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Income Tax Appellate Tribunal, “A” BENCH, MUMBAI
O R D E R
PER PAVAN KUMAR GADALE JM:
The revenue has filed the appeal against the order of the CIT(A)- National Faceless Appeal Centre (NFAC), Delhi passed u/s 271(1)(c) and 250 of the Act. The revenue has raised the following grounds of appeal:
1."Whether on the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in deleting the penalty
Ashok Govindji Chauhan, Mumbai. - 2 - of Rs. 1,70,00,000/- levied u/s 271(1)(c) of the I.T. Act 1961."
Whether on the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in not appreciating the fact that the Revenue is in appeal to the Hon'ble High Court Vide no. ITXA/3287/2019.
3. The appellant prays that the order of Ld.CIT(A), NFAC on the above ground be reversed and that of the Assessing Officer be restored.
4. The Appellant craves leave to amend or alter any ground or add a new ground which may be necessary. 2. The brief facts of the case are that the assessee is an individual and filed the return of income for the A.Y 2010-11 disclosing total income of Rs.1,26,99,467/-. Subsequently the case was reopened u/sec148 of the Act based on the AIR information and assessment was completed by making addition of Rs.8,87,69,134/- on account of surrender of tenancy rights and the A.O. has passed order u/s 143(3) r.w.s 147 dated 13.11.2014 determining total income of Rs. 9,00,39,080/-. Subsequently the AO has initiated the penalty proceedings u/s 271(1)(c) of the Act and Ashok Govindji Chauhan, Mumbai. - 3 - issued notice u/sec271/274 of the Act. In compliance to the notice, the assessee has filed reply on 21.02.2018 and submitted that the quantum addition in dispute is already challenged before two appeal forums before CIT(A) and Hon’ble ITAT. The assessee was a owner of only one residential house and hence eligible for claiming exemption u/s 54F of the Act against the capital gains arising out of transfer of tenancy rights. The A.O has also considered the facts that against quantum addition made by the A.O, and the assessee has filed the appeal before the CIT(A) and the CIT(A) has partly allowed the relief. Further, the assessee has filed an appeal before the Hon’ble Tribunal. The A.O has considered the submissions, findings of scrutiny assessement and was not satisfied with the explanations and levied a penalty of Rs. 1,70,00,000/- and passed the order u/s 271(1)(c) of the Act dated 27.04.2018.
Aggrieved by the penalty order, the assessee has filed an appeal before the CIT(A). Whereas the CIT(A) has considered the grounds of appeal, submissions of the assessee and findings of the AO and relied on the facts that the addition made by the A.O. in quantum
Ashok Govindji Chauhan, Mumbai. - 4 - appeal was deleted by the Honble Tribunal and observed that the penalty cannot survive and deleted the penalty levied and allowed the assessee appeal.. Aggrieved by the CIT(A) order, the revenue has filed an appeal before the Hon’ble Tribunal.
At the time of hearing, the Ld.DR submitted that CIT(A) has erred in deleting the penalty irrespective of the facts that the decision of the Hon’ble Tribunal has been challenged by the revenue before the Hon’ble High Court and prayed for restoration of penalty order of the A.O.
Contra, the Ld. AR supported the order of the CIT(A) and substantiated with the submissions and relied on the decision of the Hon’ble Tribunal in the assessee own case of quantum appeal in and prayed for dismissal of revenue appeal.
We heard the rival submissions and perused the material available on record. The sole crux of the disputed issue as envisaged by the Ld.DR that the CIT(A) has erred in deleting the penalty on the ground that the quantum addition has been deleted, whereas
Ashok Govindji Chauhan, Mumbai. - 5 - the revenue has challenged the decision of the Honble Tribunal and filed an appeal before the Hon’ble High Court and is pending. At this juncture we consider it appropriate to refer to the findings of the Hon’ble Tribunal in the quantum appeal in the assessee’s own case for the A.Y 2010-11 in dated 12.04.2019 and the observations at Para 8 to 8.6 of the order read as under:
We have heard the counsels for both the parties and we have also perused the material placed on record, judgment cited by the parties as well as the orders passed by the revenue authorities. We find that it is an undisputed fact that assessee was actually co-owner of the property i.e. flat at Goa along with his wife and had transferred his share to his daughter Ms Alisha Ashok Chauhan by virtue of gift deed dated 15.04.04.
8.1 According to the above decision of Coordinate Bench of ITAT in the case of Mrs. V. R. Usha Vrs. ITO [2016]70 taxmann.com 340 (Chennai - Trib.)/[2016]159ITD 402 (Chennai –Trib), wherein it was held that Where ownership of assessee over property was subject to life interest retained by her mother in said property, it could not be said that assessee owned said property fully and it could not be a reason to deny exemption under section 54F claimed by assessee on sale of her another property.
