ITAT Deletes Penalty Proceedings on Claim of Capital Gain Deductions u/s 54EC and 54F in Belated ITR

Brief facts of the case are that the assessee is an individual and the Proprietor of M/s. Mehaan Infrastructure. The assessee sold an immovable property as a co-owner and received his 30% share of Rs.1.8 crores and claimed deduction u/s. 54EC of Rs. 50,00,000/- and deduction u/s. 54F of Rs.36,27,254/-. The Assessing Officer denied the deduction as the assessee filed the Return of Income belatedly on 24-03-2017 and belatedly filed the Revised Return of Income. Thus the Ld. A.O. making an addition of Rs. 86,27,254/- by disallowing the claim of deductions u/s. 54EC and u/s. 54F and demanded tax thereon.

The assessee preferred an appeal against that assessment order, which was partly allowed. It is thereafter the Assessing Officer proceeded with the penalty proceedings for furnishing inaccurate particulars of income and levied a minimum penalty of Rs. 1,70,414/- u/s. 271(1)(c) of the Act.

Aggrieved against the Penalty order, assessee filed before the Ld. CIT(A), which has been confirmed. Against which assessee is in appeal before the Income Tax Appellate Tribunal (ITAT), raising the following Grounds of Appeal:

1. That on facts, and in law, the learned CIT (A) has grievously erred in confirming the levy of penalty of Rs. 1,70,414/- u/s. 271(1) (c) of the Act.

2. That on facts, in law, and on evidence on record, it ought to have been held that there is neither concealment of income, inaccurate particulars, nor furnishing of income within the meaning of section 271(1) (c) of the Act.

3. The appellant craves liberty to add, alter, or amend any ground of appeal.

Ld. Counsel for the assessee submitted that the belated Return of Income cannot deny the deduction u/s. 54F of the Act as held by the Co-ordinate Bench of this Tribunal in the case of Shri Jignesh Jaysukhlal Ghiya Vs. DCIT in ITA No. 324/Ahd/2020 dated 07-08-2024. Thus Ld. Counsel pleaded that there is no concealment of income in claiming the deduction u/s. 54EC and u/s. 54F by the assessee and the penalty imposed by the Lower Authorities are liable to be deleted.

Per contra, Ld. Sr. D.R., appearing for the Revenue, supported the order passed by the Lower Authorities and requested to confirm the penalty levied by the Assessing Officer for concealment of income.

ITAT Observations:

• The Ld. CIT(A) in the quantum appeal set aside the assessment with the direction to the A.O. to allow the claim of investment/deposit done on or before 31-07-2016 and proportionately allow the claim of deduction u/s. 54F and u/s. 54EC.
• Penalty Proceedings were initiated against the Assessee, but he failed to participate in spite of notice by Speed Post, which has resulted in levying a minimum penalty of Rs. 1,70,414/- for concealing the income.
• Aggrieved against the penalty order, assessee filed an appeal before the Ld. CIT(A) who was confirmed the levy of penalty for concealing the income and dismissed the appeal. As extracted in the quantum appeal, Ld. CIT(A) proportionately allowed the deduction u/s. 54F and u/s. 54EC of the Act. Thus, there is no concealment of income by the assessee. This was not properly brought out in the exparte penalty proceedings by the assessee and also before Ld. CIT((A).
• Co-ordinate Bench of this Tribunal in the case of Shri Jignesh Jaysukhlal Ghiya (cited supra) held that when assessee furnishes Return of Income subsequent to the due date of filing u/s. 139(1) but within the extended time limit u/s. 139(4) of the Act, the benefit of investment made up to the date of furnishing of the Return of Income cannot be denied. Thus in our considered view, there is no concealment of income by the assessee in filing the belated return.
• Thus the levy of penalty u/s. 271(1)(c) is liable to be deleted.