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2019 (12) TMI 254 - AT - Income TaxLevy of penalty u/s 271(1)(c) of the Act - exemption claimed u/s 54 of the IT Act - AO opined that the assessee has made an incorrect claim of deduction resulting in furnishing inaccurate particulars of income by not brought forwarding the correct income for the AY 2008-09 - HELD THAT - A glance of provision of section 271(1)(c) would suggest that in order to be covered, there has to be concealment of the particulars of the income of the assessee. Secondly, the assessee must have furnished inaccurate particulars of his income. The instant case was not the case of concealment of the income, but, the case of wrong claim. The revenue argued that submitting an incorrect claim in law would amount to giving inaccurate particulars of such income. In order to expose the assessee to the penalty unless the case is strictly covered by the provision, the penalty provision cannot be invoked. By any stretch of imagination, making an incorrect claim in law cannot tantamount to furnishing of inaccurate particulars. Thus, making a wrong claim by the assessee cannot be said to be furnishing of inaccurate particulars of income by the assessee - the order of CIT(A) set aside - penalty levied u/s 271(1)(c) of the Act set aside - appeal allowed - decided in favor of assessee.
Issues:
Penalty under section 271(1)(c) for incorrect claim of deduction u/s 54F. Analysis: The appeal was filed against the penalty levied under section 271(1)(c) of the Income Tax Act, 1961 for the assessment year 2008-09. The assessee initially filed a return of income admitting a total income of ?24,325, which was later scrutinized, and the total income was assessed at ?1,12,02,476 by disallowing the exemption claimed under section 54 of the IT Act. The Assessing Officer (AO) added ?1,12,02,475 to the returned income due to the disallowance of the exemption claimed under section 54F. The AO observed that the assessee, having knowledge of owning two residential houses, claimed an exemption under section 54F, which was not permissible as per the Act. Consequently, the AO imposed a penalty of ?25,38,481 on the concealed income. The CIT(A) upheld the penalty levied by the AO under section 271(1)(c) of the Act. The assessee then appealed before the ITAT Hyderabad, challenging the CIT(A)'s order. The grounds of appeal included contentions that the claim under section 54F was made under a bona fide impression, no inaccurate particulars were furnished, and the issue was debatable as relief was granted in quantum proceedings. During the proceedings, the assessee argued that there was no concealment as all material facts were disclosed, and the wrong claim under section 54F was due to ignorance of the law, not intentional concealment. The Revenue authorities, however, supported the penalty imposition. The ITAT, after considering the submissions and relevant legal provisions, noted that the case was not about concealment but a wrong claim made by the assessee. Referring to the Supreme Court's decision in CIT vs Reliance Petroproducts Pvt Ltd, the ITAT emphasized that making an incorrect claim in law does not amount to furnishing inaccurate particulars of income. Therefore, the ITAT set aside the CIT(A)'s order and directed the AO to delete the penalty of ?26,00,000 imposed under section 271(1)(c) of the Act. In conclusion, the ITAT allowed the appeal of the assessee, ruling in favor of the assessee based on the distinction between a wrong claim and inaccurate particulars of income, ultimately leading to the deletion of the penalty imposed by the AO.
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