The ADIT(Intl.Texn.), Ahmedabad V. Smt. Leena J.Shah, Baroda

ITA 4194/AHD/2007

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 6001 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 6 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-06-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 08-06-2010
• Assessment Year: 1998-1999
• Appeal Filed On: 23-11-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K M MAHESH
• Keywords: Question of law; Capital Gains
• Section: 271(1)(c); 54B; 54F; 143(1); 205; 147; 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'C' [BEFORE S/SHRI BHAVNESH SAINI,JM & A N PAHUJA,AM] ITA NO.4194/AHD/2007 (ASSESSMENT YEAR:-1998-99) ADIT (INTERNATIONAL TAXATION), AHMEDABAD V/S SMT. LEENA JUGALKISHOR SHAH, 10, GREEN PARK SOCIETY, BHAVANIPURA, NIZAMPURA, BARODA [PAN:NOT AVAILABLE] [APPELLANT] [RESPONDENT] REVENUE BY :- SHRI K M MAHESH, DR ASSESSEE BY:- SHRI MILIN MEHTA, AR O R D E R A N PAHUJA: THIS IS AN APPEAL BY THE REVENUE AGAINST AN ORDER DATED 11-09-2007 OF THE LD. CIT(APPEALS)-II, BARODA , CANCELLING A PENALTY OF RS. 8,80,000/- LEVIED U/S 271(1)(C) OF T HE INCOME-TAX ACT, 1961 [ HEREINAFTER REFERRED TO AS THE ACT] 2 FACTS, IN BRIEF, AS PER RELEVANT ORDERS ARE THAT RETURN DECLARING INCOME OF RS.3,05,510/- FILED ON 17-08-1998 BY THE ASSESSEE NRI, WAS PROCESSED ON 10.9.1998 U/S 143(1) OF THE ACT. I NTER ALIA, THE ASSESSEE REFLECTED CAPITAL GAINS OF RS.43,60,454/- ON SALE OF PLOT OF LAND AND CLAIMED DEDUCTION U/S 54B/54D/54G OF THE A CT. HOWEVER, THE ASSESSING OFFICER[AO IN SHORT[ WAS OF THE OPINI ON THAT THE ASSESSEE WAS NOT ENTITLED TO ANY DEDUCTION U/S 54B/ 54D/54G OF THE ACT. ACCORDINGLY, ASSESSMENT WAS REOPENED U/S 147 O F THE ACT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO CONCLUDED THAT THE ASSESSEE WAS NOT ENTITLED TO ANY DEDUCTION U/S 54B/54D/54G OF THE ACT. THEREAFTER, THE ASSESSEE CL AIMED THAT SHE HAD PURCHASED A RESIDENTIAL HOUSE IN USA OUT OF 7,66 ,000 US DOLLARS ON MORTGAGE LOAN TAKEN FROM BBNT(USA) BESIDES HER PER SONAL SAVINGS OF 32,601 US DOLLARS. THE AO FOUND THAT THE SALE PR OCEEDS OF THE PLOT SOLD IN INDIA WERE RETAINED IN INDIA AND UTILI ZED IN GIVING LOAN TO ITA NO.4194/AHD/2007 FOR AY 1998-99 SMT. LEENA JUGALKISHOR SHAH 2 SMT. BHARATI K VYAS, ACCORDINGLY, THE AO DENIED DED UCTION U/S 54F OF THE ACT, THE SALE PROCEEDS OF THE PLOT SOLD HAVI NG NOT BEEN UTILIZED IN ACQUIRING THE RESIDENTIAL HOUSE IN USA AND BROUGHT TO TAX LONG TERM CAPITAL GAINS OF RS.43,30.454/-.INTER ALI A, PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT WERE INITIATED FOR FURNISHING INACCURATE PARTICULARS OF INCOME. THE APPEAL OF THE ASSESSEE WAS DISMISSED BY THE LD. CIT(A) AND LATER BY THE ITAT V IDE THEIR ORDER DATED 10.11.2005 IN ITA NO.2467/AHD./2000 HOLDING THAT THE ASSESSEE HAVING PURCHASED THE RESIDENTIAL HOUSE OUT SIDE INDIA, BENEFIT U/S. 54F OF THE ACT WAS NOT ALLOWABLE. 