JOSEPH J MUDALIAR, MUMBAI V. ACIT CEN CIR 31, MUMBAI

ITA 1603/MUM/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 78941 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-05-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: J
• Assessment Year: 2009-2010
• Appeal Filed On: 27-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Wrong claim; Revised return
• Section: 54F; 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL J BEN CH, MUMBAI JH FOT; IKY JKO] U;KF;D LNL; ,OA JH FOT; IKY JKO] U;KF;D LNL; ,OA JH FOT; IKY JKO] U;KF;D LNL; ,OA JH FOT; IKY JKO] U;KF;D LNL; ,OA JH JH JH JH JKTSUN JKTSUN JKTSUN JKTSUNZZ ZZZZ ZZ] YS[KK LNL; DS LE{K ] YS[KK LNL; DS LE{K ] YS[KK LNL; DS LE{K ] YS[KK LNL; DS LE{K BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI RAJENDRA, ACCOUNTANT MEMBER VK;DJ VIHY LA[;K / ITA NO.1603/MUM/2013 FU/KKZJ.K O'KZ @ ASSESSMENT YEAR: - 2009-10 SHRI JOSEPH J. MUDALIAR. ROW HOSUE, NO. 12, CRYSTAL PALACE, LINK ROAD, MALAD (WEST) MUMBAI 400 064. VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIR-31, MUMBAI. PAN:-AASPM5300P APPELLANT RESPONDENT ASSESSEE BY / FU/KKZFJRH DH VKSJ LS FU/KKZFJRH DH VKSJ LS FU/KKZFJRH DH VKSJ LS FU/KKZFJRH DH VKSJ LS SHRI RAJESH KOTHARI REVENUE BY/ JKTLO DH VKSJ LS JKTLO DH VKSJ LS JKTLO DH VKSJ LS JKTLO DH VKSJ LS SHRI MAURYA PRATAP ORDER PER VIJAY PAL RAO, JM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 16.01.2013 OF CIT FOR THE A.Y. 2009-10. THE ASSESSEE HAS RAISE D FOLLOWING GROUNDS IN THIS APPEAL:- 1. THE LD. COMMISSIONER OF INCOME TAX (A) HAS ERRED IN LEVYING PENALTY U/S 271(1)(C) OF THE ACT ON THE APPELLANT AT RS. 11 ,61,144/- 2. THE LD. COMMISSIONER OF INCOME TAX (A) ERRED IN LEV Y OF PENALTY IN SPITE OF FACT THE APPELLANT HAD NOT SUBMITTED ANY I NACCURATE PARTICULARS . DATE OF HEARING 27.05.2014 DATE OF PRONOUNCEMENT 30.05.2014 SHRI JOSEPH J. MUDALIAR. 2 | P A G E 2. DURING THE ASSESSMENT YEAR, THE ASSESSEE HAS SOL D ITS FACTORY PREMISES FROM WHICH IT HAS BEEN SHOWING RENTAL INCOME. IN THE CO MPUTATION OF TOTAL INCOME THE ASSESSEE HAS CLAIMED DEDUCTION U/S 54F OF RS. 1,34, 95,220/- ON THE INVESTMENT IN THREE FLATS. THE AO ASKED THE ASSESSEE TO EXPLAIN A S TO HOW IT CAN CLAIM DEDUCTION U/S 54F ON THREE DIFFERENT UNITS ON THE SAME FLOOR AND IN THE NAME OF THREE DIFFERENT PERSONS, AS IT IS CONTRARY TO THE PROVISIONS OF SEC TION 54F. IN RESPONSE THE ASSESSEE FILED REVISED RETURN OF INCOME AND RESTRICTED ITS C LAIM U/S 54F ONLY TO ONE FLAT. CONSEQUENTLY THE ASSESSEE WITHDREW ITS CLAIM IN RES PECT OF OTHER TWO FLATS WHICH WERE JOINTLY PURCHASED IN THE NAME OF WIFE AND SON. THE AO INITIATED THE PENALTY PROCEEDINGS U/S 271(1)(C) IN RESPECT OF THE CLAIM WITHDRAWN BY THE ASSESSEE U/S 54F IN RESPECT OF TWO FLATS PURCHASED IN THE JOINT NAME OF WIFE AND SON RESPECTIVELY. IN THE PENALTY PROCEEDINGS THE ASSESSEE CONTENDED B EFORE THE AO THAT