ITO, CHENNAI vs. SHANMUGHAM RAMAMOORTHY, CHENNAI

O R D E R

PER DUVVURU RL REDDY, JUDICIAL MEMBER:

2 & C.O. No. 59/Chny/17 Street, Cantonment Pallavaram and the sale price of the land and building was ₹.2,96,33,000/-. The assessee worked out the capital gain at ₹.1,41,09,724/- and claimed deduction under section 54 of the Act for the entire amount and admitted nil income under long term capital gain. The Assessing Officer found during the course of assessment proceedings that the property sold was not a residential property but commercial property. The Assessing Officer also found that the property purchased out of the sale proceeds, was only an agricultural land of 7.5 acres which consisted of a small house measuring 990 sq.ft. and hence, disallowed the total deduction claimed by the assessee under section 54 of the Act of ₹.1,84,99,503/- as the deduction was allowable only for residential property. Further, the Assessing Officer also observed from the return filed for consecutive assessment years that the assessee had owned more than two residential houses at the time of sale of his property and accordingly held that the assessee was not eligible for deduction under section 54F of the Act also.

3 & C.O. No. 59/Chny/17 rea not essential for civil liability of penalty and moreover, it was also a fact that this amount could not have been assessed but for the scrutiny assessment and there is no voluntary admission by assessee, the Assessing Officer levied penalty of ₹.38,10,897/-.

4 & C.O. No. 59/Chny/17 7. We have heard both sides, perused the materials available on record and gone through the orders of authorities below. In this case, regular assessment under section 143(3) of the Act was passed after issuing statutory notices. It is not the case of the Department that the return filed by the assessee was initially processed under section 143(1) of the Act and thereafter, it was detected that the income chargeable to tax has escaped assessment or there was any search or survey in the case of the assessee. In this case, the assessee has furnished complete particulars of income with a bonafide belief that whatever details furnished in the return or correct. If the Assessing Officer found any of the claim made by the assessee is not correct, he is suppose to reject such claim and the assessee is liable to pay tax. In this case also, the Assessing Officer held that the assessee is not eligible to claim deduction under section 54 or under section 54F of the Act and accordingly, the assessee agreed and paid tax, which was also not disputed. The ld. CIT(A) has observed that the Assessing Officer has not established anywhere in the assessment order that the assessee has concealed the particulars of income or furnished inaccurate particulars of income. He further observed that just because the assessee has accepted the addition in the scrutiny assessment, the Assessing Officer cannot levy penalty under section 271(1)(c) of the Act in a mechanical manner.

5 & C.O. No. 59/Chny/17 7.1 By referring the decision of the Hon’ble Supreme Court in the case of CIT v. Reliance Petroproducts P. Ltd. 322 ITR 158, in the case of CIT v Manjuntha Cottan & Ginning Factory (supra), the Hon’ble Karnataka High Court has held that even if the assessee has not challenged the order of assessment levying tax and interest and has paid tax that by itself would not be sufficient for the authorities either to initiate penalty proceedings or impose penalty, unless it is discernible from the assessment order that, it is on account of such unearthing or enquiry conducted by the authorities which has resulted in payment of such tax or such tax liability came to be admitted, and if not, it would have escaped from tax net as opined by the Assessing Officer in the assessment order. Accordingly, by following the above decisions, the ld. CIT(A) has held that penalty under section 271(1)(c) of the Act is not leviable on the assessee’s claim of deduction under section 54 of the Act and deleted the penalty. Thus, we find no infirmity in the order passed by the ld. CIT(A) and accordingly, the ground raised by the Revenue is dismissed.

Order pronounced on the 26th April, 2018 at Chennai.