2.1 THEREAFTER, IN RESPONSE TO A SHOW CAUSE NOTI CE DATED 18.7.2006 AS TO WHY PENALTY U/S. 271(1)(C) OF THE A CT BE NOT LEVIED, THE ASSESSEE IN HER WRITTEN SUBMISSIONS DATED 25-07 -2006 CONTENDED THAT THE ISSUE BEING HIGHLY DEBATABLE AND THE VIEW TAKEN BY THE ASSESSEE HAVING BEEN ACCEPTED BY THE HON'BLE TRIBUN AL, MUMBAI BENCH IN THE CASE OF MRS. PREMA P. SHAH VS. ITO 100 ITD 60, NO P ENALTY CAN BE IMPOSED NOR EXPLANATION 1 TO SECTION 271 (1) (C) OF THE ACT WAS APPLICABLE. INTER ALIA, A NUMBER OF JUDGMENTS OF THE HON'BLE SUPREME COURT AND HIGH COURT WERE CITED IN SUPPORT OF HER CONTENTIONS. HOWEVER, THE AO REJECTED ALL T HESE CONTENTIONS OF THE ASSESSEE AND IMPOSED A PENALTY OF RS.8,80,000/- U/S 271(1)(C) OF THE ACT, THE ASSESSEE HAVING FURNISHED INACCUR ATE PARTICULARS OF INCOME BY DELIBERATELY MAKING INCORRECT CLAIM OF D EDUCTION U/S 54B / 54D OR 54G OF THE ACT NOR SUBSTANTIATED HER EXPLAN ATION OR INTERPRETATION OF PROVISIONS OF SECTION 54F OF THE ACT EVEN WHEN SHE DID NOT MAKE ANY INVESTMENT IN RESIDENTIAL PROPERTY IN INDIA. INTER ALIA, THE AO RELIED UPON DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF ORISSA STATE WAREHOUSING CORPORATION VS. CIT 237 ITR 589, ADDL. CIT VS. JEEVANLAL SHAH (1994 ) 205 ITR 244 AND CIT V/S MUNGHARAM OMPRAKASH (2005) 276 ITR 362 (PUNJAB & HA RYANA) ITA NO.4194/AHD/2007 FOR AY 1998-99 SMT. LEENA JUGALKISHOR SHAH 3 3. ON APPEAL, THE ASSESSEE IN HER DETAILED SUBMISSIONS CONTENDED, INTER ALIA THAT I) THE BENEFIT OF SECTIONS 54 AND 54F WAS INTENDED TO BE AVAILABLE TO BOTH THE CATEGORIES OF ASSESSEE I.E RESIDENTS AND NON-RESIDE NTS WITHOUT ANY DISCRIMINATION; II) THE ISSUE WAS DIRECTLY COVERED BY THE DECISION OF THE ITAT, MUMBAI BENCH IN THE CASE OF MRS. PREMA P SHAH V. IT O (2006) 100 ITD 60 (MUM) WHEREIN IT WAS HELD AS UNDER: 'DURING THE RELEVANT ASSESSMENT YEAR, THE ASSESSEE SOLD A RESIDENTIAL PROPERTY AND INVESTED PART OF THE SALE CONSIDERATIO N IN A RESIDENTIAL PROPERTY IN LONDON. THE ASSESSEE'S CLAIM FOR EXEMPT ION U/S. 54 WAS REJECTED BY THE AO ON THE GROUND THAT SHE HAD PURCH ASED ONLY THE TENANCY RIGHTS OF A RESIDENTIAL PROPERTY; THAT TO CLAIM EXE MPTION THE INVESTMENT SHOULD MADE IN INDIA ITSELF, AND THAT RECEIPTS, WHI CH GAVE RISE TO CAPITAL GAINS, WERE NOT UTILIZED FOR PURCHASE OF PROPERTY B UT THE ASSESSEE HAD USED BORROWED AMOUNT AND FOREIGN EARNINGS TO