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Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
O R D E R PER MAHAVIR SINGH, JM:
This appeal by the assessee is arising out of the order of Commissioner of Income Tax (Appeal)-28 in short CIT (A), Mumbai in appeal No. CIT (A)-28/ITO- 16(2) (2)/67/13-14 vide dated 01-11-13. The Assessment was framed by the Income Tax Officer Ward-16(2) (2), Mumbai for the AY 2004-05 u/s 143(3) of the Income Tax Act, 1961 (hereinafter ‘the Act’). The penalty under dispute was levied by the Income Tax Officer Ward-16(2) (2), Mumbai, u/s 271 (1) (c) of the Act vide his order dated 24.03.2011.
The only issue in this appeal of the assessee is against the order of the CIT (A) in upholding the levy of penalty u/s 271(1) (c) of the Act amounting to Rs. 3,84,732/ by the Assessing Officer (in short ‘AO’) on account of claim of exemption u/s 54 of the Act.
Brief facts relating to this issue are that the assessee is co-owner along with her husband in a house property Flat No. 44 Tardeo Court, Tardeo Road, adjacent to Bhatia Hospital, Tardeo, Mumbai to the extent of 35 %. This flat was sold on 03-01- 2004 by an agreement to sell for total consideration of Rs. 77,00,000/-. The assessee worked out long-term capital gain on this sale of flat, qua her share, to the extent of Rs. 16,63,305/-. The assessee claimed exemption of this long-term capital gain by claiming that she has acquired a flat no. 402, the new property, in Laxmi Co- operative Housing society vide agreement 28-03-1995 and payments were made in installments w.e.f. 14-10-1995 to 28-02-2000 amounting to Rs. 19,73,000/-. The assessee claimed that the possession was given to the assessee in the year 2003 and payments were made till 02-05-2001 and hence claimed exemption u/s 54 of the Act in respect to long-term capital gain earned on sale of flat vide agreement dated 03-01- 2004. The assessment was completed and exemption was disallowed by the AO u/s 54 of the Act claimed by the assessee. The AO initiated the penalty proceedings u/s 271(1) (c) of the Act for both the charges i.e. for concealment of income as well as for furnishing of inaccurate particulars of income as is evident from the assessment order. Before the AO, during penalty proceedings, the assessee claimed that the assessee disclosed all the facts regarding transactions relating to purchase of new house property claimed to be as on 14-03-2003, and sale of house property on 03-01- 2004. The assessee explained that she has paid construction cost during the period 1995 to 2001 as per agreement dated 28-03-1995. It was claimed by assessee that the possession of residential house was taken on 14-03-2003 and qua this a letter from Co-operative Housing Society was filed. It was explained before AO as well as CIT (A) that assessee was under bonafide belief and on legal advice claimed exemption u/s 54 of the Act on the fact that the construction cost as per agreement dated 28-03- 1995 is nothing but purchase of right in immovable property which in term becomes a house property on completion and possession of the same as on 14-03-2003. It was claimed that consideration received on sale of residential house as per agreement dated 03-01-2004 was very well used for the purchase of residential house property and eligible for exemption u/s 54 of the Act. None of the authorities below, i.e. the AO or CIT (A) has not appreciated the above facts and the penalty was levied by AO and confirmed by CIT(A) u/s 271(1) (c) of the Act i.e. for both the charges the concealment of income as well as for furnishing of inaccurate particulars of income. Aggrieved, assessee came in second appeal before Tribunal.
4. We have heard rival contention and gone through facts and circumstances of the case. We find that the assessee has claimed exemption u/s 54 of the Act on long term capital gain shown as invested in purchase of a residential flat. The receipt of payment of flats sold is split over from 14-10-1995 to 02-05-2001on various dates
14-03-2003. We find that these are doubtful issues for claim of deduction u/s 54 of the Act but the assessee has filed explanation which seems to be bonafide. Even otherwise the penalty is levied by the AO on both the charges and he is not sure whether the assessee has concealed the income or furnished inaccurate particulars of Income. Now before us the issue is whether the AO can levy penalty u/s 271 (1) (c) of the Act on the charge of concealment of income whereas the penalty was initiated for the charge of furnishing of inaccurate particulars of income as well for concealment of income. Even otherwise the assessee has not concealed the income and the other way round that he has concealed the particulars of his income. According to us, charge must be precise, and imposition only on that footing. We are of the view that before a penalty is imposed on the assessee, the AO must apprise the assessee of the precise charge brought against him. He must be told distinctly whether he is held guilty of having concealed the particulars of his income or of having furnished inaccurate particulars thereof. Section 271 (1) (c) read with section 274 (1) of the Act provides for a reasonable opportunity to be given to the assessee so that he can meet the charge. Where the penalty proceedings under section 271(1) (c) of the Act are commenced against the assessee on both footing, viz., of concealment of particulars of income and on the footing of furnishing inaccurate particulars of his income, it cannot be said that in such circumstances the assessee had been given a reasonable opportunity of being heard before the order imposing the penalty was passed. In such a case the penalty imposed is not justified. Accordingly, we delete the penalty levied by AO and confirmed by CIT (A) on the ground of the assumption of jurisdiction. This appeal of the assessee is allowed.
In the result, the appeal of the Assessee is allowed. Order pronounced in the open court on 03 -11-2016.