THOUGH THE ASSESSEE HAS WITHDRAWN ITS CLAIM U/S 54 IN RESPECT OF INVESTMENT MADE IN TWO FLATS OUT OF TOTAL THREE FLATS, HOWEVER, IN VIEW OF THE DECISION OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. ANANDA BASAPPA (2009) 223 CTR 186 (KAR), THE ASSESSEE CAN CLAIM EXEMPTION U/S 54F IN RESPECT OF ALL THE THREE FLATS ON THE SAME FLOOR AS ONE UNIT. THE ASSESSEE HAS ALSO RELIED UP ON THE DECISIONS OF THIS TRIBUNAL AS WELL AS THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF RELIANCE PETROPRODUCTS (P) LTD.. (2010) 230 CTR (SC) 320 AND CONTENDED THAT THE PENALTY IS NOT ATTRACTED MERELY BECASE THE ASSESSEE HAS CLAIME D THE EXEMPTION WHICH WAS NOT ACCEPTED BY THE DEPARTMENT WHEN THE CLAIM OF TH E ASSESSEE IS BONAFIDE. THE AO DID NOT ACCEPT THE EXPLANATION AND CONTENTION OF THE ASSESSEE AND LEVIED PENALTY OF RS. 11,61,144/-, BEING 100% OF TAX SOUGH T TO BE EVADED ON ACCOUNT OF WRONG CLAIM OF DEDUCTION U/S 54F. 3. THE ASSESSEE CHALLENGED THE LEVY OF PENALTY U/S 271(1)(C) BEFORE CIT(A) BUT COULD NOT SUCCEED. SHRI JOSEPH J. MUDALIAR. 3 | P A G E 4. BEFORE US, THE LD. AR OF THE ASSESSEE HAS SUBMIT TED THAT THE CAPITAL GAIN ARISING FROM THE SALE OF THE PREMISES WAS INVESTED BY THE ASSESSEE IN THREE FLATS ON THE SAME FLOOR OF THE BUILDING WHICH COMPRISED ONE RESIDENTIAL UNIT. HE HAS FURTHER SUBMITTED THAT ONE FLAT WAS PURCHASED IN THE NAME OF ASSESSEE AND THE OTHER TWO FLATS WERE PURCHASED IN THE JOINT NAME OF THE ASSES SEE AND HIS WIFE AND SON RESPECTIVELY. THE ENTIRE INVESTMENT FOR PURCHASE OF THESE FLATS HAVE BEEN MADE FROM THE SALE PROCEEDS OF THE ASSET SOLD BY THE ASS ESSEE. THUS THE LD. AR OF THE ASSESSEE HAS SUBMITTED THAT EXEMPTION U/S 54F IS AL LOWABLE WHEN A NEW HOSUE IS PURCHASED IN THE JOINT NAME OF THE ASSESSEE AND HIS WIFE AS WELL AS ASSESSEE AND HIS SON. IN SUPPORT OF HIS CONTENTION HE HAS RELIED UPON THE DECISIOIN OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. KAMAL WAHAL (2013) 258 CTR 251 (DEL). HE HAS ALSO RELIED UPON THE FOLLOWING DECISIONS. (I) DIT (INTL) VS. MRS. JENNIFER BHIDE (2012) 252 C TR 444 (KAR) (II) CIT VS. RAVINDER KUMAR ARORA (2012) 252 CTR 39 2 (DEL) (III) CIT VS. GURNAM SINGH (2008) 218 CTR 674 (P&H ) 5. PLACING RELIANCE ON THE ABOVE DECISIONS, LD. AR HAS SUBMITTED THAT IT HAS BEEN HELD IN ALL THESE DECISIONS THAT THE EXEMPTION U/S 54F IS ALLOWABLE WHERE NEW HOUSE IS PURCHASED IN THE JOINT NAME OF THE ASSESSE E AND HIS SPOUSE WHERE NO CONTRIBUTION WAS MADE BY THE SPOUSE. THE LD. AR THE N SUBMITTED THAT THOUGH THE ASSESSEE WITHDREW ITS CLAIM OF EXEMPTION U/S 54F IN RESPECT OF TWO FLATS OUT OF THREE PURCHASED BY INVESTING THE SALE PROCEEDS OF THE ASS ET SOLD, HOWEVER IN VIEW OF THE VARIOUS DECISIONS THE CLAIM OF THE ASSESSEE IN RESP ECT OF ALL THREE FLATS IS ALLOWABLE. THUS THE CLAIM OF EXEMPTION U/S 54F IN RESPECT OF I NVESTMENT IN THREE FLATS AT THE SAME FLOOR OF THE BUILDING IS BONAFIDE CLAIM AND WI THDRAWAL OF PART OF CLAIM DURING THE ASSESSMENT PROCEEDINGS WOULD NOT AMOUNT TO FUR NISHING OF INACCURATE SHRI JOSEPH J. MUDALIAR. 