M/S. MANAK DEVI SURANA,NEW DELHI vs. ITO, NEW DELHI

The Hon’ble Commissioner of Income Tax (Appeals) while upholding penalty order u/s 271(1) (c) of the Act, has erred in law as much as facts of the case in not judicially deciding the legal issue challenged by the appellant about the validity of the assessment order in view of the belated approval obtained from the Ld. JCIT.

Ground No.5 is not as per the Income-tax Rules. Therefore, the same is not pressed by the Ld. AR. Ground No. 1 is general in nature. Ground No. 2, 3 & 4 are contested by the assessee before us.

The appellant filed return of income for the A.Y 2007-08 on 22/8/2007, disclosing income of Rs.2,39,486/-. The appellant had disclosed long term capital gains on sale of land situated at Indore, in respect of which exemption u/s 54F of Rs.18,93,024/- was claimed. During the scrutiny assessment proceedings, it was found from the Balance Sheet as on 31/3/2007 that the appellant was the owner of two residential properties, other than the third residential property purchased during the year and in respect of which exemption u/s 54F had been claimed. Approval was taken from the JCIT, Range-22, New Delhi, for comprehensive scrutiny, and the appellant was required to justify her claim for exemption. In response, the Authorized Representative filed a letter dated 17/9/2009 withdrawing the claim and offering the long term capital gains of Rs.19, 05,431/- for tax. The assessment was completed at an income of Rs.21, 44,920/- and penalty proceedings were initiated u/s 271(1)(c) for furnishing inaccurate particulars of income and concealment of income. During the penalty proceedings, it was submitted that the appellant was 78 years of age, was ignorant of the provisions of law, and had inadvertently claimed the exemption. Moreover, the computation of income had been revised before the completion of assessment. The Assessing Officer however, held that the appellant was regularly assessed to tax and had sufficient knowledge of the law to make a claim u/s 54F. Moreover, the revision of income was not suo motu, but after the ineligibility of claim was pointed out by the Assessing Officer. Penalty was levied at 100% of the tax sought to be evaded which worked out to Rs.4, 27,579/-. Aggrieved, the appellant has filed this appeal before Ld. CIT(A) which was dismissed.

The Ld. AR submits that there was no concealment on her part as the exemption u/s 54F was not disallowed by the Assessing Officer but there was no material on record, we shows that the assessee has concealed any document or any income to that effect before the Assessing Officer. There was no query raised by the Assessing Officer as relates to long term capital gain which is evident on page 12 of the paper book on 17/9/2009. The assessee herself has withdrawn claim u/s 54F and thus the same was suo motu withdrawn by the assessee. Therefore, the finding given by the Ld. CIT (A) that there is furnishing of inaccurate particulars of income was not proper.

The Ld. DR relied upon the Ld. CIT (A)’s order and submitted that the same has taken into account all the contentions of the assessee and has given right finding by dismissing the appeal of the assessee.

We have perused all the records and heard both the parties. The contentions of the assessee that all the material particulars were disclosed before the Assessing Officer is correct. It is pertinent to note that no query about the long term capital gain has been raised by the Assessing Officer. All the disclosure in return of income has been properly done by the assessee. Merely claiming exemption u/s 54F and thereafter withdrawing the same suo-motto before any enquiry does not amount to furnishing of inaccurate particulars of income. Therefore, the assessee’s explanation, in our view is bonafide. Hence, we cancel the penalty levied u/s 271(1)(c) as confirmed by the Ld. CIT(A).

In result, the appeal is allowed.