Making wrong claim in ITR can’t be equated with concealment of income

Case Details: Pawan Garg v. ACIT - [2022] 138 taxmann.com 471 (Chandigarh-Trib.)

Judiciary and Counsel Details

• • N.K. Saini, Vice President & Sudhanshu Srivastava, Judicial Member
  • Sudhir Sehgal, Adv. for the Appellant. 
  • Dr. Ranjit Kaur, Sr. DR for the Respondent.

Facts of the Case

The assessee was a partner in a firm engaged in the dyeing and finishing of textile yarn. During the assessment, Assessing Officer (AO) noticed that assessee had claimed long-term capital loss (LTCL) in respect of property that had been gifted by him to his son. The assessee also had long-term capital gain (LTCG) which was set off up to the amount of LTCL claimed by him.

The assessee was asked by the AO to explain why LTCL claimed by him may not be disallowed. Assessee accepted that there was a mistake due to some typographical error. Accordingly, AO disallowed LTCL, and said amount was added to the income of the assessee. AO also imposed a penalty on the assessee against said addition towards concealment of income.

On appeal, the CIT(A) upheld the order of AO. Aggrieved-assessee filed an instant appeal to the tribunal.

ITAT Held

The Tribunal held that the assessee had gifted one plot to his son and claimed LTCL in the return of income. He also had LTCG and as a result of the impugned LTCL, the LTCG came to be reduced by the amount of capital loss so wrongly claimed.

It should be noted that the amount of capital loss had been duly mentioned in the computation of income as well. Therefore, there was no concealment of any material fact by the assessee.

At best, it can be said that there was an incorrect claim or a wrong claim but there was not a false claim by any measure. There was only a mistake in the legal sense that the gift made by the assessee to the son was considered as a transfer in the computation of income and the resultant figure was shown as a capital loss.

It was also a fact on record that the assessee had accepted the same at the time of assessment proceedings. Considering the fact of the case, it can be concluded that no penalty was legally imposable on the assessee.

List of Cases Reviewed

• • Price Waterhouse Coopers (P.) Ltd. v. CIT [2012] 25 taxmann.com 400/211 Taxman 40/348 ITR 306 (SC)
  • CIT v. Reliance Petroproducts (P.) Ltd. [2010] 189 Taxman 322/322 ITR 158 (SC) (para 8.2) followed.

List of Cases Referred to

• • CIT v. Reliance Petroproducts (P.) Ltd. [2010] 189 Taxman 322/322 ITR 158 (SC) (para 8.1)
  • Price Waterhouse Coopers (P.) Ltd. v. CIT [2012] 25 taxmann.com 400/211 Taxman 40/348 ITR 306 (SC) (para 8.2).