Income Tax Appellate Tribunal - Ahmedabad
Vijay I. Sheth vs Income Tax Officer on 5 June, 1998
Equivalent citations: (1999)63TTJ(AHD)488
ORDER
B.L. CHHIBBER, AM.
This appeal by the assessee is directed against the order of the CIT(A) confirming the penalty of Rs. 23,023 levied by the AO under s. 271(1)(c) of the IT Act for concealment of particulars of income.
2. The assessee while filing the statement of total income for asst. yr. 1982-83 had claimed a deduction of Rs. 93,994 under s. 80T of the IT Act in respect of total long-term capital gains of Rs. 2,19,984 and also put the following note in his statement of total income :
"Deduction under s. 80T is claimed on total capital gain (long-term) amounting to Rs. 2,19,984 in view of various judicial pronouncements viz., CIT vs. V. Venkatachalarn (1979) 12 CTR (Mad) 362 : (1979) 120 ITR 688 (Mad) and CIT vs. K.A.L.K.R. Ramaswaini Chettiar (1979) 120 ITR 694 (Mad)."
The learned AO in his assessment order under s. 143(3) reduced the assessee's claim for deduction under s. 80T on the ground that the decisions relied upon by the assessee were no longer good law since Finance (No. 2) Act of 1980 had inserted ss. 80AA and 80AB w.e.f. asst. yr. 1981-82, according to which the deduction under s. 80T was required to be ca/culated with reference to the net income under the head 'Capital gain'. In the present case, according to the AO the gross long-term capital gain of Rs. 2,19,984 was required to be reduced by short-term capital loss of Rs. 1,33,437 and the assessee was entitled to deduction under s. 80T only with reference to the net amount of taxable gain of Rs. 86,547. He also initiated penalty proceedings under s. 271(1)(c) of the Act and after giving an opportunity of being heard to the assessee levied the impugned penalty of Rs. 23,023.
3. On appeal the learned CIT(A) confirmed the penalty levied by the AO. He rejected the submissions on behalf of the assessee that full particulars of income were duly submitted under the IT return. It was explained on behalf of the assessee that he was under the bona fide belief that judgment in the cases of CIT vs. V. Venkatachalam (1979) 12 CTR (Mad) 362.. (1979) 120 ITR 688 (Mad) and CIT vs. K.A.L.K.R. Ramaswami (1979) 120 ITR 694 (Mad) being squarely applicable in the case of the assessee, he was entitled to deduction under s. 80T as claimed by him and accordingly a note was also submitted under the statement of total income. It was also explained before the CIT(A) that the amendment in s. 80AB which became effective from Ist April, 1981 was not in sight of the assessee and it could not be said that the assessee had knowingly made false claim in his return of income. The CIT(A) stating that "ignorance of law cannot be taken as a reasonable excuse" held that the assessee had filed inaccurate particulars of income and hence provisions of s. 271(1)(c) were clearly applicable.
4. Shri Mukesh M. Patel, the learned counsel for the assessee, submitted that there was no justification for, the impugned penalty. He invited our special attention to para 5 of the penalty order under s. 271(1)(c) where the learned AO has levied the penalty for concealment of particulars of income. He further submitted that in view of the fact that the assessee had placed a clear note in the statement of total income showed that he had bona fidely relied on the two Court decisions to support his claim and accordingly it cannot be said that the assessee had concealed any particulars of income. Moreover, according to the learned counsel, the assessee was under the bona fide belief that the ratio of the said Madras High Court judgments duly covered his case. Merely because the assessee was not aware of the implication of the newly introduced provisions of s. 80AB w.e.f. asst. yr. 1981-82, it could not be said that the assessee had any "mens rea" for making the claim for deduction under s. 80T. In support of his contentions, he relied upon the following judgments :
(1) Cement Marketing Co. of India ITD. vs. Asstt. CIT (1980) 124 ITR 15 (SC);
(2) Hindustan Steel ITD. vs. State of Orissa (1972) 83 ITR 26 (SC);
(3) Addl. CIT vs. Delhi Cloth & General Mills Co. ITD. (1984) 42 CTR (Del) 188 (1986) 157 ITR 822 (Del); and (4) CIT vs. Anand Water Meter Mtg. Co. (1979) 117 ITR 866 (P&H).
5. Shri Ramesh Chander, the learned Departmental Representative strongly supported the orders of the authorities below.
6. We have considered the rival submissions and perused the facts on record. The penalty in this case has been levied and confirmed by the CIT(A) for concealment of particulars of income. From the facts of the case it is evident that the assessee had placed a clear note in the statement of total income (reproduced supra) and the deduction under s. 80T was claimed in view of two judicial pronouncements viz., CIT vs. V. Venkatachalam and CIT vs. K.A.L.K.R. Ramaswami (cited supra). In our view the assessee bona fidely relied on the above two decisions to support his claim and accordingly it cannot be said that the assessee had concealed any particulars of income. The assessee had not concealed anything and the AO was free to disallow the claim of the assessee and he rightly did so in the assessment order under s. 143(3) but there is no justification for levy of penalty under s. 271(1)(c) for alleged concealment of particulars of income. In Cement Marketing Co. of India vs. Addl. CIT (supra) the Hon11e Supreme Court held as under:
"Return cannot be said to be 'false' unless there is element of deliberateness in it. Where the assessee does not include a particular item under the bona fide belief that he is not liable to do so, it would not be right to condemn the return as a 'false' return inviting imposition of penalty. Until the filing of inaccurate return is accompanied by guilty mind, the section cannot be invoked for imposing the penalty."
In CIT vs. Anand Water Meter M1g. Co. (supra) the Hon'ble High Court held as under :
"Where the assessee claimed deduction of a sum as expenditure under the bona fide belief that it was so, subsequently on this disallowance penalty could not be levied".
6.1. In the light of the above facts and circumstances of the assessee's case and keeping in view the aforesaid judicial pronouncements we hold that there is no justification for the impugned penalty. The same is accordingly deleted.
7. In the result, the appeal is allowed.