ITO WD 19(3)(4), MUMBAI V. VILMA M PEREIRA, MUMBAI

ITA 2253/MUM/2014

• Counselvise Citation: 225319914 RSA 2014
• Duration Of Justice: 1 year(s) 5 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-09-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2007-2008
• Appeal Filed On: 03-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ADAGIRI DR
• Assessee Lawyers: JITENDRA SINGH
• Keywords: Capital asset; Fair market value; Valuation report
• Section: 54

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES F, MUMBAI , , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ITA NO.2253/MUM/2014 ASSESSMENT YEAR: 2007-08 ITO-19(3)4, PIRAMAL CHAMBER, R. NO.304, LALBAUG, MUMBAI-400012 / VS. MRS. VILMA M. PEREIRA, 50, CLAMER COTTAGE, TPS-III, 29 TH ROAD, BANDRA (W), MUMBAI-400050 ( / REVENUE) ( !' # /ASSESSEE) PAN. NO. AEHPP5901J / REVENUE BY SHRI B. YADAGIRI-DR !' # / ASSESSEE BY SHRI JITENDRA SINGH & MS. NEHA PARANJPE $ % & # ' / DATE OF HEARING : 24/09/2015 & # ' / DATE OF ORDER: 30/09/2015 / O R D E R PER JOGINDER SINGH (JUDICIAL MEMBER) THE REVENUE IS AGGRIEVED BY THE IMPUGNED ORDER DAT ED 10/01/2014 OF THE LD. FIRST APPELLATE AUTHORITY, MU MBAI, DELETING PENALTY OF RS.18,75,314/-, IMPOSED U/S 271 (1)(C), EVEN THOUGH THE QUANTUM ADDITION HAS BEEN UPHELD BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS). MRS. VILMA PEREIRA ITA NO.2253/MUM/2014 2 2. DURING HEARING OF THIS APPEAL, THE LD. COUNSEL FOR THE ASSESSEE, AT THE OUTSET, POINTED OUT THAT THE Q UANTUM ADDITION ON THE BASIS OF WHICH PENALTY WAS IMPOSED HAS BEEN DELETED BY THE TRIBUNAL IN ORDER DATED 27/02/2015. THE ASSESSEE FURNISHED THE COPY OF THE ORDER. ON THE O THER HAND, LD. DR, SHRI B. YADAGIRI, DEFENDED THE IMPOSITION O F PENALTY. 2.1. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN VIEW O F THE ABOVE, WE ARE REPRODUCING HEREUNDER THE AFORESAID O RDER OF THE TRIBUNAL (ITA NO.8797 AND 8798/MUM/2010) ORDER DATED 27/02/2015 FOR READY REFERENCE:- THESE TWO APPEALS HAVE BEEN FILED BY TWO ASSESSEES AGAINST THE ORDER OF CIT(A), FOR THE ASSESSMENT YEAR 2007-08, I N THE MATTER OF ORDER PASSED U/S.143(3) OF THE I.T.ACT. 2. COMMON GRIEVANCE IN BOTH THE APPEALS RELATE TO D ISALLOWANCE OF CLAIM OF DEDUCTION U/S.54(1) IN RESPECT OF RESIDENT IAL FLATS ACQUIRED BY THE ASSESSEES IN CONSIDERATION OF OLD HOUSE SOLD TO THE BUILDER. 