Case Law Details

Case Name : Rajesh C. Sanghani Vs. ITO (ITAT Mumbai)
Appeal Number : ITA No. 1713/Mum/2014
Date of Judgement/Order : 06/05/2016
Related Assessment Year : 2008-09
Courts : All ITAT (4439) ITAT Mumbai (1463)

Rajesh C. Sanghani Vs ITO (ITAT Mumbai)

Undisputedly, the basis for imposition of penalty under section 271(1)(c) is, the assessee has wrongly claimed deduction under section 54F. As could be seen, it is the claim of the assessee that capital gain arising from sale of shop is not taxable as the assessee has invested in flats No. 103 and 104, in the first floor of a building at Ghatkopar. The department also does not dispute this fact. Only ground on which the assessees claim of deduction 54F was disallowed was flats Nos. 103 and 104 are two separate properties. It is the claim of the assessee that these two flats are adjacent to each other and contiguous, hence, to be treated as one flat. In this regard, it is to be noted that the expression a residential house as provided under section 54F is a subject matter of judicial interpretation in a number of cases and it has been held that a would not denote one residential house. Therefore, In our view, the issue relating to the assessees claim of deduction under section 54F, is debatable in nature. Merely because the assessee in the course of assessment proceedings, agreed for disallowance of its claim for deduction under section 54F, will not lead to a conclusion that the assessee has either furnished inaccurate particulars of income or concealed particulars of his income. That being the case, in our view, it is not a fit cause for imposition of penalty under section 271(1)(c).

Full Text of the ITAT Order is as follows:-

The aforesaid appeal of the assessee is directed against the order dt. 2-9-2013, passed by the learned Commissioner (Appeals)-28, Mumbai, confirming the penalty imposed under section 271(1)(c) of the Income Tax Act, 1961 (for short the Act) for the assessment year 2008-09.

2. There is a delay of 114 days in filing the present appeal. The assessee has filed a petition seeking condonation of delay supported by an affidavit. It is submitted, the assessee sold his old residential premises in June, 2012, and shifted to a new residential premises. He submitted, after shifting to a new residential premises, he suffered heart attack in March, 2013, and was undergoing treatment for a proionged period. He submitted, the order passed by the learned Commissioner (Appeals) though was communicated to the assessees old residential address but since the purchaser of the flats were busy in marriage function of their son, they could not inform the assesee. He submitted, after slight recovery from heart ailment, the assessee along with his wife went abroad in December, 2013, and after returning back, on a phone call received from the concerned Income Tax Officer, the assessee could come to know about the status on his appeal before the learned CIT (Appals) and collected the order from his old residential address on 12-2-2014. Immediately, therefore, step was taken for filing of the appeal. He, therefore submitted, the delay caused being totally unintentional and due to bona fide reasons, should be condoned.

3. The learned departmental representative opposed the condonation of delay.

4. We have heard both the parties on the issue of delay in filing the present appeal. After perusing the cause of delay, as explained in the delay condonation petition which is supported by affidavit, we are satisfied that there is a reasonable cause for delay in filing the appeal. Consequently, condoning the delay, we admit the appeal for hearing on the merits.

5. Reverting back to the issue of dispute, brief facts are, the assessee an individual filed his return of income for the impugned assessment year on 30-9-2008, declaring total income of Rs. 4,92,045. In the course of assessment proceedings, the assessing officer noticed that the assessee had purchased two residential flats being flat Nos. 103 and 104, in the first floor of the building at Ghatkopar on 6-11-2007, the investment in which was claimed as deduction under section 54F against the long-term capital gain received on sale of shop. The assessing officer observed, the assessee was already the owner of one residential house at Andheri. As per section 54F, the assessee can be eligible for deduction under sectin 54F, if he invested in one more residential house. However, the assessee had purchased two flats, hence, deduction 54F is not allowable. He also observed that as per section 71, the assessee was required to adjust the business loss against long-term capital gain whereas the assessee without doing so has carried forward his business loss. Therefore, while disallowing the assessees claim of deduction under section 54F at the time of completion of assessment, the assessing officer initiated proceedings for imposition of penalty under section 271(1)(c). In response to the show-cause notice issued under section 274 read with section 271(1)(c), but the assessing officer rejected the assessees explanation observing that in the course of assessment proceedings, the assessee agreed that he has wrongly claimed deduction under section 54F. He, therefore, concluded that as the assessee has concealed particulars of income and furnished incurred particulars, he is liable for penalty under section 271(1)(c) which was quantified at Rs. 1,60,651. Being aggrieved of penalty order so passed, the assesee preferred an appeal before the learned Commissioner (Appeals).

6. The learned Commissioner (Appeals) having not found merit in the submissions of the assessee confirmed the penalty imposed under section 271(1)(c).

7. The learned authorised representative submitted before us though the assessee in the course of assessment proceedings, had agreed disallowance of claim under section 54F but legally the assessee is eligible for deduction under section 54F. The leanred authorised representative relying upon certain judicial precedents submitted, flats Nos. 103 and 104, purchased by the assessee being contiguous should be treated as one flat, hence, conditions of section 54F are not violated.

8. The learned department representative, on the other hand, relied upon the reasoning of the assessing officer and the learned Commissioner (Appeals).

9. We have considered the submissions of the parties and perused the material available on record. Undisputedly, the basis for imposition of penalty under section 271(1)(c) is, the assessee has wrongly claimed deduction under section 54F. As could be seen, it is the claim of the assessee that capital gain arising from sale of shop is not taxable as the assessee has invested in flats No. 103 and 104, in the first floor of a building at Ghatkopar. The department also does not dispute this fact. Only ground on which the assessees claim of deduction 54F was disallowed was flats Nos. 103 and 104 are two separate properties. It is the claim of the assessee that these two flats are adjacent to each other and contiguous, hence, to be treated as one flat. In this regard, it is to be noted that the expression a residential house as provided under section 54F is a subject matter of judicial interpretation in a number of cases and it has been held that a would not denote one residential house. Therefore, in our view, the issue relating to the assessees claim of deduction under section 54F, is debatable in nature. Merely because the assessee in the course of assessment proceedings, agreed for disallowance of its claim for deduction under section 54F, will not lead to a conclusion that the assessee has either furnished inaccurate particulars of income or concealed particulars of his income. That being the case, in our view, it is not a fit cause for imposition of penalty under section 271(1)(c). Accordingly, accepting the assessees explanation, we delete the penalty imposed under section 271(1)(c) of the act.

10. In the result, the assessees appeal is allowed.

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Category : Income Tax (25514)
Type : Judiciary (10263)
Tags : ITAT Judgments (4619) section 271(1)(c) (315) Section 54F (133)

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