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2013 (4) TMI 662 - AT - Income TaxLevy of penalty u/s 271(1)(c) - disallowance of deduction u/s 54F, disallowance on 60% of car insurance and depreciation, disallowance of business promotion expenses, disallowance on discount bills and disallowance on generator expenses and depreciation thereon - Held that - A perusal of the notice issued u/s 271(1)(c) by the AO demonstrates that the penalty notice u/s 271(1)(c) was not issued related to the addition pertaining to the disallowance of claim of exemption from capital gain. The notice has been issued only on concealment of particulars of income of Rs.40823 which is disallowance of generator expense and depreciation thereon. Thus, reading of assessment order along with the notice issued u/s 271(1)(c) and reply filed by the assessee clearly demonstrates that the AO had no intention to levy penalty during the course of assessment proceedings on this particular issue of Section 54F even by reading section 271(1B). Thus,to conclude no satisfaction as required by law has been recorded by AO during the assessment proceedings, hence, imposition of penalty is bad in law. As from the computation that the land at Haridwar was sold on 7.5.2004 (A.Y. 2005-06) and exemption u/s 54F was claimed. The period of three (3) years stipulated under the Act expires on 7.5.2007 related to AY 2008-09. Technically and legally, the assessee has time to invest on or before 7.5.2007. Meaning thereby that section 54F(3) cannot legally be invoked for AY 2007-08. Thus, there is no concealment by the assessee on account of non-declaration of the said income in this assessment year. Accordingly, the appeal of the assessee deserves to be accepted & penalty order is set aside. In favour of assessee.
Issues Involved:
1. Levy of penalty under Section 271(1)(c) of the Income Tax Act, 1961. 2. Allegations of concealment of income and furnishing inaccurate particulars. 3. Satisfaction of the Assessing Officer regarding the concealment of income or inaccurate particulars. 4. Legal representatives' compliance with tax authorities post the death of the assessee. 5. Timing and applicability of Section 54F(3) of the Income Tax Act. Issue-wise Analysis: 1. Levy of Penalty under Section 271(1)(c): The primary issue in this case is the confirmation of a penalty amounting to Rs. 3,25,000 under Section 271(1)(c) of the Income Tax Act, 1961. The penalty was levied due to various disallowances made by the Assessing Officer (AO) during the assessment proceedings, which included disallowances under Section 54F, car insurance, business promotion expenses, and generator expenses. 2. Allegations of Concealment of Income and Furnishing Inaccurate Particulars: The AO's decision to impose the penalty was based on the observation that the assessee had not fulfilled the conditions under Section 54F and had failed to withdraw the claim in the Income Tax Return (ITR) for the relevant assessment year. The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the penalty, noting that the assessee had a history of making incorrect claims and had not paid taxes on the withdrawn deduction. 3. Satisfaction of the Assessing Officer: The Tribunal examined whether the AO had recorded the necessary satisfaction regarding the concealment of income or furnishing inaccurate particulars before concluding the assessment proceedings. The Tribunal referred to the Full Bench decision of the Delhi High Court in the case of Commissioner of Income Tax vs. Rampur Engineering Co. Ltd., which held that the power to impose a penalty depends on the AO's satisfaction during the assessment proceedings. The Tribunal found that the AO had not recorded such satisfaction in the assessment order, making the imposition of the penalty legally unsustainable. 4. Legal Representatives' Compliance Post Death of the Assessee: The Tribunal acknowledged that the assessee had passed away, and the legal representatives were unaware of the relevant facts and evidence. The Tribunal noted that the legal representatives had paid all taxes and interest to avoid further disputes. The Tribunal emphasized that the legal representatives were duty-bound to cooperate with the tax authorities but also recognized the difficulty they faced in presenting the case properly. 5. Timing and Applicability of Section 54F(3): On the merits, the Tribunal examined whether the conditions under Section 54F(3) were applicable in the assessment year 2007-08. The Tribunal found that the period for investing in a residential house under Section 54F(3) expired in the subsequent assessment year (2008-09). Therefore, there was no requirement for the assessee to offer the income to tax during the year under consideration (2007-08). Consequently, there was no concealment or furnishing of inaccurate particulars for the assessment year 2007-08. Conclusion: The Tribunal concluded that the penalty imposed under Section 271(1)(c) was not justified due to the lack of recorded satisfaction by the AO and the incorrect application of Section 54F(3) for the assessment year 2007-08. The Tribunal allowed the appeal of the assessee, setting aside the penalty order and canceling the penalty of Rs. 3,25,000.
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