2015 (10) TMI 742 - AT - Income Tax

Penalty u/s 271(1)(c) - disallowance u/s 54F - CIT(A) confirmed part penalty - Held that - From the facts of the case of the assessee and the provisions of Section 54F under which claim has been made, the claim is clearly inadmissible. Therefore, the penalty u/s 271(1)(c) is to be imposed on wrong claim u/s 54F made on purchase of plots at B-10 and B-1, Raghunandan Vihar, Jaipur for ₹ 3,05,336/- and ₹ 3,59,048/- respectively. The A.R. himself has admitted that the penalty may be reduced proportionately as per the order of the ld. CIT(A). Thus the AO is directed to reduce the penalty u/s 271(1) (c) proportionately on the tax evaded on the disallowance u/s 54F confirmed by the ld. CIT(A) of ₹ 6,64,384/-. To that extent, the penalty is confirmed u/s 271(1)( c) for filing inaccurate particulars of income - the directions of the ld. CIT(A) in the penalty order are in consonance with the directions of the ld. CIT(A) in the quantum proceedings in relation to disallowance of deduction of ₹ 664,384 claimed by the assessee. What the assessee has failed to consider is that he has raised an additional claim before the ld. CIT(A) towards the cost of construction of the house which has been allowed to him by the ld. CIT(A) by exercising his jurisdiction as he has coterminous power under the I.T. Act. The amount which is finally disallowed would ,therefore, suffer the consequent penalty provisions under section 271(1)(c) of the Act. - Decided against assessee. Exemption u/s 54F is available in respect of investments in two adjacent houses which constitute one residential unit. In the case of the assessee, it has invested the consideration received on sale of plot of land in 03 different plots of lands which were geographically located at 03 different locations i.e, at Santosh Vihar, at B-10 Raghunandan Vihar and at B-1, Raghunandan Vihar. Further, a residential house has been constructed only on the plot of land at Santosh Vihar. It is thus clear that in the facts of the present case, the assessee doesn t have any legal and tenable basis for claim of deduction in respect of 03 separate plots of land which are physically at different locations as by no stretch of imagination, they would collectively satisfy the definition of a residential house . Therefore, it is clearly a case of striking in the dark which the assessee has been unsuccessful as rightly held by the lower authorities. It is clearly a case where the factual position doesn t support the claim of the assessee and there cannot be any dispute or debate that the assessee was eligible for claim at first place. Accordingly, in the facts and circumstances of the case, we are of the considered view that claim of the assessee under section 54 was not a bonafide claim and levy of penalty u/s 271(1)(c) was justified and hence confirmed. - Decided against assessee.

Summary

Issues Involved:
1. Imposition of penalty under Section 271(1)(c) of the Income Tax Act.
2. Calculation error in the penalty amount by CIT(A).
3. Imposition of penalty while quantum appeal was pending.

Detailed Analysis:

Issue 1: Imposition of Penalty under Section 271(1)(c)
The primary issue revolves around the imposition of a penalty of Rs. 2,28,340 under Section 271(1)(c) by the AO, which was later reduced to Rs. 1,49,088 by the CIT(A). The assessee had claimed a deduction under Section 54 for the purchase of three plots of land, which was disallowed by the AO on the grounds that the investment was not in a residential house, a precondition for claiming the deduction. The AO held that the assessee furnished inaccurate particulars of income, leading to concealment, and thus imposed the penalty.

The CIT(A) partially upheld the penalty, allowing a deduction for the value of land and construction of a house at Santosh Vihar but disallowing deductions for the other two plots. The Tribunal examined whether the claim for deduction under Section 54F was bonafide. It was found that the assessee sold a plot of land, not a residential house, and reinvested in three separate plots, which did not qualify as a single residential house. Therefore, the Tribunal upheld the penalty, stating that the claim was not bonafide and the levy of penalty was justified.

Issue 2: Calculation Error in Penalty Amount by CIT(A)
The assessee contended that the CIT(A) erred in directing the AO to compute the penalty on a disallowance of Rs. 6,64,384 instead of Rs. 5,07,884 under Section 54F. The CIT(A) allowed a deduction of Rs. 5,98,800 for the value of land and construction of a house at Santosh Vihar, but disallowed deductions for the other two plots, resulting in a disallowed amount of Rs. 6,64,384. The Tribunal found no infirmity in the CIT(A)'s order, confirming that the penalty should be based on the disallowed amount of Rs. 6,64,384.

Issue 3: Imposition of Penalty While Quantum Appeal Was Pending
The assessee initially raised an issue regarding the imposition of penalty while the quantum appeal was pending before the CIT(A), arguing it violated Section 275 of the I.T. Act. However, this ground was not pressed during the hearing and was dismissed.

Conclusion:
The Tribunal dismissed the appeal, upholding the penalty imposed under Section 271(1)(c) for filing inaccurate particulars of income. The Tribunal confirmed the calculation of the penalty based on the disallowed amount of Rs. 6,64,384 and found no merit in the assessee's contentions regarding the bonafide nature of the claim and the procedural aspects of the penalty imposition. The judgment emphasizes the importance of accurate and bonafide claims in tax returns and the consequences of failing to meet statutory requirements.