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PER USED. FACTS IN BRIEF ARE THAT THE ASSESSEE VILMA MARY PEREIRA HAS SOLD IMMOVABLE PROPERTY SITUATED AT 'VIOLET VALLEY' (WITH GARAGE) AT JUNCTION OF 26TH AND 30TH ROAD AT BANDRA (W), MUMBAI FOR A TOTA L CONSIDERATION OF RS.3,05,00,000/- VIDE AGREEMENT DA TED 28.4.2006 TO M/S. AQUA MARINE ENTERPRISES. THE SHARE OF THE A SSESSEE IS 23% IN THE SAID PROPERTY AND THE OTHER ASSESSEE MR. PET ER PEREIRA WAS HAVING SHARE OF 77% IN THE SAID HOUSE. FROM THE AGR EEMENT, THE A.O. OBSERVED THAT THE ASSESSEE WAS TO RECEIVE THRE E MORE FLATS I.E. MRS. VILMA PEREIRA ITA NO.2253/MUM/2014 3 TWO FLATS HAVING A CARPET AREA OF 1200 SQ.FT. EACH AND ONE FLAT HAVING CARPET AREA OF 750 SQ.FT. AND THREE PARKING SPACES (TWO STILT AND ONE OPEN) AS PART OF ADDITIONAL CONSIDERATION. HOWEVER, THE ADDITIONAL CONSIDERATION WAS NOT SHOWN AS PART OF T HE TOTAL CONSIDERATION RECEIVED BY THE ASSESSEE IN HER COMPU TATION OF LTCG ON TRANSFER OF THE SAID PROPERTY DURING THE YEAR. F URTHER, THE ASSESSEE HAD TAKEN THE FMV OF THE SAID PROPERTY AS ON 1.4.1981 AT RS.35,00,000/- ON THE BASIS OF VALUATION REPORT DAT ED 3.8.2006. IN VIEW OF THIS, VIDE LETTER DATED 21.8.2009, THE A.O. ASKED THE ASSESSEE TO STATE AS UNDER :- '1. PLEASE PROVIDE THE MARKET VALUE OF TILE ADDITIONA L FLATS AND OTHER AMENITIES TO BE RECEIVED BY YOU FROM THE BUILDE R AS PER THE SALE AGREEMENT DATED 28.4.2006. FURNISH COPIES OF AGRE EMENTS ENTERED BY YOU IN THIS RESPECT. PLEASE ALSO EXPLAIN W HY THE MARKET VALUE OF THE SAID FLATS AND AMENITIES SHOULD NOT BE ADDED TO YOUR TOTAL CONSIDERATION FOR SALE OF PROPERTY DURING THE YEA R WHILE COMPUTING THE LTCG FOR THE YEAR ON SALE OF PROPERTY. 2. PLEASE FURNISH PURCHASE PROOF AT' NHA BONDS AGAINST WHICH DEDUCTION ULS.54EC HAS BEEN CLAIMED. PLEASE FURNISH COPIES OF RELEVANT BANK EXTRACTS WITH NARRATION OF EACH ENTRY TO S UPPORT YOUR CLAIM. 3. PROOF OF PAYMENT OF PROFESSIONAL FEES AND ALLOW ABILITY OF THE SAME AS DEDUCTION FROM THE LTCG SHOWN. 4. BASIS OF DIVISION OF SHARE OF THE PROPERTY SOLD DURI NG THE YEAR. PLEASE FURNISH EVIDENCES TO SUPPORT YOUR CLAIM. 5. PLEASE EXPLAIN WHY THE VALUATION MADE BY YOU OF THE PROPERTY SOLD AS ON 1.4.1981 SHOULD NOT BE REJECTED? 4. IN RESPONSE, THE A.R. OF THE APPELLANT VIDE LETTE R DATED 23.10.2009 SUBMITTED AS UNDER :- 'THE NEW FLAT AND CAR PARKING IS RECEIVABLE IN LIEU OF OLD RESIDENTIAL PLACE AND OLD CAR PARKING PLACE. HENCE THERE IS NO ADD ITIONAL AMENITIES RECEIVED FROM SELLER HENCE THERE SHOULD NOT B E ADDITION ON ACCOUNT OF MARKET VALUE OF THE SAID FLAT AND AMEN ITIES ADDED TO TOTAL CONSIDERATION FOR SALE OF PROPERTY DURING THE YEA R. MRS. VILMA PEREIRA ITA NO.2253/MUM/2014 4 VALUATION DONE BY ODILIO FERNANDES ON 31.7.2006 AS O N 1.4.1981 AT RS.35 LACS. YOUR HONOUR MAY REFER TO DEPARTMENTAL VALUER FOR FURTHER VERIFICATION. IN CASE YOUR HONOUR IS NOT SATISFI ED WITHOUT VALUATION REPORT. 