2021 (4) TMI 334 - AT - Income Tax

Penalty u/s 271(1)(c) - denial of claim of exemption against long term capital gains on the ground that the investment made was in excess of ₹ 50,00,000/- in a particular financial year in terms of section 54EC - HELD THAT - Facts of the case as narrated by the Assessing Officer above clearly indicate that there was some confusion in this regard as assessee had made two investments in two years and made one claim for both the amounts. There was no case of concealment or furnishing inaccurate particulars as everything was disclosed. The assessee s claim can also not be said to be ex facie bogus. In these circumstances, the decision of Hon'ble Supreme Court in the case of Reliance Petro Products Pvt. Ltd., . 2010 (3) TMI 80 - SUPREME COURT comes to rescue the assessee. In this case it was expounded that the rejection of claim by the Assessing Officer cannot ipso facto lead to the conclusion that the assessee deserves to be visited with rigours of penalty u/.s 271(1)(c) of the Act. Hon'ble Supreme Court in the case of Hindustan Steel Vs. State of Orissa 1969 (8) TMI 31 - SUPREME COURT through larger bench had expounded that the authorities may not levy penalty if the conduct of the assessee is not found to be contumacious. We find that on the facts and circumstances of the present case, the submissions of the assessee and explanations are not ex facie bogus or contumacious. Shortfall in the disclosure of interest income - We find that the assessee s explanation deserves to be accepted. When interest amount is already disclosed to the Department through ITS details, there is no reason why the assessee would deliberately try to conceal the interest income. Our adjudication and reference of case laws on the earlier issues are also applicable on this issue. We set aside the orders of the authorities below and direct that the penalty should be deleted. Appeal of assessee allowed.

Summary

Issues:
1. Denial of claim of exemption against long term capital gains under section 271(1)(c) of the I.T. Act.
2. Penalty levied for shortfall in interest receipts.

Analysis:

Issue 1: Denial of claim of exemption against long term capital gains under section 271(1)(c) of the I.T. Act:
The Assessing Officer disallowed the exemption claimed by the assessee for long term capital gains, amounting to &8377; 45,83,160, on the grounds of exceeding the investment limit of &8377; 50 lakhs in a financial year under section 54EC. The assessee had made two investments in two different financial years but claimed exemption for both amounts together. The Assessing Officer imposed a penalty under section 271(1)(c) based on this disallowance. However, the ITAT noted that there was confusion regarding the investments made by the assessee, and the claim was not ex facie bogus. Citing the decision in Reliance Petro Products Pvt. Ltd. case, the ITAT concluded that the rejection of the claim does not automatically warrant a penalty. Referring to Hindustan Steel Vs. State of Orissa case, the ITAT observed that the conduct of the assessee was not contumacious, leading to the decision to delete the penalty and allow the appeal.

Issue 2: Penalty levied for shortfall in interest receipts:
The Assessing Officer also imposed a penalty for a shortfall of &8377; 54,822 in interest receipts, which the assessee explained as an inadvertent mistake due to certain FDs not being accounted for in computing interest. The Assessing Officer rejected the explanation and levied the penalty. Upon appeal, the CIT(A) confirmed the penalty without specifying the relevance of case laws cited. The ITAT, after considering the explanation provided by the assessee and the disclosure of interest income to the Department, concluded that there was no deliberate attempt to conceal the interest income. Referring to the earlier issues and case laws, the ITAT decided to delete the penalty in this regard as well.

In conclusion, the ITAT set aside the orders of the authorities below and directed the deletion of the penalty, allowing the appeal of the assessee in both issues.