ACIT, CHENNAI V. Late Sri B.Manivannan Rep.by L/H Shanthi, CHENNAI

ITSSA 17/CHNY/2012

• Counselvise Citation: [2013] 121 COUNSELVISE.COM (IT) 8643 (ITAT-CHENNAI)
• Duration Of Justice: 7 month(s) 21 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 22-01-2013
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 16-01-2013
• Assessment Year: misc
• Appeal Filed On: 01-06-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SHAJI P JACOB IRS CIT SHRI
• Keywords: Capital asset; Block assessment; Benefit of exemption
• Section: 54F; 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI BEFORE DR. O.K. NARAYANAN, VICE-PRESIDENT AND SHRI VIKAS AWASTHY, JUDICIAL MEMBER I.T(SS).A. NOS. 17 & 18/MDS/2012 BLOCK PERIOD : 01.04.1990 TO 20.07.2000 THE ASSISTANT COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-IV(2), CHENNAI 600 034. VS. LATE B. MANIVANNAN, REP. BY L/H SMT. SHANTHI, BRN APARTMENTS, NO.18, RAJARATHINAM STREET, KILPAUK, CHENNAI 600 010. PAN BTCPS4781A (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SHAJI P. JACOB, IRS, ADDL. CIT RESPONDENT BY : SHRI PHILIP GEORGE, ADVO CATE DATE OF HEARING : 16 TH JANUARY, 2013 DATE OF PRONOUNCEMENT : 22 ND JANUARY, 2013 O R D E R PER DR. O.K. NARAYANAN, VICE-PRESIDENT THESE TWO APPEALS ARE FILED BY THE REVENUE. IT(SS )A NO.17/MDS/2012 ARISES OUT OF THE BLOCK ASSESSMENT C OMPLETED ON THE ASSESSEE. THE APPEAL IS DIRECTED AGAINST THE O RDER OF THE IT(SS)A 17 & 18/12 :- 2 -: COMMISSIONER OF INCOME-TAX(APPEALS)-I AT CHENNAI DA TED 19.3.2012. THE OTHER APPEAL IN IT(SS)A NO.18/MDS/2 012 ARISES OUT OF THE PENALTY ORDER PASSED UNDER SEC.158BFA(2) OF THE INCOME-TAX ACT, 1961 AND IS DIRECTED AGAINST THE OR DER OF THE COMMISSIONER OF INCOME-TAX(APPEALS)-I AT CHENNAI. 2. FIRST, WE WILL CONSIDER THE QUANTUM APPEAL. IN THIS CASE, THE ASSESSEE HAS CLAIMED THE RELIEF PROVIDED UNDER SEC. 54F FROM PAYMENT OF CAPITAL GAINS TAX. IN THE FIRST ROUND O F PROCEEDINGS, THE CLAIM OF THE ASSESSEE WAS REJECTED BY THE ASSESSING OFFICER BUT ALLOWED BY THE COMMISSIONER OF INCOME-TAX(APPEALS). THE MATTER WAS TAKEN UP BY THE REVENUE BEFORE THE TRIBU NAL. THE TRIBUNAL REMITTED THE MATTER BACK TO THE ASSESSING OFFICER TO MAKE FURTHER ENQUIRIES AND COME TO A CONCLUSION. I N CONSEQUENCE TO THE TRIBUNALS ORDER, THE ASSESSMENT WAS REFRAMED AGAIN AND THIS APPEAL ARISES OUT OF THE SA ID ASSESSMENT ORDER PASSED UNDER SEC.158BD READ WITH SEC.263/143( 3)/251/ 254. IN THIS ORDER, THE CLAIM OF RELIEF MADE BY TH E ASSESSEE UNDER SEC.54F WAS DENIED. 