2026 (1) TMI 680 - AT - Income Tax

Levy of penalty for excess capital gains deductions challenged; tribunal finds inadvertent error and quashes penalty relief for assessee.

Levy of penalty under tax provisions for excess claim of capital gains exemptions was examined; tribunal found the assessee had disclosed correct ... Levy of penalty u/s. 271(1)(c) - excess claim of deduction u/s. 54F & 54B - HELD THAT:- Assessee has furnished all the particulars of income properly in the income tax return and has shown the correct LTCG of ₹ 90,95,120/- as against the old amount calculated at ₹ 27,14,877/-. It is also not the case of the Revenue that claim of deduction u/s. 54F/54B made by the assessee is not as per the provisions of the Act and that any of the conditions provided u/s. 54F/54B of the Act, has not been fulfilled. Only mistake pointed out by the AO is that incorrect claim of higher deduction u/s. 54F/54B has been made by ₹ 63,80,243/-. It is further an admitted fact that assessee has revised the computation of income during the assessment proceedings itself in spite of the fact that assessee could have easily revised the income tax return. All these facts clearly demonstrate that inadvertent mistake has been committed by the assessee making a wrong claim of deduction u/s. 54F/54B of the Act, however, it is not a case of concealment of particulars of income or furnishing inaccurate particulars and therefore the ratio laid down in the case of Reliance Petroproducts (P.) Ltd [2010 (3) TMI 80 - SUPREME COURT] squarely applies on the facts of the instant case. CIT(A) erred in confirming the action of the Ld.AO in levying penalty u/s. 271(1)(c) of the Act. Decided in favour of assessee. Issues: Whether penalty under Section 271(1)(c) of the Income-tax Act, 1961 can be sustained for an excess claim of deductions under Sections 54F and 54B where the return furnished the particulars of income and the excess claim resulted from an inadvertent mistake subsequently rectified during assessment proceedings.Analysis: The Tribunal examined whether the excess claim amounted to concealment of particulars or furnishing of inaccurate particulars within the meaning of Section 271(1)(c). The decision applies the legal principle that a mere claim which is unsustainable in law does not necessarily amount to furnishing inaccurate particulars if the particulars supplied in the return are not factually incorrect, erroneous or false. The Tribunal noted that the assessee had disclosed the capital gain particulars in the return, the excess deduction arose from an inadvertent error in claiming exemptions under Sections 54F and 54B, and the assessee revised the computation during assessment proceedings before the statutory date for filing a revised return. Reliance was placed on the Supreme Court precedent establishing that penalty under Section 271(1)(c) requires inaccurate particulars or concealment of particulars and that mere failure of a claim in law does not automatically attract penalty. The Tribunal found no allegation or finding that any particulars furnished were factually false or that conditions for exemption under Sections 54F/54B were not satisfied.Conclusion: The penalty levied under Section 271(1)(c) is not sustainable and is deleted; the decision is in favour of the assessee.