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Income Tax Appellate Tribunal, “C” BENCH, CHENNAI
Before: SHRI A. MOHAN ALANKAMONY & SHRI G. PAVAN KUMAR
आदेश /O R D E R
PER G. PAVAN KUMAR, JUDICIAL MEMBER:
The assessee has filed an appeal against the order of Commissioner of Income Tax (Appeals)-3, Madurai, in dated 06.03.2015 passed u/s. 271(1)(c) and 250 of the Income Tax Act.
:-2-: I.T.A. No. 619/Mds/2015
The sole substantive ground raised by the assessee that the Ld. CIT(A) erred in confirming the levy of penalty u/s. 271(1)(c) of the Act by the Assessing Officer on concealment of income and furnishing of inaccurate particulars because of withdrawal of exemption u/s. 54F of the Act of long term capital gains.
The Brief facts of the case are that the assessee is an individual and filed his Income tax return for the assessment year 2009-10 on 09.06.2009 with total income of Rs. 42,24,270/- and the Return of income was processed u/s. 143(1) of the Act. Subsequently, the case was selected for scrutiny under CASS and notice u/s. 143(2) & 142(1) of the Act was issued calling for the information. In compliance Ld. AR of the assessee appeared from time to time and filed information. The Assessing Officer on perusal of the details found that the assessee has sold the property on 10.09.2008 for a consideration of Rs. 85 lakhs and has purchased Residential flat for Rs. 73 lakhs on 04.07.2007 and claimed exemption u/s. 54F of the Act and was under a bonafide belief that property can be purchased within 2 years before the date of sale of Original asset, whereas the Assessing Officer explained that the long term capital gains is exempted only when the assessee purchase a Residential property within one year before the date of sale of asset. The Ld. AO found that the assessee has not complied the conditions of purchase within one year before the sale and withdrawn the exemption claimed earlier and added to returned income which was accepted by the assessee and the assessee paid the long term capital gains tax before
:-3-: I.T.A. No. 619/Mds/2015 passing the assessment order u/s. 143(3) of the Act dated 29.12.2011 with assessed income of Rs. 94,55,591/-. Subsequently, the Ld. AO initiated penalty proceedings u/s. 271(1)(c) of the Act and issued notice u/s. 274 r.w.s. 271(1)(c) dated 07.05.2012. The Ld. AO considered the findings in the assessment proceedings and the facts being the assessee has paid capital gains tax liability Rs.16,08,610/- on 21.11.2011 including interest before the completion of the assessment proceedings. The Ld. AO perused the provisions of section 54F of the Act and found that the assessee has not invested in the Residential property within one year before the sale of original asset, and observed such act as the concealment of assessee and filed inaccurate particulars and but for scrutiny assessment, the facts has come to the knowledge of the Revenue and was of the opinion that the assessee has furnished inaccurate particulars and the assessee has not submitted satisfactory explanations with these observations, the Ld. AO levied penalty u/s. 271(1)(c) of the Act on 14.05.2012.
Aggrieved by the penalty order, the assessee has filed an appeal with the CIT(A). In the appellate proceedings, the LD AR of the assessee argued the grounds and made submissions in the assessment and penalty proceedings. The fact being the assessee has purchased the property after expiry of one year before date of sale. The assessee filed the details in letter dated 22.01.2012 explaining the reasons as the assessee could not purchase the property within the said stipulated period. The Ld. CIT(A) considered the findings of the Assessing Officer and the submissions of the assessee and discussed exhaustively
:-4-: I.T.A. No. 619/Mds/2015 on the findings and the provisions and judicial decisions at Page 5 to 13 of the order and concurred with the findings of the Assessing Officer and confirmed the levy of penalty.
Aggrieved by the order of CIT(A), the assessee has filed an appeal with the Tribunal. Before us, the Ld. AR argued the grounds on levy of penalty and explained that the Ld. CIT(A) has erred in confirming the levy of penalty without considering the fact that the assessee has purchased the property and claimed exemption u/s. 54F of the Act. Subsequently, in the assessment proceedings, the assessee has accepted the mistake committed on claim of exemption u/s. 54F of the Act and accepted the withdrawal of the claim by the Ld. AO and paid the tax and interest before the completion of the assessment proceedings and there is a reasonable cause that the assessee has not obtained proper advice on the provisions and to buy peace with the department has not contested the addition in the quantum appeal and the assessee also filed explanations in the penalty proceedings which the Ld. CIT(A) has overlooked and prayed for allowing the appeal. Contra, the Ld. DR relied on the orders of the CIT(A) and opposed the grounds of the assessee .
We heard the rival submissions, perused the material on record and judicial decisions. The sole crux of the issue being the levy of penalty u/s. 271(1)(c) of the Act by the Assessing Officer on the ground that the assessee has concealed the income and furnished inaccurate particulars. The Ld. AR argued
:-5-: I.T.A. No. 619/Mds/2015 that the assessee was not having knowledge on the provisions and was on bonafide belief that the property can be purchased within 2 years before the date of sale of original asset and purchased the residential property on 04.07.2007.
Whereas, the assessee sold the property on 10.09.2008 for Rs. 85 lakhs. There is no dispute that the assessee has sold the property and purchased a Residential property but not within specified time period under the provisions of section 54F of the Act. The exemption is granted on purchase of residential property one year before the transfer of the original asset or purchase of the residential property within 2 years from the date of transfer or purchase and construct the residential property within the period of 3 years from the date of sale of original asset. In the present case, the property was sold on 10.09.2008 and the time limit of purchase of Residential property one year before is 10.09.2007 and for various reasons. The property was purchased on 04.07.2007 and the assessee has not complied primary conditions of provisions of section 54F of the Act discussed above and accepted the lapse and paid the tax, along with interest before the completion of assessment proceedings. The Assessing Officer has initiated penalty proceedings and observed that but for the scrutiny of the Income Tax Returns filed the fact of withdrawal of exemption u/s. 54F of the Act would have arisen. We are of the opinion that every addition in the Assessment proceedings shall not be a gateway for levying of penalty. The Assessing Officer has discretionary powers and shall consider the reasonable cause explained by the Assessee in the penalty proceedings. Considering the Apparent facts, material on record, we are of the opinion that the assessee has complied the tax
:-6-: I.T.A. No. 619/Mds/2015 payments and relying on principles of M/s. Manujnath Spinning and Ginning Mills vs CIT, 359 ITR 565 (Krn), where it was held the levy of penalty is not automatic held as under:
" Merely because assessee agreed for addition and accordingly assessment order was passed on the basis of addition and when the assessee has paid the tax and interest thereon in the absence of any material on record to show the concealment of income, it cannot be inferred that the said addition is on account of concealment so as to levy penalty u/s. 271(1)(c)."
We find there is a reasonable cause explained by the assessee and accordingly we direct the Assessing Officer to delete the penalty.
In the result, the appeal of the assessee is allowed.
Order pronounced on Wednesday, the 22nd day of March, 2017 at Chennai.