TaxTMI 
TaxTMI 
2025 (7) TMI 44
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....f the Department submitted that the assessee in the return of income had claimed the benefit of deduction u/s. 54F of the Act, without actual purchase or construction of a new asset i.e. a residential house. The assessee had merely entered into an agreement for construction of the house. The AO asked the assesseeto explain and furnish evidence to substantiate claim of deduction u/s. 54F of the Act. The assessee vide letter dated 13.12.2018 surrendered the claim of deduction and agreed for the addition. Since, the assessee had made wrong claim of deduction, therefore the AO initiated penalty proceedings u/s. 271(1)(c) for furnishing inaccurate particulars of income and levied penalty of Rs. 1,45,59,592/- vide order dated 26.06.2019. The CIT(A) deleted the penalty levied u/s. 271(1)(c) only for the reason that the assessee has not litigated further and has offered the deduction claimed u/s. 54F of the Act to tax. Before the CIT(A), the assessee had raised a plea that the construction was delayed by the contractor and was beyond the control of assessee. However, before the AO in assessment proceedings as well as in penalty proceedings no such plea was made, hence, the plea made before....
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.... 14A of the Act specifically excluded the deductions in respect of the expenditure incurred by the assessee in relation to income which does not form part of the total income under the Act. It was further pointed out that the dividends from the shares did not form the part of the total income. It was, therefore, reiterated before us that the Assessing Officer had correctly reached the conclusion that since the assessee had claimed excessive deductions knowing that they are incorrect; it amounted to concealment of income. It was tried to be argued that the falsehood in accounts can take either of the two forms; (i) an item of receipt may be suppressed fraudulently; (ii) an item of expenditure may be falsely (or in an exaggerated amount) claimed, and both types attempt to reduce the taxable income and, therefore, both types amount to concealment of particulars of one's income as well as furnishing of inaccurate particulars of income. We do not agree, as the assessee had furnished all the details of its expenditure as well as income in its Return, which details, in themselves, were not found to be inaccurate nor could be viewed as the concealment of income on its part. It was up t....
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....sessee is the Director of Trophy Estates Private Limited since 2005 onwards, whom the initial payment of Rs. 7.00 Crores out of purchase consideration of Rs. 7.25 Crores, was made for the property. Normally, no prudent man will do such initial advance payment to any independent builder/unrelated parties. c. No documentary evidence was brought on the record to demonstrate that the construction got delayed due to the builder as claimed by the assessee before income tax authorities during the assessment and penalty proceedings. Similarly, no evidence/material was brought on the record to justify the claim of the assessee that the builder had made sincere efforts to complete the construction work in time. No documentary evidence of sanctioned of map of construction over the said plot No.25, Property No. 226 (old) 222/200 (New), Rajpur Road, Dehradun was brought on the record. However, the details available in public domain clearly show that Trophy Estates Private Limited got map sanctioned of 62 flats, by the competent authority, on part of the Property No. 226 (old) 222/200 (New), Rajpur Road, Dehradun and also got completion certificates, by the competent authority, of resid....
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.... the two forms; (i) an item of receipt may be suppressed fraudulently; (ii) an item of expenditure may be falsely (or in an exaggerated amount) claimed, and both types attempt to reduce the taxable income and, therefore, both types amount to concealment of particulars of one's income as well as furnishing of inaccurate particulars of income. We do not agree, as the assessee had furnished all the details of its expenditure as well as income in its Return, which details, in themselves, were not found to be inaccurate nor could be viewed as the concealment of income on its part. It was up to the authorities to accept its claim in the Return or not. Merely because the assessee had claimed the expenditure, which claim was not accepted or was not acceptable to the Revenue, that by itself would not, in our opinion, attract the penalty under Section 271(1)(c). If we accept the contention of the Revenue then in case of every Return where the claim made is not accepted by Assessing Officer for any reason, the assessee will invite penalty under Section 271(1)(c). That is clearly not the intendment of the Legislature.' 7. Thus, in facts of the case and in light of the decision of ....