4. THE AFORESAID SUBMISSION OF THE ASSESSEE WAS CON SIDERED BY THE A.O. ACCORDING TO THE A.O. THE NEW FLAT AND CAR PAR KING ARE NOTHING BUT ADDITIONAL CONSIDERATION. IF THE SAID NEW FLAT IS RECEIVABLE FOR OLD FLAT AND OLD CAR PARKING PLACE, HOW THE ASSESSE E HAS CLAIMED INDEXATION ON THE VALUE OF THE SAID PROPERTIES AS O N 1.4.1981 AGAINST THE CONSIDERATION. IF THE NEW FLAT WAS TO B E GIVEN IN LIEU OF THE OLD AREA OCCUPIED BY THE ASSESSEE IN THE OLD ST RUCTURE, THEN THE VALUE OF THE SAID OLD STRUCTURE SHOULD HAVE BEEN RE DUCED FROM THE VALUE OF THE ENTIRE PROPERTY AS ON 1.4.1981 WHILE C OMPUTING THE LTCG ON SUCH SALE. HOWEVER, THE ASSESSEE HAS TAKEN THE FMV OF THE ENTIRE PROPERTY AS ON 1.4.1981 INTO CONSIDERATI ON WHILE COMPUTING THE LTCG ON THE SALE OF SUCH PROPERTY. 5. THE A.R. OF THE ASSESSEE VIDE HIS SUBMISSION DAT ED 12.11.2009 STATED THAT IF MARKET VALUE OF THE NEW FLAT IS ADDE D TO INCOME OF THE ASSESSEE, THEN THE INVESTMENT IN NEW RESIDENTIAL PR OPERTY SHOULD BE ALLOWED U/S.54 AT MARKET VALUE. THE AO. ANALYSED TH E CONTENTION OF THE ASSESSEE. ACCORDING TO THE A.O., EXEMPTION U/S. 54 IS AVAILABLE ONLY WHEN THE ASSESSEE HAS PURCHASED A NEW FLAT ONE YEAR BEFORE OR TWO YEARS AFTER THE DATE OF TRANSFER OR HAS CONSTRU CTED A NEW RESIDENTIAL' HOUSE WITHIN A PERIOD OF THREE YEARS F ROM THE DATE OF TRANSFER OF THE HOUSE PROPERTY (ORIGINAL). THE FLAT S (ALONGWITH CAR 'PARKING SPACES) RECEIVED BY THE ASSESSEE IN THE PR OPOSED BUILDING AS 'ADDITIONAL CONSIDERATION' AGREED UPON IN THE AG REEMENT DATED 28.4.2006 WAS OVER AND ABOVE HER SHARE IN THE MONET ARY MRS. VILMA PEREIRA ITA NO.2253/MUM/2014 5 CONSIDERATION. THESE FLATS (ALONGWITH CAR PARKING S PACES) FORM PART OF CONSIDERATION RECEIVED BY THE ASSESSEE TOWARDS T RANSFER OF THE PROPERTY. THIS FLAT IS NEITHER PURCHASED BY THE ASS ESSEE NOR CONSTRUCTED BY HER. THE A.O. HELD THAT SINCE THE AS SESSEE HAS NOT FULFILLED THE CONDITIONS LAID DOWN IN SECTION 54, S HE IS NOT ELIGIBLE FOR EXEMPTION U/S.54 OF THE LT. ACT. THE A.O. HAS F URTHER ELABORATED THIS ISSUE IN PARA 10 OF THE ASSESSMENT ORDER WHERE IN HE HAS HELD THAT EXEMPTION U/S.54 OF THE I.T.ACT IS ALLOWABLE O NLY WHEN THE ASSESSEE MAKES AN INVESTMENT TOWARDS PURCHASE OR CO NSTRUCTION OF A NEW HOUSE PROPERTY WITHIN THE STIPULATED PERIOD. THUS FOR AVAILING EXEMPTION U/S.54, THE ASSESSEE HAS TO EITHER PURCHA SE OR CONSTRUCT A NEW HOUSE PROPERTY. 