2025 (6) TMI 642 - AT - Income Tax

Levy of penalty u/s 271(1)(c) - deduction u/s. 54EC and deduction u/s. 54F denied as the assessee filed the Return of Income belatedly and belatedly filed the Revised the Return of Income - HELD THAT - 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 2024 (8) TMI 493 - ITAT AHMEDABAD 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 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. Appeal filed by the Assessee is allowed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this appeal are:

- Whether the levy of penalty under section 271(1)(c) of the Income Tax Act, 1961 for furnishing inaccurate particulars of income is justified where the assessee filed a belated return and claimed deductions under sections 54EC and 54F of the Act.

- Whether the claim for deduction under sections 54EC and 54F can be denied solely on the ground of filing a belated return of income.

- Whether there was concealment of income or furnishing of inaccurate particulars within the meaning of section 271(1)(c) when the assessee claimed deductions belatedly but supported by documentary evidence.

- The scope and power of appellate authorities to entertain additional claims or grounds not made before the Assessing Officer, especially in the context of legitimate claims for deductions.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Justification for levy of penalty under section 271(1)(c) for furnishing inaccurate particulars of income due to belated filing of return and claiming deductions under sections 54EC and 54F

Relevant legal framework includes section 271(1)(c) of the Income Tax Act, 1961, which penalizes concealment of income or furnishing inaccurate particulars of income. The provisions under sections 54EC and 54F provide deductions related to capital gains on sale of immovable property, subject to specified conditions and timelines.

The Assessing Officer denied the deductions claimed by the assessee on the ground that the return of income was filed belatedly and the revised return was also filed late. Consequently, the Assessing Officer added Rs. 86,27,254/- to income by disallowing deductions under sections 54EC and 54F and levied a penalty of Rs. 1,70,414/- under section 271(1)(c) for furnishing inaccurate particulars of income.

The assessee challenged the penalty, contending that the belated filing of return does not amount to concealment or furnishing inaccurate particulars, especially when the claim for deductions is supported by documentary evidence such as bank statements and sale deed registrations.

The Court examined precedents including a decision by a Co-ordinate Bench of the Tribunal in the case of Shri Jignesh Jaysukhlal Ghiya, which held that the benefit of investment made up to the date of furnishing the return cannot be denied merely because the return was filed belatedly under section 139(4), provided it is within the extended time limit.

The Court also referred to the power of appellate authorities under sections 251 and 254 of the Act, as interpreted by the Hon'ble Bombay High Court in Pruthvi Brokers and Shareholders, to entertain additional claims not made before the Assessing Officer if they are valid in law and made without malafide intention.

Key evidence included documentary proof of investments/deposits made on or before the stipulated date of 31/07/2016, which largely complied with the conditions for claiming deductions under sections 54EC and 54F.

The Court observed that the Assessing Officer's denial of deductions solely on the ground of belated filing was not justified, especially when the claim was substantiated and the delay was inadvertent without any malafide intent.

In applying the law to facts, the Court directed the Assessing Officer to allow the claim of investment/deposit made on or before 31/07/2016 and proportionately allow the deductions under sections 54EC and 54F accordingly, disallowing only the portion of investments made after that date.

The competing argument from the Revenue was that the belated filing and revised return amounted to concealment warranting penalty. However, the Court found that since the deductions were legitimate and supported by evidence, and no concealment was established, the penalty was not justified.

The conclusion was that the penalty under section 271(1)(c) could not be sustained on the facts of the case.

Issue 2: Scope of appellate authority to entertain additional claims not made before the Assessing Officer

The Court considered the power of appellate authorities to entertain additional claims or grounds not raised before the Assessing Officer, referencing the decision of the Hon'ble Bombay High Court in Pruthvi Brokers and Shareholders. The headnote of that case was reproduced, emphasizing that appellate authorities have full power to entertain additional claims valid in law and made without malafide intention.

The Court also relied on decisions of the Jurisdictional High Court in Shree Rama Multi Tech Ltd and CIT v. Arvind Mills Ltd, which supported the view that legitimate claims may be entertained at the appellate stage even if not made in the original return.

The Supreme Court decision in Goetze (India) Ltd. v. CIT was also considered, with the Court interpreting that it does not bar the first appellate authority from allowing legitimate claims even if not filed in the revised return.

Applying this legal framework, the Court held that the assessee's claim for deductions under sections 54EC and 54F, though made belatedly, was a legitimate claim and could be entertained by the appellate authority.

This reasoning supported the direction to proportionately allow the deductions, reinforcing that procedural lapses in filing returns should not defeat substantive rights of the assessee.

Issue 3: Whether there was concealment of income or furnishing inaccurate particulars within the meaning of section 271(1)(c)

The Court examined whether the facts amounted to concealment or furnishing inaccurate particulars. The penalty proceedings were initiated on the basis that the assessee had concealed income by claiming deductions without proper disclosure in the return filed within time.

However, the Court noted that the assessee had furnished the return within the extended time limit under section 139(4), and the investments qualifying for deductions were largely made within the stipulated time frame.

The Court observed that the penalty proceedings were conducted ex parte due to the assessee's failure to participate despite notice, which did not establish concealment conclusively.

Given that the quantum appeal allowed proportionate deductions and there was no evidence of malafide intention or deliberate concealment, the Court concluded that the penalty for concealment was not sustainable.

The Court relied on the precedent from the Co-ordinate Bench in Shri Jignesh Jaysukhlal Ghiya, which held that belated filing of return within the extended time does not amount to concealment if the investments are made before the return filing date.

3. SIGNIFICANT HOLDINGS

- "Section 251, read with section 254, of the Income-tax Act, 1961 - Commissioner (Appeals) - Powers of - Assessment year 2004-05 - Whether assessee is entitled to raise before appellate authorities additional grounds in terms of additional claims not made in return filed by it - Held, yes."

- "Since error in not claiming deduction in return of income was inadvertent and without any malafide intention as there was nothing on record that militated against such finding, impugned additional claim of assessee was to be allowed."

- "The benefit of investment made up to the date of furnishing of Return of Income cannot be denied merely because the return was filed belatedly under section 139(4) of the Act."

- "The decision of the Supreme Court in Goetze (India) Ltd. v. CIT (284 ITR 323) was not a bar on the power of the first Appellate Authority to allow a legitimate claim of the assessee even if he had not filed a revised return for making that claim."

- "There is no concealment of income by the assessee in filing the belated return. Thus the levy of penalty under section 271(1)(c) is liable to be deleted."

- The final determination was to partly allow the quantum appeal by directing proportionate allowance of deductions under sections 54EC and 54F for investments made on or before 31/07/2016, and to allow the penalty appeal by deleting the penalty levied under section 271(1)(c) for concealment of income.