PURCHA SE PROPERTY. HELD: THE ARGUMENT OF THE REVENUE THAT THE SAME AMOUNT SH OULD HAVE BEEN UTILIZED FOR THE ACQUISITION OF NEW ASSET, COULD NO T BE ACCEPTED IN VIEW OF THE DECISION OF THE TRIBUNAL, MUMBAI BENCH, IN THE CASE OF BOMBAY HOUSING CORPORATION V. ASSTT. CIT 81 ITD 545. IN TH AT CASE, THE TRIBUNAL HELD THAT EVEN IF AN ASSESSEE BORROWS REQUIRED FUND S AND SATISFIED CONDITIONS RELATING TO INVESTMENT IN SPECIFIED ASSE TS, HE IS ENTITLED TO EXEMPTION. FURTHER, MERELY BECAUSE PROPERTY ACQUIRED IS IN A F OREIGN COUNTRY, SECTION 54 DOES NOT EXCLUDE RIGHT OF AN ASSESSEE TO CLAIM B ENEFIT IN RESPECT OF SUCH PROPERTY IF ALL OTHER CONDITIONS LAID DOWN IN THAT SECTION ARE SATISFIED. III) SINCE THE ISSUE UNDER CONSIDERATION WAS ADMI TTED BY THE HONBLE GUJARAT HIGH COURT AS SUBSTANTIAL QUESTION OF LAW , THE ISSUE WAS WIDE OPEN AND DEBATABLE . WHEN TWO VIEWS ARE PO SSIBLE ON THE ISSUE, PENALTY CANNOT BE LEVIED U/S 271(1)(C) OF TH E ACT. IN SUPPORT, THE ASSESSEE RELIED UPON THE DECISIONS IN THE CASE OF CIT VS. AMAR NATH 230 ITR 619 (ALL), CIT VS. PREM DASS (NO.2) 24 8 ITR 237 ITA NO.4194/AHD/2007 FOR AY 1998-99 SMT. LEENA JUGALKISHOR SHAH 4 (P&H),CIT VS. SWARUP COLD STORAGE AND GENERAL MILLS 136 ITR 435 (ALL),DURGA KAMAL RICE MILLS VS. CIT 265 ITR 25 (CA L),NATIONAL TEXTILE VS. CIT 249 ITR 125 (GUJ) AND CIT VS. P K N ARAYANAN 238 ITR 905 (KER), ACIT VS. ADVANCE FILM CLUB 45 TTJ 25 9 (AHD),ITO VS. AMBICA AGENCIES 50 ITD 31 (HYD) (SMC) AND JUMAB HAI PREMCHAND (HUF) VS. CIT 243 ITR 812 (GUJ). 4. AFTER CONSIDERING THE SUBMISSIONS ON BEHALF OF T HE ASSESSEE, THE LEARNED CIT(A) CANCELLED THE PENALTY, HOLDING A S UNDER: 2.3 I HAVE CONSIDERED THE SUBMISSIONS OF THE LD. CO UNSEL AND FACTS OF THE CASE. APPELLANT CLAIMED DEDUCTION U/S 54F ON IN VESTMENT ON PROPERTY IN FOREIGN COUNTRY. IN THE QUANTUM APPEAL ADDITION MADE BY THE AO WAS CONFIRMED BY CIT(A) AS WELL TRIBUNAL AND THEREAFTER THE PENALTY WAS LEVIED BY THE AO. AS FAR AS LEVY OF PENALTY U/S 271(1)(C) IS CONCERNED, THE SAME CAN BE LEVIED WHERE ASSESSEE FURNISHED INACCURATE P ARTICULARS OF INCOME OR CONCEALED THE INCOME. FROM THE SUBMISSION OF THE APPELLANT, I FOUND THE FOLLOWING TWO ASPECTS VERY RELEVANT TO DECIDE THE I SSUE: I. THE ISSUE WHETHER BENEFIT U/S.54F CAN BE AVAILAB LE IF THE RESIDENTIAL HOUSE IS PURCHASED OR CONSTRUCTED BY THE APPELLANT IN A PLACE OUTSIDE INDIA, HAS BEEN TREATED A SUBSTANTIAL QUESTION OF L AW BY HON GUJARAT HIGH COURT ORDER DATED 04-10-2006. THE COPY OF THE SAID ORDER, ADMITTING THE APPELLANT'S APPEAL HAS BEEN PLACED AT PAGE-63 OF TH E PAPER BOOK. II. ITAT, MUMBAI, BENCH-J IN THE CASE OF PREMA J. S HAH