THE COMMISSIONER OF INCOME TAX V. SMT. K.S. SARASWATHI

ITA/597/2013

AI Insights

The case involves an appeal by the Commissioner of Income-Tax and the Income Tax Officer against K.S. Saraswathi concerning a penalty under Section 271(1)(c) of the Income Tax Act, 1961. The dispute arose from the assessee's claim of exemption under Section 54F upon the purchase of a property, which was later found to be used for commercial purposes. The Tribunal had set aside the penalty, recognizing the assessee's mistake as bona fide. The High Court of Karnataka, after reviewing the materials and arguments, agreed with the Tribunal's decision, noting that the property was consistently used for non-residential purposes before and after the purchase, and the assessee had acted in good faith by withdrawing the exemption claim when informed.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 729012 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 30-06-2014
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: CHANDRASHEKAR
• Assessee Lawyers: KAMALADHAR
• Keywords: Commercial property; Exemption withdrawal; Income Tax; Penalty; Non-residential property
• Section: 271(1)(c); 54F; 260-A

Judgement Text

" 1 IN THE HIGH COURT OF KARNATAKA AT BANGALORE DATED THIS THE 30th DAY OF JUNE 2014 PRESENT THE HON'BLE MR. JUSTICE N. KUMAR AND THE HON’BLE MRS. JUSTICE B MANOHAR ITA No.597 OF 2013 BETWEEN; 1.The Commissioner of Income-Tax, C.R.Building, Queens Road, Bangalore. 2.The Income Tax Officer, Ward-4(1), C.R. Building, Queens Road, Bangalore. ...APPELLANTS (By Sri.Kamaladhar.G., Advocate) AND: K.S. Saraswathi, #721, 10th ‘A’ main 4th Block, Jayanagar Bangalore-560 011 ...RESPONDENT (By Sri.Chandrashekar, Advocate for Sriyuths. R. Rama Murthy and Kashinath Kalmath, Advocates) -0-0-0-0- 2 This ITA is filed under Section 260-A of I.T. Act, 1961 arising out of Order dated 31.07.2013 passed in ITA.No.914/BANG/2013, for the Assessment Year 2008-09 praying to formulate the substantial questions of law stated therein and to allow the appeal and set aside the order passed by the ITAT, Bangalore in ITA No.914/BANG/2013 dated 31.07.2013 and confirm the order of the Appellate Commissioner confirming the order passed by the Income Tax, Ward-4(1), Bangalore. This appeal coming on for admission this day, N. KUMAR, J. delivered the following:- JUDGMENT The revenue has preferred this appeal against the order passed by the Tribunal setting aside the penalty imposed under Section 271(1)(c) of the Income Tax Act. 2. It is not in dispute that the assessee purchased the property on 31.8.2006. As seen from the katha extract dated 12.06.2006 i.e. prior to the date of purchase of the property by the assessee, the Bangalore Mahanagara Palike had treated the property as non- residential. The vendor of the property had also let out the property for commercial purpose as is clear from the lease deed entered into by the vendor in favour of the lessee. After the purchase of the property, the katha 3 extract, which is dated 13.7.2011, describes the property as non-residential. Therefore, prior to purchase and subsequent to purchase the property was used for non-residential purpose. The plan is of the year 1974 which shows that it is a residential construction and that plan was obtained and produced by the assessee before the assessing authority on 18.10.2010 when the authorities called upon them to produce the plan. As is clear from the letter withdrawing the exemption claimed under Section 54F, the assessee was in complete dark about the fact that the property was a non-residential property and in the course of the enquiry based on the aforesaid documents when it was pointed out that mere user of the property for commercial purpose would not make it a commercial property, without murmuring she has withdrawn the claim for exemption. That shows the bonafides on the part of the assessee. It is not a case where the assessee deliberately with an intention to avoid payment of tax has filed the return on 31.7.2008 claiming exemption 4 under Section 54(f) of the Act. The mistake as rightly held by the authorities is a bonafide one. Prima-facie the documents produced show that it was used as a commercial property. In those circumstances, we are of the view that the Tribunal in proper exercise of its discretion after taking into consideration the entire material on record has rightly held that Section 271(1)(c) is not attracted. In that view of the matter, we do not see any merit in this appeal. No substantial question of law do arise for consideration. Accordingly, the appeal is dismissed. Sd/- JUDGE. Sd/- JUDGE. *alb/-. "