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2019 (6) TMI 787 - AT - Income TaxPenalty u/s 271(1)(c) - claiming wrong exemption u/s 54F on construction of first floor of property at Sainik Farms - CIT (A) sustaining penalty in order passed the Appellate Order ex-party - HELD THAT:- In the instant case, not only the notice issued to the assessee under section 274 read with section 271(1)(c) is defective but AO has not even made himself satisfied at the time of making disallowance / addition in assessment order if the assessee has furnished inaccurate particulars of income or has concealed particulars of his income rather to be on the safer side he has invoked both the limbs of section 271(1)(c). This is not merely a case of serving a defective notice under section 274 read with section 271(1) on the assessee rather it is a case of non-application of mind on the part of the AO to make himself satisfied as to under which limb of section 271(1)(c) of the Act, he is going to initiate/levy the penalty on the assessee and as such, decision of Sundaram Finance Ltd. [2018 (10) TMI 1451 - SC ORDER] relied upon by the ld. DR for the Revenue is not applicable to the facts and circumstances of the case. The facts of this case is covered by Hon’ble Apex Court in case of CIT vs. Reliance Petro Products Pvt. Ltd. . [2010 (3) TMI 80 - SUPREME COURT] wherein it is held that merely making claim which is not sustainable in law by itself would not amount to furnishing of inaccurate particulars of income Coordinate Bench of the Tribunal in case cited as Shri D. Harindran vs. ITO [2016 (9) TMI 1462 - ITAT CHENNAI] decided the identical issue in favour of the assessee in the light of the decision of Rajasthan Spinning and Weaving Mills [2009 (5) TMI 15 - SUPREME COURT] and CIT vs. Gem Granites [2013 (11) TMI 1375 - MADRAS HIGH COURT] by holding that even if it is considered that the claim made by the assessee u/s 54/54F is incorrect, it would not tantamount to furnishing of inaccurate particulars of income Referring to ledger account of capital work-in-progress qua construction of residential property for claiming deduction u/s 54 the assessee has claimed deduction u/s 54 for raising construction of house bonafidely qua which the AO has taken different view that it does not amount to construction of house rather it is renovation/interior designing. In the face of the ledger account of capital work-in-progress brought on record by the assessee, when we examine the assessment order it is nowhere mentioned by the AO that at any point of time, he has visited the property in question or the property claimed to have been constructed by the assessee was not having sanctioned site plan. Rather AO proceeded to reject the claim of the assessee on the basis of imagination that the construction claimed by the assessee amounts to renovation/interior designing. - Decided in favour of assessee.
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