VS ITO WD.2(4), REPORTED IN 100 ITD 60 HELD THAT BENEFIT U /S.54 IS TO BE ALLOWED TO THE ASSESSEE EVEN IF THE PROPERTY IS ACQUIRED IN FO REIGN COUNTRY, IF OTHER CONDITIONS LAID-DOWN IN THAT SECTION ARE SATISFIED. THE REQUIREMENT U/S.54 AND 54F AND ALSO THE WORDINGS OF THESE SECTIONS AS FAR AS PURCHASE OR CONSTRUCTION OF RESIDENTIAL HOUSE PROPERTY ARE CONC ERNED, ARE SAME. THEREFORE, WHEN ONE BENCH OF ITAT ALLOWS DEDUCTION ON ACCOUNT OF INVESTMENT IN FOREIGN COUNTRY AND THE OTHER BENCH D O NOT ALLOW THE SAME, THEN THE ISSUE IS WHETHER SUCH DISALLOWANCE CAN BE CONSIDERED FOR LEVY OF PENALTY U/S. 271(L)(C) OR THE SAME SHOULD BE TREATE D AS DEBATABLE ISSUE. THE APPELLANT'S FACTS HAVE BEEN CONSIDERED IN THE L IGHT OF ABOVE. ITAT, AHMEDABAD, BENCH-A (3RD MEMBER) IN THE CASE OF RUPA M MERCANTILE LTD. VS DCIT REPORTED IN 91 ITD 237 HELD THAT A PLEA OR CLAIM, WHICH IS HELD BY HIGH COURT AS SUBSTANTIAL QUESTION OF LAW CANNOT BE TREATED TO BE FRIVOLOUS OR MALA FIDE AS TO ATTRACT LEVY OF PENALTY U/S.271( L)(C). SINCE THE CLAIM OF THE APPELLANT HAS BEEN AS SUBSTANTIAL QUESTION OF LAW A S HELD BY HON. GUJARAT ITA NO.4194/AHD/2007 FOR AY 1998-99 SMT. LEENA JUGALKISHOR SHAH 5 HIGH COURT, PENALTY U/S 271(1)(C) IS NOT LEVIABLE I N VIEW OF THE DECISION OF JURISDICTION ITAT. FURTHER, ON THE SAME ISSUE, ITAT MUMBAI, HAS ALLOWED THE CLAIM OF DEDUCTION U/S 54 ON THE INVESTMENT IN RESIDENTIAL PROPERTY IN FOREIGN COUNTRY, SUCH ADDITION IN MY OPINION, MAY N OT ATTRACT LEVY OF PENALTY U/S 271(1)(C). CONSIDERING BOTH THE ASPECTS, I DELE TE THE PENALTY LEVIED BY THE AO. 5. THE REVENUE IS NOW IN APPEAL BEFORE US AGAIN ST THE AFORESAID FINDINGS OF THE LD. CIT(A).THE LEARNED DR RELIED ON THE ORDER OF THE AO WHILE THE LEARNED AR ON BEHALF OF THE ASSESSEE SUPPORTED THE FINDINGS OF THE LD. CIT(A). 6.. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. THE FACTS AS NARRATED ABOVE ARE NOT DISPUTED. WE FI ND THAT THE ISSUE AS TO WHETHER OR NOT THE ASSESSEE IS ENTITLED TO CLAIM DE DUCTION U/S 54F OF THE ACT, HAVING PURCHASED THE RESIDENTIAL HOUSE OUTSIDE INDI A, WITHOUT UTILISING SALE PROCEEDS OF HER PLOT OF LAND IN INDI A, IS HIGHLY DEBATABLE. IN THIS CASE, THE ITAT VIDE THEIR ORDER DATED 10.11.2005 UPHELD THE FINDINGS OF THE LD. CIT(A) IN REJECTING THE CLAIM FOR DEDUCTION U/S 54F OF THE ACT. SUBSEQUENTLY, THE HON BLE GUJARAT HIGH COURT VIDE THEIR ORDER DATED 4.10.2006 IN TAX APP EAL NOS. 483 OF 2006, HAVE ADMITTED THE FOLLOWING SUBSTANTIAL QUESTION OF LAW : . WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE TRIBUNAL WAS RIGHT IN LAW IN HOLDING THAT SECTION 54F BENEFI T WILL NOT BE AVAILABLE IF THE RESIDENTIAL HOUSE IS PURCHASED OR CONSTRUCTED B Y THE ASSESSEE OUTSIDE INDIA ? 