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....t mere disallowance of the claim in the assessment proceedings could not be the sole basis for levying penalty under Section 271(1)(c) of the Act. It was submitted specifically that it was an investment company and in its own case for Assessment Year 2000-01 the Commissioner (Appeals) had deleted the disallowance of interest made by the Assessment Officer and the Tribunal has also confirmed the stand of the Commissioner (Appeals) for that year and, therefore, it was on the basis of this that the expenditure was claimed. It was further submitted that making a claim which is rejected would not make the assessee company liable under Section 271(1)(c) of the Act. It was again reiterated that there was absolutely no concealment, nor were any inaccurate particular ever submitted by the assessee-company. (Emphasis supplied) 6. The crucial facts of Reliance Petroproducts Pvt. Ltd. (supra) are that the AO levied penalty on the disallowance of interest incurred on the loans which was used to buy IPL shares, which had not resulted any taxable income. In the case of Reliance Petroproducts Pvt. Ltd. Similar disallowance of interest was also made in AY 2000-01, which was deleted by the CIT....
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....of the Act in his ITR was not bonafide mistake on the part of the assessee. 8. It is evident from the section 271(1)(c) of the Act that the words used are 'has concealed the particulars of his income' or furnished 'inaccurate particulars of such income'. Thus, both in case of concealment and inaccuracy, the phrase 'particulars of income' has been used. The legislature has not used the words 'concealed his income'. From this, it would be apparent that penal provision would operate when there is a failure to disclose fully or truly all the particulars. The words 'particulars of income' refer to the facts which lead to the correct computation of income in accordance with the provisions of the Act. Deduction under section 54F of the Act is crucial part of the computation of income in accordance with the provisions of the Act. The respondent/assessee claimed deduction under section 54F of the Act without disclosing full and complete particulars thereof. Hence, I am of the considered opinion that the respondent/assessee, by claiming non-genuine/bogus deduction under section 54F of the Act, particularly when he was fully aware the fact that he hi....
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....is leviable if the AO is satisfied in the course of any proceedings under this Act that any person has concealed the particulars of his income or furnished inaccurate particulars of such income. The Hon'ble Supreme Court, in the case of Dharamendra Textile Processors 295 ITR 244, held that the penalty under section 271(1)(c) of the Act is a civil liability for which willful concealment is not an essential ingredient for attracting the civil liability. Here, the respondent/assessee did not disclose the full and complete facts with respect to claim of deduction under section 54F of the Act though he was fully aware of the bare facts about the status of construction of the residential property under reference of deduction under section 54F of the Act. 11. The case in hand is quite similar to that of the case of Zoom Communication (P.) Ltd. 327 ITR 510 and Escorts Finance Ltd. 328 ITR 44, wherein the Hon'ble Delhi High Cour the ld that if the assessee makes a claim which is not only incorrect in law, but is also wholly without any basis and explanation furnished by him for making such a claim is not found to be bona fide, Explanation 1 to section 271(1)(c) of the Act would come into....
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....accurate particulars of income may at times overlap, as for example when half of the income under a particular head is not at all disclosed, that would be concealed to that extent while the remaining half which is in fact disclosed would, not being his complete disclosure amount to inaccurate particulars of income as regards that constituent item of the ITR. By the very nature of the assessment proceedings the AO while ascertaining the total income chargeable to tax would be in a position to detect the specific or definite particulars of income concealed or of which false particulars are furnished. Where in the constituents of income returned, such specific or definite particulars of income are detected as concealed, then even in the total income figure to that extent they reflect, it would amount to concealment to that extent. In the same way where specific and definite particulars of income are detected as inaccurate, then such figure will also make the total income inaccurate in particulars to the extent it does not include such income. Whether it be a case of only concealment or of only inaccuracy or both, the particulars of income so vitiated would be specific and definite and....
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....e of which the construction of the house was delayed therefore, the penalty of Rs. 1,45,59,592/- levied by learned AO should be deleted. 5.7 Accordingly, the appeal of appellant is allowed." [Emphasis supplied] 14. In terms of provisions of section 271(1)(c) of the Act read with explanation 1 thereto and the judicial pronouncements in the case of B.A. Balasubramaniam & Bros. Co. 157 CTR 556(SC); B.A. Balasubramaniam & Bros. 152 ITR 529 (Mad.);Mussadilal Ram Bharose 165 ITR 14 (SC); K.R. Sadayappan 185 ITR 49 (SC); Jeevan Lal Sah 205 ITR 244 (SC) and K.P.Madhusudanan 251 ITR 99(SC), it is well established that whenever there is difference between the returned and assessed income, there is inference of concealment. The explanation 1 to section 271(1)(c) of the Act raises a presumption that can be rebutted by the assessee with reference to facts of the case. Thus, the onus is on the assessee to rebut the inference of concealment. The absence of plausible explanation itself would attract penalty. The onus laid down upon the assessee to rebut the presumption raised under explanation 1 would not be discharged by any fantastic or fanciful explanation without any corro....
