ILA JITENDRA MEHTA,MUMBAI V. DCIT CENTRAL CIRCLE 8(4), MUMBAI

ITA 5219/MUM/2024

AI Insights

The case revolves around Ms. Ila Jitendra Mehta, who claimed an exemption under section 54F of the Income Tax Act, 1961, amounting to Rs.6,72,00,364 from long-term capital gains on the sale of shares. This claim was made in her belated return for the assessment year 2014-15. The Assessing Officer (AO) disallowed the claim and initiated penalty proceedings under section 271(1)(c) for furnishing inaccurate particulars of income. The Tribunal examined whether the Assessee's actions constituted a deliberate attempt to evade tax or were merely an inadvertent mistake. The Tribunal concluded that the Assessee's mistake was inadvertent and rectified during the assessment proceedings, thus not warranting a penalty.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 398086 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-06-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2014-2015
• Other Referred Cases: CIT vs. Zoom Communication Pvt. Ltd., MAC Data Limited vs. CIT, Hindustan Steels Ltd. vs. State of Orissa, CIT vs. Reliance Petro products Ltd., Commissioner of Income Tax -1, Mumbai vs. Somani Evergreen Knits Ltd., CIT vs. Dalmia Dyechem Industries, Nuchem Ltd. vs. DCIT, ITO vs. M/s. New Kamlesh Jewellers, CIT vs. Samson Perinchery, T. Ashok Pai vs. CIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: YOGESH KUMAR; LD.
• Assessee Lawyers: RAVI GANATRA; LD; RECTIFYING
• Keywords: Set aside; Capital asset; Proportionate interest; Revised return; Revenue expenditure; Depreciation; Bonafide belief; Capital Gains; Principle of natural justice; Valuation report; Bonafide mistake; Initiation of penalty proceedings
• Section: 142(1); 271(1)(c); 131; 54F; 139

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH “C”, MUMBAI BEFORE SHRI NARENDER KUMAR CHOUDHRY, JUDICIAL MEMBER AND SMT RENU JAUHRI, ACCOUNTANT MEMBER ITA No.5219/M/2024 Assessment Year: 2014-15 Ms. Ila Jitendra Mehta, 2601, 26th Floor, Shivtapi Apt., HG Marg,Gamdevi, Mumbai – 400 007 PAN: ABDPM4231H Vs. DCIT, Central Circle 8(4), Aayakar Bhawan, Mumbai – 400 020 (Appellant) (Respondent) Present for: Assessee by : Shri Ravi Ganatra, Ld. A.R. Revenue by : Shri Yogesh Kumar, Ld. Sr. DR. Date of Hearing : 08 . 05 . 2025 Date of Pronouncement :02 . 06 . 2025 O R D E R Per : Narender Kumar Choudhry, Judicial Member: This appeal has been preferred by the Assessee against the order dated 06.08.2024, impugned herein, passed by the Ld. Commissioner of Income Tax (Appeals) (in short Ld. Commissioner) under section 250 of the Income Tax Act, 1961 (in short ‘the Act’) for the A.Y. 2014-15. ITA No.5219/M/2024 Ms. Ila Jitendra Mehta 2 2. The Assessee in the instant case had declared her total income at Rs.17,78,390/- by filing belated return of income on dated 29.03.2016 which was selected for limited scrutiny assessment and therefore statutory notices were issued to the Assessee. In response to which, the Assessee attended the proceedings and made the submissions. By considering the case of the Assessee it was observed by the Assessing Officer (AO) that the Assessee has earned income from business and profession and has also availed a deduction of Rs.6,72,00,364/- on account of long term capital gain qua sale of shares from Halford Realtors Pvt. Ltd., Rutham Builders Pvt. Ltd. and Wellcity Real Estate Pvt. Ltd. and claimed the same as exempt u/s 54F of the Act. The AO therefore asked the Assessee to prove the identity, creditworthiness and genuineness of the said transaction as the Assessee has shares in the above three companies which were sold by the Assessee, has land properties and therefore the AO asked the Assessee to submit the valuation reports of the same which was filed by the Assessee and placed on record by the AO. Thereafter, complete details with respect to the same were called for examination by the AO. 3. The Assessee in response to the same by filing a letter dated 16.08.2016 has claimed that she has incorrectly claimed the aforesaid deduction. 4. Therefore, in order to verify the said transaction the AO issued summon u/s 133 to the Assessee and recorded her statement wherein vide question No.4 asked as under: Q.4. During the assessment year under consideration, you have claimed a deduction u/s 54F of the IT Act, 1961 of Rs.6,72,00,364/. Please produce the documentary evidences for the eligible claim of Rs.6,72,00,364/-. 4.1 The Assessee, in reply to the aforesaid question, has replied as under: Ans: Sir, I have inadvertently claimed the exemption u/s 54F of the Act, while filing return of income u/s 139(1) of the Act. I have filed revised computation of income vide letter dated 16.08.2016 wherein the above mentioned inadvertent error, has been rectified. Further, since the return was belated return, hence I was unable to revise it. However, to rectify the mistake I have filed revised computation of income. Sir, I request you to ITA No.5219/M/2024 Ms. Ila Jitendra Mehta 3 kindly accept the revised computation of income and not to levy penalty for my ignorance. 4.2 The AO vide question no.5 also asked the Assessee specifically: Q5. Who files your income tax return? As per the return of income dated 30th March 2016, the same is filed and digitally signed by yourself? Please offer your comments. 4.3 The Assessee in response to aforesaid question has replied as under: Ans: Sir, the return of income was filed on 30th March 2016 by my accountant. Since, I was having digital signature, the same was attached while filing my return of income. 4.4 The AO further vide question No.6 show caused the Assessee as to why penalty u/s 271(1)(c) of the Act “is not attracted”. (emphasized by us) 5. The Assessee in response to aforesaid show cause/question replied as under: Ans: Sir, I have rectified my mistake by filing revised computation of income. Since the return could not revise as was filed after due date. Hence, I request not to levy penalty u/s 271(1)(c) of the Act. 6. Though the AO considered the aforesaid claim and answers given by the Assessee to the specific questions raised by him in respect of making said claim u/s 54F of the Act and filing of return of income dated 30th March 2016 and reply to show cause as to why the penalty u/s 271(1)(c) of the Act is not leviable, however, he by considering and observing as under: “That in the case pertaining to AY. 2013-14 also the Assessee has claimed an incorrect claim deduction u/s 54F of the Act of long term capital gain, which was disallowed and a penalty u/s 271(1)(c) of the Act has been initiated for the A.Y. 2013-14. Thus, it is evident that the Assessee is habitually claiming incorrect deduction u/s 54F of the Act. Thus, the incorrect deduction claimed by the Assessee cannot be considered as a mistake nor a bonafide mistake”. ultimately, disallowed the said deduction claimed u/s 54F of the Act and consequently made the addition of Rs.6,72,00,364/- and added the same in the income of the Assessee. 