The Commissioner Of Income Tax-Iii v. M/S Ved Parkash Likhi & Sons (Huf

IN THE HIGH COURT OF PUNJAB AND HARYANA ATCHANDIGARH. I.T.A. No.458 of 2010 Date of decision: 22.11.2010 The Commissioner of Income Tax-III -----Appellant. Vs. M/s Ved Parkash Likhi & Sons (HUF) -----Respondent CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOELHON'BLE MR. JUSTICE AJAY KUMAR MITTAL Present:-Mr. Denesh Goyal, Standing Counselfor the appellant. --- ADARSH KUMAR GOEL, J. 1. This appeal has been preferred by the revenue underSection 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 theassessment year 2006-07 proposing to raise following substantialquestion of law:- “Whether on the facts and in the circumstances of thecase, the Hon’ble ITAT is right in law in upholding theorder of the CIT(A)-II, Ludhiana dated 19.06.2006deleting the penalty imposed u/s 271(1)(c) of theI.T.Act?” 2.The assessee derived income from capital gains andclaimed deduction to the extent of purchase of RuralElectrification Corporation Bonds under Section 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 ofsix months. The Assessing Officer also levied penalty underSection 271(1)(c) of the Act. On appeal, the CIT(A) deleted thepenalty. It was held that the assessee having made investment inbonds, though technically there was delay of few days after theprescribed period, claim for deduction could not be held to beconcealment of income by the assessee. The assessee haddisclosed all the material facts. Mere fact that the assessee’s pleawas turned down on merits, was not by itself enough to attractpenalty. The Tribunal upheld the view of the CIT(A) with thefollowing observations:- “9. Penalty for concealment u/s 271(1)(c) of the Actis leviable in all such cases where the assessee hadconcealed his income or furnished inaccurateparticulars of income. In the facts of the presentappeal before us, the basis for levying of penaltyimposed is the denial of benefit u/s 54EC of the Act.The assessee on sale of capital asset had investedRs.33 lakhs in the purchase of bonds as eligible fordeduction us/ 54EC of the Act as against his incomearising from long term capital gains. The bonafides ofthe claim of the assessee is further strengthened bythe facts that in addition to the said claim being madein the computation of income filed along-with return ofincome, the assessee had enclosed the proof of theinvestments along-with the return of income. The saidinvestment was made after a delay of few days as theperson to whom the assessee had entrusted job wasunder the bonafide belief that the investment is to bemade within six months from the end the month in which the asset was sold. The mistake in making theinvestment within the prescribed time can be the basisfor disallowing the claim of deduction u/s 54EC of theAct but cannot be the basis for levy of penalty u/s 281(1)(c) of the Act. The assessee having fully disclosedthe material facts for the computation of income andthe 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 placingreliance on CIT vs. Deep Tools Pvt. Ltd. (274 ITR603) (P&H), wherein it was held that no malafidescould not attributed to the assessee as the claim fordeduction was based on the certificate of the CA withwhom no collusion was proved and hencecancellation of the penalty was held to be justified.We are in conformity with the order of the CIT(A) indeleting the penalty levied u/s 271(1)(c) of the Act.We uphold the order of CIT(A) and dismiss thegrounds of appeal raised by the Revenue.” 3. We have heard learned counsel for the appellant. 3. We have heard learned counsel for the appellant. 4. In view of finding of fact concurrently recorded by theCIT(A) and the Tribunal that there was no concealment of incomeby the assessee, no substantial question of law arises. 5. The appeal is dismissed. (ADARSH KUMAR GOEL) JUDGE November 22, 2010ashwani (AJAY KUMAR MITTAL) JUDGE