6. IN THIS REGARD, THE A.O. FURTHER HELD THAT EXEMP TION U/S.54 IN RESPECT OF CAPITAL GAINS ARISING ON-SALE OF PROPERT Y USED FOR RESIDENCE IS ONLY AVAILABLE TOWARDS INVESTMENT [BY WAY OF PURCHASE OR CONSTRUCTION IN A NEW HOUSE PROPERTY WITHIN THE TIME LIMIT PRESCRIBED UNDER THE ACT. IN THE CASE UNDER CONSIDE RATION, THE ASSESSEE IS TREATING THE FLATS AND PARKING LOTS REC EIVED BY HER AS ADDITIONAL CONSIDERATION AS INVESTMENT MADE U/S.54. THESE FLATS (ALONGWITH CAR PARKING SPACES) RECEIVED BY THE ASSE SSEE AS PART OF 'CONSIDERATION' CANNOT SIMULTANEOUSLY BE TREATED AS INVESTMENT. IN ORDER TO AVAIL THE EXEMPTION U/S.54, THE ASSESSEE S HOULD HAVE MADE THE INVESTMENT IN A NEW RESIDENCE EITHER BY WAY OF PURCHASE OR CONSTRUCTION OF THE SAME. IN THE INSTANT CASE, AS P ER AO, THE ASSESSEE HAS NOT FULFILLED THIS CONDITION WHICH IS THE REQUIREMENT OF THE ACT. IN VIEW OF THE ABOVE, THE A.O. HELD THAT T HE ASSESSEE IS NOT ELIGIBLE FOR EXEMPTION U/S.54 OF THE L.T.ACT AND AC CORDINGLY DENIED THE SAME TO THE ASSESSEE. MRS. VILMA PEREIRA ITA NO.2253/MUM/2014 6 7. BY THE IMPUGNED ORDER, THE CIT(A) CONFIRMED THE DISALLOWANCE AGAINST WHICH THE ASSESSEES ARE IN FURTHER APPEALS BEFORE US. 8. WE HAVE CONSIDERED RIVAL CONTENTIONS, CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND FOUND FROM THE RECORD THAT DURING THE COURSE OF APPELLATE PROCEEDINGS THE ASSE SSEE HAS SUBMITTED AS UNDER :- '1. DURING THE YEAR THE ASSESSEE WITH HER CO OWNER I.E. HER BROTHER MR.PETER SAVIO PEREIRA SOLD THE ANCESTRAL RESIDENTIAL PROP ERTY FOR CONSIDERATION OF RS.3,05,00,00/- AND 3 FLATS ADMEESU RINQ 3150 SQ. FT. WITH ONE OPEN AND TWO STILT PARKING IN KIND. 2. IN THE ASSESSMENT ORDER. THE A.O. HAS VALUED THE C ONSIDERATION RECEIVED IN KIND FOR RS.3,32,70,540/- AND ADDITIONS W ERE MADE IN THE ASSESSMENT ORDER UNDER THE HEAD LONG TERM CAPITAL GAINS WITHOUT CONSIDERING THE SAID AMOUNT AS REINVESTMENT I S NEITHER PURCHASED NOR CONSTRUCTED BY THE ASSESSEE. 3. AS REGARDS BENEFIT OF SECTION 54, THIS SECTION MAK ES IT CLEAR THAT CAPITAL GAIN ARISING FROM THE TRANSFER OF A HOUSE PROPE RTY IS EXEMPT FROM TAX PROVIDED THE FOLLOWING CONDITIONS ARE SATISF IED :- (A) THE HOUSE PROPERTY IS A RESIDENTIAL HOUSE WHOSE IN COME IS TAXABLE UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY' AS TRANSFERRED BY AN INDIVIDUAL OR AN HUF. (B) THE HOUSE PROPERTY (MAY BE SELF OCCUPIED OR LET OU T) IS A LONG TERM CAPITAL ASSET. (C) THE ASSESSEE HAS PURCHASED A RESIDENTIAL HOUSE WI THIN A PERIOD OF ONE YEAR BEFORE THE TRANSFER OR WITHIN TWO YEARS AFTER THE DATE OF TRANSFER OR HAS CONSTRUCTED A RESIDENTIAL HOUSE PROPE RTY WITHIN A PERIOD OF THREE YEARS AFTER THE DATE OF TRANSFER. THE APPELLANT HAS FULFILLED THE PRECONDITION MENTION ED AT POINT NOS.