6.1 IN VIEW OF THE FACT THAT A SUBSTANTIAL QU ESTION OF LAW HAS BEEN ADMITTED BY THE HONBLE HIGH COURT ,THE LD. CIT(A) WHILE FOLLOWING THE DECISION OF THIRD MEMBER IN THE CASE OF RUPAM MERCANTILE LTD. VS. DCIT,91 ITD 237(A HMEDABAD) CANCELLED THE PENALTY. WE ARE OF THE OPINION THAT A MERE REJECTIO N OF A LEGAL CLAIM DOES NOT GIVE RISE TO CONCEALMENT OF INCOME. [BURMAH SHELL OIL STORAGE & DISTRIBUTING CO. OF INDIA LTD. V. ITO [1978] 112 ITR 592 (CAL)]. A MERE REJECTION OF THE CLAIM OF THE ASSESS EE BY RELYING ON DIFFERENT INTERPRETATIONS DOES NOT AMOUN T TO CONCEALMENT OF THE PARTICULARS OF INCOME OR FURNISHING INACCURATE PARTICULARS THER EOF BY THE ASSESSEE. WHEN TWO ITA NO.4194/AHD/2007 FOR AY 1998-99 SMT. LEENA JUGALKISHOR SHAH 6 VIEWS, ARE POSSIBLE, NO PENALTY CAN BE IMPOSED IS A PRINCIPLE THAT HAS BEEN ENUNCIATED IN THE DECISION IN THE CASE OF CIT V. P.K. NARAYANAN [1999] 238 ITR 905 (KER) AND CIT VS. HMA UDYOG P. LTD., 211 CTR 543 (D EL). A PLEA OR CLAIM WHICH IS HELD BY THE HON'BLE HIGH COURT TO GIVE RISE TO A SU BSTANTIAL QUESTION OF LAW, CANNOT BE TREATED TO BE FRIVOLOUS OR MALA FIDE SO AS TO ATTRA CT LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE INCOME-TAX ACT, AS HELD BY THE TH IRD MEMBER IN THE AFORESAID DECISION RELIED UPON BY THE LD. CIT(A). 6.2 IN VIEW OF AFORESAID DECISIONS AND CONSIDE RING THE FACTS AND CIRCUMSTANCES OF THE CASE, ESPECIALLY WHEN A SUBSTANTIAL QUESTION OF LAW HAVE BEEN ADMITTED BY THE HONBLE JURISDICTIONAL HIGH COURT, THE ISSUE BECO MES DEBATEABLE AND IT IS DIFFICULT TO HOLD THAT IT WAS A CASE OF CONCEALMENT OF INCOME. IN THESE CIRCUMSTANCES, WE HAVE NO HESITATION IN UPHOLDING THE FINDINGS OF THE LD. CIT(A), CANCELLING THE PENALTY LEVIED U/S 271(1)(C) OF THE ACT . THUS, GROUND NOS.1 & 2 IN THE APPEAL ARE DISMISSED. 7. GROUND NOS. 3 & 4 IN THE APPEAL BEING GENERAL IN NATURE, DO NOT REQUIRE ANY SEPARATE ADJUDICATION AND ARE, THEREFORE, DISMISSED .. 8. IN THE RESULT, APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE COURT TODAY ON 11-06-2010 SD/- SD/- (BHAVNESH SAINI) JUDICIAL MEMBER (A N PAHUJA) ACCOUNTANT MEMBER DATE : 11-06-2010 COPY OF THE ORDER FORWARDED TO : 1. SMT. LEENA JUGALKISHOR SHAH, 10, GREEN PARK SOCI ETY, BHAVANIPURA, NIZAMPURA, BARODA 2. THE ADIT (INTL. TAXN), 4 TH FLOOR, VASANT NATURE BUILDING, ASHRAM ROAD, AHMEDABAD 3. CIT CONCERNED 4. CIT(A)-II, BARODA 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER ITA NO.4194/AHD/2007 FOR AY 1998-99 SMT. LEENA JUGALKISHOR SHAH 7 DEPUTY REGISTRAR ASSISTANT REGISTRAR ITAT, AHMEDABAD