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2015 (10) TMI 742 - ITAT JAIPUR

2015 (10) TMI 742 - ITAT JAIPUR - TMI - Penalty u/s 271(1)(c) - disallowance u/s 54F - CIT(A) confirmed part penalty - Held that:- From the facts of the case of the assessee and the provisions of Section 54F under which claim has been made, the claim is clearly inadmissible. Therefore, the penalty u/s 271(1)(c) is to be imposed on wrong claim u/s 54F made on purchase of plots at B-10 and B-1, Raghunandan Vihar, Jaipur for ₹ 3,05,336/- and ₹ 3,59,048/- respectively. The A.R. himself h .....

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ceedings in relation to disallowance of deduction of ₹ 664,384 claimed by the assessee. What the assessee has failed to consider is that he has raised an additional claim before the ld. CIT(A) towards the cost of construction of the house which has been allowed to him by the ld. CIT(A) by exercising his jurisdiction as he has coterminous power under the I.T. Act. The amount which is finally disallowed would ,therefore, suffer the consequent penalty provisions under section 271(1)(c) of the .....

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land at Santosh Vihar. It is thus clear that in the facts of the present case, 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 .....

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RI T.R. MEENA, AM For The Appellant : Shri Anil Goyal, CA For The Respondent : Smt. Neena Jeph, JCIT ORDER PER R.P. TOLANI, JM This is an appeal filed by the assessee against the order of the ld. CIT(A) -1, Jaipur dated 22-08-2012 for the assessment year 2007-08 raising the following effective grounds: 2. That the ld. AO has erred in imposing huge penalty of ₹ 2,28,340/- u/s 271(1)(c) and the ld. CIT(A) has erred in sustaining the penalty of ₹ 1,49,088/-. 3. That the ld. CIT(A) has e .....

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not pressed the Ground No. 4. Therefore, the same is dismissed being not pressed. 3.1 Now we take up Ground No. 2 and 3 of the assessee for adjudication. 3.2 The facts in brief of the case are that the assessee filed its return of income on 31-10-207 declaring an income of ₹ 18,95,470/- The case of the assessee was selected for scrutiny and order u/s 143(3) of the Act was passed on 25-1-2009 determining the income of the assessee at ₹ 30,87,790/-. During the course of assessment proc .....

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on for claiming deduction u/s 54 of the Act. The AO asked the assessee to explain as to why the amount so invested for buying the new plots of land amounting to ₹ 11,06,684/- be not added to his total income. In response to the query, the assessee submitted his explanation dated 22-10-2009 which was considered by the AO but the AO did not find the reply of the assessee tenable for the reason that plot situated at 127, Bal Vihar, Jhotwara, Jaipur was not a residential house and the income f .....

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ee while passing the order u/s 143(3) of the Act. 3.3 The assessee was thereafter given a show cause notice by the AO to explain as to why penalty u/s 271(1)(c) be not imposed on him. In the penalty order, the AO observed that the claim of the assessee in claiming deduction u/s 54 of the Act 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 c .....

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3 of his order):- the claim of appellant of deduction under section 54F is required to be restricted to the value of land at 42, Santosh Vihar colony, Jhotwara, Jaipur, stamp duty of ₹ 4,42,300 and construction of house of ₹ 1,56,500. Therefore, the assessee is allowed the claim of deduction under section 54F of ₹ 5,98,000. Deduction claimed on purchase of land at B-10 and B-1, Raghunandan Vihar, Jaipur at ₹ 305,336 and ₹ 359,048 respectively cannot be allowed to be .....

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6 In light of above facts, the limited issue before us is whether levy of penalty of ₹ 1,49,088 under section 271(1)(c) is justified or not 3.7 Firstly, in relation to ground no. 3, during the course of hearing, the ld. AR of the assessee submitted that the ld. CIT(A) has erred in directing the AO to compute the penalty on disallowance ₹ 6,64,384/- instead of ₹ 5,07,884/- u/s 54F of the Act and has submitted the working as under: Deduction claimed by the assessee u/s 54 - ͅ .....

