Penalty cannot be levied for mere Deletion of Capital Gain Exemption Claim u/s 54F: ITAT [Read Order]

Penalty cannot be levied for mere deletion of Capital Gain Exemption Claim under Section 54F of the Income Tax Act,1961 and so was held by Income Tax Appellate Tribunal (ITAT), Pune

The appeal has been preferred by the assessee, Mihir Madhavrao Suryawanshi for the Assessment Year 2013-14 against the order passed by the Commissioner of Income Tax (CIT)involving proceedings under Section 271(1)(c) of the Income Tax Act, 1961. The assessee seeks in this appeal to reverse the action of the lower authority invoking section 271(1)(c) of the Act thereby imposing penalty of Rs.13,66,999/- in the assessing authority’s order dated and affirmed by the CIT. The penalty has arisen in consequence to the lower authority’s action disallowing the assessee’s section 54F deduction claim of Rs.66,35,931/-.

Section 54F of the Income Tax Act, 1961 allows tax exemption on the long term capital gains earned from selling a capital asset, other than a house property. So, if one sells capital asset like shares, bonds, jewellery, gold, etc. and reinvest the sale proceeds towards the purchase or construction of a house property, the returns earned on the sale of the capital asset would be allowed as an exemption from tax under Section 54F.Some of the features to avail exemptions u/s 54F are mentioned below are:

• The exemptions u/s 54F is for Hindu Undivided Families and individuals.
• The capital gain that arises for transferring any long term capital assets that is other than the residential house.
• Net consideration that arises for transferring long term capital assets that are invested in the following:

• The net consideration is re-invested in the buying of one residential property in one year before the transfer date or within two years after the transfer date.
• The net consideration is re-invested in constructing 1 residential property in India in three years from the transfer date.

The Bench consisting of R.S. Syal, Vice President and S.S. Godara, Judicial Member observed ”that this Tribunal’sCco-ordinate Bench has already deleted the foregoing 54F disallowance and therefore, we conclude that the penalty in issue herein has no legs to stands as a necessary corollary.”

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