3. THE ASSESSEE IN FACT IN THE PRESENT CASE HAS PUR CHASED THREE FLATS VIZ., 3A, 3B AND 3C AND CLAIMED EXEMPTI ON UNDER IT(SS)A 17 & 18/12 :- 3 -: SEC.54 ON THE VALUE OF ALL THESE THREE FLATS. THE ASSESSING OFFICER HELD THAT THE RELIEF UNDER SEC.54F IS AVAILABLE ONL Y ON ONE RESIDENTIAL HOUSE AND IT CANNOT BE CLAIMED FOR THRE E RESIDENTIAL HOUSES. THE ASSESSING OFFICER FURTHER HELD THAT TH E THREE FLATS VIZ., 3A, 3B AND 3C ARE THREE RESIDENTIAL HOUSES AN D NOT ONE RESIDENTIAL UNIT AS ARGUED BY THE ASSESSEE. HE, TH EREFORE, GAVE THE BENEFIT OF SEC.54 TO FLAT NO.3C WHICH IS THE LA RGEST ONE AND DENIED EXEMPTION FOR FLAT NOS. 3A AND 3C. IN FIRST APPEAL, THE COMMISSIONER OF INCOME-TAX(APPEALS) RELIED ON THE D ECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT V. D. ANANDA BASAPPA (309 ITR 329) TO HOLD THAT A RESIDENTIAL HOUSE WOULD MEAN ONLY ONE RESIDENTIAL HOUSE IS NOT CORRECT. TH E COURT HELD THAT IT SHOULD NOT BE UNDERSTOOD TO INDICATE A SING ULAR NUMBER. A COMBINED READING OF SECTIONS 54(1) AND 54F INDICATE S THAT NON- RESIDENTIAL BUILDING CAN BE SOLD AND THE CAPITAL GA INS OF THE SAME CAN BE INVESTED IN A RESIDENTIAL BUILDING BUT IT DO ES NOT EXCLUDE FOR THE PURCHASE OF MORE THAN ONE FLAT. THE COMMISSION ER OF INCOME-TAX(APPEALS) ALSO RELIED ON THE DECISION OF THE ITAT, MUMBAI BENCH IN THE CASE OF K.G.VYAS V. ITO DATED 6 .1.1986 AND HELD THAT ALL THE THREE FLAT NOS. 3A, 3B AND 3C SHOULD BE IT(SS)A 17 & 18/12 :- 4 -: TREATED AS A SINGLE HOUSE PROPERTY AND EXEMPTION UN DER SEC.54 SHOULD BE ALLOWED. 4. THE REVENUE IS AGGRIEVED AND, THEREFORE, THE APP EAL BEFORE THE TRIBUNAL. IT IS THE CASE OF THE REVENUE THAT T HE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF D. ANAN DA BASAPPA (309 ITR 329) HAS NO APPLICATION IN THE PRESENT CAS E FOR THE REASON THAT THE FACTS ARE DIFFERENT. IN THE CASE C ONSIDERED BY THE HONBLE KARNATAKA HIGH COURT, THE APARTMENTS WERE S ITUATED SIDE BY SIDE AND THE BUILDER HAS ALSO STATED THAT HE HAD EFFECTED MODIFICATION TO THE FLATS TO MAKE THEM AS A ONE RES IDENTIAL UNIT BY OPENING THE DOOR IN BETWEEN THOSE TWO APARTMENTS. IN THE PRESENT CASE, NO SUCH STRUCTURAL UNITY IS AVAILABLE . IN THE ABOVE CASE DECIDED BY THE TRIBUNAL, THE FAMILY HAD 10 MEM BERS AND, THEREFORE, THAT MUCH SPACE WAS NECESSARY TO ACCOMMO DATE THEM TO HOLD THE PROPERTY AS A RESIDENTIAL UNIT. 5. WE HEARD SHRI SHAJI P. JACOB, THE LEARNED COMMIS SIONER OF INCOME-TAX APPEARING FOR THE REVENUE AND SHRI PHILI P GEORGE, THE LEARNED COUNSEL APPEARING FOR THE ASSESSEE. 6. THE LEARNED COMMISSIONER OF INCOME-TAX RELIED ON THE DECISION OF THE ITAT, MUMBAI SPECIAL BENCH IN THE C ASE OF ITO IT(SS)A 17 & 18/12 :- 5 -: VS. MS. SUSHILA M. JHAVERI [107 ITD 327 (MUM.)