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Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
Before: SHRI SHAMIM YAHYA, AM & RAM LAL NEGI, JM
O R D E R Per Shamim Yahya, A. M.:
This appeal by the assessee is directed against the order of the learned Commissioner of Income Tax (Appeals)-55, Mumbai (‘ld.CIT(A) for short) dated 04.10.2018 and pertains to the assessment year (A.Y.) 2014-15.
The grounds of appeal read as under:
1. That the penalty order u/s 271(1 )(c) levying a penalty of Rs.6,64,730/- dated 17.05.2017 is bad in law on the facts of the case and the Ld, Commissioner of Income Tax (Appeals) has erred in sustaining the addition made in the assessment.
2. That the Ld. Commissioner of Income Tax (Appeals) has erred in sustaining the penalty u/s 271(1)(c) of Rs.6,64,730/- for "furnishing of inaccurate particulars of income" on the basis of the disallowances made of claimed expenses in the LTCG giving detailed discussions, relying and discussing of judicial pronouncements thereby establishing that issues are debatable and hence there allegation is baseless. Hence the penalty needs to be deleted. 3. That the Ld, Commissioner of Income Tax (Appeals) has erred in sustaining the addition made in the assessment for levying the penalty based on the disallowances of certain alleged unsupported expenses claimed by the gullible assessee in the LTCG in the assessment order u/s 143(3) which were incurred more than 6 years old besides, the fact that the assessee did not claim the deduction u/s 54 on the purchase of new residential house and thus no LTCG became chargeable to tax. The penalty based on such illegal disallowances in the assessment is bad in law and hence needs to be deleted. 4. That the penalty levied on the basis of a defective notice u/s 274 r.w.s. 271(1)(c) is bad in law and the Ld. CIT(A) has erred in sustaining the order of penalty and hence the order passed by the AO needs to be quashed.
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Brief facts of the case are that in course of assessment proceedings, the assessing officer has denied certain expenditure, which were claimed to have been incurred in connection with the acquisition of the flat for claiming deduction u/s 54 of the I.T.Act.
The total claim of the expenditure incurred for the acquisition of new flat was Rs.87 Lacs. The denial was to the extent of Rs.6.67 Lacs. The details thereof are as under as per AO’s noting a. Evidence of Rs.67,000/- regarding expense on transfer of property incurred by the assessee was not provided. b. No evidence were provided in respect of cost of improvement by way of bills/invoices. Initially assessee had claimed Rs. 4 lac for cost of improvement. When he was asked to furnish evidence claim of only Rs, 50.000/- was withdrawn. However no supporting evidence for claim of Rs.3.50 Lakh obtained by assessee on 01.01.2011 from canfin Homes Ltd. against the security of the said property were provided. However, the assessee could not produce any evidence to suggest that the loan availed has been actually utilized for the purpose of improvement of the property. Therefore, the Assessing Officer disallowed Rs. 4 Lakh claimed by assessee in his original return of income in respect of cost of improvement and Rs, 67,000/- on cost of expenditure related to transfer of property. IV. It was further noticed that assessee had indexed the amount of interest of Rs.12,06,868/- paid till 25.08.2012 on the housing of loan of Rs. 30 lakh availed from Canfin Homes Ltd. Indexation of interest was claimed for F.Y. 2006-07, though the payment of same has been made till 25.08.2012.
V. Thereafter in revised Long Term Capital Gain working the assessee took cost of acquisition at Rs.44,06,868/- (Originally taken at Rs.46 lakh) by adding the cost of Oat being Rs.32 lakh and interest on housing loan paid till 25.08.2012 at Rs.12.06.868/-. VI. It was found from the system database that assessee has claimed the deduction us. 24(b) in respect of the interest paid on housing loan for the previous year. This showed that assessee was claim double deduction as it was adding the same again to the cost of acquisition of the property which is not permissible in Law. Thereafter the Assessing Officer did not allow the interest of Rs.12,06,868/- paid by assessee on housing loan to be added in cost of acquisition not worked out capital gain at Rs.29,10,405/- in place of Long Term Capital Loss of Rs.4,13,242/-. However as the assessee had made investment in another house property exemption u/s, 54 of the I.T. Act was allowed. It is against this addition that penalty proceedings were initiated for furnishing inaccurate particulars of income.
On these additions, penalty was also initiated. During the penalty proceedings, the assessing officer declined to accept the assessee submission that there was no 3 273/Mum/2019 contumacious effort on the part of the assessee for concealment or furnishing of inaccurate particulars of income.
Upon assessee’s appeal, Ld.CIT(A) also confirmed the assessing officer’s action. While confirming the penalty Ld.CIT(A) expounded that only issue for consideration as to whether penalty is leviable or not is whether tax was collected or not. The portion of Ld.CIT(A) order dealing with this aspect reads as under:- “I have gone through the appellant submission and I do not agree with the theory that as no tax impact there is no loss to revenue had been done. The fact remains that appellant has furnished inaccurate particulars of income and hence penalty is leviable Ignorance of law cannot be taken a plea of claiming inaccurate deductions. Assessment proceedings and penalty proceedings are deferent proceedings. In this case, the question is not whether in the nutshell tax was collected or not. The moot question is inaccurate particulars was submitted and this is itself is sufficient reason for levying the penalty.”
Against this order, assessee is in appeal before us.
We have heard the Ld. Departmental Representative. None appeared on behalf of the assessee.
We find that penalty u/s. 271(1)(c) has been levied merely because a small part of the expenditure claimed to have been incurred in acquisition of new flat was not accepted by the authorities below. We find that on the facts and circumstances of the cse the claim of the assessee is not ex-facie bogus. In these circumstances, assesee cannot be is said to have been guilty of contumacious conduct or that assessee was guilty of furnishing inaccurate particulars of income or concealment of income.
This proposition is duly supported by the decision of Hon’ble Supreme Court in the case of CIT vs Reliancepetro Products Pvt.Ltd.(2010) 322 ITR 158. In this case, it was duly expounded that if certain claim of the assessee is denied the same cannot ipso fact lead to the conclusion that the assessee is guilty of concealment or furnishing of inaccurate particulars of income. Furthermore, Hon’ble Supreme Court in the case of Hindustan Steel Ltd. vs State of Orissa 83 ITR 26 has also expounded that if the conduct of the assesee is not found to be contumacious the authority may not levy penalty.
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In the background of aforesaid discussion and precedent in our considered opinion assessee does not deserve to be visited with the rigors of penalty u/s 271(1)(c). Ld.CIT(A) has completely erred in observing that penalty has to be levied merely because certain tax has to be found to be further payable.
Accordingly, we set aside the orders of the authorities below and delete the penalty.
In the result, this appeal by the assessee stands allowed.
Order pronounced in the open court on 1.6.2021