
carry forward the loss of Rs. 80.64 crores, under the bona fide belief
that u/s. 10(38) the loss was not required to be considered. It could not be
stated that the act of the assessee in giving the note was with some ulterior
intention or concealment of income or giving inaccurate particulars.

ii)   Therefore, the penalty was rightly cancelled
by the Tribunal. No question of law arose.”