2012 (10) TMI 801 - AT - Income Tax

Penalty under section 271(1)(c) of the Income Tax Act, 1961 - Whether penalty can be levied if Part of sale consideration has been applied for purchase of another residential house and assessee is allowed proportionate amount of deduction under section 54F when income declared was not correct - Held that - Mere addition in Income is not sufficient there must be concealment of Income to attract penalty. - Revised return can be filed by an assessee where there is omission or wrong statement or any inadvertent mistake. Udayan Mukherjee v. CIT 2005 (11) TMI 62 - CALCUTTA HIGH COURT - In the Present case under consideration a bonafide mistake has happened in the matter of deduction under section 54F or under section 54 of the Act. This is a case of bona fide misconception and belief, therefore, penalty under section 271(1)(c) is not leviable. - Further when the assessee has disclosed the transaction which is the basis for capital gains tax and though wrongly claimed exemption from the capital gains tax, that cannot be a case of Penalty.Thus, the explanation of the assessee was bonafide and under that facts and circumstances, section of 271(1)(c) is not applicable - A.O. is not justified in levying penalty of Rs. 2,78,660/- under section 271(1)(c) of the Act. Therefore, the same is cancelled. - decided in favor of assessee.

Issues Involved:
1. Penalty under section 271(1)(c) of the Income Tax Act, 1961.
2. Claim of deduction under section 54F.
3. Filing of revised return.
4. Bona fide mistake and explanation.
5. Applicability of judicial precedents.

Issue-wise Detailed Analysis:

1. Penalty under section 271(1)(c) of the Income Tax Act, 1961:
The primary issue in this case was the imposition of a penalty of Rs. 2,78,660/- under section 271(1)(c) of the Income Tax Act, 1961. The Assessing Officer (A.O.) levied this penalty on the grounds that the assessee had deliberately and knowingly filed inaccurate particulars and thereby concealed income. The A.O. argued that the assessee was aware of the exemption under section 54F and had claimed it incorrectly, which would have gone undetected if the case had not been selected for scrutiny assessment.

2. Claim of deduction under section 54F:
The assessee had sold a property and earned Long Term Capital Gain of Rs. 71,79,363/-. The assessee invested Rs. 70,00,000/- in a residential house and claimed exemption under section 54F. However, the A.O. found that the assessee was entitled to only a proportionate amount of deduction under section 54F, resulting in an excess claim of Rs. 9,10,634/-. The assessee later filed a revised return, attributing the mistake to a clerical error and not an intentional act.

3. Filing of revised return:
The assessee filed a revised return after the A.O. pointed out the excess deduction. The revised return was submitted voluntarily, according to the assessee, to correct the mistake. However, the A.O. rejected this contention, stating that the revised return was filed after detection and was barred by limitation under section 139(5) of the Act.

4. Bona fide mistake and explanation:
The assessee claimed that the mistake was due to a misunderstanding by the clerical staff and was not intentional. The assessee's explanation was considered bona fide, and it was argued that such a mistake does not amount to concealment. The assessee relied on various judicial precedents to support this contention, including the judgment in CIT v. Reliance Petroproducts (P.) Ltd. (2010, SC), which distinguished between furnishing wrong particulars and making a wrong calculation based on those particulars.

5. Applicability of judicial precedents:
The CIT(A) relied on the judgments of the Hon'ble Gujarat High Court in CIT v. Vidyagauri Natverlal and the Hon'ble Supreme Court in Union of India v. Dharamendra Textile Processors. However, the assessee argued that these cases were not applicable to the present facts. The Tribunal considered the development of law, particularly the Supreme Court's judgment in Reliance Petroproducts (P.) Ltd., which clarified that a bona fide omission cannot justify a penalty. The Tribunal also noted that the A.O. did not find the assessee's explanation to be false and that the explanation was substantiated with complete facts.

Conclusion:
The Tribunal concluded that the mistake in claiming the deduction under section 54F was a bona fide calculation error and not an act of concealment or furnishing inaccurate particulars. The explanation provided by the assessee was found to be bona fide, and the penalty under section 271(1)(c) was deemed not applicable. Consequently, the penalty of Rs. 2,78,660/- was cancelled, and the appeal of the assessee was allowed. The Tribunal did not express an opinion on whether the revised return was voluntary, as the primary ground was decided in favor of the assessee.

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