Penalty upheld under section 271(1)(c) for incorrect section 54EC deduction claim after assessee withdrew it in revised return

ITAT Ahmedabad upheld penalty under section 271(1)(c) for incorrect deduction claim under section 54EC, as assessee admitted the claim was wrong and withdrew it by filing revised return, constituting furnishing of inaccurate particulars. Regarding section 54F deduction, while assessee misrepresented facts and penalty was justified, ITAT directed AO to re-compute penalty quantum considering partial relief of Rs. 30,00,000/- granted in quantum proceedings, as the claim wasn't entirely without merit. Appeal partly allowed.

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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.

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