(A) & (B) ABOVE WAS NOT IN DOUBT. THIS WAS ALSO NOT IN DISPUTE THAT THE ASSESSEE HAD PURCHASED NEW RESIDENTIAL PROPERT Y BY WAY OF CONSTRUCTION. THIS WAS BECAUSE IT WAS CLEAR FROM TH E AGREEMENT WITH DEVELOPER THAT THE DEVELOPER WOULD CONSTRUCT THE RESIDENTIAL BUILDING ON THE PROPERTY ALIENATED BY THE ASSESSEE TO THE DEVELOPER AND HANDOVER THE RESIDENTIAL HOUSE TO THE ASSESSEE IN CONSIDERATION OF THE SALE OF ORIGINAL RESIDENTIAL PROPE RTY. THIS FACT IS CLEAR AND UNAMBIGUOUS. THEREFORE TO SAY THAT THE APPEL LANT HAS MRS. VILMA PEREIRA ITA NO.2253/MUM/2014 7 ALSO COMPLIED THE LAST CONDITION OF SECTION 54 FOR A CQUISITION OF NEW RESIDENTIAL PROPERTY. THE A.O. HAS CONSIDERED SALE CONSIDERATION RECEIVED I N CASH AND KINDBUT FAILED TO ALLOW THE EXEMPTION U/S.54 FOR REIN VESTMENT OF THE SAID CONSIDERATION RECEIVED IN KIND FOR ACQUIRING O F NEW RESIDENTIAL HOUSE PROPERLY. 5. THE A.O. HAS MISINTERPRETED THE DEFINITION OF 'P URCHASE' HELD BY THE APEX COURT IN THE ASSESSEE OF CIT VS. T.N. ARAVIN DA REDDY. IN THIS CASE, THE DEFINITION OF THE TERM 'PURCHASE' HAS BEEN GIVEN AS UNDER: '....... WE FIND NO REASON TO DIVORCE THE ORDINARY MEAN ING OF THE WORD PURCHASE AS BUYING FOR A PRICE OR EQUIVALENT OF PRIC E BY PAYMENT IN KIND OR ADJUSTMENT TOWARDS AN OLD DEBT OR F OR OTHER MONETARY CONSIDERATION FROM THE LEGAL MEANING OF THAT WORD IN SECTION 54(1). IF YOU SELL YOUR HOUSE AND MAKE A PROF IT PAY CAESAR WHAT IS DUE TO HIM. BUT IF YOU BUY OR BUILD ANOTHER S UBJECT TO THE CONDITIONS OF SECTION 54(1), YOU ARE EXEMPT. THE PUR POSE IS PLAIN THE SYMMETRY IS SIMPLE, THE LANGUAGE IS PLAIN. ' THUS THE HON. SUPREME COURT HAS DEFINED THE TERM 'PURCH ASE' AS BUYING FOR A PRICE / EQUIVALENT OF PRICE BY PAYMENT IN KIND OR ADJUSTMENT TOWARDS AN OLD DEBT OR FOR OTHER MONETARY CONSIDERATION. THE WORD 'PURCHASE' IN SECTION 54 HAS TO BE GIVEN ITS COMMON AND WIDER MEANING. IT SHOULD INCLUDE BUYING OR ADJUSTMENT TOWARDS OLD DEBT OR FOR OTHER MONETARY CONSI DERATION. 6. IN THE PRESENT' CASE BEFORE YOUR HONOUR, THE ASSESS EE HAS PURCHASED/CONSTRUCTED THE NEW RESIDENTIAL PROPERTY AND P AID THE CONSIDERATION EQUIVALENT OF PRICE BY PAYMENT IN KIND. THEREFORE THE ASSESSEE HAS PURCHASED THE RESIDENTIAL PROPERTY AND IS ENTITLED FOR EXEMPTION U/S.54 OF THE I T.ACT 1961. 