(SB)] TO SUPPORT HIS ARGUMENT THAT THE THREE FLATS CANNOT BE CONSTRU ED AS A SINGLE RESIDENTIAL UNIT. IN THE ABOVE CASE, THE SPECIAL B ENCH EXHAUSTIVELY CONSIDERED THE SCHEME OF EXPLANATION P ROVIDED UNDER SEC.54. IN THAT CASE, THE ASSESSEE WAS AN OW NER OF A RESIDENTIAL FLAT SITUATED AT MUMBAI. DURING THE PR EVIOUS YEAR, THE ASSESSEE HAD SOLD THE SAID FLAT AND REINVESTED THE TOTAL SALE CONSIDERATION IN PURCHASING TWO RESIDENTIAL FLATS A T DIFFERENT LOCATIONS IN MUMBAI. THE ASSESSEE CLAIMED EXEMPTIO N UNDER SEC.54 IN RESPECT OF LONG-TERM CAPITAL GAIN ARISING FROM THE SALE OF RESIDENTIAL FLAT AT MUMBAI. THE ASSESSING OFFICER HELD THAT EXEMPTION WAS AVAILABLE ONLY IN RESPECT OF INVESTME NT IN ONE RESIDENTIAL HOUSE. THE ASSESSING OFFICER, THEREFOR E, ALLOWED EXEMPTION UNDER SEC.54 IN RESPECT OF THE HOUSE, WHI CH PERMITTED HIGHER EXEMPTION. AFTER CONSIDERING THE FRAME OF LAW ON THE SUBJECT, THE SPECIAL BENCH HELD THAT THE EXEMPTION UNDER SECTIONS 54 AND 54F WOULD BE AVAILABLE IN RESPECT OF ONE RES IDENTIAL HOUSE ONLY. IF THE ASSESSEE HAS PURCHASED MORE THAN ONE RESIDENTIAL HOUSE, THEN THE CHOICE WOULD BE WITH ASSESSEE TO AV AIL THE EXEMPTION IN RESPECT OF EITHER OF THE HOUSES, PROVI DED THE OTHER CONDITIONS ARE FULFILLED. HOWEVER, WHERE MORE THAN ONE UNIT ARE IT(SS)A 17 & 18/12 :- 6 -: PURCHASED WHICH ARE ADJACENT TO EACH OTHER AND ARE CONVERTED INTO ONE HOUSE FOR THE PURPOSE OF RESIDENCE BY HAVI NG COMMON PASSAGE, COMMON KITCHEN, ETC., THEN, IT WOULD BE A CASE OF INVESTMENT IN ONE RESIDENTIAL HOUSE AND CONSEQUENTL Y, THE ASSESSEE IS ENTITLED TO EXEMPTION. 7. WHEN WE EXAMINE THE PRESENT CASE IN THE LIGHT OF THE ABOVE SPECIAL BENCH DECISION, WE FIND THAT THE CLAIM MADE BY THE ASSESSEE SHOULD FAIL. THE DECISION OF THE HONBLE KARNATAKA HIGH COURT DOES NOT CLASH WITH THE DECISION OF THE ITAT, MUMBAI SPECIAL BENCH MENTIONED ABOVE. IN THE CASE CONSIDE RED BY THE HONBLE KARNATAKA HIGH COURT, THE BUILDER HIMSELF S TATED THAT TWO UNITS OF FLATS WERE CONVERTED INTO ONE DWELLING UNI T BY PROVIDING INTERCONNECTION BETWEEN THE FLATS AND FOR ALL PRACT ICAL PURPOSES, THE FLATS FUNCTIONED AS A SINGLE RESIDENTIAL UNIT. IN THE LIGHT OF THE ABOVE SPECIAL BENCH DECISION, OTHER DECISIONS OF TH E TRIBUNAL RELIED ON BY THE ASSESSEE DO NOT HOLD GOOD. 8. IN THE PRESENT CASE, THE FLATS 3A, 3B AND 3C, EV EN THOUGH SITUATED IN A SINGLE COMPLEX, BUT MAINTAIN THEIR IN DEPENDENT AND SEPARATE IDENTITY. ALL THE THREE FLATS ARE NUMBERE D SEPARATELY BY THE MUNICIPAL AUTHORITIES. ALL THE THREE FLATS ARE HAVING SEPARATE IT(SS)A 17 & 18/12 :- 7 -: PROPERTY TAX ASSESSMENTS. THESE THREE FLATS ARE FU NCTIONALLY SEPARATE AND