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Income Tax Appellate Tribunal, DELHI BENCH “F” DELHI
Before: SHRI PRADIP KUMAR KEDIA & SHRI NARENDER KUMAR CHOUDHRY
PER PRADIP KUMAR KEDIA, A.M.: The captioned appeal has been filed at the instance of the assessee against the order of the Commissioner of Income Tax (Appeals)-XX, New Delhi (‘CIT(A)’ in short) dated 22.01.2019 arising from the assessment order dated 23.02.2015 passed by the Assessing Officer (AO) under Section 271(1)(c) of the Income Tax Act, 1961 (the Act) concerning AY 2012-13.
As per the grounds of appeal, the assessee has challenged the imposition of penalty of Rs.13,75,050/- on account of disallowance of deduction under Section 54F of the Act.
When the matter was called for hearing, ld. counsel for the assessee submitted that penalty imposed by the Assessing Officer under Section 271(1)(c) amounting to Rs.13,75,050/- and confirmed by the ld. CIT(A) is wholly unjustified in the facts of the present
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case. It was pointed out that the Assessing Officer in the quantum proceedings, disallowed the claim of the assessee under Section 54F of the Act for exemption of capital gains on the ground that the assessee has not satisfied the conditions of Section 54F of the Act. In this regard, the ld. counsel pointed out that the assessee has transferred the original asset on 30.05.2011 (incorrectly written as 24.05.2011) by the CIT(A) and claimed exemption of Rs.44,50,000/- towards Long Term Capital Gain arising thereon on the ground that new asset was purchased by the assessee albeit on 09.04.2010. Further, the ld. counsel pointed out that the Tribunal in the quantum proceedings itself has noted the fact that the assessee had received Rs.5 lac on account of security deposit against the property under proposed sale on 06.04.2011 (i.e. within a period of one year from the date of corresponding of new asset) although a formal agreement was executed on 30.05.2011 with a different party. The security deposit received was promptly refunded on the next date of agreement on 31.05.2011 on happening of actual sale. In these circumstances, it was pointed out that when the date of receipt of security deposit on 06.04.2011 is reckoned as a cause of action, the purchase of the property on 09.04.2010 falls within the stipulated time period specified under Section 54F of the Act. Under the circumstances notwithstanding the rejection of the claim of the assessee in the quantum proceedings upto ITAT, the penalty being a distinct proceeding requires to be tested on these facts. It was claimed that the claim of deduction under Section 54F albeit found to be wrong in the quantum proceedings, by itself would not construe that the assessee has concealed any particulars of his income or furnished inaccurate particulars of such income per se. It was contended that mere incorrect claim in law for such deduction would not automatically tantamount to the default specified under
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Section 271(1)(c) of the Act as held by the Hon’ble Supreme Court in CIT vs. Reliance Petro Products Pvt. Ltd., (2010) 322 ITR 158 (SC). The ld. counsel accordingly urged for cancellation of the penalty imposed by the Assessing Officer.
Ld. DR for the Revenue relied upon the actions of the Ld. CIT(A) and Assessing Officer as reflected in their respective orders.
We have carefully considered the rivals submissions. The short issue, in the instant case, is towards justification of imposition of penalty with aid of Section 271(1)(c) for rejection of deduction claimed under Section 54F of the Act.
5.1 As narrated on behalf of the assessee, it is seen that the basis for denial of deduction under Section 54F is that the purchase of the property i.e. new asset was beyond the period of one year vis-à-vis sale of the old asset in this regard. It is the case of the assessee that although the purchase of new asset is beyond one year vis-à-vis sale of the old asset, the security deposit for sale of old asset was taken within a period of one year, and therefore, the action for sale of old asset started rolling within the stipulated period. It is the case of the assessee that the provisions of Section 54F are beneficial in nature and the Courts have always accorded liberal interpretation and a small delay of few days have been condoned for the eligibility purposes. Even otherwise, in these circumstances, the imposition of penalty on account of denial of deduction on such technical breach is not justified on the contours of Section 271(1)(c) of the Act.
5.2 We find merit in the plea of the assessee for cancellation of penalty. While the admissibility of deduction under Section 54F in the circumstances may be somewhat debatable due to non compliance of strict letter of law. However, this by itself, would not
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result in imposition of penalty as a consequential measure. The case of the assessee is fully supportable by the decision of the Hon’ble Supreme Court in the case of CIT vs. Reliance Petro Products Pvt. Ltd. as reported in 189 Taxman 322. Admittedly, no inaccuracy was found in the particulars of deduction claimed as such. The assessee also has a basis for claim of deduction in the light of the fact that security deposit was accepted from the brokers against the sale of property which ultimately materialized 20-25 days later resulting in slight delay in actual execution of sale agreement of old asset. In such circumstances, small breach in the stipulated period of one year between purchase and sale of assets would not justify imposition of onerous penalty.
5.3 The order of the CIT(A) is accordingly set aside and the penalty imposed by the Assessing Officer on this score stands cancelled.
In the result, the appeal of the assessee is allowed. Order pronounced in the open Court on 09/05/2022.
Sd/- Sd/- [NARENDER KUMAR CHOUDHRY] [PRADIP KUMAR KEDIA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 09/05/2022 Prabhat