2022 (12) TMI 502 - AT - Income Tax

Levy of penalty u/s. 271(1)(c) - assessee earned capital gains and claimed exemption u/s. 54F 54EC - deduction u/s 54F was solely due to difference in interpretations of the provisions and therefore, the penalty was not to be levied on this count - HELD THAT - Assessee considered the sale transactions as three sale transactions and made three separate investments in REC bonds to claim deduction u/s 54EC. The assessee accordingly claimed deduction of aggregate investment. The assessee furnished full particulars and made the claim in the return of income which was partly accepted. Mere non-acceptance of claim made in the return of income would not attract penalty. In such a case, the ratio of decision of CIT V/s Reliance Petroproducts Pvt. Ltd 2010 (3) TMI 80 - SUPREME COURT was squarely applicable to assessee s case. In this decision, it has been held by Hon ble Court that mere making of wrong claim do not amount to furnishing of inaccurate particulars of income. In the absence of finding that any details supplied by the assessee is incorrect or false, penalty could not be levied. AO must prove that there was concealment of income or the return of income furnished by the assessee or documents submitted by assessee were based on incorrect fact, falsity and untruth. It is not a fit case for imposition of penalty. The other two additions are small additions which, in any way, is not a fit case for levy of penalty considering the fact that the assessee is a senior citizen and may have missed out to compute pension and interest correctly. Therefore, we by deleting the impugned penalty, we allow the appeal.

Summary

Issues:
Confirmation of penalty u/s. 271(1)(c) for AY 2011-12 based on legitimacy of the claim made by the assessee under sections 54F and 54EC.

Detailed Analysis:
The appeal by the assessee for AY 2011-12 challenged the penalty imposed under section 271(1)(c) by the Commissioner of Income Tax (Appeals) confirming the levy. The primary contention of the assessee was that the penalty was unjust as the claim made was legitimate. The Assessing Officer (AO) had held that the exemption u/s. 54EC was allowable only to the extent of Rs.50 Lacs, despite the assessee's claim for Rs.100 Lacs based on investments in REC Bonds for three sales. The AO also made small additions for differences in pension amount and interest on bank account. The first appellate authority partially allowed the deductions claimed u/s. 54EC and 54F. Subsequent to the finality of the order, penalty proceedings were initiated, resulting in a penalty of Rs.39.99 Lacs for concealment of income and furnishing inaccurate particulars of income.

The contention put forth by the assessee was that the penalty was unwarranted as the claim made was genuine, even though it was partly accepted. The CIT(A) concurred with the assessee that the penalty should not be levied for the difference in interpretations regarding the provisions of Sec. 54F. However, regarding Sec. 54EC, it was held that the investment should not exceed Rs.50 Lacs in a financial year, and thus, the assessee's interpretation was not bona-fide. The CIT(A) upheld the penalty for the Sec. 54EC claim and the other small additions. The Tribunal, upon further appeal, was approached by the aggrieved assessee.

The Tribunal analyzed the case and noted that the assessee treated the sale transactions as three separate transactions, justifying the three investments in REC bonds for claiming deduction u/s. 54EC. The Tribunal emphasized that the mere non-acceptance of a claim made in the return of income does not automatically attract a penalty. Citing the decision of the Hon'ble Supreme Court in the case of CIT v. Reliance Petroproducts Pvt. Ltd., it was established that making a wrong claim does not amount to furnishing inaccurate particulars of income unless there is proof of concealment or submission of incorrect details. As there was no evidence of incorrect or false information provided by the assessee, the Tribunal concluded that it was not a suitable case for imposing a penalty. Considering the small nature of the other additions and the fact that the assessee was a senior citizen, the Tribunal decided to delete the penalty and allowed the appeal.

In conclusion, the Tribunal allowed the appeal, ruling in favor of the assessee and deleting the imposed penalty in consideration of the legitimate claim made by the assessee and the absence of evidence indicating concealment or submission of incorrect particulars.