Ashok Govindji Chauhan, Mumbai. - 6 - 8.2 Therefore, as per the principles laid down above, the assessee cannot be said to be the full owner of the property and thus cannot be denied exemption u/s 54 of the Act as claimed by him. Even otherwise as per the decision of Coordinate Bench of ITAT in the case of ITO vrs. Rasiklal N. Satra (2006) 98 ITD 335 (Mum)/(2006) 100 TTJ 1039 (Mum), it has been categorically held that the word 'own' appearing in section 54F of the Act includes only such residential house which is fully and wholly owned by one person and not a residential house owned by more than one person. The above decision of ITO vrs. Rasiklal N. Satra (2006) 98 ITD 335 (Mum)/(2006) 100 TTJ 1039 (Mum), also referred and relied upon other decisions i.e. i) CIT Vrs. Aravinda Reddy 120 ITR 46 (SC), ii) Shiv Narayan Chaudhari V. CWT 108 ITR 104 (Allahabad), iii) Smt. Kulwanti D. Alreja Vrs. ITO (Bom) and iv) Abdul Rehman Vrs. CIT 12 ITR 302 (Lahore) , wherein it was held that shared interest in the property does not amount to ownership of the property.
8.3 Now the only question remains as to whether assessee can be said to be the owner of residential house/flat at Goa. The legislature has used the word "a" before the words "residential house". In our opinion, it must mean a complete residential house and would not include shared interest in a residential house. Where the property owned by more than one person, it cannot be said that any one of them is the owner of the property. In such a case, no individual person of his own can sell the entire property. No doubt, he can sell his share of interest in the property but as far as the property is considered, it would continue to be owned by co-owners. Joint ownership is different from absolute ownership. In the case of residential unit, none of the co-owners can claim that he is the owner of Ashok Govindji Chauhan, Mumbai. - 7 - residential house. Ownership of a residential house, in our opinion, means ownership to the exclusion of all others. Therefore, where a house is jointly owned by two or more persons, none of them can be said to be the owner of that house. This view of ours is also fortified by the judgment of the Hon'ble Supreme Court in the case of Seth Banarsi Ds Gupta v. CIT 166 ITR 783, wherein it was held that a fractional ownership was not sufficient for claiming even fraction depreciation Under Section 32 of the Act. Because of this judgment, the legislature had to amend the provisions of Section 32 with effect from 1.4.1997 by using the expression "owned wholly or partly". So, the word "own" would not include a case where a residential house is partly owned by one person or partly owned by other person(s). After the judgment of Hon’ble Supreme Court in the case of Seth Banarsi Dass Gupta (supra), the legislature could also amend the provisions of Section 54F so as to include part ownership. Since, the legislature has consciously not amended the provisions of section 54F, it has to be held that the word "own" in Section 54-F would include only the case where a residential house is fully and wholly owned by the assessee and consequently would not include a residential house owned by more than one person.
8.4 In this way, in the present case, admittedly the flat at Goa was not fully and wholly owned by the assessee as the same was initially owned co-jointly in the name of assessee and his wife. Admittedly, it is nobody’s case that wife was benami of the assessee. Therefore, the said house was jointly owned by assessee and his wife. However, by virtue of gift deed dated 15.04.04, which is at page no. 37 to 60 of the paper book, the share of the assessee has already been transferred in the name of his
Ashok Govindji Chauhan, Mumbai. - 8 - daughter. Thus even if, as per the provision of section 27(1) of the Act, the assessee is considered to be a deemed owner of the Goa flat, but even then, assessee would still being a co-owner cannot be termed that Goa flat is fully and wholly owned by him, thus cannot be denied exemption.
8.5 Therefore, in such circumstances, assessee could not be treated as ‘absolute owner’ of the residential flat situated at Goa and the exemption u/s 54F of the Act cannot be denied to the assessee. On the other hand, Ld. DR had not placed on record any contrary judgments to rebut the contentions of the assessee.
8.6 Therefore respectfully following the decision of the Coordinate Bench of ITAT in the aforementioned cases which are mutatis mutandi in the present case, we direct the AO to allow the exemption u/s 54 of the Act. With these directions, these grounds raised by the assessee are allowed.
We considering the facts that the Hon’ble Tribunal has deleted addition and directed the A.O. to allow exemption u/s 54F of the Act. We are of the opinion that, when the quantum addition has been deleted then the penalty levied cannot be sustained. We find that the CIT(A) has considered the facts of Hon’ble Tribunal decision and granted relief. The Ld. DR could not controvert the findings of the CIT(A) with any new
Ashok Govindji Chauhan, Mumbai. - 9 - material or information to take a different view. Accordingly, we do not find any infirmity in the order of the CIT(A) and uphold the same and dismiss the grounds of appeal of the revenue.
8. In the result, the appeal filed by the revenue is dismissed.