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e time, deduction in respect of purchase of land at B-10 and B-1, Raghunandan Vihar, Jaipur at ₹ 3,05,336/- and ₹ 3,59,048/- respectively were withdrawn. The resultant position that emerges is as under: Deduction claimed before AO - ₹ 11,06,684 Add: Additional deduction claimed before CIT(A) - ₹ 1,56,500 Total deduction claimed ₹ 12,63,184 Less: Deduction allowed by the CIT(A) - ₹ 5,98,800 Deduction denied to the appellant ₹ 6,64,384 3.9 In the context o .....

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n Vihar, Jaipur for ₹ 3,05,336/- and ₹ 3,59,048/- respectively. The A.R. himself has admitted on page 2 of his submission that the penalty may be reduced proportionately as per the order of the ld. CIT(A) dated 7- 02-2012 in ITA No. 870/09-10. Thus the AO is directed to reduce the penalty u/s 271(1) (c) proportionately on the tax evaded on the disallowance u/s 54F confirmed by the ld. CIT(A) of ₹ 6,64,384/-. To that extent, the penalty is confirmed u/s 271(1)( c) for filing ina .....

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is jurisdiction as he has coterminous power under the I.T. Act. In other words, the order of the AO merges with the order of the ld. CIT(A). So, what needs to be examined is what has been claimed as a deduction before the AO as well as before ld. CIT(A) and what has been finally allowed to him. The amount which is finally disallowed would ,therefore, suffer the consequent penalty provisions under section 271(1)(c) of the Act. We therefore do not find any infirmity in the order of the ld. CIT(A) .....

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wever, the deduction claimed by the assessee was not acceptable to the Department and the same has been disallowed. The ld. AR further 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 by the ld. AR of the assessee on the last date of filing of appeal on 31-10-2007 and if the return had not been filed by the assessee then the assessee had to face penalty u/s .....

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and perused the material available on record. In this case, it is seen that during assessment proceedings, the assessee had shown capital gains of ₹ 12.71 lacs after getting benefit of indexation by sale of a plot of land at Bal Vihar for deduction u/s 54 of the Act towards cost of purchase of 03 plots of land totaling to ₹ 11,06,684/- and paid tax on balance amount of ₹ 1,64,316/-. The question which arises for consideration is whether the appellant has a reasonable basis for .....

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satisfaction or otherwise of the other eligibility conditions under the said provisions, it is clear that the assessee s claim for deduction under section 54 is not admissible at first place. Having said that, we have also observed that ld. CIT(A) has taken cognizance of the additional evidence towards cost of construction of residential house on one of the 3 plots of land and allowed deduction under section 54F. To this extent, the claim of the assessee has been accepted and penalty has already .....

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the last date of filing of appeal on 31-10-2007 after claiming deduction of ₹ 11,06,684/- u/s 54 of the Act without fully verifying the facts of the case. Thus there was no fault of the assessee in claiming more deduction u/s 54 of the Act and to this effect, an affidavit of Shri Sushil Varma was filed before the ld. CIT(A). It would be interesting to observe that during the course of the assessment proceedings, the assessee has not corrected so called mistake and has continued with the po .....

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ecially when a specific show cause made by the AO on this specific matter of deduction under section 54 and even subsequently during the appellate proceedings which he has failed miserably to utilize. In light of these facts, it is difficult for us to rely on the affidavit filed by the ld AR to the effect that the assessee cannot be penalized for the acts of the ld AR and to this extent, we don t find any infirmity in the order of the ld CIT(A). 3.15 Now coming to the assessee s contention that .....

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s wherein it is stated that regarding investment of long term capital gains of ₹ 12,71,000/- on sale of residential house at Bal Vihar, we submit that assessee has purchased residential plots for ₹ 11,06,684/- in accordance with the provisions of section 54 whereby exemption of equivalent amount has been claimed in the return of income, section 54 doesn t deny for exemption in case more than one residential house are purchased by the assessee out of capital gains on sale of residenti .....

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