6. The AO simultaneously in the Assessment order, also recorded the satisfaction that the Assessee is liable for penalty u/s 271(1)(c) of the Act ITA No.5219/M/2024 Ms. Ila Jitendra Mehta 4 and therefore initiated separately, the penalty proceedings u/s 271(1)(c) of the Act for concealment of income. 8. The AO thereafter issued a penalty notice dated 31.12.2016 u/s 271(1)(c) r.w.s 274 of the Act for the limb of furnishing of particulars of income. 9. Thereafter the AO vide show cause notice 23.02.2017, show caused the Assessee “as to why the penalty u/s 271(1)(c) of the Act should not be imposed”. 10. The Assessee in response to the aforesaid show cause notice, filed her reply dated 24.05.2017, which reads as under: \"We refer to your notice in respect of penalty under section 271(1)(c) of the Act. In connection to that, under the instructions of our above mentioned Assessee and on his behalf, we state and submit as follows: 1. Before dealing with the grounds on which the present proceedings were initiated we would like to state the relevant facts, in brief, for a better understanding of the matter before Your Goodself 2. The Assessee had filed its original Return of Income u/s. 139 of the Act on 29.03.2016 declaring total income as Rs. 17,78,3901-. The case was selected for limited scrutiny assessment. 3. Subsequently, notices u/s. 143(2) and 142(1) of the Act dated 28.07.2016 and 22.08.2016 along with a detailed questionnaire calling for various details was served on the assessee. 4. Further, during the course of Assessment Proceedings Your Goodself observed that, Assessee has claimed exemption u/s. 54F on sale of shares of M/s. Halford Reaties Pvt. Ltd., Rutham Builders Pvt. Ltd. and Wellcity Real Estate Pvt. Ltd. of Rs. 6,72,00,364/- your Goodself asked the Assessee to provide details with regards to the exemption claimed by the Assessee. In reply to the same, Assessee filed the all the required details. 5. Further, during the course of Assessment Proceedings, the Assessee filed a letter stating that the deduction u/s. 54F of the Act is incorrectly taken by the Assessee and filed revised computation of income vide letter dated 16.08.2016. 6. Accordingly, the AO disallowed a sum of Rs. 6,72,00,364/- on account of violation of section 54Fvide order dated 23.12.2016. 7. The Assessee is now in receipt of notice u/s. 271 (J)(c) of the Act asking to show cause as to why penalty u/s. 271 (J)(c) of the Act should not be levied. 8. In this regard we would like to state that, there was no intention of assessee to provide inaccurate details of exemption or to conceal any income. Therefore, in view of the same, penalty proceedings u/s 271 (J)(c) of the Act is bad in law. ITA No.5219/M/2024 Ms. Ila Jitendra Mehta 5 PENAL PROVISIONS ARE NOT ATTRACTED: 9. As per provisions of section 271 (J)(c) of the Income tax Act, for a just levy of penalty, there are some primary requirements that need to be fulfilled. Relevant provisions of the Act are as under: 10. Section 271 of the Act provides : \"(1) If the Assessing Officer or the Commissioner (Appeals) or the Commissioner in the course of any proceedings under this Act, is satisfied that any person- (a). .. .. .... ... . . (b) (c) has concealed the particulars of his income or furnished inaccurate particulars of such income. He may direct that such person shall pay by way of penalty. 11. From the above, it may be observed that the levy of penalty will be justified only when it is independently proved that there is concealment of income Or inaccurate particulars of income are furnished. 12. Further, mere making of the claim in the Return of Income which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the Assessee. 13. Further, a guilty mind is necessary for the purpose of levy of penalty. In the instant case, the Assessee had neither concealed any income nor furnished inaccurate particulars of income. There was no deliberate attempt by the Assessee to evade tax. 14. At this juncture, it is relevant to mention that the Assessee under bonafide intention filed a revised computation before Assessing Officer could point out. 15. Hence, there was no intention of the Assessee to conceal any income nor to provide inaccurate information. Thus, levy of penalty u/s. 271 (l)(c) does not arise. 16. Looking at the above facts, we ingeminate that a) All the facts and details were submitted during the course of assessment proceedings. b) There was no mens rea or guilty mind on the part of the Assessee. c) Additions/Disallowances made do not automatically warrant concealment of income or furnishing of inaccurate particulars of income. 17. It will be observed and appreciated in view of the above facts, relevant provisions of the Act and considering the relevant judicial pronouncements as stated below, it is hereby submitted that the penalty proceedings u/s. 271 (I)(c) of the Act deserve to be recalled. 