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Income Tax Appellate Tribunal, ‘’ SMC’’ BENCH, AHMEDABAD
Before: SHRI MAHAVIR PRASAD & SHRI WASEEM AHMED
आदेश/O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:
The captioned appeal has been filed at the instance of the Assessee against the order of the Learned Commissioner of Income Tax (Appeals)-3, Ahmedabad dated 18/08/2017 (in short “Ld.CIT(A)”) arising in the matter of penalty order passed under s. 271(1)(c) of the Income Tax Act, 1961 (here-in-after referred to as "the Act") relevant to the Assessment Year 2008-2009.
The assessee has raised the following grounds of appeal.
The C.I.T.(Appeals) erred in law and on facts in levying penalty of Rs.2,66,947/- u/s.271(1)(c) of the I.T. Act 1961.
The sole issue raised by the assessee is that the Ld. CIT-A erred in confirming the penalty levied by the AO amounting to Rs. 2,66,947.00 under section 271(1)(c) of the Act.
The brief facts of the case are that the assessee is an individual and engaged in the business of purchase and sale of shares. The assessee in the year under consideration had sold an immovable property jointly held for Rs. 33,00,000.00. As such the assessee was the co-owner in the said property. Therefore he declared sale consideration of Rs. 16,50,000.00 being 50% of the share i.e. Rs. 33,00,000.00. The assessee accordingly filed his return of income declaring long term capital gain amounting to Rs. 11,17,511.00 only. The assessee also claimed deduction under section 54F of the Act against such long term capital gain.
However, the assessee during the assessment proceedings contended that he could not make the investment in the property to claim the deduction under section 54F of the Act as he was suffering from financial crisis. The AO accordingly made addition of Rs. 11,17,511.00 to the total income of the assessee.
Subsequently the assessee carried the matter before the Ld. CIT-A, but withdrew the appeal later to avoid the litigation and agreed to pay the demand of tax.
4.1 The AO was of the view that the assessee by claiming wrong deduction under section 54F of the Act, had furnished inaccurate particulars of income. The AO accordingly issued SCN to the assessee to levy the penalty under section 271(1)(c) of the Act.
4.2 The assessee in reply to the SCN submitted that he had disclosed all the facts including true copy of sale deed, purchase deed, bank statement and computation of capital gain during the assessment proceedings. As such he suffered huge losses in share trading business amounting to Rs. 1,45,57,446.00. The loss arose from shares trading business had been completely paid in the year under consideration. Therefore he was not in a position to make investment in the property so as to claim the deduction under section 54F of the Act.
4.3 However the AO disregarded the contentions of the assessee by observing that he deliberately furnished inaccurate particulars of income to evade the payment of taxes. The AO accordingly levied the 100% penalty i.e. Rs. 2,66,947.00 on the amount of tax sought to be evaded.
Aggrieved assessee preferred an appeal before the Ld. CIT-A. The assessee before the Ld. CIT-A submits that he withdrew the appeal for the reasons as given hereunder:
1. 1. Due to non availability of funds (due to business loss) no investment was made u/s.54F in time proof of business loss was submitted as well as this facts was brought to the notice of the ITO vide letter dated 29-11-2010.
2. There is no any bad intention on the part of the appellant to claim the wrong deduction as circumstances behind the control of the appellant.
3. To Avoid the litigation and peace of mind.
However the Ld. CIT-A observed that the assessee was well aware about the liability arising on long term capital gain but he was not ready to pay the tax due on him until the scrutiny assessment has been made.
7.1 The Ld. CIT-A further observed that the mistake committed by the assessee was not an accidental mistake as such it was intention to misguide the Department to evade the taxes due. The Ld. CIT-A in view of the above did not interfere with the order of the AO.
Aggrieved by the order of the Ld. CIT-A, the assessee is in appeal before us.
The learned AR before us submitted that the assessee has suffered the loss on account of share trading and accordingly he was not in a position to make the investment within the time prescribed under section 54F of the Act.
8.1 Without prejudice to the above, the learned AR also submitted that the impugned income is not taxable in the year under consideration. It is because the provision of section 54F requires taxing such income in the year when the time- limit for making the investment expired. As such, the income was not taxable in the assessment year 2008-09 but the assessee to avoid the dispute with the Department and to buy the peace of mind agreed for the impugned addition in the year under consideration.
On the other hand, the learned DR vehemently supported the order of the authorities below.
We have heard the rival contentions of both the parties and perused the materials available on record. The assessee in the instant case has generated long-term capital gain income amounting to Rs. 11,17,511.00 only. However the assessee in his income tax return claims the exemption against such long term capital gain under section 54F of the Act.
10.1 Admittedly, the assessee did not make any investment in the house property before filing the income tax return for the year under consideration. Similarly, the assessee has also not deposited the amount of capital gain/sale proceeds in the capital gain account scheme as provided under section 54F of the Act.
10.2 Thus, in our considered view the impugned capital gain is chargeable to tax in the year under consideration. Thus the question of taxing the impugned capital gain does not arise in the assessment year 2011-12 i.e. the year in which the time expires for making the investment under section 54F of the Act as the assessee has not made any deposit in the capital gain account scheme. Thus we disagree with the contention of the Ld. AR for the assessee.
