TaxTMI 
TaxTMI 
2025 (7) TMI 1484
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....ee has earned income from business and profession and has also availed a deduction of Rs. 6,72,00,364/- on account of long term capital gain qua sale of shares from Halford Realtors Pvt. Ltd., Rutham Builders Pvt. Ltd. and Wellcity Real Estate Pvt. Ltd. and claimed the same as exempt u/s 54F of the Act. The AO therefore asked the Assessee to prove the identity, creditworthiness and genuineness of the said transaction as the Assessee has shares in the above three companies which were sold by the Assessee, has land properties and therefore the AO asked the Assessee to submit the valuation reports of the same which was filed by the Assessee and placed on record by the AO. Thereafter, complete details with respect to the same were called for examination by the AO. 3. The Assessee in response to the same by filing a letter dated 16.08.2016 has claimed that she has incorrectly claimed the aforesaid deduction. 4. Therefore, in order to verify the said transaction the AO issued summon u/s 133 to the Assessee and recorded her statement wherein vide question No.4 asked as under: Q.4. During the assessment year under consideration, you have claimed a deduction u/s 54F of the IT....
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....s 54F of the Act. Thus, the incorrect deduction claimed by the Assessee cannot be considered as a mistake nor a bonafide mistake". ultimately, disallowed the said deduction claimed u/s 54F of the Act and consequently made the addition of Rs. 6,72,00,364/- and added the same in the income of the Assessee. 7. The AO simultaneously in the Assessment order, also recorded the satisfaction that the Assessee is liable for penalty u/s 271(1)(c) of the Act and therefore initiated separately, the penalty proceedings u/s 271(1)(c) of the Act for concealment of income. 8. The AO thereafter issued a penalty notice dated 31.12.2016 u/s 271(1)(c) r.w.s 274 of the Act for the limb of furnishing of particulars of income. 9. Thereafter the AO vide show cause notice 23.02.2017, show caused the Assessee "as to why the penalty u/s 271(1)(c) of the Act should not be imposed". 10. The Assessee in response to the aforesaid show cause notice, filed her reply dated 24.05.2017, which reads as under: "We refer to your notice in respect of penalty under section 271(1)(c) of the Act. In connection to that, under the instructions of our above mentioned Assessee and on his behalf, we state....
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....concealed the particulars of his income or furnished inaccurate particulars of such income. He may direct that such person shall pay by way of penalty. 11. From the above, it may be observed that the levy of penalty will be justified only when it is independently proved that there is concealment of income Or inaccurate particulars of income are furnished. 12. Further, mere making of the claim in the Return of Income which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the Assessee. 13. Further, a guilty mind is necessary for the purpose of levy of penalty. In the instant case, the Assessee had neither concealed any income nor furnished inaccurate particulars of income. There was no deliberate attempt by the Assessee to evade tax. 14. At this juncture, it is relevant to mention that the Assessee under bonafide intention filed a revised computation before Assessing Officer could point out. 15. Hence, there was no intention of the Assessee to conceal any income nor to provide inaccurate information. Thus, levy of penalty u/s. 271(1)(c) does not arise. 16. ....
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.... 19. We next place reliance on upon the order of the Hon'ble Tribunal in the case of ITO vs. M/s. New Kamlesh Jewellers [ITA No.36501M120lJ[ (2016). Wherein it was held as under: " ... The Ld. A.R. of the assessee, before us, has submitted that the assessee neither had filed any inaccurate particulars of income nor had concealed its income. The assessee was under bonafide belief that there was no liability to capital gains tax. The assessee had formed this view in the light of the decision of the Jabalpur Bench of the Tribunal in the case of "ACIT vs. Thermoflics India Ltd. " (supra). He has further submitted that the assessee was of the view that even if section 45(4) was applicable to distribution of capital assets on retirement, the value of stock in trade was to be excluded from the value of net assets transferred to the retiring partners. He has further submitted that if so done, the result would be a negative balance and under such circumstances the assessee was under the bonafide belief that there was no liability for capital gains tax under section 45(4). There was no intention of the assessee to evade tax. That full particulars were disclosed. The assess....