18. In this connection, reliance is first placed upon the order of the Hon'ble Tribunal in the case of Nuchem Ltd. v. DCIT [49 ITD 441, 451 (Del)). In this case, as against the returned loss, the assessment was completed on a positive income as a result of disallowance of expenditure on purchase of plant and machinery claimed as revenue expenditure; disallowance of interest on FDRs representing amounts of disputed excise duty deposited for obtaining bank guarantee; and addition/disallowance u/s. 40A(7) of the Act etc. Upon their sustenance by the Hon'ble Tribunal, proceedings u/s. 217(I)(c) of the Act were initiated and ITA No.5219/M/2024 Ms. Ila Jitendra Mehta 6 consequent penalty levied by the Assessing Officer whose order was sustained in first appeal. In the second appeal preferred by the assessee, the Hon'ble Tribunal, however, deleted the levy by observing as under: \"7. ... ... ..................... ......... ... .. ... .. ....... .......... ..... ... In such a situation where the assessee has raised a legal contention bona fide and this issue was not settled by the Hon'ble Supreme Court, whether it is ultimately accepted or rejected, will not generally be an act of concealment of particulars of income, fraud or gross or willful negligence on the part of the assessee or furnishing of inaccurate particulars of income. Therefore, provision contained in Explanation to section 271 (1) Cc) cannot be attracted even if it can be said that the said Explanation applies because of the discrepancy between the income returned by the petitioner and the income assessed by the Income-tax Officer. In the case of Burmah- Shell Oil Storage & Distributing Co. of India Ltd. (supra), the Hon'ble Calcutta High Court had taken this view.\" 19. We next place reliance on upon the order of the Hon'ble Tribunal in the case of ITO vs. M/s. New Kamlesh Jewellers [ITA No.36501M120lJ[ (2016). Wherein it was held as under: \" ... The Ld. A.R. of the assessee, before us, has submitted that the assessee neither had filed any inaccurate particulars of income nor had concealed its income. The assessee was under bonafide belief that there was no liability to capital gains tax. The assessee had formed this view in the light of the decision of the Jabalpur Bench of the Tribunal in the case of \"ACIT vs. Thermoflics India Ltd. \" (supra). He has further submitted that the assessee was of the view that even if section 45(4) was applicable to distribution of capital assets on retirement, the value of stock in trade was to be excluded from the value of net assets transferred to the retiring partners. He has further submitted that if so done, the result would be a negative balance and under such circumstances the assessee was under the bonafide belief that there was no liability for capital gains tax under section 45(4). There was no intention of the assessee to evade tax. That full particulars were disclosed. The assessee had not declared capital gains under bonafide belief that it was not liable to pay any tax on this income. After considering the above submissions of the assessee and going through the order of the Ld. CIT(A), we find that the Ld. CIT(A) has committed no mistake while deleting the penalty levied by the AO under section 27I(1)(c) of the Act upon the assessee. We do not find any infirmity in the order of the Ld. CIT(A) and the same is therefore upheld.\" 20. At the cost of repetition, it is submitted that rejection of a claim made in the assessment or its sustenance by the appellate authorities would not justify levy of penalty. In any case, we submit that no case of concealment of particulars of income or furnishing of inaccurate particulars of income has been made out against Assessee. In the circumstances, this cannot be considered to be a fit case for visiting with penal provision. For these reasons also, the impugned proceedings deserve to be recalled. 21. Since in the present case, AR of the Assessee had voluntarily filed a revised computation of income vide letter dated 16.08.2016 before Assessing Officer pointed out and all the facts relating to the same and material to the computation of Assessee's total income were duly submitted, we humbly request your good self to drop the penalty proceedings initiated by Your Goodself. ITA No.5219/M/2024 Ms. Ila Jitendra Mehta 7 22. Therefore, penalty for concealment of particulars of income or furnishing inaccurate – particulars of such income as contemplated u/s. 271 (l)(c) cannot and should not be imposed.) 23. In view of the above, we humbly request your good self to drop the penalty proceedings initiated under Section 27I(I)(c) o/the Act.” 11. The AO though considered the aforesaid reply of the Assessee, however, not being satisfied, rejected the same and by relying on various judgments, vide penalty order dated 19.06.2017 u/s 271(1)(c) of the Act, ultimately levied the penalty of Rs.2,28,41,400/- on account of filing of inaccurate particular of income within the meaning of section 271(1)(c) of the Act, as mentioned by the AO in para no.9 of the penalty order, by observing and holding as under: “That the Assessee is a member of part of Rohan group. All the personal and business accounts are being handled professionally through Chartered Accountants. The Assessee cannot take a plea that return was filed by her accountant. As per the same, it is digitally signed by the Assessee. Further, as the individual returns are needed to be personally signed by the Assessee and a physical copy required to be sent to Bangalore CPC for validating the same. Thus, the Assessee cannot take plea that she has not filed the return or she has not seen this return. Further, the return of income was filed belated on 29.03.2016 and the case was selected for scrutiny on 28.07.2016. Thus, the Assessee has availed already plenty of times for filing her individual return of income. Further, on perusal of the case records, it is seen that the Assessee has submitted the claim of withdrawal of deduction u/s 54F of only after issuance of plethora of notices and follow up scrutiny action. A notice u/s 142(1) dated 22.08.2016 was not responded to. Further, a show cause for initiating action u/s 271(1)(b) of the Act was issued on 16.09.2016. Further, a notice u/s 142(1) was issued on 19.10.2016 and 07.11.2016. However, no reply was submitted in this case by the Assessee. Further, a summon u/s 131 of the Act was issued by the AO on 20.11.2016. Then on 07.12.2016 the Assessee has submitted a letter for withdrawal of claim u/s 54F of the Act. The Act does not provide such a claim of withdrawal of any deduction claimed in the return of income during the course of the scrutiny. Thus, claim of the Assessee of withdrawal of expense cannot be said to be justified and deserves to be penalized. The AO while relying on various judgments specifically in the case of CIT vs. Zoom Communication Pvt. Ltd. (327 ITR 510) wherein it was held that for the proposition that \"if the Assessee makes a claim which is not only incorrect in law, but is also wholly without any basis and explanation furnished by him for making such a claim is not found to be bona fide, Explanation-1 to section 271(1)(c) would come into play and assessee will be liable to penalty\". and Mac Data Limited in ITA No.415/2012 358 ITR 0593 (SC), ultimately held that incorrect deduction claimed by the Assessee cannot be considered as a mistake nor a bonafide ITA No.5219/M/2024 Ms. Ila Jitendra Mehta 8 mistake. From all the above discussions and considering the overall facts of the case it is evident that the Assessee is habiuatilly claiming incorrect deduction u/s 54F of the Act. This approach cannot be accepted by the Department. It needs to be underlined at this juncture that only 1 or 2% of the total returns filed are selected for income tax scrutiny every year. Had the case would not have been selected for scrutiny, the claim of the Assessee would have been finalized u/s 143(1) of the Act and would have resulted to loss of revenue. Thus, the Assessee is liable for penalty u/s 271(1)(c) of the Act for filing inaccurate particular of income thereby concealing the taxable income with a motive to evade the tax”. 