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2015 (11) TMI 123 - HC - Income TaxPenalty under section 271(1) (c) - disallowance of exemption under section 54 for construction - Held that - The Tribunal while affirming the findings of the Assessing Officer and the CIT(A) had recorded that the assessee had failed to produce bills or vouchers. She had also failed to produce any proof of construction and the date of completion of construction during the assessment proceedings. Merely reflecting the expenditure incurred on construction in the balance sheet alongwith the income tax return was not sufficient to establish the claim No merit in the claim of the assessee that it is not exigible to levy of penalty under section 271(1)(c) of the Act on the aforesaid disallowance as the claim made by the assessee vis a vis the cost of construction in the immovable property was found to be a false claim and the assessee has failed to discharge the onus of establishing that it had undertaken the aforesaid construction of the immovable asset. Merely because the assessee had reflected certain amount of expenditure claimed to be on account of construction of property in its balance sheet does not entitle the assessee to the claim of deduction under section 54 of the Act being the amount spent on construction of the asset on sale of residential property. In the entirety of the facts and circumstances where the claim of the assessee was found to be false, the assessee is liable to penalty under section 271(1)(c) of the Act - Decided against assessee.
Issues:
1. Justification of penalty under Section 271(1)(c) for disallowance of exemption under Section 54 for construction. 2. Evidence of construction and justification of penalty under Section 271(1)(c) for disallowance of exemption under Section 54 for construction. Issue 1: The appellant challenged the penalty under Section 271(1)(c) for disallowance of exemption under Section 54 for construction, arguing that the levy of penalty was unjustified as there were no inaccurate particulars furnished regarding the claim under Section 54F of the Income Tax Act. The appellant relied on legal precedents to support the argument. However, the revenue contended that the appellant failed to produce evidence of construction, and all authorities had found that the appellant did not provide bills, vouchers, or proof of construction, justifying the penalty. After hearing both parties, the court found no merit in the appeal, upholding the findings of the lower authorities and confirming the penalty. Issue 2: The appellant failed to substantiate the claim of exemption under Section 54 for construction by not providing evidence of construction during the assessment proceedings. The Assessing Officer disallowed the exemption as the appellant could not prove the expenditure incurred on construction. The CIT(A) and the Tribunal upheld this disallowance, leading to the levy of penalty under Section 271(1)(c) of the Act. The court noted that merely reflecting the expenditure on construction in the balance sheet was insufficient to establish the claim, emphasizing the importance of producing bills, vouchers, and proof of construction. The court confirmed the penalty, stating that the appellant had failed to discharge the onus of proving the construction of the immovable asset, making the claim false. The court dismissed the appeal, as no substantial question of law arose, and the appellant could not challenge the factual findings of the lower authorities. This detailed analysis of the judgment highlights the issues raised, the arguments presented by both parties, and the court's reasoning in dismissing the appeal and confirming the penalty under Section 271(1)(c) for the disallowance of exemption under Section 54 for construction.
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