Smt. Suma Narsimha Rao Vs DCIT (ITAT Bangalore)
ITAT Bangalore: Mere Wrong Claim u/s 54 Does Not Attract Penalty u/s 271(1)(c)
The Bangalore ITAT deleted penalty levied under Section 271(1)(c) where the assessee, a non-resident, had claimed deduction under Section 54 on reinvestment of capital gains. Although the claim was disallowed because the sale deed was executed beyond the prescribed time, the Tribunal held that substantial investment was made within the stipulated period, and all facts were fully disclosed in the return.
The Tribunal emphasized that the issue was debatable and arguable, particularly since payments for the new property were made in time and only registration was delayed. Relying on the Supreme Court ruling in Reliance Petroproducts, it held that mere rejection of a claim does not amount to concealment or furnishing inaccurate particulars.
Since there was no suppression of facts and full disclosure was made, the penalty was held unsustainable. Accordingly, the Tribunal deleted the penalty, reinforcing that penalty cannot be levied for a bona fide but legally untenable claim
FULL TEXT OF THE ORDER OF ITAT BANGALORE
This is an appeal filed by the assessee challenging the order of the Ld.CIT(A), Bengaluru – 12 dated 11/11/2024 in respect of the A.Y. 2015-16 and raised the following grounds:
| GROUNDS OF APPEAL | Tax Effect relating to each Ground of appeal | |
|---|---|---|
| 1. | On the facts and in the circumstances of the case the penalty under sec 271(1)(c) of the Act is opposed to law and liable to be cancelled. | General |
| 2. | The Id. CIT(A) ought to have appreciated the fact that the Appellant has paid the full amount during the year in residential property only registration was done after the Covid-19 period. Thus, the claim of the Appellant cannot be denied. The Id. CIT(A) further ought to have’ appreciated that the Appellant has not concealed any income nor furnished any inaccurate particular, thus the penalty confirmed has to be deleted. | |
| 2. | The learned CIT(A) ought to have appreciated that the levy of penalty under Section 271(1)(c) for the relevant assessment year is opposed to law and to the principles of natural justice and accordingly he ought not to have confirmed the levy of penalty. | |
| 3. | The learned CIT(A) ought to have appreciated that there being no concealment or furnishing of inaccurate particulars of income, the levy of penalty under Section 271(1)(c) was unwarranted. |
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| 4. | The learned CIT(A) ought to have appreciated that the assessing authority having failed to indicate to the proceedings initiated either for concealment of income or furnishing of inaccurate particulars in the show cause notice, the penalty proceedings initiated were bad in law and consequently the penalty levied is also bad in law and liable to be deleted as held by the jurisdictional High Court and accordingly, he ought to have cancelled the penalty levied. |
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| 5. | The learned CIT(A) ought to have appreciated that the assessing officer should have accepted the various explanation given by the Appellant in the course of the assessment proceedings which would justify the claim of the Appellant and accordingly he ought to have refrained from holding that there was justifiable penalty to be levied under Section 271(1)(c) of the Act. | |
| 6. | The learned CIT(A) ought to have appreciated that the Appellant had disclosed all the materials and given explanation towards justification of the claim and accordingly there was no reason to confirm the levy of penalty under Section 271(1)(c) of the Act. |
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| 7. | Without prejudice, the levy of penalty as confirmed by the learned CIT(A) is arbitrary, excessive and ought to be deleted in full | |
| 8. | For these and such other grounds that may be urged at the time of hearing the Appellant prays that the appeal may be allowed. | General |
| TOTAL TAX EFFECT | Rs. 22,24,063/- | |
2. The brief facts of the case are that the assessee is a non-resident and in her return of income she claimed deduction u/s. 54 of the Act. Subsequently, notice u/s. 148A(b) was issued for which the assessee filed her reply by stating that she had sold her property on 25/03/2015 and through the power of attorney, she proposed to purchase an agricultural property but the same was not materialised. In the meanwhile, the assessee submitted that she decided to buy another property for which she had made the payments on 15/04/2015 and 21/04/2015 for a total sale consideration of Rs. 87,74,565/- whereas executed the sale deed on 23/11/2020. The assessee submitted that therefore within the period prescribed under the provisions of the Act, she had made substantial payments for the purchase of property which was evidenced from the sale deed and therefore even though the sale deed was made on 23/11/2020, it could be treated as sufficient compliance to the provisions of the Act and deduction u/s. 54 should be granted. The AO not accepted the said claim and deduction u/s54 was denied and on that basis, the assessment was made. The assessee being a non-resident, was advised to accept the quantum assessment and also paid the tax dues. Subsequently, the AO had proposed to impose penalty u/s. 271(1)(c) of the Act on the ground that the assessee had concealed the particulars of income. In spite of the reply to the said penalty notice, the AO had confirmed the penalty.