12. The Assessee being aggrieved challenged the said penalty order and levy of penalty before the Ld. Commissioner, however, of no avail, as the Ld. Commissioner more or less on the same footing/reasoning as observed by the AO in the Assessment order and penalty order, ultimately affirmed the levy of penalty by dismissing appeal of the Assessee, by observing and holding as under: “11. GROUND NO 1 In this ground the appellant has challenged the penalty levied u/s 271(1)(c) of the IT Act. 11.2 I have considered the penalty order and facts available on record. It is seen that during the year under consideration the appellant filed the return of income claiming exemption u/s 54F of the I.T Act of Rs.6,72,00,364/- on the capital gains derived from sale of shares of Halford realties Pvt. Ltd., Rutham builders Pvt. Ltd. and Wellcity real estate Pvt. Ltd. During the assessment proceedings, the AO asked the appellant to furnish the details of the same. In response to this the appellant filed a letter stating that she has incorrectly claimed the exemption u/s 54F. The A.Ο recorded the statement of the appellant u/s 131 of the IT Act on 19.12.2016 wherein in the answer to question no 4 the appellant has stated that she has inadvertently claimed exemption u/s 54F while filing the return of income. On 7.12. 2016 the appellant has filed a letter withdrawing the claim of exemption. Therefore, the AO disallowed the claim of exemption made u/s 54F of the IT Act and also initiated penalty u/s 271(1)(c) for furnishing inaccurate particulars about her income. 11.3 During the penalty proceedings, the appellant has submitted that there was no intention to conceal the income and the claim was made inadvertently. It was also contended that merely making the claim in the return of income which is not sustainable in law by itself will not amount to furnishing inaccurate particulars about the income. The appellant has also relied on various case laws. The AO considered the submission of the appellant. It is noted that the assessee is a part of Rohan group which is engaged in the business of builder and construction. The books of accounts are being handled by the professional chartered accountants therefore, the assessee cannot take a plea that the return was filed by her accountant and the claim was made by mistake. The return of income was filed belated on 29.03.2016 and the case was selected for scrutiny on 28.07.2016. Further, only after the case selected for scrutiny and notice u/s 143(2) was issued the assessee has submitted a letter withdrawing the claim of deduction u/s 54F. ITA No.5219/M/2024 Ms. Ila Jitendra Mehta 9 Notices u/s 142(1) were also issued however the same were not complied and only on 07.12.2016 the assessee has filed the letter of withdrawal. This fact shows that assessee has withdrawn the claim after various notices issued. The AO held that in facts of the case the explanation given by the assessee is not acceptable and hence the penalty for furnishing inaccurate particulars is leviable as per the explanation 1 to section 271(1)(c) The AO relied on the decision of Delhi High Court in case of CIT vs. Zoom Communication Pvt. Ltd(191 taxman 179) and the decision in case of MAK DATA Ltd. 11.4 During the appeal proceedings as discussed in para 3 above, in spite of issuing several notices, the appellant has not complied to the same. No explanation to substantiate the grounds of appeal has been furnished. In the grounds of appeal, the appellant has contended that adequate opportunities were not provided to the appellant by the AO and hence there is gross violation of principle of natural justice. However, it is seen from the penalty order that the AO has issued notices to the appellant and in response to the same the appellant furnished the written submission. Hence the contention of the appellant is factually incorrect. Further during the appeal proceedings also adequate opportunities were provided however the same are not availed. The contention of the appellant is contrary to the facts available on record and hence the same deserves to be rejected. 11.5 It is an undisputed fact that, the appellant has filed the I.T return belatedly on 29.03.2016. The assessment was selected for scrutiny on 28.07.2016 thereafter AO issued notice u/s 142(1) on 22.08.2016, 19.10.2016 and 07.11.2016. However, the appellant has not complied to these notices issued by the AO. Thereafter, summons u/s 131 was issued on 20.11.2016. A statement of the appellant was recorded u/s 131 of the IT Act on 19.12.2016 wherein the appellant has stated that the exemption claimed u/s 54F was inadvertently claimed while filing the return of income. The appellant submitted the letter on 07.12.2016 withdrawing the claim made u/s 54F of the IT Act. Further, as pointed out by the AO the appellant is part of Rohan group and the books of accounts are handled by the professional chartered accountants. From the facts of the case the contention of the appellant that the exemption claimed u/s 54F is due to inadvertent mistake is factually incorrect. The fact itself shows that the appellant has deliberately made an attempt to claim the exemption u/s 54F of the IT Act for which the appellant is not eligible. The appellant was aware that she was not eligible for such claim u/s 54F of the IT Act and in spite of that the exemption was claimed. The intention is nothing but to evade the taxes by furnishing