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2.1 As the Ld.CIT(A) dismissed the assessee's appeal applying the provisions of section 294(4)(a), the Assessing Officer passed the penalty order levying penalty of Rs.1,57,82,879/-. The operative part of the penalty order in which the Assessing Officer has given the reasons are as under :

"5. Before levying the penalty u/s.271(l)(c), Assessing Office has to arrive at a conclusion that there is a concealment of income or that there is a furnishing of inaccurate particulars of income or that case of assessee is covered by deeming fiction covered by one of the explanations appended to u/s.271(l)(c). In this context, the decision of Hon'ble Supreme Court in the case of Union of India vs. Dharmendra Textile Processors (306 ITR 277) is very much relevant. In the said decision, their lordships have held that even in absence of 'mens-rea', penalty can be imposed. Therefore, in the case of assessee, controversy of proving that mens rea has been established does not rest with department. Their lordships observed that penalty u/s.271(l)(c) is a civil liability in contra-distinction with prosecution u/s.276C which is a criminal liability. A plain reading of the above judgment shows that only impact of civil liability is that mens rea or intention of the assessee need not be proved and Apex Court further observed 'willful concealment is not an essential ingredient for attracting civil liability'.

6.3 The ITAT, "A" Bench, Pune in the case of Kanbbay Software India (P) Ltd vs. DCIT vide its order dated 28th April , 2009 TTJ (Pune) 721 was of the opinion that the law as on today rests on the Supreme Court judgement in the case of Dharmendra Textile Processors and penalty u/s.271(1)(c) will be leviable since it is not necessary for tax authorities to establish 'mens-rea' of the assessee. In the said decision, it also referred what is meant by furnishing of inaccurate particulars of income which has been reproduced herein above. It further went on to elaborate that furnishing inaccurate particulars of income in its natural sense are to be viewed with the opening words employed in the deeming fiction. These read "where in respect of any facts, material to the computation of total income of any person under this Act. In the present case, there is no dispute about the assessed income, however as discussed in detail, the classification of share transactions under the head capital gain do not fall strictly under that head. In the assessment proceedings, the AO concluded that the share transactions were entered with an intention to earn profit. The intention of earning the dividend which is main criteria for investment as an capital asset is missing in the case of assessee, hence the classification made by assessee as capital gain is untenable, hence rejected. Further as described above, the CIT(A) has upheld the treatment given by A.O. Therefore, I am of considered view that the facts of the case warrant levy of penalty u/s.271(1)(c).

3. The assessee challenged the penalty order before the Ld.CIT(A) and Ld.CIT(A) deleted the entire penalty. The operative part of the finding of the Ld.CIT(A) is as under :

"4.3. I have carefully considered the facts of the case and the law as are apparent from the record. It is apparent from the materials available on record that the penalty u/s 271(1)(c) has been levied by the Assessing Officer by holding that the appellant filed inaccurate particulars of income in respect of claim made for assessment of income earned on sale of shares, claimed to be held as investment under the head 'Capital Gains', whereas he was fully aware that the activity is of the nature of business. As per the Assessing Officer, making a claim which the appellant knew is not allowable in law, the appellant has to be held that it has filed inaccurate particulars of income. The appellant on the other hand has claimed that the Assessing Officer has erred in coming to this conclusion. According to the appellant, the claim of the appellant was as per law and in the facts of this case the penalty cannot be levied only because the AO had a different view on this issue. It was also stated that the quantum appeal was dismissed on technical reasons and therefore it cannot be said that the view of the AO has been approved by the Ld. CIT(A) while dismissing the quantum appeal. Therefore, for the decisions quoted supra, the appellant has claimed that penalty cannot be levied u/s 271(1)(c) of the IT. Act. I have carefully considered the materials available on record. From the I perusal of the assessment order, placed on record, it is evident that the appellant has claimed the income earned on sale of shares of Rs.6,27,97,405/- under the head 'Capital Gains' as STCG and LTCG. However, the AO after considering the frequency, quantum and regularity etc. of the transactions concluded that the aforesaid income is of the nature of business. The appeal filed by the appellant was dismissed by the Ld. CIT(A) for violation of sec. 249(4). Therefore the claim of the appellant that AO's finding has not been approved is correct. On careful Consideration of the facts relating to taxation of share transactions under the head 'business' as against the claim of the appellant of its assessment under the head 'Capital Gain', it is apparent that the issue is quite subjective. The AO has not brought on record any fact or evidence which could show that the appellant has concealed the income or has filed inaccurate particulars of income. The particulars of income filed by the appellant has been accepted to be correct in the assessment order as well as in the penalty order. The difference of opinion lies only in respect of head of income under which share transaction is required to be assessed. Therefore, it is apparent that the penalty is not leviable under the main provisions of the sec.271(1)(c) of the IT. Act. Even if Explanation-1 is examined, it can be noted that the appellant has given the explanation in respect of the claim for assessment of share transaction under the head 'Capital Gains'. Therefore, it cannot be said that the appellant had no explanation for making this claim. Furthermore, the claim made also cannot be said to be false or unsubstantiated in the facts of this case. The regularity of transactions, the frequency, etc. are parameters which on overall consideration can lead to a conclusion whether it would be more appropriate to assess the income arising out of share transactions under the head 'business' or 'capital gains'. There are examples available which shows that the view has been changed at different stages of appeal. In such circumstances, it is difficult to hold that the penalty can be levied in this case u/s 271(1)(c) of the IT. Act. The AO has placed reliance on the judgment of Dharmendra Textile Processors 306 ITR 277 and Kanbay Software India Pvt. Ltd. vs. DCIT, 2009 TTJ Pune 721 etc. On careful consideration, it is noted that the AO has incorrectly applied these laws. In fact the decision of Dharmendra Textile Processors can be seen to have been further explained by the Hon'ble Supreme Court on such issues in the case of Reliance Petro Products Ltd. The decision of Kanbay Software India Pvt. Ltd., is in fact in favour of the assessee. In the facts of this case it can be seen that the appellant is correct in claiming that the issue is debatable and therefore, for making such a claim, it cannot be held that inaccurate particulars have been filed. I have carefully examined the facts and found that the claim has been clearly made and all the .material facts were available on record before the Assessing Officer and only "/because the claim is debatable, it is not correct to hold that inaccurate particulars have been filed. The decision of the Supreme Court given in the case of Reliance Petro Products Ltd. 322 ITR 128 (SC) and CIT Vs. Kanbay Software India Pvt. Ltd., relied upon by the appellant are directly applicable and are in favour of the assessee. For the aforesaid reasons, Grounds No. 1 to 2 are allowed."