Case Law Details
Smt. Gaytri Sharma Vs ITO (ITAT Jaipur)
Conclusion: Penalty under section 271(1)(c) could not be levied as assessee had proved that there was a reasonable cause for making the wrong claim under section 54 instead of section 54F.
Held: Assessee has disclosed sale of building transaction in the return of income and then claimed the deduction U/s 54 as assessee also purchased a new residential house. AO noted that the capital asset sold by assessee was a shop allotted by JDA and therefore, the deduction U/s 54 was not available to assessee. Assessee revised its mistake of claiming deduction U/s 54 instead of section 54F. AO had allowed the claim of deduction U/s 54F. Due to the difference of computation of the deduction under two provisions i.e. 54 & 54F a lesser amount of claim of deduction which was allowed U/s 54F instead of Section 54 and consequently, AO made an addition. There was a bonafide and inadvertent mistake and omission on the part of assessee to claim deduction U/s 54 instead of section 54F. Therefore, assessee had explained the reasons for making a wrong claim and the facts explained by assessee were duly established from the record and found to be true then even if the addition was made by AO due to the claim made under wrong provisions of the Act. It would not amount to furnishing inaccurate particulars of income or concealment of particulars of income. Accordingly, once the assessee had proved that there was a reasonable cause for making the claim of section 54 instead of section 54F then the penalty U/s 271(1)(c) could not be imposed.
FULL TEXT OF THE ITAT JUDGMENT
This appeal by the assessee is directed against the order dated 24.11.2017 of ld. CIT (A), Jaipur arising from penalty order passed U/s 271(1)(c) of the I. T. Act for A.Y. 2014-15. The assessee has raised the following grounds:-
“1. Whether in the facts and circumstances of the case and in law, is it justified to levy penalty of Rs. 1,38,770/-, whereby all the primary facts necessary for claiming deduction of capital gain tax have been disclosed before the Learned authority and no fact had been concealed by the assessee.
2. Whether in the facts and circumstances of the case and in law, is it justified by the learned authority to levy penalty, whereby the property being used for residential purpose only.
3. Whether in the facts and circumstances of the case and in law, is it justified by the learned authority to levy penalty, even i f assessee is not required to maintained books of accounts as per u/s 44AA read with rule 6F of Income Tax Act, 1961.
4. Whether in the facts and circumstances of the case and in law, is it justified by the learned authority to levy penalty, whereby mistake in claiming of deduction under wrong provision of law was bona-fide mistake. ”
2. The assessee is an individual and filed its return of income on 29.7.2014 declaring total income at nil. During the course of scrutiny assessment proceedings, the AO noted that the assessee has shown income from long term capital gain at nil after claiming deduction U/s 54 of the Act of Rs. 26,30,950/-. On examination of the sale deed the AO noted that the assessee has sold a shop no. A-66, Subhash Nagar Shopping Center, Jaipur vide sale deed dated 21.05.2013 for a consideration of Rs. 44,62,330/-. Thus, the AO was of the view that the assessee is not entitled for the deduction U/s 54 of the Act and accordingly, issued a show cause notice to the assessee. In response, the assessee admitted that the property sold by the assessee is a shop and consequently the deduction U/s 54F of the Act has to be allowed instead of section 54 of the Act. The AO has allowed the deduction U/s 54F of the Act in respect of the investment made in the new house property and consequently an addition of Rs. 8,73,642/- in the long term capital gain was made. The AO then initiated the penalty proceedings U/s 271(1)(c) of the Act and levied the penalty of Rs. 1,38,770/- being 100% of the tax sought to be evaded. The assessee challenged the action of the AO before the ld. CIT(A) but could not succeed.