inaccurate particulars about her income. Had this case not been selected for scrutiny u/s 143(2) of the IT Act, the appellant would have got the benefit and to that extent the taxes would have been evaded. Even the filing of belated return is a well thought out strategy. The appellant can claim that she could not revised the return as the same was belated return. The entire fact shows that the appellant has made the illegal claim after a well thought out strategy. Therefore, it cannot be compared with the cases where the assessee makes some claims/deductions in the return of income and the same is disallowed. Hence the case laws relied by the appellant are not applicable in the facts of the case of the appellant. In the appellant's case there is a deliberate attempt to evade the taxes by furnishing inaccurate particulars about her income. Therefore, the explanation furnished by the appellant is not acceptable as the same is not bona fide. The appellant case is thus clearly covered by the Explanation 1 to section 271(1)(c). The reliance is also placed on the decision of Hon'ble Supreme Court in case of MAC Data Pvt. Ltd vs. CIT (358 ITR 593) wherein the Hon'ble S.C has held as under- \"The question is whether the Assessee has offered any explanation for concealment of particulars of income or furnishing inaccurate particulars of income. Explanation to Section 271(1) raises a presumption of concealment, when a ITA No.5219/M/2024 Ms. Ila Jitendra Mehta 10 difference is noticed by the AO. between reported and assessed income. The burden is then on the assessee to show otherwise, by cogent and reliable evidence. When the initial onus placed by the explanation, has been discharged by him, the onus shifts on the Revenue to show that the amount in question constituted the income and not otherwise.\" 12. In view of the above, the penalty levied u/s 271(1)(c) of the I.T. Act is upheld. Accordingly, appeal is DISMISSED.” 13. The Assessee, being aggrieved, challenged the impugned order affirming the levy of penalty of Rs.2,28,41,400/- levied by the AO. The Assessee mainly claimed as under: “That she being a lady is not much acquainted with the taxation matters and admittedly the return of income which is under consideration was filed by her accountant by using digital signature of the Assessee, however, on realizing her mistake qua incorrect claim made u/s 54F of the Act inadvertently, she rectified her mistake by filing a specific letter dated 16.08.2016 wherein she has specifically statted that deduction u.s 54F of the Act was inadvertently claimed and therefore she is rectifiying her said inadvertent mistake by filing letter dated 16.08.2016 along with revised computation of income. The Assessee further claimed that she in reply to the questions raised during the statement recorded by the AO u/s 131 of the Act during the assessment proceedings the Assessee in reply to the question about the deduction claimed u/s 54F of the Act, specifically replied that she had inadvertently claimed such exemption by filing her return of income u/s 139(1) of the Act. She has filed revised computation of income vide letter dated 16.08.2016 wherein the above mentioned inadvertent mistake has been rectified. Further, since the return was belated return hence, she was unable to revise it. However, to rectify the mistake she has filed revised computation of income and therefore to accept the revised return of income and not to levy penalty for her ignorance. Her return of income was filed on 30.03.2016 by her accountant by using the digital signature. Since the return could not be revised as the same was filed after due date and therefore she has rectified her mistake by filing revised computation of income, hence, requested the AO not to levy penalty u/s 271(1)(c) of the Act”. 14. The Assessee further in support of her claim for deletion of the penalty also relied on various judgments of various courts including in the cases of Pullanguod Rubber Produce Company Ltd. Vs. State of Kerala (1973) 91 ITR 18 (SC), CIT vs. Reliance Petroprdoucts Ltd. 322 ITR 158 (SC), Commissioner of Income Tax -1, Mumbai vs. Somani Evergree Knits Ltd. (2013) 35 taxmann.com 529 (Bom.) and CIT vs. Dalmia Dyechem Industries (ITA No.1396 of 2013) (2015) 61 taxmann.com 200 (Bom.). ITA No.5219/M/2024 Ms. Ila Jitendra Mehta 11 15. On the contrary, the Ld. D.R. refuted the claim of the Assessee and submitted that the Assessee is a habitual offender as observed by the AO in the assessment order as well as in the penalty order as she has also claimed the deduction u/s 54F of the Act in the AY 2013-14, which was disallowed and therefore the Assessee is not entitled for any relief and consequently the penalty imposed by the AO and affirmed by the Ld. Commissioner may be sustained. 16. Heard the parties and perused the material available on record and given thoughtful considerations to the facts and circumstances of the case and rival submissions of the parties. As observed above, the Assessee had claimed the deduction of Rs.6,72,00,364/- u/s 54F of the Act on account of long term capital gain earned from sale of shares of Halford Realtors Pvt. Ltd., Rutham Builders Pvt. Ltd. and Wellcity Real Estate Pvt. Ltd., by filing her belated return of income on dated 29.03.2016 declaring total income at Rs.17,78,390/-. As the Assessee has share in the above three companies which were sold by the Assessee, has a land properties and therefore the valuation report of the same was called for and submitted by the Assessee which was placed on record and thereafter complete details were called for vide issuing notice dated 28.07.2016 u/s 143(2) of the Act. The Assessee immediately vide reply dated 16.08.2016 filed before the AO, has claimed that she has inadvertently claimed the said exemption u/s 54F of the Act, however, rectified said inadvertent error by filing revised computation of income along with such letter/reply dated 16.08.2016. 17. The AO not being impressed with the said claim of the Assessee recorded the statement of the Assessee u/s 131 of the Act and specifically asked various questions related to the deduction claimed u/s 54F of the Act, the person who filed the return of income, use of digital signature, to produce the documentary evidence for eligible claim u/s 54F of the Act and to show cause “as to why the penalty u/s 271(1)(c) of the Act is not leviable”. 