From the above discussion, there remains no ambiguity to the fact that the assessee has furnished the inaccurate particulars of income by claiming the deduction under section 54F of the Act despite the fact that the assessee failed to comply the formalities/conditions as specified therein. Accordingly, we hold that it is a fit case for imposing the penalty under section 271(1)(c) of the Act on account of furnishing the inaccurate particulars of income.
10.3 We also find support and guidance from the judgment of Hon’ble Delhi High Court in the case of CIT v/s Zoom Communication Pvt Ltd reported in 191 Taxman 179 wherein it was held as under: “Section 271(1)(c), to the extent it is relevant, provides for imposition of penalty in case the Assessing Officer, in the course of any proceedings under the Act, is satisfied that any person had concealed particulars of his income or had furnished inaccurate particulars of such income. The Explanation 1 to sub-section (1) of section 271 provides that where in respect of any facts material to the computation of the total income of any person, such person fails to offer an explanation or offers an explanation which is found to be false or he offers an explanation which he is not able to substantiate and fails to prove that such explanation is bona fide and that all the facts relating to the same and material to the computation of his total income, have been disclosed by him, then the amount added or disallowed in computing total income of such person as a result thereof shall, for the purpose of clause (c), bedeemed to represent the income in respect of which particulars have been concealed. [Para 10] Thus, in case of failure of the assessee to offer any explanation or the explanation furnished by him being found false, penalty may be imposed on him. However, if an explanation is offered by the assessee, mere failure on his part to substantiate it will not be enough to warrant penalty, if the explanation is bona fide and all the facts relating to the same have been disclosed by him in the return. The Explanation 1 to section 271(1) would be inapplicable in respect of any amount added or disallowed as a result of rejection of the explanation furnished by the assessee, provided his explanation is shown to be bona fide and all the facts relating to the same and material to the computation of his total income have been disclosed by him. [Para 11] So long as the assessee has not concealed any material fact or the factual information given by him has not been found to be incorrect, he will not be liable to imposition of penalty under section 271(1)(c), even if the claim made by him is unsustainable in law, provided either he substantiates the explanation offered by him or the explanation, even if not substantiated, is found to be bona fide. If the explanation is neither substantiated nor shown to be bona fide, the Explanation 1 to section 271(1)(c ) would come into play and the assessee will be liable for the prescribed penalty. [Para 16]
In the instant case, the accounts of the assessee were mandatorily subjected to audit. It was not the case of the assessee that it was advised that the amount of income-tax paid by it could be claimed as a revenue expenditure. It was also not the case of the assessee that deduction of income-tax paid by it was a debatable issue. In fact, in view of the specific provisions contained in section 40(ii), no such advice could be given by an auditor or other tax expert. No such advice had been claimed by the assessee even with respect to the amount claimed as deduction on account of certain equipment having become useless and having been written off. The Tribunal was entirely wrong in saying that section 32(1)(iii) applied to such a deduction. It was not the contention that claiming of such a deduction under section 32(1)(iii) was a debatable issue on which there were two opinions prevailing at the relevant time. In fact, the assessee did not claim, either before the Assessing Officer or before the Commissioner (Appeals), that such a deduction was permissible under section 32(1)(iii). No such contention on behalf of the assessee was found noted in the order of the Tribunal. Thus, it was the Tribunal which took the view that section 32(1)(iii ) could be attracted to the deduction claimed by the assessee. It was also not the case of the assessee that it was under a bona fide belief that those two amounts could be claimed as revenue expenditures. The assessee, in fact, outrightly conceded before the Assessing Officer that those amounts could not have been claimed as revenue deductions. The only plea taken by the assessee before the income-tax authorities was that it was due to oversight that the amount of income-tax paid by it as well as the amount claimed as deduction on account of certain equipment being written off could not be added back in the computation of income. [Para 17] It is true that mere submitting a claim which is incorrect, in law, would not amount to giving inaccurate particulars of the income of the assessee, but it cannot be disputed that the claim made by the assessee needs to be bona fide. If the claim besides being incorrect, in law, is mala fide the Explanation 1 to section 271(1) would come into play and work to the disadvantage of the assessee.”
In view of the above, we hold that the assessee is guilty for furnishing the inaccurate particular of income.
10.4 We also find support and guidance from the decision of coordinate bench of this ITAT in case of Dholu Construction & Projects Ltd. reported in 17 taxmann.com 176. Where it was held as under; “Merely because the claim made by the assessee is not found acceptable cannot lead to the interference that claim was rather false or particulars furnished in support of the claim were inaccurate. Non-acceptance of the claim is different from false claim or inaccurate particulars having been filed in support of the claim. The case of the Assessing Officer and the Commissioner (Appeals) does not fall in the main proviso of section 271(1)(c) as there is no evidence to this effect. Whatever finding is given about furnishing inaccurate particulars is not in accordance with the law. [Para 9] 10.5 In the present facts of the case, the assessee has made the false claim under section 54F of the Act fully knowing the facts that he has not complied the provision under section 54F of the Act. Hence we do not find any reason to interfere the finding of the Ld. CIT-A.
In the result the appeal filed by the assessee is dismissed.
Order pronounced in the Court on 20/01/2020 at Ahmedabad.