Penalty – Concealment – Section 271(1)(c) – A. Y. 2008-09 – Capital gains – Exemption – Whether assesee entitled to exemption u/s. 54 or section 54F or neither pending before High Court – Addition itself debatable – Penalty u/s. 271(1)(c) not justified

For the A. Y. 2008-09, the assessee’s claim for deduction u/s. 54/54F was pending before High Court for consideration. The Tribunal deleted the penalty imposed by the Assessing Officer u/s. 271(1)(c).

On appeal by the Revenue, the Karnataka High Court upheld the decision of the Tribunal and held as under:

“i) The imposition of penalty u/s. 271(1)(c) was for concealment of material particulars of income by the assessee or furnishing inaccurate particulars of such income. It was not the case of the Revenue that the assessee had furnished details with regard to the income derived from the sale and purchase of the properties. The question as to whether the assessee was to be given the benefit u/s. 54 or section 54F or was not to be given the benefit, was yet to be finalized by the High Court, where the appeal against the assessment proceedings was still pending.

ii) The assessee had given full description of the property which was sold by him and of the property purchased by him. Merely because the assessee was not to be given the benefit u/s. 54 as the property sold by the assessee was not a residential property it could not be said that there was concealment of material information by the assessee because complete details of the property sold by the assessee were given by him in the returns filed by him.

iii) Where penalty was imposed in respect of any addition where the High Court has admitted the appeal on substantial question of law, then the sustainability of the addition itself becomes debatable, and in such circumstances penalty could not be levied u/s. 271(1)(c).”