Conscious claim of ineligible tax exemption constitutes intentional concealment of income attracting Section 271(1)(c) penalty.

The appellant/assessee sold shares in M/s. Vision Health Services (P) Ltd. to a US-based company for Rs. 5,51,29,555/- and initially paid advance tax on the resulting capital gains

However, while filing her return for AY 2006-2007, she claimed an exemption under Section 10(34) of the Income Tax Act and sought a refund of Rs. 1,22,48,928/-

During scrutiny, the Assessing Officer (AO) denied the exemption because the company was unlisted and no Security Transaction Tax (STT) was paid, subsequently initiating penalty proceedings under Section 271(1)(c) for concealment of income

The assessee argued the claim was a "bonafide opinion" based on deferred payment terms and an Advance Ruling in the case of a co-shareholder, Anurag Jain

The CIT(Appeals) deleted the penalty, but the Income Tax Appellate Tribunal (ITAT) reversed this and restored the penalty, leading to the present appeal

1. Whether the Tribunal was right in restoring the penalty under Section 271(1)(c) while ignoring the explanation offered by the assessee regarding the disclosure of the transaction

2. Whether the penalty was justified when the claim was made under a bonafide belief without intent to conceal income or furnish inaccurate particulars

3. Whether a typographical error in the Chartered Accountant’s computation of income disclosing capital gains as exempt attracts penalty under Section 271(1)(c)

Section 271(1)(c) of the Income Tax Act, 1961, which provides for penalties for the concealment of income or furnishing of inaccurate particulars

While inadvertent or unintentional omissions do not attract penalty, conscious and intentional false claims do

Precedent of CIT v. Reliance Petroproducts (2010) regarding the distinction between unsustainable claims and concealment

Section 10 exemptions for share sales require the company to be listed and STT to be paid

The court examined the "intention" of the assessee to determine the validity of the penalty

The court observed that the appellant was fully aware of the tax liability, as evidenced by her initial payment of advance tax on the capital gains

The court found that the subsequent claim for exemption and refund in the return was a conscious attempt to avoid tax, which only came to light during scrutiny

The court rejected the reliance on the Anurag Jain Advance Ruling, noting that the ruling was based on a specific employer-employee relationship and non-compete clauses not present in the appellant’s case

The court dismissed the "typographical error" defense, characterizing the claim as an intentional and conscious attempt to evade tax rather than a clerical mistake by the Chartered Accountant

The court held that the claim for exemption was not bonafide and constituted an intentional suppression of taxable income and the furnishing of inaccurate particulars

The restoration of the penalty under Section 271(1)(c) was justified, and the Tax Case Appeal was dismissed