2015 (10) TMI 1421 - AT - Income Tax

Penalty made u/s. 271(1)(c) - disallowance of deduction u/s. 54F in part - Held that - It is an undisputed fact that the assessee has tendered loan to the builder much earlier to the date of purchase. It is also an undisputed fact that the loan amount of ₹ 12.75 lakhs was converted into sale consideration which is also evident from the sale deed placed on record. Whether the assessee is entitled for deduction u/s. 54F of the Act on this conversion of loan into sale consideration is definitely a highly debatable issue, therefore, in our considered opinion, penalty cannot be levied u/s. 271(1)(c) of the Act in respect of the claim of ₹ 12.75 lakhs. In so far as the claim of deduction in respect of additions/alteration of ₹ 08 lakhs is concerned, we find that the assessee had furnished all the details although he failed to succeed in claiming the deduction but that by itself would not make the claim a false claim. We, therefore, do not find this a fit case for the levy of penalty u/s. 271(1)(c) of the Act. - Decided in favour of assessee.

Summary

Issues:
Levy of penalty under section 271(1)(c) of the Income Tax Act for false claim of deduction under section 54F.

Analysis:
The appeal was filed against the order of the Ld. CIT(A)-24, Mumbai for the assessment year 2009-10, specifically challenging the levy of penalty under section 271(1)(c) of the Act. The penalty proceedings were initiated based on the assessment order dated 21.12.2011, where the Assessing Officer allowed the deduction under section 54F partly and initiated penalty proceedings for the balance claim. The assessee contended that there was no false claim made, as all details regarding the deduction were provided during the assessment proceedings, and the claim was withdrawn partly during the same proceedings. However, the AO levied a minimum penalty of Rs. 2,55,535 under section 271(1)(c) of the Act, which was upheld by the Ld. CIT(A).

During the proceedings before the tribunal, the assessee's counsel argued that the claim under section 54F was not false, emphasizing that the conversion of a loan into sale consideration in the sale deed supported the claim. The counsel also highlighted that even though the claim for additions/alterations was unsuccessful, all necessary details were furnished to the AO. The tribunal noted that the issue of entitlement to deduction under section 54F for the converted loan amount was debatable, and the claim for deductions related to additions/alterations, although unsuccessful, did not constitute a false claim. Consequently, the tribunal held that it was not a suitable case for levying a penalty under section 271(1)(c) of the Act.

In conclusion, the tribunal allowed the appeal filed by the assessee, ruling in favor of the assessee and against the penalty imposed under section 271(1)(c) of the Income Tax Act. The tribunal's decision was based on the debatable nature of the claim under section 54F and the furnishing of all necessary details by the assessee, even though the claim was not successful.