2019 (1) TMI 1521 - AT - Income Tax

Tribunal quashes penalty for good faith claims under Section 271(1)(c)

The Tribunal allowed the assessee's appeal, quashing the penalty imposed under Section 271(1)(c). The Tribunal held that the claims made by the assessee, ... Penalty u/s 271(1)(c) - deliberate concealment of income OR bonafide contesting claim of exemption - assessee was not entitled to claim u/s 54F and 54B for the specific reason that the land so sold was not agricultural one, the same was converted into a non-agricultural land before transferring it on 30.11.2010 by the assessee - Held that:- It is evident from the records that in this particular case, the assessee has disclosed all particulars with bonafide belief, no such disclosure was found to be incorrect. Neither the assessee concealed the income by not showing such income in its return or in its books of accounts. The assessee did not hide any income so mentioned in his return, the documents relating to the agricultural land sold by the assessee was produced before the AO, claimed u/s 54F regarding investment for purchase of land for construction of house, investment for purchase of flat or cost of construction of the residential house was duly disclosed by the assessee in his return and the corroborating evidences were also placed before the Assessing Officer. Therefore, there is no conclusive evidence of concealment of income ever found by the authorities below. The primary fact was duly disclosed by the assessee relating to his claim. Merely because the claim was made on bonafide belief of the appellant, the same cannot be held that the income was concealed or inaccurate particulars were furnished. Since, the claim was rejected as not tenable does not empower the revenue authorities to levy the penalty. We repeat that the appellant had furnished all the details, information and explanation regarding his claim of exemption during assessment. No information or details were withheld from the acknowledgement of the Assessing officer. It can be a wrong claim, but according to us, cannot be said to be false. Merely because the claim was made on bonafide interpretation and belief of the appellant it cannot be held that income was concealed or inaccurate particulars furnished. Case of COMMISSIONER OF INCOME-TAX VERSUS RELIANCE PETROPRODUCTS PVT. LTD. [2010 (3) TMI 80 - SUPREME COURT] to be followed - decided in favour of assessee Issues Involved:1. Validity of the claim for exemption under Section 54B.2. Validity of the claim for exemption under Section 54F.3. Validity of the penalty imposed under Section 271(1)(c) for concealment of income.Issue-wise Detailed Analysis:1. Validity of the claim for exemption under Section 54B:The assessee claimed an exemption under Section 54B for Rs. 20,65,100/- on the sale of land, asserting it was agricultural land. However, the land was converted into non-agricultural land before the sale. The Assessing Officer (AO) denied the claim, noting that the assessee failed to prove that agricultural activities were carried out for two years prior to the sale and one year from the date of sale. The Commissioner of Income Tax (Appeals) [CIT(A)] confirmed the disallowance, stating the claim was false and not covered by the definition of exemption provided in the Act.2. Validity of the claim for exemption under Section 54F:The assessee claimed exemptions under Section 54F for investments made in the purchase of land for house construction, a flat, and the cost of constructing a residential house. The AO denied these claims on several grounds:- The assessee already owned a house property in Ahmedabad, making him ineligible for the Section 54F exemption.- The investment in a flat was not supported by a sale deed, only a booking amount.- The cost of construction was not substantiated with sufficient evidence, only a few bills were provided.The CIT(A) upheld the AO's decision, noting that the claims were contrary to the express provisions of the Act and not supported by cogent evidence.3. Validity of the penalty imposed under Section 271(1)(c) for concealment of income:The AO initiated penalty proceedings under Section 271(1)(c) for concealment of income, noting that the assessee failed to attend or provide explanations during the penalty proceedings. The AO imposed a lump sum penalty of Rs. 36,00,000/-, concluding that the assessee had concealed income to the extent of Rs. 1,70,55,571/-. The CIT(A) confirmed the penalty, referencing several judicial precedents supporting the imposition of penalties for false claims and emphasizing that the assessee failed to provide tangible material in support of the claims.During the appeal, the assessee argued that there was no concealment of income and that all particulars were disclosed in good faith. The assessee cited the judgment in CIT-vs-Reliance Petro Products, asserting that merely because a claim was disallowed, it does not amount to concealment or furnishing inaccurate particulars.The Tribunal found that the penalty order was passed without considering the explanation provided by the assessee, violating the principles of natural justice. The Tribunal observed that the assessee disclosed all particulars with a bona fide belief and that there was no conclusive evidence of concealment of income. The Tribunal referred to the judgment in Reliance Petro Products, emphasizing that a bona fide claim, even if incorrect, does not warrant a penalty for concealment. Consequently, the Tribunal quashed the penalty order.Conclusion:The Tribunal allowed the assessee's appeal, quashing the penalty imposed under Section 271(1)(c). The Tribunal held that the claims made by the assessee, though found untenable, were made in good faith and did not amount to concealment of income or furnishing inaccurate particulars.