2014 (6) TMI 607 - AT - Income Tax

Levy of penalty u/s 271(1)(c) of the Act - Claim of deduction u/s 54F - investment in two adjacent houses Held that - The assessee has made a claim u/s 54F to the extent of the investment made in three flats at same floor of the building - out of the three flats one flat was purchased in the name of assessee himself and two other flats were purchased in the joint name of assessee and his wife as well as the assessee and his son respectively - the investment made in flats are from the sale proceeds of the asset sold by the assessee and there is no dispute on this fact - if the investment is made by the assessee in the new asset though in the joint name of the assessee and his wife, the exemption u/s 54/54F is allowable Relying upon ITO Vs. Ms. Sushila M. Jhaveri 2007 (4) TMI 289 - ITAT BOMBAY-I - the exemption u/s 54F is available in respect of the investment in two adjacent houses which constitute one residential unit. The claim u/s 54/54F may be allowable in case of purchase of more than one new flats when more than one flat constitutes one residential house - all three flats in which the assessee invested the consideration received on sale of the old assets are located at the same floor of the building - the claim of the assessee would not fall under the category of bogus of absolute untenable claim under the law - The assessee has brought on record the entire facts relating to the claim and further there are various decisions supporting the claim of assessee, even the assessee withdrew the claim u/s 54F in respect of two flats out of three, the mere withdrawal of the claim would not turn the bonafide claim of the assessee into the category of wholly untenable and unsustainable claim having no basis - the claim of exemption u/s 54F is a highly debatable one and it cannot be said that it is an absolutely untenable claim under the law thus, the penalty levied u/s 271 (1)(c) is not justified and is to be set aside Decided in favour of Assessee.

Summary

Issues:
Levy of penalty under section 271(1)(c) for inaccurate particulars and concealment of income.

Analysis:
The appeal was against the order of the Commissioner of Income Tax (CIT) for the assessment year 2009-10, where the assessee was penalized under section 271(1)(c) for claiming deduction under section 54F on the investment in three flats. The Assessing Officer (AO) questioned the claim as contrary to the provisions of section 54F, leading to penalty proceedings. The assessee withdrew the claim for two flats purchased jointly with wife and son. The AO imposed a penalty of Rs. 11,61,144, equivalent to 100% of tax sought to be evaded. The assessee contended that the claim was bonafide, citing relevant court decisions and tribunal rulings to support the exemption under section 54F for all three flats as one unit. The CIT(A) upheld the penalty, prompting the appeal.

The assessee argued that the investment in three flats on the same floor constituted one residential unit, justifying the claim under section 54F. Citing the decision of the Delhi High Court in CIT Vs. Kamal Wahal, the assessee maintained that joint ownership with spouse and son did not disqualify the claim. The assessee relied on various court decisions and tribunal rulings to support the legitimacy of the claim, emphasizing that the withdrawal of part of the claim during assessment did not amount to inaccurate particulars or concealment of income. The assessee contended that the claim was bonafide and duly explained before the AO, supported by legal precedents.

The Tribunal examined the facts and legal precedents cited by the assessee. It noted that the investment in the flats was from the sale proceeds of the asset, and there was no dispute on this aspect. Referring to various decisions, including the Hon'ble Karnataka High Court and the Special Bench of the Tribunal, the Tribunal found that the claim under section 54F for multiple flats constituting one residential unit was valid. The Tribunal highlighted that the claim was not wholly untenable but a highly debatable one, supported by legal principles. Considering the bonafide nature of the claim and the legal backing provided by the assessee, the Tribunal concluded that the penalty under section 271(1)(c) was unwarranted and deleted the same.

In conclusion, the Tribunal allowed the appeal of the assessee, emphasizing the bonafide nature of the claim and the legal validity supported by relevant court decisions and tribunal rulings. The penalty under section 271(1)(c) was deemed unjustified and consequently deleted.