2021 (4) TMI 984 - AT - Income Tax

Penalty order under section 271(1)(c) - wrong claim of deductions u/s.54EC and 54F of the Act against the Long Term Capital Gain (LTCG) earned on sale of land situated at Vesu, Surat - deduction u/s.54EC allowed to the assessee on the amount invested within the specified period and not on the amount invested after the specified period - HELD THAT - In CIT Vs Reliance Petroproducts Limited 2010 (3) TMI 80 - SUPREME COURT holds that quantum and penalty are parallel proceedings wherein each and every disallowance/addition made in former does not ipso facto attract latter penal provision. As the assessee has furnished all the particulars regarding claim of deduction u/s.54EC and 54F of the Act in the Return of Income, and during the course of assessment proceedings, all the material facts relating to investment in Bonds u/s.54EC and specified account 54F of the Act were disclosed to the assessing officer. The assessee also explained that he had received the amount of sale consideration in piecemeal manner and invested the said amount of ₹ 1,50,00,000/- u/s.54EC of the Act, in three different financial years, that is, F.Y. 2009-10, 2010-11 and 2011-12. Therefore, we noticed that no fault has been found by the ld. CIT(A) with the particulars submitted by the assessee in its Return of income. Besides, as we noted above that the charge against which the penalty is to be levied is not specific and when the charge itself is not specific and is vague, the penalty should not be levied. Hence, we are not inclined to accept the contention of the ld. CIT(A) in confirming the penalty imposed by assessing officer under section 271(1) (c ) of the Act, therefore we delete the penalty - Decided in favour of assessee.

Summary

Issues Involved:
1. Legitimacy of penalty under section 271(1)(c) of the Income Tax Act, 1961.
2. Correctness of deductions claimed under sections 54EC and 54F of the Income Tax Act, 1961.
3. Consistency and clarity of the charges for penalty proceedings.

Detailed Analysis:

1. Legitimacy of Penalty under Section 271(1)(c) of the Income Tax Act, 1961:
The assessee challenged the penalty of ?31,35,750 imposed under section 271(1)(c) of the Act for the assessment year 2011-12. The penalty was based on the disallowance of deductions claimed under sections 54EC and 54F. The Tribunal noted that there was inconsistency in the assessment order and the penalty order regarding the charge—whether it was for “furnishing inaccurate particulars of income” or “concealment of income.” The Tribunal referenced the Supreme Court’s ruling in T Ashok Pai and the Gujarat High Court’s decision in Manu Engineering Works, emphasizing that the penalty order must be clear about the specific charge. The Tribunal concluded that the penalty order was not sustainable due to the lack of a definite charge and quashed it.

2. Correctness of Deductions Claimed under Sections 54EC and 54F of the Income Tax Act, 1961:
The assessee claimed deductions of ?1,50,00,000 under section 54EC and ?52,04,000 under section 54F. The Assessing Officer (AO) allowed only ?50,00,000 under section 54EC, disallowing the remaining ?1,00,00,000 as it was not invested within the specified period. Similarly, the AO disallowed the deduction under section 54F because the amount was deposited in the Capital Gains Account Scheme after the due date. The Tribunal observed that the assessee had made a bona fide claim supported by various judicial pronouncements and had disclosed all material facts during the assessment proceedings. The Tribunal referenced the Supreme Court’s decision in CIT vs. Reliance Petroproducts, which held that merely making a claim that is not accepted by the Revenue does not attract penalty under section 271(1)(c).

3. Consistency and Clarity of the Charges for Penalty Proceedings:
The Tribunal found that the AO initiated penalty proceedings for “furnishing inaccurate particulars of income” but imposed the penalty for both “concealment and furnishing inaccurate particulars of income.” This inconsistency and lack of a clear, specific charge rendered the penalty order unsustainable. The Tribunal emphasized that the penalty proceedings must be clear about the specific charge, and any ambiguity or inconsistency could invalidate the penalty.

Conclusion:
The Tribunal quashed the penalty order under section 271(1)(c) of the Act due to the lack of a definite charge and the bona fide nature of the assessee’s claims for deductions under sections 54EC and 54F. The appeal filed by the assessee was allowed, and the penalty of ?31,35,750 was deleted.