Wrong claim of Sec 54B and 54F exemption invites rigors of penalty: ITAT

During the assessment year, assessee along with his brother Shri Ramesh Chand sold agricultural land for a consideration of Rs.38,44,75,000/-. Assessee has 50% share therein. While filing the return of income assessee claimed deduction u/s 54F and 54B of the Income Tax Act. Assessee made some revision of calculation of Long Term Capital Gain (LTCG). By perusing the revised calculation, AO observed that assessee purchased a residential house for a sum of Rs.3,07,55,000/-. Besides the assessee also purchased agricultural land of Rs.4,02,06,000/-. Further, assessee had deposited Rs.9,40,00,000/- in capital gains deposit account bonds. Hence AO reworked the assessee’s capital gain and came to the conclusion that the capital gain of Rs.2,61,23,549/- was taxable.

AO made addition of Rs.2,61,23,549/-. On this addition, penalty notice was issued. The AO found that above conduct of the assessee was liable to be visited through rigorous of penalty. AO held that when assessee was completely cornered by the AO he had no option to offer the said LTCG for taxation.

Before the ld. CIT (A), assessee stated that assessee has earlier filed a wrong computation/defective computation on the advice of counsel at that time. Thereafter, assessee had corrected the defect to a great extent and the balance surrender so made was voluntary and no concealment of income was there. However, ld. CIT (A) rejected the same by observing that even after being pointed out Shri Rajpal Yadav, assessee’s counsel insisted on the claim of depreciation u/s 54B and 54F. Ld. CIT (A) also agreed that the surrender of balance amount was not voluntary. Ld. CIT (A) proceeded to refer several case laws and confirmed the penalty.

Against this order, the assessee is in appeal before the Income Tax Appellate Tribunal

ITAT upheld the order of Revenue authorities, citing that the wrong claim of section 54B and 54F exemption not being in consonance with the documents invites the rigors of penalty. Further, the assessee’s plea of having income voluntarily offered, the same has rightly been rejected by the authorities below as it is clearly after the AO’s confrontation with the assessee with the correct position, that the assessee offered the same.