4 | P A G E PARTICULARS OF INCOME OR CONCEALMENT OF INCOME. IN SUPPORT OF HIS CONTENTION HE HAS RELIED UPON THE FOLLOWING DECISIONS:- (I) CIT VS. ANANDA BASAPPA (2009) 223 CTR 186 (KAR) (II) CIT VS. SMT. K.G. RUKMINIAMMA (2011) 239 CTR 4 35 (III) ITO VS. MS. SUSHILA M. JHAVERI (2007) 109 TTJ 299 (MUM) (SB). 6. HENCE THE LD. AR HAS SUBMITTED THAT WHEN THE CLA IM OF ASSESSEE IS NOT BOGUS BUT IT WAS A BONAFIDE CLAIM WHICH HAS BEEN DU LY EXPLAINED BY THE ASSESSEE BEFORE THE AO IN THE PENALTY PROCEEDINGS THEN THE P ENALTY IN THE CASE OF ASSSSEE IS NOT WARRANTED. IN SUPPORT OF HIS CONTENTION HE HAS RELIED UPON FOLLOWING DECISIONS:- (I) CIT VS RELIANCE PETROPRODUCTS (P) LTD.. (2010) 230 CTR (SC) 320 (II) DIT(IT)-1 VS. ADMINISTRATOR OF THE ESTATE OF L ATE MR. F.E. DINSHAW (III) SRI VENKATESH MURTHY VS. CIT [ITA NO. 720/200 7/C/W ITA NO. 719/2007] (IV) PRICE WATERHOSUE COOPERS PVT. LTD. VS. CIT (20 12) 253 CTR 1(SC) 7. ON THE OTHER HAND THE LD. DR HAS SUBMITTED THAT IT IS NOT A VOLUNTARY ADMISSION OF INCOME BY WITHDRAWAL OF EXEMPTION U/S 54F BUT THE ASSESSEE HAS REVISED ITS INCOME ONLY WHEN THE AO DETECTED THE WR ONG CLAIM MADE BY THE ASSESSEE U/S 54F. THE LD. DR HAS FURTHER CONTENDED THAT ONCE THE ASSESSEE HAS WITHDRAWN THE CLAIM U/S 54F BY CONSIDERING THE SAME AS WRONG CLAIM THEN THE PENAL PROVISIONS OF SECTION 271(1)(C) ARE ATTRACTED. HE H AS RELIED UPON THE ORDERS OF AUTHORITIES BELOW. SHRI JOSEPH J. MUDALIAR. 5 | P A G E 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. THERE IS NO DISPUTE THAT THE ASSESSEE HAS M ADE A CLAIM U/S 54F TO THE EXTENT OF THE INVESTMENT MADE IN THREE FLATS AT SAM E FLOOR OF THE BUILDING. OUT OF THESE THREE FLATS ONE FLAT WAS PURCHASED IN THE NAM E OF ASSESSEE HIMSELF AND TWO OTHER FLATS WERE PURCHASED IN THE JOINT NAME OF ASS ESSEE AND HIS WIFE AS WELL AS THE ASSESSEE AND HIS SON RESPECTIVELY. WE FIND THAT THE INVESTMENT MADE IN FLATS ARE FROM THE SALE PROCEEDS OF THE ASSET SOLD BY THE ASS ESSEE AND THERE IS NO DISPUTE ON THIS FACT. THERE ARE VARIOUS PRECEDENTS ON THIS POI NT THAT IF THE INVESTMENT IS MADE BY THE ASSESSEE IN THE NEW ASSET THOUGH IN THE JOIN T NAME OF THE ASSESSEE AND HIS WIFE, THE EXEMPTION U/S 54/54F IS ALLOWABLE. THE AS SESSEE HAS PLACED RELIANCE ON VARIOUS DECISIONS ON THIS POINT AND WE FIND THAT IN THE SERIES OF DECISIONS AS RELIED UPON BY THE ASSESSEE IT HAS BEEN HELD THAT EXEMPTIO N U/S 54/54F IS ALLOWABLE WHERE A NEW HOUSE IS PURCHASED IN THE JOINT NAME OF ASSESSEE AND HIS WIFE BUT THE INVESTMENT IS MADE OUT OF THE SALE PROCEEDS OF THE ASSESSEES ASSET. IT IS PERTINENT TO NOTE THAT IN THE CASE OF ITO VS. MS. SUSHILA M. JHAVERI (SUPRA), THE SPECIAL BENCH OF THIS TRIBUNAL HAS HELD THAT THE EXEMPTION