The Commissioner of Income Tax-III vs Ved Parkash Likhi and Sons (HUF)

Adarsh Kumar Goel, J.—This appeal has been preferred by the revenue u/s 260-A of the Income Tax Act, 1961 (for short, ""the Act"")

against the order of the Income Tax Appellate Tribunal, Chandigarh dated 28.10.2009 in I.T.A. No. 908/ChD/2009 for the assessment year

2006-07 proposing to raise following substantial question of law:

Whether on the facts and in the circumstances of the case, the Hon''ble ITAT is right in law in upholding the order of the CIT(A)-II, Ludhiana

dated 19.06.2006 deleting the penalty imposed u/s 271(1)(c) of the I.T. Act?

2 The Assessee derived income from capital gains and claimed deduction to the extent of purchase of Rural Electrification Corporation Bonds u/s

54EC of the Act. The Assessing Officer did not accept the said claim on the ground that the bonds were purchased beyond the prescribed period

of six months. The Assessing Officer also levied penalty u/s 271(1)(c) of the Act. On appeal, the CIT(A) deleted the penalty. It was held that the

Assessee having made investment in bonds, though technically there was delay of few days after the prescribed period, claim for deduction could

not be held to be concealment of income by the Assessee. The Assessee had disclosed all the material facts. Mere fact that the Assessee''s plea

was turned down on merits, was not by itself enough to attract penalty. The Tribunal upheld the view of the CIT(A) with the following

observations:

Penalty for concealment u/s 271(1)(c) of the Act is leviable in all such cases where the Assessee had concealed his income or furnished

inaccurate particulars of income. In the facts of the present appeal before us, the basis for levying of penalty imposed is the denial of benefit u/s

54EC of the Act. The Assessee on sale of capital asset had invested Rs. 33 lakhs in the purchase of bonds as eligible for deduction us/ 54EC of

the Act as against his income arising from long term capital gains. The bonafides of the claim of the Assessee is further strengthened by the facts

that in addition to the said claim being made in the computation of income filed along-with return of income, the Assessee had enclosed the proof

of the investments along-with the return of income. The said investment was made after a delay of few days as the person to whom the Assessee

had entrusted job was under the bonafide belief that the investment is to be made within six months from the end the month in I.T.A. No. 458 of

2010 which the asset was sold. The mistake in making the investment within the prescribed time can be the basis for disallowing the claim of

deduction u/s 54EC of the Act but cannot be the basis for levy of penalty u/s 281(1)(c) of the Act. The Assessee having fully disclosed the material

facts for the computation of income and the explanation of the Assessee being found not false, cannot make Assessee liable for the levy of penalty.

We find merit in the order of the CIT(A) in placing reliance on Commissioner of Income Tax Vs. Deep Tools (P) Ltd., , wherein it was held that

no malafides could not attributed to the Assessee as the claim for deduction was based on the certificate of the CA with whom no collusion was

proved and hence cancellation of the penalty was held to be justified. We are in conformity with the order of the CIT(A) in deleting the penalty

levied u/s 271(1)(c) of the Act. We uphold the order of CIT(A) and dismiss the grounds of appeal raised by the Revenue.

We have heard learned Counsel for the Appellant.

In view of finding of fact concurrently recorded by the CIT(A) and the Tribunal that there was no concealment of income by the Assessee, no

substantial question of law arises.

The appeal is dismissed.