2019 (3) TMI 283 - AT - Income Tax

Penalty u/s 271(1)(c) - not entitled for the deduction U/s 54 - after denial of deduction U/s 54 assessee made the claim deduction U/s 54F - claim made under wrong provisions - bonafide mistake - due to the difference of computation of the deduction under two provisions i.e. 54 54F claim reduced, the AO made an addition - HELD THAT - This is a clear case of the claim made under wrong provisions of Section 54 instead of U/s 54F of the Act. The assessee has also produced the copy of the family ration card, Voter ID Card, Electricity Bill, gas connection receipts and saving bank account to establish the fact that the assessee was using the property in question for their residential purpose. These facts clearly make out a case that it was a bana-fide and inadvertent mistake and omission on the part of the assessee to claim deduction U/s 54 instead of section 54F of the Act. Therefore, we find that once, the assessee has explained the reasons for making a wrong claim and the facts explained by the assessee are duly established from the record and found to be true then even if the addition was made by the AO due to the claim made under wrong provisions of the Act. It will not amount to furnishing inaccurate particulars of income or concealment of particulars of income. In view of the provisions of Section 273B once the assessee has proved that there was a reasonable cause for making the claim of section 54 instead of section 54F of the Act then the penalty U/s 271(1)(c) of the Act cannot be imposed. Accordingly we delete the penalty levied by the AO U/s 271(1)(c) - Decided in favour of assessee.

Summary

Issues involved:
1. Justification of penalty under section 271(1)(c) of the Income Tax Act for Assessment Year 2014-15.
2. Eligibility for deduction under section 54F of the Act instead of section 54.
3. Claiming deduction under wrong provisions of the law.
4. Consideration of primary facts and disclosure in the return of income.

Issue 1: Justification of penalty under section 271(1)(c) of the Income Tax Act:
The appeal was against the penalty levied under section 271(1)(c) for Assessment Year 2014-15. The Assessing Officer (AO) had noted that the assessee claimed deduction under section 54 instead of section 54F for long term capital gain. The penalty was imposed as 100% of the tax sought to be evaded. The assessee challenged this before the CIT(A) but was unsuccessful.

Issue 2: Eligibility for deduction under section 54F of the Act:
The assessee purchased a property in 1981 and used it as a residential house until its transfer in the relevant year. The AO observed that the property sold was a shop, not a residential house, and thus, deduction under section 54 was not applicable. The assessee rectified the mistake and claimed deduction under section 54F. The Tribunal noted that the primary facts were disclosed, and the mistake was rectified promptly, establishing a genuine error rather than deliberate concealment.

Issue 3: Claiming deduction under wrong provisions of the law:
The assessee, an illiterate lady, relied on a tax consultant for filing returns. The wrong claim under section 54 instead of section 54F was deemed a bona fide mistake. The Tribunal considered the evidence provided, such as family ration card, Voter ID, and utility bills, to support the residential use of the property. The mistake was acknowledged and rectified promptly, indicating no intention to evade taxes.

Issue 4: Consideration of primary facts and disclosure in the return of income:
The Tribunal emphasized that the assessee disclosed the sale transaction and relevant details in the return of income. Despite the initial error in claiming the deduction, the assessee rectified it upon being informed by the AO. The Tribunal found that the facts were accurately disclosed, and the mistake was due to a misinterpretation of the applicable provisions rather than an attempt to conceal income.

In conclusion, the Tribunal ruled in favor of the assessee, considering the genuine mistake, prompt rectification, and disclosure of primary facts. The penalty under section 271(1)(c) was deemed unjustified, and it was deleted.