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....iled by her accountant. As per the same, it is digitally signed by the Assessee. Further, as the individual returns are needed to be personally signed by the Assessee and a physical copy required to be sent to Bangalore CPC for validating the same. Thus, the Assessee cannot take plea that she has not filed the return or she has not seen this return. Further, the return of income was filed belated on 29.03.2016 and the case was selected for scrutiny on 28.07.2016. Thus, the Assessee has availed already plenty of times for filing her individual return of income. Further, on perusal of the case records, it is seen that the Assessee has submitted the claim of withdrawal of deduction u/s 54F of only after issuance of plethora of notices and follow up scrutiny action. A notice u/s 142(1) dated 22.08.2016 was not responded to. Further, a show cause for initiating action u/s 271(1)(b) of the Act was issued on 16.09.2016. Further, a notice u/s 142(1) was issued on 19.10.2016 and 07.11.2016. However, no reply was submitted in this case by the Assessee. Further, a summon u/s 131 of the Act was issued by the AO on 20.11.2016. Then on 07.12.2016 the Assessee has submitted a letter for withdrawa....
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....al gains derived from sale of shares of Halford realties Pvt. Ltd., Rutham builders Pvt. Ltd. and Wellcity real estate Pvt. Ltd. During the assessment proceedings, the AO asked the appellant to furnish the details of the same. In response to this the appellant filed a letter stating that she has incorrectly claimed the exemption u/s 54F. The A.O recorded the statement of the appellant u/s 131 of the IT Act on 19.12.2016 wherein in the answer to question no 4 the appellant has stated that she has inadvertently claimed exemption u/s 54F while filing the return of income. On 7.12. 2016 the appellant has filed a letter withdrawing the claim of exemption. Therefore, the AO disallowed the claim of exemption made u/s 54F of the IT Act and also initiated penalty u/s 271(1)(c) for furnishing inaccurate particulars about her income. 11.3 During the penalty proceedings, the appellant has submitted that there was no intention to conceal the income and the claim was made inadvertently. It was also contended that merely making the claim in the return of income which is not sustainable in law by itself will not amount to furnishing inaccurate particulars about the income. The appellant h....
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....2016. However, the appellant has not complied to these notices issued by the AO. Thereafter, summons u/s 131 was issued on 20.11.2016. A statement of the appellant was recorded u/s 131 of the IT Act on 19.12.2016 wherein the appellant has stated that the exemption claimed u/s 54F was inadvertently claimed while filing the return of income. The appellant submitted the letter on 07.12.2016 withdrawing the claim made u/s 54F of the IT Act. Further, as pointed out by the AO the appellant is part of Rohan group and the books of accounts are handled by the professional chartered accountants. From the facts of the case the contention of the appellant that the exemption claimed u/s 54F is due to inadvertent mistake is factually incorrect. The fact itself shows that the appellant has deliberately made an attempt to claim the exemption u/s 54F of the IT Act for which the appellant is not eligible. The appellant was aware that she was not eligible for such claim u/s 54F of the IT Act and in spite of that the exemption was claimed. The intention is nothing but to evade the taxes by furnishing inaccurate particulars about her income. Had this case not been selected for scrutiny u/s 143(2) of th....
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....ecifically statted that deduction u.s 54F of the Act was inadvertently claimed and therefore she is rectifiying her said inadvertent mistake by filing letter dated 16.08.2016 along with revised computation of income. The Assessee further claimed that she in reply to the questions raised during the statement recorded by the AO u/s 131 of the Act during the assessment proceedings the Assessee in reply to the question about the deduction claimed u/s 54F of the Act, specifically replied that she had inadvertently claimed such exemption by filing her return of income u/s 139(1) of the Act. She has filed revised computation of income vide letter dated 16.08.2016 wherein the above mentioned inadvertent mistake has been rectified. Further, since the return was belated return hence, she was unable to revise it. However, to rectify the mistake she has filed revised computation of income and therefore to accept the revised return of income and not to levy penalty for her ignorance. Her return of income was filed on 30.03.2016 by her accountant by using the digital signature. Since the return could not be revised as the same was filed after due date and therefore she has rectified her mistake ....