3. Before us, the ld. AR of the assessee has submitted that the assessee purchased a property from Jaipur Development Authority (JDA) in auction in the year 1981 and thereafter the assessee started living in the said house till the said same was transferred during the year under consideration. Since, the assessee was using property as her residential house therefore, the assessee while filing its return of income through her tax consultant has claimed deduction U/s 54 instead of section 54F of the Act. The ld. AR has referred to the copy of the family ration card, Voter ID Card, Electricity Bill, gas connection receipts and saving bank account in support of the claim that the assessee was using the property as a residential house prior to transfer during the year under consideration. Thus, the ld. AR has submitted that merely because the assessee has made a claim under wrong provisions instead of under correct provisions it will not amount to furnishing of inaccurate particulars of income or concealment of particulars of income attracting penalty provisions U/s 271(1)(c) of the Act. He has further submitted that once the AO has pointed out that the assessee is not eligible for deduction U/s 54 of the Act the assessee has filed a revised computation and made the claim deduction U/s 54F of the Act. Therefore, this is a case of bana-fide mistake on the part of the assessee and his tax consultant. The Ld. AR further submitted that the assessee is an illiterate lady and was fully independent on the tax consultant while filing the return of income. The assessee has duly disclosed the transaction of sale of property in question in the return of income and therefore, it would not amount to furnishing inaccurate particulars of income or concealment of particulars of income merely because the deduction claimed by the assessee is under wrong provisions of Section 54 instead of section 54F of the Act. In support his contention, he has relied upon the decision of Hon’ble Supreme Court in case of CIT vs. Reliance Petroproducts Pvt. Ltd. 322 ITR 158 as well as decision of Hon’ble jurisdictional High Court in case of Chandrapal Bagga vs. ITAT & Another 261 ITR 67. Hence, the ld. AR has submitted that once the assessee has brought the relevant facts on record and explained the omission and mistake in the claim of deduction of u/s 54 instead of Section 54F of the Act then, the assessee is covered by the provisions of Section 273B of the Act.
4. On the other hand, the ld. DR has relied upon the orders of the authorities below and submitted that the assessee has claimed the deduction U/s 54 despite the fact that the property sold by the assessee is a shop and not a residential house and consequently the assessee has deliberately furnished inaccurate particulars of income or concealment of particulars of income. Only when the Assessing Officer has issued a show cause notice the assessee has accepted the wrong claim and consequently the AO has made an addition after allowing the deduction U/s 54F of the Act.
5. We have considered the rival submissions as well as relevant material on record. The assessee has disclosed the sale transaction in the return of income and shown as sale of building and then claimed the deduction U/s 54F of the Act as the assessee also purchased a new residential house. The AO noted that the capital asset sold by the assessee was a shop allotted by JDA and therefore, the deduction U/s 54 is not available to the assessee. The assessee revised its mistake of claiming deduction U/s 54 instead of section 54F of the Act. Accordingly, the assessee revised its computation and made a claim of deduction U/s 54F of the Act. The Assessing Officer has allowed the claim of deduction U/s 54F of the Act. It is pertinent to note that the AO has not disputed the primary facts disclosed by the assessee in the return of income being sale consideration, the cost of acquisition and computation of capital gain. The addition was made by the AO due to the reasons that the deduction of U/s 54 of the Act is available to the extent of the investment of the capital gain whereas the deduction U/s 54F of the Act is available in the proportion of investment of the net sale consideration in the purchase of new residential house. Therefore, due to the difference of computation of the deduction under two provisions i.e. 54 & 54F of the Act a lesser amount of claim of deduction which was allowed U/s 54F instead of Section 54 of the Act and consequently, the AO made an addition of Rs. 8,73,642. We find that the assessee has also disclosed the property as a building though it was not claimed as residential house. The assessee also produced before the Assessing Officer the sale deed from which the AO found that the property sold by the assessee is a shop and therefore, the deduction U/s 54 of the Act is not available but the deduction U/s 54F was finally allowed by the AO. Therefore, this is a clear case of the claim made under wrong provisions of Section 54 instead of U/s 54F of the Act. Further, the assessee has also produced the copy of the family ration card, Voter ID Card, Electricity Bill, gas connection receipts and saving bank account to establish the fact that the assessee was using the property in question for their residential purpose. These facts clearly make out a case that it was a bana-fide and inadvertent mistake and omission on the part of the assessee to claim deduction U/s 54 instead of section 54F of the Act. Therefore, we find that once, the assessee has explained the reasons for making a wrong claim and the facts explained by the assessee are duly established from the record and found to be true then even if the addition was made by the AO due to the claim made under wrong provisions of the Act. It will not amount to furnishing inaccurate particulars of income or concealment of particulars of income. Accordingly, in view of the provisions of Section 237B of the Act once the assessee has proved that there was a reasonable cause for making the claim of section 54 instead of section 54F of the Act then the penalty U/s 271(1)(c) of the Act cannot be imposed. Accordingly we delete the penalty levied by the AO U/s 271(1)(c) of the I. T. Act.
In the result, the appeal of the assessee is allowed.
