2014 (4) TMI 857 - HC - Income Tax

Penalty u/s 271(1)(c) of the Act LTCG Non-furnishing of information Denial of exemption u/s 54F of the Act - Held that - The AO quoted wrong provision of law viz., Section 54 when, the exemption was claimed u/s 54F of the Act - The assessee had not deposited the long term capital gain in the capital gain account, and he had deposited the amount in his savings account with Vijaya Bank - he paid Rs.26,70,000/- to the owner of the property from the said account - the AO ought to have exercised the discretionary powers, while considering to impose penalty u/s 271(1)(c) - the assessee in response to the notice u/s 148 of the Act had paid LTCG tax and interest - the AO ought not to have imposed any penalty in exercise of the discretion vested in him Decided in favuor of Assessee.

Summary

Issues:
1. Dismissal of ITA No.836/2006 by the Income Tax Appellate Tribunal regarding Long Term Capital Gain Tax (LTCG) and exemption under Section 54-F of the Income Tax Act, 1961.
2. Imposition of penalty under Section 271(1)(c) of the Act based on non-compliance with conditions and inaccurate particulars.

Issue 1: Dismissal of ITA No.836/2006
The appellant-assessee's appeal against the order of the Assessing Officer, upholding the LTCG tax and denying exemption under Section 54-F, was dismissed by the Income Tax Appellate Tribunal. The Tribunal observed that the appellant had not complied with the conditions laid down by Section 54(2) by failing to deposit the LTCG in a specified account before filing the return of income. Additionally, the appellant did not provide information regarding a court matter-litigation against the purchase of a new property. The Tribunal confirmed the findings of the Assessing Officer and the first Appellate Authority, leading to the dismissal of the appeal.

Issue 2: Imposition of Penalty under Section 271(1)(c)
The Assessing Officer initiated penalty proceedings against the assessee for inaccurate particulars and non-compliance with Section 54F. The assessee argued that he had paid the LTCG tax promptly upon notice under Section 148 of the Act and had cooperated with the department. The High Court noted that the Assessing Officer incorrectly referred to Section 54 instead of Section 54F. The assessee had paid a significant amount towards the property purchase but had not deposited the LTCG in the specified account. However, considering the circumstances and the payment made to the property owner, the Court held that the Assessing Officer should have exercised discretion before imposing the penalty. The Court set aside the penalty order under Section 271(1)(c) due to the overall facts and the payment made by the assessee. In a separate appeal, the denial of exemption under Section 54F was confirmed as the appellant did not press the appeal on merits.

This judgment highlights the importance of compliance with specific provisions of the Income Tax Act, particularly concerning capital gains and exemptions. It also emphasizes the discretionary powers of the Assessing Officer in penalty imposition and the need for thorough consideration of all relevant facts before penalizing a taxpayer.