U/S 54F IS AVAILABLE IN RESPECT OF THE INVESTMENT IN TWO ADJACENT HOUSES WHICH CONSTI TUTE ONE RESIDENTIAL UNIT. FURTHER THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. ANANDA BASAPPA (SUPRA) HAS HELD THAT THE EXPRESSION A RESIDENTIAL HOUSE USED IN SECTION 54 MAKES IT CLEAR THAT IT WAS NOT THE INTENTION OF THE LEGISLATION TO CONVEY THE MEANING THAT IT REFERS TO A SINGLE RESIDENTIAL HOUSE. AFTER ANALYZING THE PRO VISIONS OF SECTION 54, THE HONBLE HIGH COURT HAS HELD THAT THE SAID EXPRESSION A RES IDENTIAL HOUSE SHOULD BE READ IN CONSONANCE WITH OTHER WORDS BUILDINGS AND LANDS A ND, THEREFORE, THE SINGULAR ALSO PERMITS THE USE OF PLURAL. THIS VIEW WAS REITERATED IN THE CASE OF CIT VS. SMT. K.G. RUKMINIAMMA (SUPRA), WHEREIN IT WAS HELD THAT FOUR RESIDENTIAL FLATS CONSTITUTE A RESIDENTIAL HOUSE FOR THE PURPOSE OF SECTION 54. TH US IN VIEW OF THE VARIOUS DECISIONS AS RELIED UPON BY THE ASSESSEE, IT IS CLE AR THAT THE CLAIM U/S 54/54F MAY BE ALLOWABLE IN CASE OF PURCHASE OF MORE THAN ONE N EW FLATS WHEN MORE THAN ONE FLAT CONSTITUTES ONE RESIDENTIAL HOUSE. IN THE CASE OF THE ASSSESSEE ALL THREE FLATS IN SHRI JOSEPH J. MUDALIAR. 6 | P A G E WHICH THE ASSESSEE INVESTED THE CONSIDERATION RECEI VED ON SALE OF THE OLD ASSETS ARE LOCATED AT THE SAME FLOOR OF THE BUILDING AND, THEREFORE, IN VIEW OF THE VARIOUS PRECEDENTS THE CLAIM OF THE ASSESSEE WOULD NOT FALL UNDER THE CATEGORY OF BOGUS OF ABSOLUTE UNTENABLE CLAIM UNDER THE LAW. IT IS NOT T HE CASE OF THE WHOLLY UNTENABLE CLAIM UNDER LAW AND WITHOUT ANY FOUNDATION OR BASIS OF THE CLAIM MADE BY THE ASSESSEE. THE ASSESSEE HAS BROUGHT ON RECORD THE EN TIRE FACTS RELATING TO THE CLAIM AND FURTHER THERE ARE VARIOUS DECISIONS SUPPORTING THE CLAIM OF ASSESSEE, THEREFORE, EVEN THE ASSESSEE WITHDREW THE CLAIM U/S 54F IN RES PECT 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 UNSUSTAIN ABLE CLAIM HAVING NO BASIS. THEREFORE, THE CLAIM OF EXEMPTION U/S 54F IN THE FA CTS AND CIRCUMSTANCES OF THE CASE IS A HIGHLY DEBATABLE ONE AND, THEREFORE, IT C ANNOT BE SAID THAT IT IS AN ABSOLUTELY UNTENABLE CLAIM UNDER THE LAW WHEN THE A SSESSEE HAS EXPLAINED ALL RELEVANT FACTS AND ALSO BROUGHT ON RECORD VARIOUS P RECEDENTS IN SUPPORT OF HIS CLAIM THEN IT LEAVES NO DOUT THAT THE CLAIM MADE BY THE A SSESSEE WAS A BONAFIDE CLAIM AND THE EXPLANATION IS DULY SUPPORTED BY THE VARIOU S DECISION. ACCORDINGLY IN THE FACTS AND CIRCUMSTANCES OF THE CASE WE ARE OF THE C ONSIDERED VIEW THAT THE PENALTY LEVIED U/S 271 (1)(C) IS NOT JUSTIFIED AND THE SAME IS DELETED. 9. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED. . ORDER PRONOUNCED IN THE OPEN COURT TODAY I.E 3 0-05-2014 SD/- SD/- ( RAJENDRA ) (VIJAY PAL RAO) (ACCOUNTANT MEMBER/ YS[KK LNL; YS[KK LNL; YS[KK LNL; YS[KK LNL; ) (JUDICIAL MEMBER/ U;KF;D LNL; U;KF;D LNL; U;KF;D LNL; U;KF;D LNL; ) MUMBAI DATED 30 -05-2014 SKS SR. P.S,