2021 (9) TMI 1214 - AT - Income Tax

Penalty u/s. 271(1)(c) - assessee has purchased a vacant land for which he is not entitled for deduction u/s. 54F - HELD THAT - The assessee has sold a property and purchased another property and claimed deduction u/s. 54F - AO has called the details of the purchased property. After examining the sale deed, the AO noticed that the house purchased by the assessee is not a residential house and it is only for the purpose of for running the industry and other connected activities and therefore, the very nature of the property purchased by the assessee is only industrial property not a residential house and levied penalty u/s. 271(1)(c) - It is a fact that the assessee has not purchased a residential house. It is a bonafide claim of the assessee that on sale of the property he can purchase another property, but, the fact remains that another property which is supposed to be purchased only residential house and not an industrial property. Therefore, the assessee is not entitled for the deduction u/s. 54. So far as penalty is concerned, the assessee simply made a claim, which is not acceptable to the A.O, penalty cannot be levied u/s. 271(1)(c) of the Act automatically as has been held in the case of CIT vs. Reliance Petroproducts (P) Ltd. 2010 (3) TMI 80 - SUPREME COURT , wherein, explained that whether a claim simply not accepted by the AO., it does not mean that it is a concealment of income or furnishing of inaccurate particulars of income so that penalty can be levied - following the judgment of the Hon ble Supreme Court, we are of the opinion that the assessee has neither concealed the income nor furnished inaccurate particulars in this case and therefore, the penalty levied by the A.O and confirmed by the CIT(A) is not correct. In view of the above, we cancel the penalty levied under section 271(1)(c) of the Act by the AO. - Decided in favour of assessee.

Summary

Issues:
1. Disallowance of deduction claimed under section 54F of the Income Tax Act.
2. Penalty levied under section 271(1)(c) of the Act for the disallowed deduction.

Analysis:
1. The appeal was against the order disallowing the deduction claimed under section 54F of the Income Tax Act. The assessee had sold a property and declared capital gain, claiming a deduction under section 54F. The Assessing Officer (A.O) disallowed the deduction, stating that the property purchased was for industrial purposes, not residential, thus ineligible for the deduction. The A.O also noted the assessee's existing residential properties, further denying the claim. The Commissioner of Income Tax (Appeals) and ITAT upheld this decision. The purchased property was deemed industrial, not residential, making the claim invalid under section 54F.

2. Regarding the penalty under section 271(1)(c) of the Act, the A.O imposed it due to the disallowed deduction. The Departmental Representative argued that the purchase of vacant land made the claim invalid, constituting concealment. However, the assessee contended it was a bona fide claim and cited relevant case law. The ITAT found that though the claim was not accepted, it did not amount to concealment or furnishing inaccurate particulars, following the precedent set by the Supreme Court in CIT vs. Reliance Petroproducts (P) Ltd. The penalty was canceled, as the claim rejection did not signify concealment or inaccuracies, leading to the allowance of the appeal.

In conclusion, the ITAT Chennai allowed the appeal, canceling the penalty levied under section 271(1)(c) of the Act by the Assessing Officer. The judgment emphasized the importance of the nature of the property purchased in determining eligibility for deductions under the Income Tax Act and clarified the distinction between claim rejection and deliberate concealment of income.