S.RAMMOHAN,CHENNAI vs. ACIT, CHENNAI

आदेश / O R D E R PER G. PAVAN KUMAR, JUDICIAL MEMBER:

ITA No.718/Mds/2016. :- 2 -:

2009-2010 passed u/s.143(3), 271 (1) (c) and 250 of the Income Tax Act, 1961 (herein after referred to as ‘the Act’).

The only substantive ground raised by the assessee that 2. the ld. Commissioner of Income Tax (Appeals) failed to consider th facts and confirmed levy of penalty of �1,40,000/- u/s.271(1) (c) of the Act . In respect of portion of unutilized amount in Capital Gains Accounts Scheme irrespective of the fact that the assessee has three years period from date of transfer of original asset to utilize the said amount for claiming exemption u/s.54F of the Act. Further, the ld. Commissioner of Income Tax (Appeals) erred on the facts that the assessee is an individual though following cash system of accounting and offered interest accrued on Bank deposits to Income tax in assessment proceedings to purchase peace with Department and co- operated in assessment proceedings.

The Brief facts of the case is that the assessee has filed 3.

Return of Income on 28.07.2009 with total income of �17,72,760/- and the Return of income was processed u/s.143(1) of the Act.

Subsequently, the case was selected for scrutiny under CASS and notices u/s.143(2) and u/se. 142(1) of the Act with questionnaire was issued. In compliance to notices, the ld. Authorised Representative of assessee appeared and filed details and the ld. Assessing Officer found

ITA No.718/Mds/2016. :- 3 -: that the assessee has sold immovable property on 06.09.2008 for �.65,22,000/- and claimed exemption u/s.54F of the Act by depositing the net sale consideration in Capital Gains Accounts Scheme. The assessee has purchased property in the year 1999 and claimed indexed cost of acquisition of property. The assessee utilized sale proceeds in Capital Gains Accounts Scheme in two installments for constructing of a Residential flat on the site originally owned by Father-in-law, which the Father-in-law, settled 1/3 share of UDS land in favour of the Daughter and the Daughter has settled the same in favour of the assessee. The assessee has built third floor on the Building and invested �59,75,491/- and produced construction agreement, copy of plan approval and other details of construction materials with Bills. The ld. Assessing Officer having satisfied with the construction cost found that since the assessee has claimed exemption u/s. 54F of the Act were the entire sale proceeds should have been invested in construction of residential property but due to variation of value of investment made an addition for a differential amount of �4,91,905/- and in respect of Bank interest, the ld. Assessing Officer based on AIR information found that the assessee had fixed deposits in State Bank of India and ICICI Bank and the interest accrued aggregating to �1,05,543/- alongwith interest on Saving bank account was added to the Returned income and order

ITA No.718/Mds/2016. :- 4 -: was passed order u/s.143(3) of the Act dated 21.12.2011.

Subsequently, the ld. Assessing Officer issued notice u/s.274 of the Act for levy of penalty and in the penalty proceedings, the ld. Assessing Officer considered the findings of the assessment on residential property claim of exemption u/s.54F of the Act and bank interest income. The assessee filed explanations on the inadvertent mistake of not offering bank interest as assessee is following the cash system of accounting and the assessee has invested entire consideration in the Capital Gains Accounts Scheme and utilized for construction of Residential house property and further certain works are pending and the assessee has sufficient time to utilize the balance in Capital Gains Accounts Scheme. Bu the ld. Assessing Officer is of the opinion that the assessee has wrongly claimed exemption Long Term Capital Gains for evading of taxes and levied penalty of �1,40,000/- and passed the order u/s.271(1) of the Act dated 22.06.2012.

In the appellate proceedings, the ld. Authorised 4.

Representative of assessee reiterated the submissions made before the ld. Assessing Officer and there is no concealment or any furnishing of inaccurate particulars for levy of penalty u/s.271(1) (c) of the Act. The ld. Commissioner of Income Tax (Appeals) considered the grounds of ITA No.718/Mds/2016. :- 5 -: the assessee and written submissions filed on 27.01.2016 referred at page 3 to 8 of his order explaining the facts with provisions of law and Judicial decisions challenging the levy of penalty. But the ld. Commissioner of Income Tax (Appeals) finally concluded by relying on the judicial decision of Manpreet Kaur vs. CIT (Punjab & Haryana High Court) in of 2014, dated 17.08.2015 and the assessee has wrongly claimed exemption u/s.54F of the Act and also not disclosed interest income and confirmed the penalty levied by the ld. Assessing Officer. Aggrieved by the order, the assessee filed an appeal before Commissioner of Income Tax (Appeals).

Before us, the ld. Authorised Representative reiterated the 5. submissions made in assessment, penalty and appellate proceedings that the assessee has not concealed any income nor filed any inaccurate particulars. On the first ground, the assessee has sold immovable property on 06.09.2008 and deposited the sale consideration in two installments in Capital Gains Accounts Scheme.

Subsequently utilized net sale consideration deposited on Capital Gains Accounts Scheme towards construction to the extent of �59,75,491/-.

The ld. Assessing Officer has disallowed the partial claim as the assessee has not utilized the full net consideration. The ld. Authorised Representative further explained that any disallowance

ITA No.718/Mds/2016. :- 6 -: shall be effected in the assessment year 2012-13 and not in the impugned assessment year. The assessee following cash system of Accounting, therefore interest accrued on deposits were not reflected in the Return of Income but in the assessment proceedings to buy peace with the Department the assessee has accepted the additions and there is no concise attempt to conceal any income or furnish inaccurate particulars and prayed for deleting the penalty.

ITA No.718/Mds/2016. :- 7 -: the amounts for construction of Residential property which is not disputed by the ld. Assessing Officer but the differential amount �4,91,905/- was added to the Returned income. The provision of Sec.

54F of the Act are beneficial provisions and the main aim of the legislature is to promote construction of Residential properties.

Further, the assessee has time till 05.09.2011 to utilize the money from Capital Gains Accounts Scheme and if it is not utilized the same is taxable in the year when the limitation period expires. The assessee is an individual and made fixed deposits in SBI and ICICI Bank and following cash system of Accounting. In the assessment proceedings, the ld. Assessing Officer relied on information of AIR and made an addition which the assessee has accepted for peace and co-operated with the Department. The bonafide action of the assessee is not to suppress the income but effected by the legal fiction of the provisions and the levy of penalty cannot be mandatorily initiated. We consider the Apex Court decision of CIT vs. Reliance Petro Products Pvt. Ltd 322 ITR 158(SC) and the levy of penalty cannot be automatic and addition in assessment proceedings cannot be a gateway for levy of penalty. We also draw support from the principles laid down in case of CIT vs. Manjunatha Cotton and Ginning Factory, 359 ITR 565, (Karnataka) were it was held that the penalty proceedings are not automatic and they are distinct. Considering the factual matrix, legal

ITA No.718/Mds/2016. :- 8 -: decisions and submissions, we delete the penalty levied by the ld. Assessing Officer and allow the grounds of the assessee.

Order pronounced on Wednesday, the 17th day of August, 2016, at Chennai.