THE issue is - Whether when assessee claims Sec 54F benefits for three plots of land, located at different places, such a claim amounts to furnishing of inaccurate particulars, warranting penalty u/s 271(1)(c). YES is the answer.
Facts of the case
The assessee had shown capital gains of Rs. 12,71,000/- after getting benefit of indexation by sale of Plot. The assessee had claimed deduction u/s 54 after buying 03 plots of land totaling to Rs. 11,06,684/- and paid tax on balance amount of Rs. 1,64,316/-. The AO observed that the assessee reinvested the capital gains for buying the new plots of land and not in a residential house which was the pre-condition for claiming deduction u/s 54. Since the assessee sold a plot of land (not a residential house) and reinvested the capital gains for buying the new plots of land (and not a residential house), it was held by the AO that he was not covered by the provisions of Section 54 and the entire amount of Rs. 11,06,684/- was added to the income of the assessee while passing the order u/s 143(3). The AO observed that the claim of the assessee in claiming deduction u/s 54 was not bonafide one and the assessee had intentionally filed inaccurate particulars of income in order to evade tax. The AO observed that the assessee furnished inaccurate particulars of income leading to concealment of the same. The AO imposed a penalty of Rs. 2,48,340/-u/s 271(1)(c) .The CIT(A) allowed deduction u/s 54F to the extent of Rs 5,98,800 and reduced the penalty.
On Appeal before the Tribunal, the AR submitted that mere erroneous claim made in the return will not be a ground for levying the penalty. Secondly, he has submitted that the return of the assessee was filed in a hurried manner on the last date of filing of appeal on 31-10-2007.
Having heard the parties, the Tribunal held that,
++ the directions of the CIT(A) in the penalty order are in consonance with the directions of the CIT(A) in the quantum proceedings in relation to disallowance of deduction of Rs 664,384 claimed by the assessee. The order of the AO merges with the order of the CIT(A). So, what needs to be examined is what has been claimed as a deduction before the AO as well as before CIT(A) and what has been finally allowed to him. The amount which is finally disallowed would, therefore, suffer the consequent penalty provisions u/s 271(1)(c). No infirmity in the order of the CIT(A) and the same is upheld on this ground;
++ even if we accept that the claim of the assessee is u/s 54F and not section 54, does the assessee has a reasonable and bonafide basis for making such claim u/s 54F in respect of other 2 plots of the land. If it was a case of a bonafide mistake and making a claim in a hurriedly manner, the assessee through its AR has got ample opportunity to withdraw such claim during the assessment proceedings specially when a specific show cause made by the AO on this specific matter of deduction u/s 54 and even subsequently during the appellate proceedings which he has failed miserably to utilize;
++ the assessee doesn't have any legal and tenable basis for claim of deduction in respect of 03 separate plots of land which are physically at different locations as by no stretch of imagination, they would collectively satisfy the definition of "a residential house". Therefore, it is clearly a case of striking in the dark which the assessee has been unsuccessful as rightly held by the lower authorities. It is clearly a case where the factual position doesn't support the claim of the assessee and there cannot be any dispute or debate that the assessee was eligible for claim at first place. The claim of the assessee u/s 54 was not a bonafide claim and levy of penalty u/s 271(1)(c) was justified and hence confirmed.
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