Penalty not justified on disallowance on certain issue being subject matter of judicial interpretation in number of case

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.

Please become a Premium member. If you are already a Premium member, login here to access the full content.