2015 (1) TMI 730 - AT - Income Tax

Penalty under S.271(1)(c) - addition made to the total income of the assessee on account of long term capital gain - Held that - Concealment of income envisaged in S.271(1)(c) is to be inferred from the return of income filed by the assessee and since the penalty proceedings under S.271(1)(c) in the present case were initiated by the Assessing Officer during the course of re-assessment proceedings it is the return of income filed by the assessee in response to notice under S.148 that has to be seen to infer the concealment. As already noted no return of income was filed by the assessee in response to notice issued by the Assessing Officer under S.148 in the month of January 2011 withdrawing the excessive claim for exemption under S.54F in spite of the fact that at that juncture the assessee was fully aware that the amount of 1.25 crores paid in advance to the contractor was not fully utilised for the construction of the house and the same having been already refunded by the contractor partly in the month of March 2010 its claim for exemption under S.54F was excessive. Having regard to all these facts of the case we are of the view that the assessee is clearly guilty of furnishing inaccurate particulars of income as rightly held by the authorities below attracting penalty under S.271(1)(c). As regards the alternative claim of the assessee that quantum of penalty worked out by the Assessing Officer is wrong we direct the Assessing Officer to verify this alternative claim of the assessee and to allow appropriate relief on such verification. - Decided partly in favour of assessee.

Summary

Issues Involved:
1. Legitimacy of penalty under S.271(1)(c) of the Income Tax Act.
2. Validity of the claim for exemption under S.54F.
3. Determination of whether the assessee voluntarily surrendered the excessive claim.
4. Correctness of the quantum of penalty imposed.

Issue-wise Detailed Analysis:

1. Legitimacy of penalty under S.271(1)(c) of the Income Tax Act:
The appeal challenges the order confirming a penalty of Rs. 47,35,554 imposed by the Assessing Officer under S.271(1)(c) for allegedly concealing income. The assessee contended that all necessary information was disclosed in the return of income and that the penalty should be dropped. However, the Assessing Officer found the explanation unacceptable, asserting that the assessee was aware of the provisions of S.54F and should have utilized the entire amount for construction. The penalty was imposed on the ground that the claim for exemption under S.54F was not fully admissible and was only accepted after inquiries by the Assessing Officer.

2. Validity of the claim for exemption under S.54F:
The assessee claimed exemption under S.54F for capital gains from the sale of shares, citing the purchase of a plot and construction of a house. However, the Assessing Officer found that only Rs. 39,19,855 was spent on construction, and the remaining Rs. 85,80,145 paid to M/s. Robo Infrastructure Pvt. Ltd. was refunded, making it ineligible for exemption. The assessee argued that the payment was made in good faith, but due to disputes with the builder, the construction was incomplete, and the amount was refunded. The CIT(A) did not accept this explanation, noting inconsistencies and ruling that the payment was shown as an investment and not for house construction.

3. Determination of whether the assessee voluntarily surrendered the excessive claim:
The assessee claimed that the excessive exemption was surrendered voluntarily to avoid litigation. However, the CIT(A) and the Tribunal found that the assessee did not withdraw the claim until cornered by the Assessing Officer during reassessment proceedings. The Tribunal noted that the assessee had an opportunity to file a revised return after becoming aware of the refund but did not do so, indicating that the surrender was not voluntary.

4. Correctness of the quantum of penalty imposed:
The assessee argued that the penalty should be calculated at the lower rate of 20% applicable to capital gains. The Tribunal directed the Assessing Officer to verify this claim and allow appropriate relief if justified.

Conclusion:
The Tribunal upheld the penalty under S.271(1)(c) for furnishing inaccurate particulars of income, as the assessee did not voluntarily surrender the excessive claim for exemption under S.54F. The appeal was partly allowed, with directions to verify the quantum of penalty.