2012 (8) TMI 982 - AT - Income Tax

Summary

Issues involved:
The appeal challenges the penalty imposed under section 271(1)(c) of the Income-tax Act on the grounds of inadequate investment in Capital Gain Bonds u/s 54EC, reliance on advice of Chartered Accountant, alleged concealment of income, and the applicability of penalty for furnishing inaccurate particulars.

Issue 1: Penalty for inadequate investment in Capital Gain Bonds u/s 54EC
The appellant contested the penalty of Rs. 88,337 levied by the Assessing Officer (AO) under section 271(1)(c) of the Act due to investing less than the required amount in Capital Gain Bonds u/s 54EC. The AO found that out of the claimed Rs. 71.5 lakhs investment, only Rs. 67.15 lakhs were actually invested, leading to a restriction of the exemption amount. The appellant did not appeal this disallowance.

Issue 2: Reliance on advice of Chartered Accountant
The appellant argued that they believed, based on the advice of their Chartered Accountant, that the investment made was sufficient to claim exemption u/s 54EC. They contended that had they been properly advised, the entire Long Term Capital Gain amount would have been invested within the stipulated time frame, resulting in full exemption.

Issue 3: Alleged concealment of income
The AO initiated penalty proceedings u/s 271(1)(c) for the excess claim made by the appellant u/s 54EC, citing reasons such as claiming an unavailable exemption, delayed investment, and furnishing inaccurate particulars of income. The First Appellate Authority upheld the decision, noting the lack of explanation for the erroneous claim and the untimely investment.

Issue 4: Applicability of penalty for furnishing inaccurate particulars
During the appeal, the Authorized Representative argued that the claim under section 54EC was a mistake, investments were made albeit delayed, and all details were provided to the authorities. The appellant rectified the error by paying taxes on the delayed amount. The Tribunal opined that the penalty for furnishing inaccurate particulars was not justified, considering the bonafide mistake made by the appellant.

Conclusion:
The Appellate Tribunal, after considering the submissions, concluded that the penalty under section 271(1)(c) should not have been imposed as it was a case of a bonafide mistake. The Tribunal emphasized that disallowance or addition during assessment proceedings is not sufficient grounds for levying a penalty. Consequently, the penalty for furnishing inaccurate particulars was deleted, and the appeal filed by the appellant was allowed.