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Issues Involved: The judgment involves the consideration of the penalty levied under section 271(1)(c) of the Income Tax Act for the assessment year 1997-98.
Consideration of Exemption u/s 54F: The assessee claimed exemption u/s 54F for investment made in a residential flat jointly with the assessee's husband. The AO disallowed the claim on the grounds that the assessee already owned a residential house, making the exemption unavailable. The issue was decided against the assessee in further appeals. The penalty proceedings were initiated based on this disallowance, leading to a penalty being levied by the AO. The assessee argued that the disallowance did not warrant a penalty as all material facts were disclosed, and there was no concealment or furnishing of inaccurate particulars of income. The AR contended that the claim was made in good faith, citing a similar case decided in favor of the assessee's sister. The Tribunal found that the explanation provided by the assessee was bona fide, supported by relevant case law, and directed the AO to delete the penalty. Justification for Penalty: The DR argued that despite knowing the ineligibility for exemption u/s 54F due to owning a residential house, the assessee made a wrong claim, amounting to furnishing inaccurate particulars of income. The DR emphasized that ignorance of the law could not be a valid defense. The lower authorities supported the imposition of the penalty based on the incorrect claim made by the assessee. Tribunal's Decision and Legal Precedent: The Tribunal considered the contentions of both parties and reviewed the relevant records. It noted that the assessee had disclosed ownership of a share in the residential property, indicating no concealment or inaccurate particulars regarding this fact. Referring to a Supreme Court decision, the Tribunal highlighted that a mere unsustainable claim does not constitute furnishing inaccurate particulars of income. Citing further legal precedents, the Tribunal concluded that since the information provided by the assessee was not found to be incorrect or inaccurate, the penalty was not justified. Following the Supreme Court's decision and considering the findings in the assessee's sister's case, the Tribunal allowed the appeal and directed the AO to delete the penalty. In conclusion, the Appellate Tribunal ITAT Mumbai ruled in favor of the assessee, directing the deletion of the penalty imposed under section 271(1)(c) for the assessment year 1997-98, based on the considerations related to the exemption claim u/s 54F and the absence of inaccurate particulars in the assessee's disclosure.
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