2016 (10) TMI 555 - AT - Income Tax

Penalty under section 271(1)(c) r.w.s 274 - claim for deduction u/s 54B was made by filing inaccurate particulars - Held that - Having regard to the rival contentions and the material on record, we find that the assessee has furnished all the information relating to the sale of the land and also purchase of agricultural land in its return of income filed by way of Form ITR. Assessee is also eligible for deduction u/s 11 of the Act as it is carrying on activities of imparting education. The only income of the assessee which is chargeable to tax is the Long Term Capital Gain. The assessee has declared the LTCG, but has claimed deduction u/s 54B of the Act. The assessee has not challenged the findings of the authorities below that the assessee is not eligible for deduction u/s 54B of the Act and has accepted the taxability of the same. The AO has initiated the penalty proceedings for concealment of income, whereas the CIT (A) has confirmed the penalty on the ground of furnishing of inaccurate particulars of income. Therefore, it is seen that the AO and the CIT (A) are not on the same page for levy of penalty u/s 271 (1)(c) of the Act. Further, mere disallowance of a claim will not automatically attract the levy of penalty. Hon ble Supreme Court in the case of CIT vs. Reliance Petro Products Ltd, (2010 (3) TMI 80 - SUPREME COURT ) has held that a mere making of the claim which is not sustainable in law, by itself, will not amount to furnishing of inaccurate particulars regarding the income of the assessee. Similar view has been expressed by various High Courts and the Tribunal in the decisions cited Supra by the learned Counsel for the assessee. In view of the same, we delete the penalty levied by the AO and confirmed by the CIT (A). - Decided in favour of assessee.

Summary

Issues:
Appeal against penalty under section 271(1)(c) for assessment year 2009-10.

Analysis:
1. The assessee appealed against the penalty imposed by the AO under section 271(1)(c) for concealment of income, which was confirmed by the CIT (A). The grounds raised included errors in passing the penalty order based on concealment, not considering the debatable nature of the claim, and misinterpretation of the provisions of section 54B of the Income Tax Act, 1961.

2. The AO observed discrepancies in the assessee's reported Long Term Capital Gain (LTCG) and the market value of the property, leading to a request for explanations regarding the valuation. Additionally, the claim for deduction under section 54B was questioned due to the timing of land purchase and sale. The AO disallowed the claim and recomputed the LTCG, which was upheld by the CIT (A).

3. Penalty proceedings were initiated by the AO, concluding that the claim of exemption under section 54B represented concealed income. The AO rejected the argument that all details were disclosed in the income tax return, emphasizing the importance of adhering to the law at the time of filing. The CIT (A) affirmed the penalty, leading the assessee to appeal.

4. The assessee's representative argued that all relevant details were disclosed in the return of income, highlighting the charitable nature of the society and the claim made under section 54B. Various legal precedents were cited to support the contention that penalty should not be levied in this case.

5. The DR supported the lower authorities' decisions, emphasizing the ineligibility of the society for the deduction under section 54B due to the timing of land purchase. The argument centered on the concealment of income and furnishing of inaccurate particulars by the assessee.

6. The tribunal noted that the assessee had provided comprehensive information in the income tax return, acknowledging the taxability of LTCG and the disallowance of the deduction under section 54B. Discrepancies between the AO and CIT (A) regarding the penalty levy were highlighted, with a focus on the legal principle that a mere unsustainable claim does not constitute inaccurate particulars of income.

7. Ultimately, the tribunal ruled in favor of the assessee, overturning the penalty imposed by the AO and confirmed by the CIT (A). The decision was based on the principle that a disallowed claim does not automatically warrant a penalty, in line with legal precedents cited during the proceedings.