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....n of income filed by it from year to year. The AO, in our view, has recorded a categorical finding that he was satisfied that the assessee had concealed true particulars of income and is liable for penalty proceedings under Section 271 read with Section 274 of the Income Tax Act, 1961." 16. The Hon'ble Apex Court in the case of K. P. Madhusudhanan 251 ITR 99 affirmed the decision of the Kerala High Court. The Kerala High Court observed as follows: "Section 271(1)(c) of the Income-tax Act, 1961, is attracted where, in the course of any proceedings under the Act, the Assessing Officer or the first appellate authority is satisfied that: (a) any person has concealed the particulars of his income; or (b) has furnished inaccurate particulars of such income. The expressions 'has concealed' and 'has furnished inaccurate particulars' have not been defined either in the section or elsewhere in the Act. However, notwithstanding differences in the two circumstances, they lead to the same effect, viz., keeping off a certain portion of income. The former is direct while the latter may be indirect in its execution. A conspectus of the Explanation added by ....
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.... the arrangement did not work out. Therefore, the amount was offered for taxation. There was a clear admission that the entries were not made on the relevant dates. It was not a case where entries were made on the relevant dates and the source of money was omitted. The entries on the contrary were made on dates when there was sufficient cash balance. The intention to hide the actual state of affairs was clear. The explanation offered was fanciful and vague. The imposition of penalty was valid and the Tribunal erred in cancelling it." 17. The Hon'ble Supreme Court in the case of K.P.Madhusudanan (supra) while affirming the aforesaid view held that "We find it difficult to accept as correct the two judgments aforementioned. The Explanation to section 271(1)(c) is a part of section 271. When the Income-tax Officer or the Appellate Assistant Commissioner issues to an assessee a notice under section 271, he makes the assessee aware that the provisions thereof are to be used against him. These provisions include the Explanation. By reason of the Explanation, where the total income returned by the assessee is less than 80 per cent. of the total income assessed under sectio....
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.... section 271(1)(c) of the Act, the AO did not categorically mention the Explanation 1 to section 271(1)(c) of the Act though he mentioned that the explanation offered by the assessee was not found acceptable. Thus, the AO has indirectly invoked the Explanation 1 to section 271(1)(c) of the Act. The Hon'ble Punjab & Haryana High Court in the case of Rajeshwar Singh 162 ITR 173, have held that Explanation 1 to section 271(1)(c) of the Act can be invoked for the first time by the ITAT. By following the aforesaid judgment of the Hon'ble Punjab & Haryana High Court in the case of Rajeshwar Singh the ITAT, Chandigarh Bench in the case of Roshan Lal Madan 245 ITR 36 (AT)(Chd.), has taken the same view that Explanation 1 to section 271(1)(c) of the Act can be invoked for the first time by the Tribunal. Thus, it is held that the Explanation 1 to section 271(1)(c) of the Act is clearly attracted here. 20. A very heavy onus was placed on the respondent/assessee to explain the difference between the assessed income and returned income and the respondent/assessee, in the case in hand, did not discharge the said onus corroborated by documentary evidence. Since the assessee failed to establish....
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....orities or records for imposition of penalty u/s. 271(1)(c) of the Act? (iii) Whether in facts of the case, penalty levied u/s. 271(1)(c) of the Act is liable to be sustained where the assessee's claim of deduction u/s. 54F of the Act was merely rejected by the AO on the grounds of noncompliance of provisions of section 54F of the Act? (iv) Whether expression 'furnished inaccurate particulars of such income' including wrong claim resulting from noncompliance of the prerequisite conditions of section 54F of the Act? (v) Whether the Tribunal can change the limb of penalty to "concealment of income", when the AO has invoked the limb of "furnishing inaccurate particulars of income" at the time of recording satisfaction for levy of penalty u/s. 271(1)(c) of the Act? 3. Brief facts of the case are that the assessee during financial year 2015-16 relevant to assessment year 2016-17 sold 5,99,990 number of shares of Dixon Appliances Private Limited for a total consideration of Rs.10,00,00,000/-, resulting in long-term capital gain of Rs.9,01,50,051/-. The AO noted that the assessee claimed to have invested a sum of Rs.7,00,00,000/- towards purchase of plot loca....