18. The Assessee in response to aforesaid questions, specifically replied as under: ITA No.5219/M/2024 Ms. Ila Jitendra Mehta 12 “That she had inadvertently claimed the exemption u/s 54F of the Act while filing her return of income u/s 139(1) of the Act, however, she has rectified her inadvertent mistake by filing her revised computation of income vide letter dated 16.08.2016. Further, since the return was belated return, hence, she was unable to revise it. The return of income was filed on 30.03.2016 by her accountant and since she was having digital signature, the same was attached while filing her return of income. Further, since the return could not be revised as the same was filed after the due date and therefore she has rectified her mistake by filing revised computation of income and therefore she requests not to levy penalty u/s 271(1)(c) of the Act. 19. From the aforesaid facts and circumstances, the question emerges “whether the act of Assessee qua rectifying her mistake by withdrawing her incorrect claim u/s 54F of the Act as inadvertent as alleged, by filing revised computation of income during the assessment proceedings”, can be treated as bonafide mistake and would not entail the levy of penalty? 20. We observe that the AO, while imposing the penalty has taken into consideration the fact that the Assessee is a habitual offender as she has also claimed the exemption u/s 54F of the Act in the A.Y. 2013-14 as well. Further, the AO also relied on the judgment of the Hon’ble High Court of Delhi in the case of CIT vs. Zoom Communication Pvt. Ltd. (supra) and in the case of MAC Data Pvt. Ltd vs. CIT {supra} wherein it was held as under: “That in the absence of any explanation in respect of surrendered income, the first part of clause (A) of explanation 1 to section 271(1)(c) is attracted because the nature and source of the amount surrendered are facts material to the computation of the total income. The absence of any explanation regarding the receipt of money, which is in the exclusive knowledge of the Assessee leads to an adverse inference against the Assessee and is statutorily considered as amounting to concealment of income under the first part of clause (a) of the explanation to section 271(1)(c) and penalty has to be levied”. 21. The Hon’ble Apex Court in the case of CIT vs. Reliance Petro products Ltd. case (supra) has also considered a question/case, wherein the Assessee had claimed expenditure, which was not acceptable to the Revenue and therefore the same was not accepted and then the question arose whether not accepting the expenditure claimed by the Assessee itself would attract the penalty u/s 271(1)(c) of the Act. The Hon’ble Apex Court by thoroughly examining the issue under consideration, laid down following principles: ITA No.5219/M/2024 Ms. Ila Jitendra Mehta 13 1. Merely because the Assessee had claimed the expenditure, which claim was not accepted or was not acceptable to the Revenue, that by itself would not attract the penalty u/s 271(1)(c) of the Act. 2. If the contention of the Revenue is accepted then in case of every return where the claim made is not accepted by the AO for any reason the Assessee will invite penalty u/s 271(1)(c) of the Act, that is clearly not the intendment of the legislature. 3. In order to expose the Assessee to the penalty, unless the case is strictly covered by the provision, the penalty provision cannot be invoked. 4. By any stretch of imagination, making an incorrect claim in law, cannot tantamount to furnishing of inaccurate particular of income. 22. The Hon’ble Apex Court in the case of Hindustan Steels Ltd. vs. State of Orissa, 83 ITR 26(SC) has also held “that the penalty will not ordinarily be imposed unless the party obliged either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest or acted in conscious disregard of its obligation. Penalty will not also be imposed merely because it is lawful to do so” by holding as under: “That an order imposing penalty for failure to carry out a statutory obligation is the result of quasi-criminal proceedings, and penalty will not ordinarily be imposed unless the party obliged either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest or acted in conscious disregard of its obligation. Penalty will not also be imposed merely because it is lawful to do so. Whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances.”. 23. The Hon’ble Jurisdictional High Court as well, in the case of Somani Evergree Knits Ltd. (supra) has also dealt with the identical issue as involved in the instant case “wherein the Assessee in its return of income had claimed the depreciation at Rs.1.70 crores, however, during the assessment proceedings, the Assessee realized that it had wrongly claimed Rs.1.70 crores of depreciation instead of Rs.1.05 crores. This excess claim for depreciation had happened due to a mistake in calculation resulting in claim for depreciation at Rs.1.70 crores and therefore the Assessee rectified its mistake, however, the AO did not accept that it was a mistake and consequently levied the penalty u/s 271(1)(c) of the Act. ITA No.5219/M/2024 Ms. Ila Jitendra Mehta 14 The Ld. CIT(A) upheld the levy of penalty, however, the Tribunal, on appeal, accepted the mistake for claiming the excess depreciation originally, as claimed as bonafide and inadvertent mistake on the part of the Assessee and therefore by holding that in any case during the course of assessment proceedings the Assessee realized its mistake and pointed out the same, the mistake should not be visited with penalty. Tribunal also held that time to file a revised return had expired. The Revenue Department being aggrieved by filling appeal before the Hon’ble High Court, challenged the order of the Tribunal in deleting the penalty mainly by focusing that mistake ought to have been rectified by filing a revised return of income but the Assessee has failed to revise the same and therefore the Tribunal was not justified in deleting the penalty levied by the AO u/s 271(1)(c) of the Act, even though the Assessee had accepted in assessment proceedings that it had filed inaccurate particulars of income by claiming excess depreciation in its return of income. The Hon’ble High Court affirmed the decision of the Tribunal by dismissing the appeal of the Revenue by taking into consideration the determination made by the Tribunal to the effect: “That the Assessee had not filed a revised return of income as the time to file the revised return of income has already expired in any event even the Revenue does not dispute that it was a bonafide mistake on the part of the Assessee and the excess depreciation originally claimed was on account of bonafide and inadvertent mistake on the part of the Assessee as during the course of assessment proceedings the Assessee realized its mistake and pointed out the same to the AO. Thus, imposition of penalty was not warranted”. 