9. IT IS CLEAR FROM THE ABOVE THAT RESIDENTIAL HOUS E WAS GIVEN TO THE ASSESSEE IN CONSIDERATION OF THE SALE OF OLD HOUSE. THE SALE CONSIDERATION WAS PARTLY RECEIVED IN CASH AND PARTL Y IN THE FORM OF NEW FLATS TO BE CONSTRUCTED ON THE PLOT OF OLD HOUS E SOLD BY ASSESSEE. THE NEW FLATS AGREED TO BE GIVEN TO ASSES SEE AMOUNTS TO INVESTMENT BY ASSESSEE IN RESIDENTIAL HOUSE. THEREF ORE, THE AO WAS NOT JUSTIFIED IN ADDING BACK THE ADDITIONAL CONSIDE RATION GIVEN IN MRS. VILMA PEREIRA ITA NO.2253/MUM/2014 8 THE FORM OF ALLOTMENT OF THREE FLATS BY DECLINING C LAIM OF DEDUCTION U/S.54 OF THE I.T.ACT. 10. IN THE PRESENT CASE BEFORE US, THE ASSESSEE HAS PURCHASED/CONSTRUCTED THE NEW RESIDENTIAL PROPERTY AND PAID THE CONSIDERATION EQUIVALENT OF PRICE BY PAYMENT IN KIN D. THEREFORE, THE ASSESSEE IS ENTITLED FOR EXEMPTION U/S.54 OF I.T.AC T, 1961 IN RESPECT OF THESE FLATS. 11. AN ISSUE WAS ALSO RAISED BY THE AO WITH REGARD TO SHARING OF 3 FLATS BETWEEN THE CO-OWNERS OF THE PROPERTY AND THE EXEMPTION U/S.54 ALLOWABLE IN CASE OF INVESTMENT IN ONE RESID ENTIAL FLAT ONLY. IN THIS REGARD, WE FOUND THAT THE DETAILS OF ALLOCA TION OF AREA OF NEW RESIDENTIAL PROPERTY BETWEEN CO-OWNERS ARE AS FOLLO WS :- NAME RATIO AREA IN SQ.FT. DESCRIPTION MR. PETER S. PEREIRA 77% 2400 FLAT NO.301 & 302 ADJ ACENT FLATS @ 1200 SQ.FT. EACH ON 3 RD FLOOR AND TWO STILT CAR PARKING SPACE MS VILMA M. PEREIRA 23% 750 FLAT NO.402 ON 4TH FLOO R AND ONE CAR PARKING SPACE THE AFORESAID RATIO OF ALLOCATION BETWEEN CO-OWNERS IS ALREADY ON RECORD OF THE AO AS WELL AS IN THE VALUATION REPORT . FURTHERMORE, THE CO-OWNER WILL GET THE AREA ACCORDING TO THEIR R ATIO IN THE NEW RESIDENTIAL PROPERTY. SINCE FLAT NO.301 & 302 ARE S ITUATED IN THE SAME FLOOR AND ADJACENT TO EACH OTHER AND WILL BE T REATED AS ONE SINGLE RESIDENTIAL UNIT FOR THE PURPOSE OF CLAIMING EXEMPTION U/S.54. THE SAME VIEW HAS BEEN TAKEN BY THE SPECIAL BENCH O F THE MUMBAI TRIBUNAL IN THE CASE OF ITO VS. MS. SUSHILA M. JHAV ERI, (2007) 292 ITR (AT) 1 (MUMBAI). 12. THE ISSUE RAISED BY THE AO IS ALSO MRS. VILMA PEREIRA ITA NO.2253/MUM/2014 9 COVERED BY THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF GITA DUGGAL 257 CTR 208, WHEREIN THE HONBLE HIGH C OURT HELD AS UNDER:- SEC. 54/54F USES THE EXPRESSION 'A RESIDENTIAL HOUSE '. THE EXPRESSION USED IS NOT 'A RESIDENTIAL UNIT'. THIS IS A NEW CONCEPT INTRODUCED BY THE AO INTO THE SECTION. SEC. 54/54F RE QUIRES THE ASSESSEE TO ACQUIRE A 'RESIDENTIAL HOUSE' AND SO LONG AS THE ASSESSEE ACQUIRES A BUILDING, WHICH MAY BE CONSTRUCTED, FOR TH E SAKE OF CONVENIENCE, IN SUCH A MANNER AS TO CONSIST OF SEVERA L UNITS WHICH CAN, IF THE NEED ARISES, BE CONVENIENTLY AND INDEPEN DENTLY USED AS AN INDEPENDENT RESIDENCE, THE REQUIREMENT OF THE SECTI ON SHOULD BE TAKEN TO HAVE BEEN SATISFIED. THERE IS NOTHING IN TH ESE SECTIONS WHICH REQUIRE THE RESIDENTIAL HOUSE TO BE CONSTRUCTED I N A PARTICULAR MANNER. THE ONLY REQUIREMENT IS THAT IT SHOULD BE FOR T HE RESIDENTIAL USE AND NOT FOR