The Income Tax Appellate Tribunal, Chennai (“the ITAT”) in Shri P.S. Jayaraman v. ACIT [ITA No.2983/Chny/2018 dated October 20, 2022] held that mere making of claim would not be attracting income tax penalty.
Facts:
Shri P.S. Jayaraman (“the Appellant”) sold land and made three separate investment in REC bonds. The Appellant earned capital gains and claimed exemptions under Section 54F and 54EC of the Income Tax Act, 1961 (“the IT Act”) for Rs.100 Lacs. The Appellant was assessed under Section 143 (3) of IT Act, wherein, the Assessing Officer (“the A.O.”) held that the land sold was one and therefore, the exemption would be allowable only to the extent of Rs.50 Lacs. The Appellant was saddled with other small additions of difference of pension amount and interest on bank account.
The Appellant filed appeal before the Commissioner of Income- Tax (Appeals) (“the Appellate Authority”), which granted partially reliefs by confirming the deduction claimed under Section 54EC and partially allowing the deduction under Section 54F of the IT Act. The Order passed by the Appellate Authority attained finality by dismissing further appeals by the Appellant as well as by the department by the Tribunal. Consequently, fine of Rupees 39.99 lakhs was levied as penalty on the Appellant for concealment of income and furnishing of inaccurate particulars of income.
Upon further appeals, CIT(A) concurred with the Appellant that deduction under section 54F was solely due to difference in interpretations of provisions and therefore, the penalty was not levied on that count. However, Section 54 EC were clear that the investment in a financial year was not to exceed Rs. 50 Lacs, hence, penalty against this and other two small additions of difference in pension and interest on bank account was confirmed. The Appellant filed an appeal against the order of Appellate Authority before the ITAT.
Issue:
Whether the wrong claim made by Appellant amounts to furnishing inaccurate particulars of income and hence is subject to penalty?
Held:
The ITAT held as under:
- Mere making of wrong claim do not amount to furnishing of inaccurate particulars of income. In the absence of finding that any details supplied by the Appellant are incorrect or false, penalty could not be levied.
- AO must prove that there was concealment of income or return of income furnished by the assessee or the document submitted by the Appellant were based on incorrect fact, falsity and untruth.
- Also, the case is not fit for levying of penalty considering the Appellant is a senior citizen who might have missed out to compute pension and interest correctly.
Hence, the Appeal filed by the Appellant was allowed.
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