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....related to the deduction claimed u/s 54F of the Act, the person who filed the return of income, use of digital signature, to produce the documentary evidence for eligible claim u/s 54F of the Act and to show cause "as to why the penalty u/s 271(1)(c) of the Act is not leviable". 18. The Assessee in response to aforesaid questions, specifically replied as under: "That she had inadvertently claimed the exemption u/s 54F of the Act while filing her return of income u/s 139(1) of the Act, however, she has rectified her inadvertent mistake by filing her revised computation of income vide letter dated 16.08.2016. Further, since the return was belated return, hence, she was unable to revise it. The return of income was filed on 30.03.2016 by her accountant and since she was having digital signature, the same was attached while filing her return of income. Further, since the return could not be revised as the same was filed after the due date and therefore she has rectified her mistake by filing revised computation of income and therefore she requests not to levy penalty u/s 271(1)(c) of the Act. 19. From the aforesaid facts and circumstances, the question emerges "whether t....
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....case is strictly covered by the provision, the penalty provision cannot be invoked. 4. By any stretch of imagination, making an incorrect claim in law, cannot tantamount to furnishing of inaccurate particular of income. 22. The Hon'ble Apex Court in the case of Hindustan Steels Ltd. vs. State of Orissa, 83 ITR 26(SC) has also held "that the penalty will not ordinarily be imposed unless the party obliged either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest or acted in conscious disregard of its obligation. Penalty will not also be imposed merely because it is lawful to do so" by holding as under: "That an order imposing penalty for failure to carry out a statutory obligation is the result of quasi-criminal proceedings, and penalty will not ordinarily be imposed unless the party obliged either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest or acted in conscious disregard of its obligation. Penalty will not also be imposed merely because it is lawful to do so. Whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority....
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.... mistake on the part of the Assessee as during the course of assessment proceedings the Assessee realized its mistake and pointed out the same to the AO. Thus, imposition of penalty was not warranted". 24. We observe that the facts of the instant case, are exactly similar to the case dealt with by the Hon'ble High Court in the above case, except the Assessee has also claimed the exemption u/s 54F of the Act in the case pertaining to A.Y. 2013-14, which resulted into levy of penalty, however, admittedly, the levy of penalty by the AO in that year, has not attained finality, as the appeal is still pending for adjudication before the Ld. CIT(A) and therefore much inference cannot be drawn in this particular case, specifically in view of the judgment by the Hon'ble Apex Court in the case of Pullanguod Rubber Produce Company Ltd. case (supra) wherein the Tribunal while relying on the decision relating to the year immediately to the previous assessment, affirmed the decision of the authorities below in not allowing the claim of the Assessee and therefore the Hon'ble Apex Court has held "that an admission is an extremely important piece of evidence but it cannot be said that it is conc....
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....O for reexamination of the deductibility. 26.1. Upon remand, the AO again disallowed the proportionate interest holding that Assessee had borrowed funds of which interest liability had been incurred. The AO also levied penalty holding that the Assessee concealed its income by furnishing inaccurate particulars. 26.2 The Assessee challenged the said penalty by filing appeal before the then CIT(Appeals) on the ground that the Assessee had no malafide intention to evade any tax and all facts and details were placed on record. 26.3 The Ld. Commissioner by relying on the judgment of the Hon'ble Apex Court in the case of Reliance Petro-products Ltd. (supra) deleted the penalty by concluding that merely because the claim made by an Assessee was disallowed, penalty cannot be levied unless it is demonstrated that the Assessee had any malafide intention. 26.4 The order of the then Ld. CIT(A) got affirmed from the Tribunal and therefore the Revenue being aggrieved challenged the order passed by the Tribunal in affirming the decision of the Ld. CIT(A) in deleting the penalty imposed. Before the Hon'ble High Court, the Revenue Department has placed reliance on the judgment of the Hon....
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....rom the aforesaid analyzations, it goes to show that simply on the reason that miniscule cases are selected for scrutiny and the Assesse has also claimed the exemption u/s 54F of the Act in the AY 2013-14, which resulted into making the disallowance and levy of penalty, which is admittedly under scrutiny of the Ld. CIT(A) in first appeal and the Assessee during the assessment proceedings itself has accepted her mistake for claiming the deduction u/s 54F of the Act inadvertently, by filing a reply/letter dated 16.08.2016 along with revised computation of income and has also demonstrated that the return filed by the Assessee was belated and therefore the same could not have been revised and the return of income was filed by the Assessee's accountant by using digital signature and therefore the penalty u/s 271(1)(c) of the Act is not leviable. The Assessee by rectifying her mistake by filling a letter along with revised computation of income during the assessment proceedings and by giving reason for not revising the return the return of income, as the original return of income was filed belatedly, has demonstrated the bonafide reason and therefore the inadvertent mistake committed by ....