No penalty if assessee was in bona fide belief that purchase of new property was within time limit

ITO v. Kantilal G. Kotecha – [2019] 108 taxmann.com 119 (Mumbai – Trib.)

The assessee sold a house property and claimed deduction under section 54.

The Assessing Officer (AO) disallowed assessee’s claim for deduction on the grounds that the purchase was outside the period stipulated under section 54. Additionally, he also levied penalty under section 271(1)(c) on the ground that the assessee had furnished inaccurate particulars of income.

Aggrieved-assessee filed appeal to the CIT(A). CIT(A) deleted the penalty imposed by the AO. Consequently, revenue filed an appeal before the Tribunal (ITAT).

The ITAT had allowed deduction under section 54 to the extent of the payment made within one year prior to the date of transfer.

The assessee argued that it was under bona fide belief on his part since he made the last payment for purchase of new house within one year prior to the date of transfer.

This claim was partially negated by the tribunal in the quantum proceedings. But it held that it didn’t mean that the assessee had furnished inaccurate particulars. It was a genuine difference of opinion between AO and assessee.

Assessee did not have any mala fide intention to furnish any inaccurate particulars. In fact, AO had justified his rejection of claim of deduction under section 54 only from the details filed by the assessee. Hence, it was only a simple disallowance of claim of deduction under section 54 by the AO. Accordingly, CIT (Appeals) had rightly deleted the penalty.