Making Wrong Claim u/s 54 instead of 54F wouldn’t attract Penalty: ITAT [Read Order]

The Income Tax Appellate Tribunal (ITAT), Jaipur bench has held that making a wrong claim under section 54 of the Income Tax Act, 1961 instead of 54F would not render penal liability under section 271(1)(c) of the Act.

The assessee, an individual file returns declaring nil income and claimed deduction under section 54 instead of section 54F. The Assessing Officer denied deduction claim and initiated penalty proceedings against the assessee. The assessee revised its mistake of claiming deduction U/s 54 instead of section 54F of the Act.

The Tribunal found that the assessee has disclosed the property as a building though it was not claimed as a residential house. The assessee also produced before the Assessing Officer the sale deed from which the AO found that the property sold by the assessee is a shop and therefore, the deduction U/s 54 of the Act is not available but the deduction U/s 54F was finally allowed by the AO.

“Therefore, this is a clear case of the claim made under wrong provisions of Section 54 instead of U/s 54F of the Act. Further, the assessee has also produced the copy of the family ration card, Voter ID Card, Electricity Bill, gas connection receipts and saving bank account to establish the fact that the assessee was using the property in question for their residential purpose. These facts clearly make out a case that it was a bonafide and inadvertent mistake and omission on the part of the assessee to claim deduction U/s 54 instead of section 54F of the Act. Therefore, we find that once, the assessee has explained the reasons for making a wrong claim and the facts explained by the assessee are duly established from the record and found to be true then even if the addition was made by the AO due to the claim made under wrong provisions of the Act. It will not amount to furnishing inaccurate particulars of income or concealment of particulars of income. Accordingly, in view of the provisions of Section 237B of the Act once the assessee has proved that there was a reasonable cause for making the claim of section 54 instead of section 54F of the Act then the penalty U/s 271(1)(c) of the Act cannot be imposed,” the Tribunal said.