2022 (6) TMI 844 - AT - Income Tax

Penalty u/s 271(1)(c) - incorrect claim of deduction by the assessee on LTCG - Assessee s plea before the ld. CIT(A) that the same was on account of wrong advice by the counsel has been rejected by the ld. CIT (A) - CIT (A) made such observation that even after AO s pointing out that correct amount of claim as per documents be submitted for section 54B and 54F, the said counsel proceeded with the inflated claim - HELD THAT - As in our considered opinion, the wrong claim of section 54B and 54F exemption not being in consonance with the documents invites the rigors of penalty. Further, the assessee s plea of having income voluntary offered, the same has rightly been rejected by the authorities below as it is clearly after the AO s confrontation with the assessee with the correct position, that the assessee offered the same. Hence, we uphold the order of Revenue authorities.

Summary

Issues:
Penalty under section 271(1)(c) of the Income-tax Act, 1961 for incorrect claim of deduction on LTCG.

Analysis:
The case involved an appeal against the confirmation of a penalty under section 271(1)(c) of the Income-tax Act, 1961 for an incorrect claim of deduction on Long Term Capital Gain (LTCG) for the assessment year 2015-16. The assessee, along with his brother, sold agricultural land and claimed deductions under sections 54F and 54B of the Act. The Assessing Officer (AO) reworked the capital gain, leading to a taxable amount of Rs.2,61,23,549/-. The AO issued a penalty notice, contending that the conduct of the assessee was not bonafide, as the revised computation of income was filed only when the assessee was cornered by the AO.

The AO found the assessee's conduct not bonafide and imposed the penalty, stating that the revised computation of income was not voluntarily filed but rather under compulsion. The assessee argued before the CIT (Appeals) that the initial incorrect computation was due to counsel's advice, and the subsequent correction was voluntary. However, the CIT (Appeals) rejected this argument, noting that even after being directed by the AO, the counsel insisted on the inflated claim for deductions under sections 54B and 54F. The CIT (Appeals) upheld the penalty, citing various case laws.

Upon hearing the arguments and reviewing the record, the Appellate Tribunal noted that the penalty was imposed for the incorrect claim of deductions on LTCG. The Tribunal agreed with the lower authorities that the claim was not in line with the documents and that the subsequent correction was made only after the AO's intervention. Therefore, the Tribunal upheld the penalty, concluding that the incorrect claims and the belated correction warranted the penalty under section 271(1)(c) of the Act.

In light of the above analysis, the Tribunal dismissed the appeal of the assessee, affirming the order of the Revenue authorities. The decision was pronounced on June 17, 2022, upholding the penalty for the incorrect claim of deductions on Long Term Capital Gain.