2024 (6) TMI 1443 - AT - Income Tax

Rectification u/s 254 - Levy of penalty u/s 271(1)(c) - disallowance of exemption of capital gains earned u/s 54F 54EC - ITAT found that the claim was disallowed for the reason that new house was not purchased within the stipulated time as prescribed under the law since the assessee had invested Rs.30 lakhs in the said property within stipulated period prescribed u/s 54F therefore the assessee was eligible to deduction of exemption to the extent of Rs.30 lakhs. HELD THAT - As the exemption denied by the AO under section 54F was allowed by the ITAT to the tune of Rs.30 lakhs. While penalty has been confirmed by the ITAT even on the addition/disallowance deleted by the ITAT in quantum proceedings.Therefore the facts as stated by assessee that the ITAT has confirmed penalty even on the addition deleted is found to be factually correct. As during the course of hearing which took place before the ITAT on various occasions the assessee in the first instance itself had placed copy of the order of the ITAT in quantum proceedings demonstrating the fact that of having been granted relief to the extent of Rs.30 lakhs which was even taken note of by the Bench when the appeal was first heard on 21.2.2020. Therefore it cannot be denied that order of the ITAT in the quantum proceedings was very much part of the records and non-consideration of the same while dealing with the appeal of the assessee in penalty proceedings does tantamount to a mistake apparent from record. Even if the assessee did not refer to the same when the appeal was finally heard the fact remains that the order was very much part of the record before us and non-consideration of the same tantamounted to error in the order of the ITAT. Even otherwise we may state that even if the assessee had failed to place on record the order passed by the ITAT in the quantum proceedings granting relief to the assessee to the extent of Rs.30 lakhs the said order being a public document non-consideration of the effect of the same in penalty proceedings would still tantamount to mistake apparent from the record. The fact remains that in the quantum proceedings the assessee has been granted relief to the tune of Rs.30 lacs allowing exemption u/s. 54F of the Act to the said extent against capital gains returned and confirming penalty on this addition which stands deleted by the ITAT is clearly impermissible in law. There cannot be any case for penalizing the assessee for an offence which has been found to have not been committed at all and therefore the confirmation of penalty on this aspect i.e. on the addition which stood deleted by the ITAT was in any case a mistake which was eligible for rectification under section 254(2) of the Act. It is a clear and apparent mistake and the MA filed by the assessee needs to be allowed which we hold so. MA allowed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The primary issue considered was whether the Appellate Tribunal erred in confirming the penalty under section 271(1)(c) of the Income Tax Act, despite the Tribunal's earlier decision to allow a partial exemption under section 54F in the quantum proceedings. The question was whether the Tribunal's oversight constituted a mistake apparent from the record, warranting rectification.

2. ISSUE-WISE DETAILED ANALYSIS

Relevant Legal Framework and Precedents:

The legal framework revolves around section 271(1)(c) of the Income Tax Act, which pertains to penalties for concealment of income or furnishing inaccurate particulars. The Tribunal's earlier order in ITA No.461/Ahd/2017, which allowed a partial exemption under section 54F, is central to the case. The Tribunal cited the precedent set by the Supreme Court in the case of Sanjeevlal vs. CIT, which dealt with similar issues of delayed property transactions due to legal impediments.

Court's Interpretation and Reasoning:

The Tribunal recognized that the penalty was confirmed on the entire amount of disallowance, including the portion where relief was granted in the quantum appeal. The Tribunal acknowledged that the failure to consider the earlier order allowing partial exemption was a mistake apparent from the record. The Tribunal emphasized that penalizing the assessee for an addition that was subsequently deleted was impermissible under the law.

Key Evidence and Findings:

The Tribunal's findings highlighted that the assessee had indeed placed the order granting relief under section 54F before the Tribunal during the penalty proceedings. The Tribunal's records, including a letter dated 11.02.2020, confirmed that the order was part of the case records and was available during the hearing. The Tribunal found that the non-consideration of this order constituted an error.

Application of Law to Facts:

The Tribunal applied the principles from the Sanjeevlal case, wherein the Supreme Court allowed relief under section 54 due to unavoidable delays in executing a sale deed. The Tribunal found that similar circumstances existed in the present case, where the delay was due to the seller's demise and subsequent legal proceedings. Consequently, the Tribunal held that the assessee was entitled to the relief granted in the quantum proceedings, and the penalty on this portion was mistakenly confirmed.

Treatment of Competing Arguments:

The Tribunal considered the Revenue's opposition to the application but found the assessee's arguments compelling. The Tribunal noted that the Revenue did not dispute the factual basis of the assessee's claim regarding the earlier order granting relief. The Tribunal concluded that the oversight in the penalty order warranted rectification.

Conclusions:

The Tribunal concluded that the confirmation of penalty on the addition deleted in the quantum proceedings was a mistake apparent from the record. The Tribunal allowed the assessee's application for rectification and recalled the order confirming the penalty.

3. SIGNIFICANT HOLDINGS

Preserve Verbatim Quotes of Crucial Legal Reasoning:

The Tribunal stated, "There cannot be any case for penalizing the assessee for an offence which has been found to have not been committed at all, and therefore, the confirmation of penalty on this aspect i.e. on the addition which stood deleted by the ITAT, was in any case a mistake which was eligible for rectification under section 254(2) of the Act."

Core Principles Established:

The Tribunal established that non-consideration of an order granting relief, which is part of the record, constitutes a mistake apparent from the record. The Tribunal emphasized that penalties cannot be levied on amounts where relief has been granted in quantum proceedings.

Final Determinations on Each Issue:

The Tribunal determined that the earlier order confirming the penalty was recalled, and the assessee's application for rectification was allowed. The Tribunal directed the Registry to list the appeal for a fresh hearing in the ordinary course.