ITAT directs AO to recompute Penalty on Incorrect Income Tax Deduction u/s 54EC [Read Order]

In a recent ruling, the Ahmedabad bench of the Income Tax Appellate Tribunal ( ITAT ) directed the assessing officer to re-compute the quantum of penalty on incorrect income tax deduction under Section 54EC of the Income Tax Act, 1961.

In this case, the assessee, Maya K. Dharwani, is having interest on loans and income from house property as her main source of income. On 14-03-2014, the assessee filed her income return for the academic year 2013-14, declaring that her total income was Rs. 8,63,230.

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The assessee’s case was selected for scrutiny, and the assessment order was passed by the assessing officer (AO) by disallowing deduction under Section 54EC of the Act of Rs. 41,00,000/- and deduction under Section 54F of the Act of Rs. 20,00,000/-.

Additionally, the AO started penalty proceedings under Section 271(1)(c) of the Act for furnishing inaccurate particulars.

Aggrieved by the above order, the assessee appealed before the Commissioner of Income Tax (Appeals) [CIT(A)]. CIT(A) restricted the deduction of Rs. 54F of the Act to Rs. 30,00,000.

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The AO during the penalty proceedings observed that the assessee had invested only Rs. 2,00,000/- in the capital gain account saving scheme with SBI but had claimed a deduction of Rs. 20,00,000/- u/s. 54F of the Act in her original return of income. It was also noted that there was no claim of Rs. 45,00,000  under Section 54F of the Act in respect of property purchased in the original return of income, with the said claim being an afterthought.

The counsel, on behalf of the assessee, contended that in the appeal before the Co-ordinate Bench, the deduction under Section 54F of the Income Tax Act is restricted to Rs. 30,00,000, and thus the penalty should not be levied considering the facts and circumstances.

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The bench observed that there was no doubt that the wrong deduction had been claimed by the assessee under Section 54F of the Income Tax Act, 1961, and thus the penalty levied by the AO was confirmed by the tribunal.

The bench, comprising of Suchitra Kamble ( Judicial Member ) and Makarand V. Mahadeokar ( Accountant Member ), directed the AO to recompute the penalty on the incorrect income tax deduction under Section 54EC. The bench also held that while computing the penalty, relief of Rs. 30,00,000 should be granted, thus reducing the penalty amount accordingly.

To Read the full text of the Order CLICK HERE

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