INDEPENDENT. THERE IS NO INTERCONNEC TING PASSAGE BETWEEN THE FLATS 3A AND 3B OR 3B AND 3C AND THERE IS NO CASE OF COMMON KITCHEN OR COMMON FACILITIES TO BE UNIFIED A S A SINGULAR RESIDENTIAL UNIT. EVEN THOUGH TECHNICALLY THERE MI GHT BE THREE FLATS, IT IS POSSIBLE FOR THE ASSESSEE TO CONVERT T HEM FUNCTIONALLY TO A SINGLE UNIT BY MAKING NECESSARY PHYSICAL AND STRU CTURAL ALTERATIONS. IN SUCH A CASE, AN ASSESSEE MIGHT HAV E A CASE BUT HERE ALL THE THREE FLATS ARE ABSOLUTELY INDEPENDENT . THERE IS NO COMMONALITY AMONG THESE FLATS. THE LAW IS VERY SPE CIFIC THAT EXEMPTION IS AVAILABLE ONLY TO ONE RESIDENTIAL UNIT . THE LARGEST FLAT AMONGST THE THREE IS FLAT NO.3C. THE ASSESSING OFF ICER HAS FAIRLY GIVEN THE BENEFIT OF EXEMPTION UNDER SEC.54 TO THAT FLAT. THE ORDER OF THE ASSESSING OFFICER IS IN ACCORDANCE WITH LAW. THE COMMISSIONER OF INCOME-TAX(APPEALS) HAS ERRED IN GR ANTING RELIEF TO THE ASSESSEE BY HOLDING THAT ALL THE THREE FLATS WOULD BE CONSTRUED AS A SINGLE RESIDENTIAL UNIT. NO CIRCUM STANCES ARE AVAILABLE IN THE PRESENT CASE TO HOLD THAT THESE TH REE FLATS ARE TO BE TREATED AS A SINGLE RESIDENTIAL UNIT. ACCORDING LY, WE SET ASIDE THE ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS ) ON THIS IT(SS)A 17 & 18/12 :- 8 -: POINT AND UPHOLD THE ORDER OF THE ASSESSING OFFICER CONFINING THE BENEFITS OF SEC.54 TO FLAT NO.3C. 9. THIS APPEAL FILED BY THE REVENUE IS ALLOWED. 10. NEXT, WE WILL CONSIDER THE PENALTY APPEAL. THE SCHEME OF PENALTY LEVIABLE UNDER SEC.158BFA PROVIDES AN ARITH METIC FRAME WORK TO IMPOSE PENALTY IF THE ASSESSED INCOME IS MO RE THAN THE RETURNED INCOME. THAT IS FOR THE PURPOSE OF MODALI TY OF COMPUTING THE QUANTUM OF CONCEALMENT, AS THE CASE MAY BE. T HAT FRAME WORK CANNOT BE CONSIDERED TO STATE THAT LEVY OF PEN ALTY UNDER SEC.158BFA IS COMPULSORY OR AUTOMATIC. FOR THAT MA TTER, NO PENALTY IN LAW IS AUTOMATIC OR COMPULSORY. THE CIR CUMSTANCES SHOULD DEMAND THE IMPOSITION OF PENALTY AND THE CON CERNED AUTHORITIES SHOULD BE INCLINED TO LEVY PENALTY. BO TH THESE CONDITIONS MUST CO-EXIST EVEN IF CIRCUMSTANCES SO E XIST. IT IS NOT COMPULSORY FOR THE CONCERNED AUTHORITY TO LEVY PENA LTY, IF HE FINDS A LENIENT APPROACH WOULD BE JUSTIFIED. SEC.158BFA IS A SPECIAL PROVISION FOR CONSIDERING THE CASE OF LEVYING OF PE NALTY IN BLOCK ASSESSMENT. SEC.271(1)(C) IS ANOTHER PROVISION DEA LING WITH THE PENALTY IN OTHER CASES. BUT FOR THESE DIFFERENCE S, THERE IS NO IT(SS)A 17 & 18/12 :- 9 -: MUCH DISPARITY BETWEEN THE PRINCIPLES GOVERNING THE LEVY OF PENALTY EITHER UNDER SEC.158BFA OR UNDER SEC.271(1) (C). 