24. We observe that the facts of the instant case, are exactly similar to the case dealt with by the Hon’ble High Court in the above case, except the Assessee has also claimed the exemption u/s 54F of the Act in the case pertaining to A.Y. 2013-14, which resulted into levy of penalty, however, admittedly, the levy of penalty by the AO in that year, has not attained finality, as the appeal is still pending for adjudication before the Ld. CIT(A) ITA No.5219/M/2024 Ms. Ila Jitendra Mehta 15 and therefore much inference cannot be drawn in this particular case, specifically in view of the judgment by the Hon’ble Apex Court in the case of Pullanguod Rubber Produce Company Ltd. case (supra) wherein the Tribunal while relying on the decision relating to the year immediately to the previous assessment, affirmed the decision of the authorities below in not allowing the claim of the Assessee and therefore the Hon’ble Apex Court has held “that an admission is an extremely important piece of evidence but it cannot be said that it is conclusive. It is open to the person who made the admission to show that it is incorrect”. As the Assessee in the instant case, after receiving the notice dated 28.07.2016, immediately by filing her reply vide letter dated 16.08.2016 along with revised computation of income and drawing the attention of the AO, rectified her mistake for claiming the deduction u/s 54F of the Act inadvertently and therefore in this case no adverse inference is warranted. 25. We further observe that the AO while levying the penalty has also taken into consideration the following facts “that the Assessee is a family member of part of Rohan group and all the personal and business accounts are being handled professionally through CA. The Assessee cannot take a plea that the return was filed by her accountant”. We observe that both the facts are contrary to each other, as the AO himself has admitted that all the personal and business accounts of the Assessee are being handled professionally through CAs and therefore how it can be construed that the Assessee cannot take a plea that return was filed by her accountant. The Assessee in response to the questions raised by the AO in the statement recorded u/s 131 of the Act specifically replied that her return of income was filed on 30.03.2016 by her accountant and since she was having digital signature the same was attached while filing her return of income. The Assessee also demonstrated that as the return was filed after due date, therefore the same could not be revised and thus the Assessee has rectified her mistake by filing revised computation of income. The Assessee accordingly asked the AO to accept the revised computation of income and not to levy the penalty for her ignorance. ITA No.5219/M/2024 Ms. Ila Jitendra Mehta 16 26. We further observe that the Hon’ble Jurisdictional High Court in the case of Dalmia Dyechem Industries (supra) has also dealt with the identical case, wherein the Assessee in its accounts had shown borrowed funds and interest free advances to its sister concerns. The AO disallowed the proportionate interest out of the interest paid for the interest free advances given to the sister concern. The Assessee challenged this order before the CIT(A) who upheld the order of the AO and therefore the Assessee being aggrieved went in appeal before the Tribunal, who set aside the orders passed by the authorities below and restored the matter to the file of the AO for reexamination of the deductibility. 26.1. Upon remand, the AO again disallowed the proportionate interest holding that Assessee had borrowed funds of which interest liability had been incurred. The AO also levied penalty holding that the Assessee concealed its income by furnishing inaccurate particulars. 26.2 The Assessee challenged the said penalty by filing appeal before the then CIT(Appeals) on the ground that the Assessee had no malafide intention to evade any tax and all facts and details were placed on record. 26.2 The Ld. Commissioner by relying on the judgment of the Hon’ble Apex Court in the case of Reliance Petro-products Ltd. (supra) deleted the penalty by concluding that merely because the claim made by an Assessee was disallowed, penalty cannot be levied unless it is demonstrated that the Assessee had any malafide intention. 26.3 The order of the then Ld. CIT(A) got affirmed from the Tribunal and therefore the Revenue being aggrieved challenged the order passed by the Tribunal in affirming the decision of the Ld. CIT(A) in deleting the penalty imposed. Before the Hon’ble High Court, the Revenue Department has placed reliance on the judgment of the Hon’ble High Court of Delhi in the case of CIT vs. Zoom Communication Pvt. Ltd. (supra) and the fact that miniscule number of cases are picked up for scrutiny and therefore the decision of the Hon’ble Apex Court in the case of Reliance Petro-products Ltd. ITA No.5219/M/2024 Ms. Ila Jitendra Mehta 17 (supra) should be interpreted in such a manner that there is no scope of misuse. 26.4 The Hon’ble Jurisdictional High Court by considering the submission made by the Revenue and decision of the Tribunal, ultimately did not find any perversity with the decision of the then CIT(A) and the Tribunal in deleting the penalty imposed by the then AO, by holding as under: “That the case of Zoom Communication Pvt. Ltd. (supra) is clearly distinguishable on facts because in that case the Assessee had conceded before the AO that its action of claiming revenue deductions was not correct at all. It was not the case of the Assessee therein, throughout the proceedings that deductions carried out by the Assessee was a debatable issue. The Hon’ble High Court of Delhi noted that before it, the Assessee could not explain the circumstances and its conduct. In the present case, when the Assessee had bonafide pleaded that it was covered by a particular position of law that one authority i.e. the Tribunal had passed certain orders in its favour during the assessment proceedings it could not be said that the Assessee fell within the ambit of section 271(1)(c) of the Act, as in this case both the authorities have taken a possible view of the matter upon appreciating the evidence”. 