ACIT 19(2), MUMBAI vs. PRAMILA R. WADHAWAN, MUMBAI

Rival contentions have been heard and record perused. From the record we found that the AO has levied penalty with regard to the disallowance made u/s.54F. By the impugned order the CIT(A) deleted the same after observing as under :- 14. The various judicial authorities have advocated the legal principle that the penalty proceedings and the assessment proceedings are two separate proceedings and every addition made during the assessment proceedings would not lead to the imposition of penalty u/s 271 (1 )(c). In various judicial pronouncements on the issue of levy of penalty, the courts have 2 held that in order to expose any person to the penalty, unless the case is strictly covered by the penal provision, the penalty cannot be levied. Making an addition to the income or the disallowance of the legal claim made by the appellant should not be construed as filling of inaccurate particulars of income and would not automatically lead to the imposition of penalty. Before levying of penalty u/s 271 (1 )(c), the AO has to conclusively prove that the conditions as postulated in the Explanation to section 271(1)(c) are satisfied. In other words, in order to impose penalty, the AO need to place on record some positive evidence regarding the concealment of income or filing of the inaccurate particulars of income on the part of the appellant. The rationale and reasoning for disallowance while passing the assessment order cannot be the same for levy of penalty.

The additions made in the instant case are on account of disallowances made for claim of deduction u/s 54F. the facts relating to which were available in the return of income filed for the year under consideration. These facts were not unearthed by the AO during the' assessment proceedings and were available on record at the start of the assessment proceedings. There are number of judicial pronouncements on the issue of disallowance of any deduction. wherein it is held that the claim of any legal deduction made by the appellant in the return of income under a bona fide belief of the same being an allowable deduction, would not attract the penalty u/s 271 (1 )(c).

In the case of Smt. Giralesh Vs. ITO in I.T.A. Nos. 4646 & 4647/Del/2011, the ITAT Delhi, while deciding a similar matter, has in its order dated 08/02/2013 has held that "So far as the denial of the claimed deduction u/s 54F of the Act is concerned, the" assessee had also furnished necessary information in this regard on the basis of which only the AO came to the conclusion that benefit is not available on the investment of sale proceeds in a vacant plot. We thus find that there was no concealment of particulars of income or furnishing inaccurate particulars thereof on the part of the assessee on the above addition/disallowance to attract the penal provisions laid down u/s 271 (1) (C) of the Act. The penalty levied at Rs.83,070/­ u/s 271 (1) (C) of the Act on the above addition/disallowance was thus not justified in absence of concealment of particulars of income or furnishing inaccurate particular. "

A mere making of the claim of deduction under a bona fide belief of the same being allowable, by itself, will not amount to furnishing inaccurate particulars regarding the income of the appellant. In the instant case, the appellant had furnished all the details of its deduction claimed in its return of income and such details, in themselves may not be complete or correct, but such a claim made was not found to be inaccurate nor could be viewed as the concealment of income on its part. It was up to the AO to accept appellant's claim of deduction u/s 54F as made in the return or not. Merely because the assessee had claimed the deduction, which claim was not accepted or was not acceptable to the AO, that by itself would not attract the penalty under s. 271(1)(c).

The above principle has been laid down by the Hon,ble Supreme Court in the case of err vs. Reliance Petroproducts (P) Ltd. ­(2010) 230 eTR (Se) 320 : (2010) 322 ITR 158 (se), wherein it is held by the Apex Court that "reading the words "inaccurate" and ''particulars'' in conjunction, they must mean the details supplied in the return, which are not accurate, not exact or correct, not according to truth or erroneous. In this case, there is no finding that any details supplied by the assessee in its return were found to be incorrect or erroneous or false. Such not being the case, there would be no question of inviting the penalty under s. 271(1)(c). A mere making of the claim, which is not sustainable in law, by itself, 4 will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such claim made in the return cannot amount to the inaccurate particulars."

In my opinion, the issue of imposition of penalty uls 271 (1)(C) on account of disallowance of any deduction or the rejection of any legal claim made in the return of income filed, has been finally settled by the above judicial pronouncement of the Hon'ble Supreme Court of India and the principle laid down by the Ape~ Court has to be followed.

In view of the above judicial pronouncement and the facts and circumstances of the case under consideration, I am of the considered opinion, that the penalty u/s 271(1)(C) of the I.T. Act. 1961 amounting to Rs. 41,50,0001­ in the case of the appellant for the AY. 2007­08 is not leviable and therefore cancelled.

We have considered rival contentions. The disallowance made u/s.54F is a legal claim made by the assessee. Such a disallowance of claim u/s.54F cannot be interpreted as filing of inaccurate particular of income or concealment of income. The legal claim u/s.54F was filed after disclosing all the relevant and basic facts of selling of lease rights of property and claim the deduction as per provisions of Section 54F. The CIT(A) while deleting the penalty observed that there is a difference of opinion of the allowability of claim of deduction u/s.54F between the assessee and the AO and observed that it is not the case of AO that he has made some independent enquiries resulting into detection of some concealment of income or bogus nature of claim made in this respect of this deduction. The detailed finding recorded by CIT(A) at para 16 to 21 have not been controverted by ld. DR by brining any positive material on record. Accordingly, we do not find any infirmity in the order of CIT(A).

In the result, appeal of the revenue is dismissed.