COMMERCIAL USE. IF THERE IS NOTHING IN THE SECTION WHICH REQUIRES THAT THE RESIDENTIAL HOUSE SHOULD BE BU ILT IN A PARTICULAR MANNER, IT SEEMS THAT THE IT AUTHORITIES CA NNOT INSIST UPON THAT REQUIREMENT. A PERSON MAY CONSTRUCT A HOUSE ACCORDING TO HIS PLANS AND REQUIREMENTS. MOST OF THE HOUSES ARE CONSTRUCTED ACCORDING TO THE NEEDS AND REQUIREMENTS AND EVEN COMP ULSIONS. FOR INSTANCE, A PERSON MAY CONSTRUCT A RESIDENTIAL HOUSE IN SUCH A MANNER THAT HE MAY USE THE GROUND FLOOR FOR HIS OWN RES IDENCE AND LET OUT THE FIRST FLOOR HAVING AN INDEPENDENT ENTRY SO THAT HIS INCOME IS AUGMENTED. IT IS QUITE COMMON TO FIND SUCH ARRANGE MENTS, PARTICULARLY POST-RETIREMENT. ONE MAY BUILD A HOUSE CON SISTING OF FOUR BEDROOMS (ALL IN THE SAME OR DIFFERENT FLOORS) IN S UCH A MANNER THAT AN INDEPENDENT RESIDENTIAL UNIT CONSISTING OF T WO OR THREE BEDROOMS MAY BE CARVED OUT WITH AN INDEPENDENT ENTRANC E SO THAT IT CAN BE LET OUT. HE MAY EVEN ARRANGE FOR HIS CHILDREN AND FAMILY TO STAY THERE, SO THAT THEY ARE NEARBY, AN ARRANGEMENT WHIC H CAN BE MUTUALLY SUPPORTIVE. HE MAY CONSTRUCT HIS RESIDENCE IN SUCH A MANNER THAT IN CASE OF A FUTURE NEED HE MAY BE ABLE T O DISPOSE OF A PART THEREOF AS AN INDEPENDENT HOUSE. THERE MAY BE SE VERAL SUCH CONSIDERATIONS FOR A PERSON WHILE CONSTRUCTING A RESIDE NTIAL HOUSE. THE PHYSICAL STRUCTURING OF THE NEW RESIDENTIAL HOUSE, WHETHER IT IS LATERAL OR VERTICAL, SHOULD NOT COME IN THE WAY OF CON SIDERING THE BUILDING AS A RESIDENTIAL HOUSE. THE FACT THAT THE ' RESIDENTIAL HOUSE CONSISTS OF SEVERAL INDEPENDENT UNITS CANNOT BE PERMI TTED TO ACT AS AN IMPEDIMENT TO THE ALLOWANCE OF THE DEDUCTION UND ER S.54/54F. IT ISNEITHER EXPRESSLY NOR BY NECESSARY IMPLICATION PROHIBI TED. TRIBUNAL WAS THEREFORE JUSTIFIED IN ALLOWING EXEMPTION UNDER S. 54 IN RESPECT MRS. VILMA PEREIRA ITA NO.2253/MUM/2014 10 OF ENTIRE INVESTMENT IN CONSTRUCTION OF BASEMENT, GROU ND FLOOR, FIRST FLOOR, SECOND FLOOR AND THIRD FLOOR. 13. IN VIEW OF THE ABOVE DISCUSSION, WE DO NOT FIND ANY MERIT IN THE ACTION OF THE AO FOR DECLINE OF CLAIM OF DEDUCTION U/S.54 IN RESPECT OF RESIDENTIAL FLATS ALLOTTED BY BUILDER IN CONSIDE RATION OF SALE OF OLD HOUSE. 14. IN THE RESULT, APPEALS OF BOTH THE ASSESSEES AR E ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 27TH FEB .2015. 