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....)(c) on account of furnishing inaccurate particulars of income with respect to the deduction claimed under section 54F of the Act." 5. The Ld. Judicial Member relying upon the decision of Hon'ble Supreme Court in the case of CIT vs. Reliance Petroproducts P. Ltd. (2010) 322 ITR 158 (SC) and also noting the fact that the assessee has furnished all the details in the return of income, including long-term capital gain on sale of shares and holding that it is not a case where the details furnished by the assessee were found to be incorrect in regard to long-term capital gain earned during the year and the same was utilised towards purchase of the property and confirmed the order of the CIT(A) in deleting the penalty. However, Ld. Accountant Member allowed the appeal of the Revenue by reversing the order of the CIT(A) and consequently the penalty was confirmed. 6. Now upon reference, the matter was heard. 7. The above noted facts as narrated in paras 2 to 5 of this order are undisputed. Admittedly, assessee sold shares of Dixon Appliances Private Limited for a total consideration of Rs.10,00,00,000/- resulting in long-term capital gain of Rs. 9,01,50,051/- and claimed that the ....
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....owever, to avoid all protracted litigation and the issue being debatable, the assessee decided to withdraw his claim of deduction under section 54 of the Act and paid the due tax along with interest. 7.2 Now before me, the Ld. Counsel for the assessee argued that the claim of assessee only became bad and impermissible on 19.07.2018 because the builder could not complete the construction of building and consequently the sale deed could not be materialized. It was the claim that any income had to be offered, would ideally have been offered in the return of income for financial year 2018-19 relating to assessment year 2019-20 and not for the relevant assessment year 2016-17 as has been done in the present case. He argued that at this juncture, what would be relevant to highlight and would also add credence to the bonafides of the assessee is that the assessee filed complete details before the AO and also surrendered the amount at the first instance. Although, the assessee could have declared this long term capital gain in financial year 2018-19 relevant to assessment year 2019-20. The only reason why this point is highlighted, argued by the Ld. Counsel for the assessee, is to evide....
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....forts to complete the construction of house before filing the ITR by the assessee. Further it is submitted that notice u/s. 143(2) of the Act informing the assessee of the fact that his case for the relevant assessment year has been selected for scrutiny by the Department, was issued to the assessee on 06.07.2017 i.e. almost 2 years after the share sale transaction, and the status of the residential house was still not complete and no evidence has been brought on record before the lower authorities in this regard and no efforts have been made by assessee and contractor to complete the building before the due date for claiming deduction u/s. 54Fof the Act. It was the further contention of the revenue that during the assessment proceedings, vide notice dated 23.10.2018 the assessee was asked to justify the claim of deduction u/s. 54F of the Act alongwith evidence, but assessee in response thereof submitted an agreement to sell with Trophy Estates P Ltd. wherein the assessee had purchased the property. On the said notice dated 23.10.2018, more than 3 years had already lapsed for the purchase / construction of the said residential house, assessee is ineligible to claim deduction u/s. 5....
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....n u/s. 54F of the Act and furnished the explanation in relation to exemption claimed u/s. 54F of the Act. The assessee vide his letter dated 13.12.2018 furnished all the requisite details and also apprised the AO that the registration of sale deed and non-construction of building could not happen due to the reasons attributable to the builder. Accordingly, the issue being debatable, the assessee surrendered the claim of exemption u/s. 54F of the Act and paid the due taxes alongwith interest. These facts clearly established the bonafide of the assesse in the factum that the assesse has claimed exemption u/s. 54F of the Act under bonafide belief. That the assessehad purchased the property and also entered into an agreement with the builder for construction of house thereon. 8.2 In the case of case of UOI vs. Dharmendra Textile Processors [2007] 295 ITR 244 (SC) the matter was referred to a Larger Bench by observing that there is a conflict of opinion between the judgements of Division Bench of Hon'ble Supreme Court in the case of Dilip N. Shroff vs JCIT [2007] 161 Taxman 218 (SC) on the one hand, and on the other hand, SEBI Chairman vs. Shriram Mutual Fund [2006] 4 SCC 361, the Ho....