26.5 The Hon’ble High Court has also dealt with the issue raised by the Revenue as observed by the AO in this case as well, to the affect “that since miniscule number of cases are picked up for scrutiny and therefore decision of the Hon’ble Apex Court in the case of Reliance Petro-products case (supra) should be interpreted in such a manner that there is no scope of misuse”, and answered by holding as under: ” Because small number of cases are picked up for scrutiny does not mean that rigorous of the provision are diluted. Whether a particular person has concealed income or has deliberately furnished inaccurate particulars, would depend on facts of each case. In the present case, we are concerned only with the finding that there has been no concealment and furnishing of inaccurate particulars of the present Assessee.” 27. From the aforesaid analyzations, it goes to show that simply on the reason that miniscule cases are selected for scrutiny and the Assesse has also claimed the exemption u/s 54F of the Act in the AY 2013-14, which resulted ITA No.5219/M/2024 Ms. Ila Jitendra Mehta 18 into making the disallowance and levy of penalty, which is admittedly under scrutiny of the Ld. CIT(A) in first appeal and the Assessee during the assessment proceedings itself has accepted her mistake for claiming the deduction u/s 54F of the Act inadvertently, by filing a reply/letter dated 16.08.2016 along with revised computation of income and has also demonstrated that the return filed by the Assessee was belated and therefore the same could not have been revised and the return of income was filed by the Assessee’s accountant by using digital signature and therefore the penalty u/s 271(1)(c) of the Act is not leviable. The Assessee by rectifying her mistake by filling a letter along with revised computation of income during the assessment proceedings and by giving reason for not revising the return the return of income, as the original return of income was filed belatedly, has demonstrated the bonafide reason and therefore the inadvertent mistake committed by the Assessee in lodging the claim u/s 54F of the Act, would not entail any penalty. Thus, the question posed is answered accordingly. 28. Consequently, on the aforesaid peculiar facts and circumstances and the observations and analyzations made above, the penalty is liable to be deleted. 29. However, coming to the other aspect of the case, we observe that the AO in the Assessment order has specifically held that the Assessee is liable for penalty u/s 271(1)(c) of the Act and therefore the penalty proceedings are also initiated separately for concealment of income, however, vide notice dated 23.12.2016 u/s 271(1)(c) r.w.s 274 of the Act, issued the show cause to the Assessee for filing of inaccurate particulars of income but not for concealment of income for which the penalty proceedings were initiated. Further, vide penalty order dated 19.6.2017 the AO ultimately levied the penalty of Rs.2,28,41,404/- for deliberately filing of inaccurate particulars of income within the meaning of section u/s 271(1)(c) of the Act but not for concealment of income for which the proceedings, were initiated in the assessment order. 30. On the aforesaid facts and circumstances, the following question emerge: ITA No.5219/M/2024 Ms. Ila Jitendra Mehta 19 “Whether the penalty levied in the instant case for furnishing of inaccurate particular of income as determined by the AO in the penalty order instead on the limb of concealment of income on which the penalty proceedings were initiated, is sustainable or not”. 31. Admittedly, both the limbs are distinct from each other and having its own connotations. The Hon'ble Jurisdictional High Court in the case of CIT vs. Samson Perinchery (392 ITR 4) while respectfully following the judgement rendered by Hon'ble Apex Court in the case of T. Ashok Pai vs. CIT (292 ITR 11), has also clearly held that concealment of income and furnishing of inaccurate particulars of income are two separate connotations. 32. On the aforesaid analyzations, we are of the considered view that where there is confusion in recording the satisfaction for initiation of penalty proceedings or issuing the notice u/s 274 of the Act or levy of penalty, on the limb for which no satisfaction was recorded and no penalty proceedings were initiated in the assessment order, then the penalty levied is un-sustainable. In simple terms, the penalty levied for “furnishing of inaccurate particular of income” as determined by the AO in the penalty order, instead of, on the limb of “concealment of income” on which the penalty proceedings were initiated, is not sustainable and liable to be deleted. Thus, the question posed, is answered accordingly. 33. Coming to the instant case, admittedly the AO had recorded the satisfaction and initiated the penalty proceedings u/s 271(1){c} of the Act qua concealment of income, however issued notice dated 31.12.2016 u/s 271(1){c} read with section 274 of the Act for furnishing of inaccurate particular of income and vide penalty order dated 19.06.2017, ultimately levied the penalty for furnishing of inaccurate particular of income but not for concealment of income, for which satisfaction was recorded and penalty proceedings were initiated and thus the penalty under consideration on this count as well, is liable to be deleted. Hence, we are inclined to do so. ITA No.5219/M/2024 Ms. Ila Jitendra Mehta 20 34. Resultantly, on the aforesaid determinations made by us, the penalty on the merit as well as on legal aspect, is unsustainable, thus the same is deleted by allowing the appeal of the Assessee. 35. In the result, the appeal of the Assessee is allowed. Order pronounced in the open court on 02.06.2024. Sd/- Sd/- (RENU JAUHRI) (NARENDER KUMAR CHOUDHRY) ACCOUNTANT MEMBER JUDICIAL MEMBER * Kishore, Sr. P.S. Copy to: The Appellant The Respondent The CIT, Concerned, Mumbai The DR Concerned Bench //True Copy// By Order Dy/Asstt. Registrar, ITAT, Mumbai. "