2016 (9) TMI 202 - AT - Income Tax

Penalty u/s 271(1)(c) - exemption from the capital gain claimed - compensation received against tenancy rights - Held that - The assessee has disclosed all particulars of income in respect of the claim of exemption from the capital gain as well as income from interest on FDR and the expenses claimed against their on and no particulars filed has been found to be incorrect or inaccurate by the authorities below. Further, the assessee has offered explanation as why it claimed exemption from the capital gain, under bona fide belief that the alternative land would be allotted to the assessee and the amount of compensation would be utilized against that within the time prescribed. This explanation has been not found to be false by the authorities below. Further, the assessee has proved that the explanation is bonafide and all the facts relating to same and material to the computation of total income, have been disclosed by the assessee. In such circumstances the Explanation-I to section 271(1)(c) of the Act is also not attracted in the case of assessee. - Decided in favour of assessee

Summary

Issues Involved:
1. Legitimacy of penalty under section 271(1)(c) for concealment of income or furnishing inaccurate particulars.
2. Eligibility for exemption under section 54D and 54EC of the Income Tax Act.
3. Classification of interest income from fixed deposits.

Detailed Analysis:

1. Legitimacy of Penalty under Section 271(1)(c):

The primary issue is whether the penalty levied under section 271(1)(c) for concealment of income or furnishing inaccurate particulars was justified. The assessee argued that there was no concealment or furnishing of inaccurate particulars as all transactions were disclosed in the audited accounts and explanations were provided. The Tribunal found that the assessee had indeed disclosed all particulars of income and provided explanations, which were not found to be false. The Tribunal held that the mere making of a claim, which is not sustainable in law, does not amount to furnishing inaccurate particulars regarding the income of the assessee. Therefore, the penalty under section 271(1)(c) was not justified and was deleted.

2. Eligibility for Exemption under Section 54D and 54EC:

The second issue involved the eligibility for exemption under sections 54D and 54EC of the Act. The assessee claimed exemption on the compensation received for the compulsory acquisition of its factory premises, intending to reinvest in industrial land. However, the Assessing Officer observed that no alternate capital asset was acquired within the stipulated time, making the assessee ineligible for the exemption. The Tribunal noted that the assessee had made persistent efforts to acquire alternate land and had invested a part of the compensation in REC bonds, albeit beyond the prescribed time limit. Citing the Tribunal's decision in the case of Aspi Ginwala, the Tribunal held that the assessee was prevented by sufficient cause, which was beyond its control, and thus, the claim for exemption was justified.

3. Classification of Interest Income from Fixed Deposits:

The third issue was the classification of interest income from fixed deposits. The Assessing Officer classified the interest income under the head "income from other sources" and disallowed the expenses claimed against it, as there were no business operations during the year. The Tribunal found that the assessee had disclosed the interest income in the profit and loss account and claimed expenses due to temporary cessation of business operations. The Tribunal held that the particulars filed by the assessee were not inaccurate, and the issue was a matter of claim, not of incorrect details supplied by the assessee.

Conclusion:

The Tribunal concluded that the assessee had disclosed all particulars of income and provided bona fide explanations, which were not found to be false. Consequently, the penalty under section 271(1)(c) was not justified. The appeal of the assessee was allowed, and the penalty was deleted. The decision was pronounced in the open court on 29th July 2016.