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TMI Blog2019 (6) TMI 787X X X X Extracts X X X X X X X X Extracts X X X X ..... 0) TMI 1451 - SC ORDER] relied upon by the ld. DR for the Revenue is not applicable to the facts and circumstances of the case. The facts of this case is covered by Hon ble Apex Court in case of CIT vs. Reliance Petro Products Pvt. Ltd. . [ 2010 (3) TMI 80 - SUPREME COURT] wherein it is held that merely making claim which is not sustainable in law by itself would not amount to furnishing of inaccurate particulars of income Coordinate Bench of the Tribunal in case cited as Shri D. Harindran vs. ITO [ 2016 (9) TMI 1462 - ITAT CHENNAI] decided the identical issue in favour of the assessee in the light of the decision of Rajasthan Spinning and Weaving Mills [ 2009 (5) TMI 15 - SUPREME COURT] and CIT vs. Gem Granites [ 2013 (11) TMI 1375 - MADRAS HIGH COURT] by holding that even if it is considered that the claim made by the assessee u/s 54/54F is incorrect, it would not tantamount to furnishing of inaccurate particulars of income Referring to ledger account of capital work-in-progress qua construction of residential property for claiming deduction u/s 54 the assessee has claimed deduction u/s 54 for raising construction of house bonafidely qua which the AO has taken different view that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he appellant on construction of first floor of his house at Sainik Farm, on the advice of his Chartered Accountant. 5. Without prejudice to the above, otherwise also penalty levied u/s 271(1)(c) of the Act is excessive as the amount of tax levied on addition of long term Capital gain at 20% of ₹ 67,68,010/- and the ACIT levied penalty @ 30% of ₹ 67,68,010/-." 2. Briefly stated the facts necessary for adjudication of the controversy at hand are : On the basis of completed assessment under section 143 (3) of the Income-tax Act, 1961 (for short 'the Act') assessing the total income at ₹ 1,60,72,970/- by making addition of ₹ 67,68,010/- on account of disallowance of claim made under section 54 of the Act, penalty proceedings by way of issuance of notice u/s 274 read with section 271(1)(c) of the Act were initiated. Declining the contentions raised by the assessee that it was not a case of concealment of particulars of income or furnishing of inaccurate particulars of income attracting penalty u/s 271(1)(c) of the Act, AO reached the conclusion that the assessee has willfully furnished inaccurate particulars of income to the extent of ₹ 67,68,010/- and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rindran - (2018) 97 taxmann.com 297 (Madras), Hon'ble Apex Court in CIT vs. Reliance Petro Products Pvt. Ltd. 322 ITR 158 (S.C.), coordinate Bench of the Tribunal in D. Harindran vs. ITO ITA No.233/Mds/2016 order dated 23.09.2016, Hon'ble Karnataka High Court in case of CIT vs. Manjunatha Cotton and Ginning Factory-359ITR 565 and CIT vs. SSA's Emerala Meadows -73 taxmann.com 241 (kar.) (Revenue's SLP dismissed in 242 taxman 180). 8. However, on the other hand, ld. Senior DR in order to repel the arguments addressed by the ld. AR for the assessee contended inter alia that the assessee has claimed the deduction u/s 54 of the Act with malafide intention which amounts to concealment of particulars of income; that the assessee has never raised any question of invalid notice or satisfaction of the AO during the penalty proceedings nor before the ld. CIT (A) so no prejudice has been caused to the assessee as the assessee has understood the purport of the notice u/s 274 r/w section 271(1)(c) of the Act and relied upon the decision rendered by the Hon'ble Madras High Court in Sundaram Finance Ltd. vs. CIT (2018) 403 ITR 407 (Madras), in which SLP has also been dismissed by Hon'ble Supreme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ambiguous and without application of mind rather initiated and completed the penalty proceedings in mechanical manner, we are of the considered view that the penalty proceedings are not sustainable. 12. Hon'ble Apex Court in case of CIT vs. SSA's Emerala Meadows - (2016) 73 taxmann.com 248 (SC) while dismissing the SLP filed by the Revenue quashing the penalty by the Tribunal as well as Hon'ble High Court on ground of unspecified notice has held as under:- "Section 274, read with section 271(1)(c), of the Income-tax Act, 1961 - Penalty - Procedure for imposition of (Conditions precedent) - Assessment year 2009-10 - Tribunal, relying on decision of Division Bench of Karnataka High Court rendered in case of CIT v. Manjunatha Cotton & Ginning Factory [2013] 359 1TR 565/218 Taxman 423/35 taxmann.com 250, allowed appeal of assessee holding that notice issued by Assessing Officer under section 274 read with section 271 (1 )(c) was bad in law, as it did not specify under which limb of section 271 (1 )(c) penalty proceedings had been initiated, i.e., whether for concealment of particulars of income or furnishing of inaccurate particulars of income - High Court held that matter was cove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... favour of the revenue. The additional substantial question of law, which was framed is rejected on the ground that on facts the said question does not arise for consideration as well as for the reasons set out by us in the preceding paragraphs." 14. However, we are of the considered view that in the instant case, not only the notice issued to the assessee under section 274 read with section 271(1)(c) is defective but AO has not even made himself satisfied at the time of making disallowance / addition in assessment order if the assessee has furnished inaccurate particulars of income or has concealed particulars of his income rather to be on the safer side he has invoked both the limbs of section 271(1)(c) of the Act. 15. So, we are of the considered view that this is not merely a case of serving a defective notice under section 274 read with section 271(1) on the assessee rather it is a case of non-application of mind on the part of the AO to make himself satisfied as to under which limb of section 271(1)(c) of the Act, he is going to initiate/levy the penalty on the assessee and as such, decision of Sundaram Finance Ltd. (supra) relied upon by the ld. DR for the Revenue is not ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te, the liability would arise. To attract penalty, the details supplied in the return must not be accurate, not exact or correct, not according to the truth or erroneous. Where there is no finding that any details supplied by the assessee in its return are found to be incorrect or erroneous or false there is no question of inviting the penalty under section 271(l)(c). A mere making of a claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such a claim made in the return cannot amount to furnishing inaccurate particulars." 18. Coordinate Bench of the Tribunal in case cited as Shri D. Harindran vs. ITO (supra) decided the identical issue in favour of the assessee in the light of the decision rendered by Hon'ble Apex Court in case of Rajasthan Spinning and Weaving Mills and decision rendered by Hon'ble Madras High Court in case of CIT vs. Gem Granites (2013) 86 CCH 160 by holding that even if it is considered that the claim made by the assessee u/s 54/54F is incorrect, it would not tantamount to furnishing of inaccurate particulars of income by returning following findings :- "8. We have also c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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