2023 (6) TMI 1034 - AT - Income Tax

Levying penalty u/s 271(1)(c) - Proof of concealment of income by the assessee - AO in quantum proceedings dismissed excess claim of assessee u/s 54 - HELD THAT - As identical facts and circumstances of the case quite similar and identical to the case of ITO Vs. M. Narayanswami 2010 (10) TMI 670 - ITAT, BANGALORE wherein, held that the assessee has furnished all particulars regarding sale of immovable property and claimed exemption u/s 54 of the Act which was partly denied by the AO. In such a situation the claim of deduction u/s 54 centres around interpretation of a provision based on various judgment of Hon'ble High Court and orders of the Tribunal. The identical situation is clearly discernable from two of the assessment orders wherein, the AO by relying and referring to certain judgments and factual matrix of the case recalculated the long term capital gain and allowed share to the assessee u/s 54 of the Act and remaining part was disallowed making addition in the hands of the assessee. Penalty u/s 271(1)(c) cannot be lead on the assessment by alleging that the assessee had concealed particulars of income and also furnished inaccurate particulars of income particularly when the AO himself has in the assessment order at page 3 only alleged that the assessee had deliberately or without any reasonable cause concealed the particulars of income without making further allegations. As in the case of CIT Vs. Reliance Petro Products Pvt. Ltd 2010 (3) TMI 80 - SUPREME COURT held that merely because the claim of assessee was not accepted or not found to be acceptable by the revenue authorities does not entitle the AO to impose penalty u/s 271(1)(c) of the Act. Decided in favour of assessee.

Summary

Issues involved:
The appeal against the order of the ld CIT(A) for AY 2013-14 regarding the levy of penalty u/s 271(1)(c) of the Income Tax Act, 1961.

Summary:
1. The assessee contested the penalty imposed by the ld CIT(A) under section 271(1)(c) of the Act, arguing that there was no concealment of income. The counsel highlighted that the excess claim of exemption u/s 54 of the Act was denied by the AO, leading to the penalty order. It was emphasized that merely making a claim not sustainable in law does not amount to furnishing inaccurate particulars of income. The penalty order alleging both concealment and furnishing inaccurate particulars was deemed invalid and unsustainable.

2. The Sr. DR supported the penalty, asserting that the assessee failed to explain the concealment of income through a false claim u/s 54 of the Act. The AO's decision to levy penalty was deemed correct and justified.

3. The Tribunal referred to a similar case where it was held that furnishing inaccurate particulars does not automatically attract penalty. The Tribunal emphasized that the assessee disclosed all particulars, and the claim, even if wrong, was based on interpretations supported by legal judgments. The Tribunal cited relevant Supreme Court judgments to support the view that penalty should not be imposed solely due to a claim being unsustainable in law.

4. Evaluating the facts, the Tribunal found that the AO dismissed the excess claim of the assessee under section 54 of the Act in quantum proceedings. However, the penalty was imposed on the grounds of concealed income and furnishing inaccurate particulars. The Tribunal concluded that in a situation where the claim is based on legal interpretations and judgments, penalty u/s 271(1)(c) cannot be imposed solely on the basis of a claim being disallowed by the revenue authorities.

5. The Tribunal allowed the appeal of the assessee, directing the AO to delete the penalty imposed u/s 271(1)(c) of the Act.

Separate Judgment:
The appeal of the assessee was allowed by the Tribunal, and the penalty imposed by the AO was directed to be deleted.