2024 (8) TMI 1182 - AT - Income Tax

Penalty proceedings u/s. 271(1)(c) - disallowing deduction u/s. 54EC and deduction u/s. 54F - HELD THAT - So far as the claim u/s 54EC, it is observed that the assessee herself admitted that the claim is incorrect and by filing revised statement of income on 19- 10-2015 withdrew the claim u/s 54EC of the Act, which clearly is an act of furnishing inaccurate particulars. Therefore, in our considered opinion, the Revenue rightly imposed the penalty for intentionally furnishing inaccurate particulars of income within the meaning of section 271(1)(c) of the Act relating to quantum of incorrect deduction under section 54EC of the Act. Quantum of penalty relating to deduction of 54F we are of the opinion that, during the course of assessment proceedings, the assessee repeatedly misrepresented the facts. Therefore, the AO disallowed the deduction, which was confirmed by the Ld.CIT(A), and the Tribunal granted relief to the extent of Rs. 30,00,000/-. There is no doubt that the assessee had claimed wrong deduction u/s. 54F of the Act and, therefore, the AO levied the penalty which was confirmed by the Tribunal. However, it is observed that the assessee's claim under section 54F of the Act, though partially disallowed, was not found to be entirely devoid of merit, as evidenced by the partial allowance in the quantum proceedings, therefore the penalty levied on the allowed portion should be reconsidered. Assessee admitted to an incorrect claim and withdrew the claim under section 54EC of the Act. Therefore, we upheld the penalty related to the incorrect deduction under section 54EC of the Act as the act of furnishing inaccurate particulars of income. We direct the AO to re-compute the quantum of penalty. Relief of Rs. 30,00,000/- should be granted in the penalty computation, reducing the penalty amount accordingly.Appeal of the Assessee is partly allowed.

Summary

Issues:
Appeal against penalty order under section 271(1)(c) of the Income Tax Act, 1961 for AY 2013-14.

Detailed Analysis:

1. Background and Facts:
The appeal was filed against the penalty order dated 25/07/2018 passed by the Commissioner of Income Tax (Appeals)-7, Ahmedabad, arising from the assessment for AY 2013-14. The case involved the disallowance of deductions under sections 54EC and 54F of the Act, leading to penalty proceedings under section 271(1)(c) for furnishing inaccurate particulars.

2. Assessee's Contentions:
The Assessee contended that the penalty imposed was illegal, unlawful, and against natural justice. They argued that the CIT(A) did not consider their submissions and evidence properly. The Assessee sought deletion of the penalty upheld by the CIT(A).

3. Arguments and Decision:
During the hearing, the AR of the assessee argued that since the deduction under section 54F was restricted to Rs. 30,00,000 in the quantum appeal, the penalty should not be levied. The DR, however, supported the CIT(A)'s order, stating that the Assessee had made incorrect claims under sections 54F and 54EC.

4. Tribunal's Findings:
The Tribunal noted the Co-ordinate Bench's decision restricting the deduction under section 54F to Rs. 30,00,000. It also considered the MA order recalling the appeal. The Tribunal found that the assessee had been granted relief in the quantum proceedings, which should have been taken into account in the penalty proceedings.

5. Penalty Re-computation:
The Tribunal upheld the penalty related to the incorrect deduction under section 54EC but directed the AO to re-compute the penalty considering the relief granted in the quantum proceedings. The penalty amount was to be reduced by Rs. 30,00,000 accordingly.

6. Conclusion:
The Tribunal partly allowed the Assessee's appeal, emphasizing the need to reconsider the penalty amount in light of the relief granted in the quantum proceedings. The decision was pronounced on 23rd August 2024 at Ahmedabad.