11. IF WE EXAMINE THE PRESENT CASE, IN THE ABOVE BA CKGROUND OF LAW, WE FIND THAT THERE IS NO HARD CASE TO LEVY PEN ALTY. AS A MATTER OF FACT, WE HAVE TO MAKE IT CLEAR THAT THERE IS NO FURNISHING OF INACCURATE PARTICULARS IN THE PRESENT CASE. THE ASSESSEE HAS DISCLOSED THE SALE OF THE CAPITAL ASSET AND COMPUTI NG OF LONG TERM CAPITAL GAIN ARISING OUT OF THAT SALE. THE ASSESSE E HAS ALSO FURNISHED THE DETAILS OF INVESTMENT MADE IN THREE F LATS VIZ., 3A, 3B AND 3C. THESE ARE ALL NECESSARY FACTUAL ASPECTS TO EXAMINE THE CLAIM OF EXEMPTION MADE BY THE ASSESSEE UNDER SEC.5 4/54F. THEREFORE, THERE CANNOT BE A CASE AGAINST THE ASSES SEE THAT THERE WAS FURNISHING OF INACCURATE PARTICULARS. 12. THE NEXT LIMB TO EXAMINE IS THAT WHETHER THERE IS ANY CONCEALMENT OF INCOME IN THE PRESENT CASE. THERE I S NO CONCEALMENT OF INCOME AS SUCH. IN THE LIGHT OF CER TAIN ANALOGOUS DECISIONS OF COURTS AND TRIBUNAL, THE ASSESSEE THOU GHT IT FIT THAT HE MIGHT BE ENTITLED FOR DEDUCTION FOR THE ENTIRE I NVESTMENTS MADE IN PURCHASING THREE FLATS. THE MOST IMPORTANT LIMB TO BE CONSIDERED IN THE PRESENT CASE IS THAT ALL THESE IN VESTMENTS WERE IT(SS)A 17 & 18/12 :- 10 -: MADE BY THE ASSESSEE ONLY IN RESIDENTIAL UNITS. SO THE FIRST QUALIFICATION TO EXEMPTION UNDER SEC.54 WAS COMPILE D BY THE ASSESSEE BY INVESTING ONLY IN RESIDENTIAL UNITS. T HE ONLY DISPUTE ARISES FOR CONSIDERATION IS THAT WHETHER THE ASSESS EE CAN CLAIM EXEMPTION IN RESPECT OF ALL THE THREE FLATS OR ONLY IN RESPECT OF ONE FLAT. BY RAISING SUCH CONTENTION BEFORE THE ASSESS ING AUTHORITY, THE ASSESSEE HAS NOT ATTEMPTED TO CONCEAL HIS INCOM E. THE ABOVE TWO LIMBS OF FURNISHING OF INACCURATE PARTICU LARS AND CONCEALMENT OF INCOME ARE APPARENT IN THE SCHEME OF SEC.271(1)(C) BUT NOT APPARENT IN THE SCHEME OF SEC .158BFA. BUT THE INGREDIENTS OF A SITUATION NECESSARY TO IMPOSE PENALTY UNDER BOTH SECTIONS ARE THE SAME. ONLY FOR THE REASON TH AT THE CLAIM OF THE ASSESSEE WAS DISALLOWED IN A BLOCK ASSESSMENT A ND THE INCOME WAS ASSESSED THEREIN, IT DOES NOT MEAN THAT SEC.158BFA WOULD AUTOMATICALLY OPERATE. 13. IN THESE CIRCUMSTANCES, WE FIND THAT THE COMMIS SIONER OF INCOME-TAX(APPEALS) IS JUSTIFIED IN CANCELLING THE PENALTY LEVIED BY THE ASSESSING AUTHORITY. IN THIS WAY, THE PENALTY APPEAL FILED BY THE REVENUE FAILS. IT(SS)A 17 & 18/12 :- 11 -: 14. IN RESULT, THE QUANTUM APPEAL FILED BY THE REVE NUE IS ALLOWED AND THE PENALTY APPEAL FILED BY THE REVENUE IS DISMISSED. ORDERS PRONOUNCED ON TUESDAY, THE 22 ND OF JANUARY, 2013 AT CHENNAI. SD/- SD/- (VIKAS AWASTHY) ( DR.O.K.NARAYANAN) JUDICIAL MEMBER VICE-PRESIDENT CHENNAI, DATED THE 22 ND JANUARY, 2013 MPO* COPY TO : APPELLANT/RESPONDENT/CIT/CIT(A)/DR