2024 (12) TMI 32 - AT - Income Tax

Penalty proceedings u/s. 270A - Denial of Exemption u/s. 54F - assessee had shown income from house property from two properties, thus, he inferred that once the assessee owns two residential properties and the income of both the properties have been offered by the assessee in the return - HELD THAT - In this case it is neither a case of misrepresentation or suppression of fact because assessee has duly placed all the facts before the AO as well as in the return of income. Other clauses from b to f are also not applicable to show that it is a case of misreporting of income. If ld. AO is levying the penalty by invoking Section 270A (9), then it is incumbent upon the AO to specify under which limb of Section 270A (9) he is initiating or is levying the penalty for misreporting of income. Penalty u/s 270 A is not automatic or adjunct to any addition made by the AO. Misreporting has to be established and onus is on the AO to give finding as how it amounts to misreporting under the clauses of sub section (9) of section 270A. As assessee had duly stated all the facts and stated that he was under a bonafide belief that the only property which he has purchased in his name (alongwith his father) on transfer of capital asset was the only property which was owned by him, and therefore on purchasing this property he can claim exemption u/s 54F. The other property which was bequeathed to him after demise of his mother and came as inheritance belonged to his mother and not him. On such bonafide belief and when this fact has been duly stated and reported, then where is the question of misrepresentation or suppression of fact. At best it is an inference of AO on interpretation of statute and not something he has found out any suppression of facts on his own or by any inquiry. Appeal of the assessee is allowed.

Summary

Issues:

1. Claim of exemption u/s. 54F denied due to ownership of two residential properties.
2. Penalty proceedings u/s. 270A initiated for wrong claim of exemption.
3. Application for immunity under Section 270AA beyond the specified period.
4. Dispute regarding misreporting of income and imposition of penalty under Section 270A(9).

Analysis:

The appeal was filed by the assessee against the order passed by NFAC, Delhi regarding penalty proceedings u/s. 270A. Despite the absence of the assessee during the proceedings, the appeal was decided on merits. The issue arose when the assessee claimed exemption u/s. 54F of Rs. 18,38,442, but the assessing officer noted that the assessee owned two residential properties, leading to the denial of the exemption claim. The AO initiated penalty proceedings u/s. 270A, deeming the wrong claim as misreporting of income.

The assessee contended that the properties were inherited and purchased jointly with the father, not exceeding one property owned by the assessee. However, the AO and CIT (A) upheld the denial of exemption and imposition of penalty, citing ownership of more than one residential property. The assessee applied for immunity under Section 270AA, but the application was filed beyond the stipulated period, leading to its rejection.

During the appeal, it was argued that the penalty under Section 270A(9) was unjustified as there was no misreporting of income. The Tribunal observed that the assessee had disclosed all relevant details and had a genuine belief in the claim made. The AO failed to specify the grounds for misreporting under Section 270A(9), and it was concluded that the penalty was not warranted. Consequently, the penalty imposed by the CIT (A) was revoked, and the appeal of the assessee was allowed.

In conclusion, the Tribunal found that the assessee's claim for exemption u/s. 54F was valid, considering the ownership details of the properties. The misreporting of income was not established, and the penalty under Section 270A was deemed unwarranted in this case. The decision highlighted the importance of clarity in assessing misreporting and the necessity for the AO to provide explicit reasoning for imposing penalties under the specified sections.