2.2. WE FIND THAT THE TRIBUNAL DELIBERATED THE ISS UE WITH RESPECT TO DECLINING THE CLAIM OF DEDUCTION U/S 54 OF THE ACT AND BY FOLLOWING THE DECISION OF THE SPECIAL BENCH IN THE CASE OF ITO VS MS. SUSHILA M. JHAVERI (2007) 292 ITR (AT ) 1 (MUM.) AND ALSO THE DECISION FROM HONBLE DELHI HIGH COURT IN GEETA DUGGAL 257 CTR 208 (DEL.) DECIDED THE CLAIMED DEDUC TION IN FAVOUR OF THE ASSESSEE. WE FURTHER NOTE THAT THE LD . ASSESSING OFFICER IMPOSED PENALTY WITH RESPECT TO CLAIMED DED UCTION U/S 54 OF THE ACT, THEREFORE, WHEN THE BASIS NO LONGER SURVIVE ON THE BASIS OF WHICH PENALTY WAS IMPOSED, IN OUR VIEW , PENALTY U/S 271(1)(C) OF THE ACT CANNOT SURVIVE. 2.3. THERE IS NO DISPUTE THAT QUANTUM ADDITION HAS BEEN DELETED BY THE TRIBUNAL, THEREFORE, IN OUR HUMBLE O PINION, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) IS JUSTIFI ED IN DELETING THE PENALTY. OUR VIEW FURTHER FINDS SUPPOR T FROM THE DECISION AND THE RATIO LAID DOWN IN CIT VS S.P VIZ CONSTRUCTION COMPANY 176 ITR 47 (PATNA) AND K.C. BUILDERS VS ACI T 265 MRS. VILMA PEREIRA ITA NO.2253/MUM/2014 11 ITR 562 (SUPREME COURT). WE ARE OF THE VIEW WHERE T HE PENALTY FOR CONCEALMENT OR FURNISHING INACCURATE PARTICULAR S WAS LEVIED AND AFTER DELETING THE QUANTUM ADDITION, THERE REMA INS NO BASIS AT ALL FOR LEVYING THE PENALTY. ORDINARILY, PENALTY CANNOT STAND IN ITSELF IF THE ADDITION MADE IN THE ASSESSM ENT ITSELF IS SET ASIDE OR CANCELLED BY THE SUPERIOR AUTHORITY/CO URT. THE PENALTY CANNOT STAND BY ITSELF BECAUSE FALSE RESULT MAY BE PRODUCED BY THE FALSITY OF ONE OR MORE OF THE CONST ITUENT ITEMS IN THE RETURN. THE WORD INACCURATE PARTICULARS W OULD COVER FALSITY IN THE FINAL FIGURE AND ALSO THE CONSTITUEN T ELEMENTS OR ITEMS. THEY SIMPLY WOULD MEAN INACCURATE IN SOME S PECIFIC OR DEFINITE RESPECT WHETHER IN THE CONSTITUENT OR SUBO RDINATE ITEMS OF INCOME OR THE END RESULT. CONCEALMENT OR FURNISHING INACCURATE PARTICULARS IMPLIES SOME DELIBERATE ACT ON THE PART OF THE ASSESSEE IN WITHHOLDING THE TRUE FACTS FROM THE AUTHORITIES. SINCE, THE BASIS OF LEVYING PENALTY R EMAINS NO MORE IN EXISTENCE, AFTER DELETION OF QUANTUM ADDITI ON, THEREFORE, FROM THIS ANGLE, THE STAND OF THE LD. CO MMISSIONER OF INCOME TAX (APPEALS) IS JUSTIFIED. FINALLY, THE APPEAL OF THE REVENUE IS HAVING NO MER IT, THEREFORE, DISMISSED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVES FROM BOTH SIDES AT THE CONCLUSION OF THE HEARING ON 24/09/2015. SD/ - (RAMIT KOCHAR) SD/ - (JOGINDER SINGH) '# / ACCOUNTANT MEMBER $# / JUDICIAL MEMBER MRS. VILMA PEREIRA ITA NO.2253/MUM/2014 12 $ % MUMBAI; ) DATED : 30/09/2015 F{X~{T? P.S/. .. %$&'()(*& / COPY OF THE ORDER FORWARDED TO : 1. +,-. / THE APPELLANT 2. /0-. / THE RESPONDENT. 3. 1 1 $ 2# ( +, ) / THE CIT, MUMBAI. 4. 1 1 $ 2# / CIT(A)- , MUMBAI 5. 45 /# , 1 +,' + 6 , $ % / DR, ITAT, MUMBAI 6. 7! % / GUARD FILE. / BY ORDER, 04,# /# //TRUE COPY// / (DY./ASSTT. REGISTRAR) , $ % / ITAT, MUMBAI