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....s not accepted as the assesse has not complied with the provision of section 54F of the Income Tax Act. Moreover, the case laws relied upon by the assesse in his reply are not applicable to the facts and circumstances of the case. The facts and circumstances of the case have been considered in the assessment order passed u/s. 143(3) of the I.T. Act dated 19.12.2018 wherein it has evidently been established that the assesse has furnished inaccurate particulars of income." 8.3 In regard to another judgements of Hon'ble Delhi High Court in the case of CIT vs. Zoom Communication P Ltd. [2010] 327 ITR 510 (Delhi) and in the case of CIT vs. Escorts Finance Ltd. [2010] 328 ITR 44 (Delhi) the Hon'ble Delhi High Court is categorical while confirming the penalty that if the assesse makes a claim which is not only incorrect in law, but also without any basis and explanation furnished by him for making such a claim and such claim is found not bonafide. I noted that facts in the present case before me are clearly distinguishable for the reasons that the assesse has furnished complete explanation alongwith evidences for purchasing of the property and thereafter entering into an agree....
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....e Act, admittedly the disclosure of concealed income does not absolve assesse of rigours of section 271(1)(c) of the Act if the assesse fails to offer any explanation which is bonafide. Similar is the situation with the decision of the Hon'ble Supreme Court in the case of K.P.Madhusudanan vs CIT (2001) 251 ITR 99 (SC). 8.7 In the present case before us, the assesse has explanation which is supported by the documentary evidences as the assesse has furnished all the relevant details alongwith return of income or during the course of scrutiny assessment proceedings and this disclosure of information in regard to claim of deduction u/s. 54F of the Act in respect of the long term capital gain earned during the year is sufficient for not confirming the levy of penalty u/s. 271(1)(c) of the Act. 8.8 The facts of the present case clearly indicates that the issue in dispute is squarely covered by the decision of the Hon'ble Supreme Court in the case of Reliance Petroproducts P. Ltd. (Supra), which has been relied by the Ld. Judicial Member in his order. 8.9 Coming to Question No. (i) & (ii) referred by the Ld. Judicial Member, as aforesaid that (i) whether the Tribunal can travel b....
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....(1980) 125 ITR 713 (SC) wherein, it has been held that cross examination is must where AO relies upon only on the statement of Third Party unconnected with the assessee. Hon'ble Supreme Court held that the letters dated 18.2.1955 and 09.03.1959 did not constitute any material evidence which the Tribunal could legitimately taken into account for the purpose of arriving at the finding that the amount of Rs. 1,07,350/- was remitted by the assessee from its Madras Office. Accordingly, Hon'ble Supreme Court eliminated these two letters from consideration and held that there was no material evidence at all before the Tribunal which could support its finding. It was further held that what the Manager wrote in his letters could not possibly be based on his personal knowledge but was based on hearsay. Even otherwise, if revenue authorities ought to have called upon the Manager to produce the documents and papers of which he made a statement and confronted the assessee with these documents and papers. In the present case, I am of the view that information gathered from the Google Search Engine cannot be the basis for arriving at a decision. If at all information from the public domain is to ....
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.... No.In view of the aforesaid facts and circumstances of the case and in the background of the aforesaid discussions, the penalty in dispute cannot be sustained. (iv) Whether expression 'furnished inaccurate particulars of such income' including wrong claim resulting from non compliance of the pre requisite conditions of section 54F of the Act? No. In view of the aforesaid facts and circumstances of the case and in the background of the aforesaid discussions, the wrong claim of deduction u/s. 54F cannot be included in 'furnishing inaccurate particulars of such income'. (v) Whether the Tribunal can change the limb of penalty to "concealment of income", when the AO has invoked the limb of "furnishing inaccurate particulars of income" at the time of recording satisfaction for levy of penalty u/s. 271(1)(c) of the Act? In view of the aforesaid facts and circumstances of the case and in the background of the aforesaid discussions, this question does not arise, hence, not required to be answered. 9. In view of above, I agree with the order of Ld. Judicial Member. I do not agree with the order of Ld. Accountant Member on the given facts and circumstances of the case. 10. ....