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Income Tax Appellate Tribunal, DELHI BENCH “G”: NEW DELHI
Before: SHRI H.S.SIDHU & SHRI PRASHANT MAHARISHI
O R D E R PER PRASHANT MAHARISHI, A. M. 1. These are the two appeal filed by the assessee , one against the quantum disallowance and second against penalty confirmed u/s 271(1) (c ) of the act. 2. Assessee has filed this appeal against the order of the ld CIT(A)-Muzaffarnagar dated 25.08.2010 for the Assessment Year 2007-08 where in the deduction denied by the ld AO u/s 54 F of the act has been confirmed. The assessee has raised the following grounds of appeal in :- “1. The assessee is an individual deriving income from property income, professional income and bank interest. The assessee has also sold a flat of Rs. 2500000/- and the sales proceeds were invested in the purchase of another flat in commercial building which is of multipurpose i.e. same may be used as office or residence purpose and accordingly claim exemption u/s 54F which was wrongly disallowed by the ld Assessing Officer as well as by the CIT(A) and huge tax was levied on the assessee, feeling aggrieved with the assessment order, CIT(Appeal) order the assessee filing this appeal on the following grounds.”
3. This appeal is filed by the assessee against the order of the ld CIT (A) confirming the penalty u/s 271(1)(c ) of the act in “1. That the learned Assessing Officer erred in law and facts in levying penalty U/s 271(1) (c), without jurisdiction as no specific charge was made in the notice U/s 274 r.w. 271,as born from the notice dated 15/04/2009 and the mere observation of issuance of notice in body of assessment order, was not suffice. The learned CIT (A) ought to have held the order passed by the AO U/s 271(l)(c) to be illegal and without jurisdiction.
2. That the learned Assessing Officer erred in law and facts in confirming the penalty levied by the AO in the amount of Rs. 2,07,900 by holding that the appellant claimed wrong exemption U/s 54-F and furnished inaccurate particulars of income and is liable to penalty U/s 271(l)(c).
3. That the Appellant having correctly filed the chargeable Capital Gains(Long Term) and deduction was claimed U/s 54-F as the investment in the Property was made on sale proceeds, in respect to which capital gain was computed and accepted in assessment frame but exemption claimed U/s 54-F was disallowed on technical grounds Viz. Exemption was available on investment in Residential House only despite the fact that immovable property purchased being commercial could be used for multi purposes by the appellant and such user was not prohibited and as such claim made was legal and simply because it has been negatived in assessment proceedings, it could not be treated to concealment of income or furnishing of wrong particular of income. 4. That the Appellant duly discharged its duties and enjoined to make correct discloser of income, but if such claim is based on opinion of the Expert and is opinion accepted bonafidely, the same by itself may not be sufficient for arriving at a conclusion that the assessee has furnished inaccurate particulars of income, was on the Revenue which has not been properly discharged and as such Appellant be held to be not liable to penalty. 5. That mere making a claim which could not be substainted and was not acceptable to the revenue, that by itself would not attract penalty U/s 271(1) (c) on the ratio of Hon'ble Supreme Court in the case of CIT V/s Reliance Petro Products (P), particularly when appellant, a house wife was not convergent with the tax laws and claim made was based on opinion of the expert engaged for conducting tax obligations. The penalty levied by AO and wrongly confirmed by CIT (A) deserved to be cancelled.” 4. The appellant is an individual deriving rental income and income from other sources, who filed her return of income for Rs. 108900/- on 24.03.2007. During the year the assessee has sold plot of land for Rs. 21.50 lakhs and after adjustment of index cost has earned capital gain of Rs. 1044989/-. From this capital gain assessee has claimed deduction u/s 54F of the Act for Rs. 1084989/- and consequently, the capital gain computed at Rs. Nil. 5. The ld Assessing Officer enquired the claim of the assessee holding that the deduction is available for purchase of residential house and not for purchase of a commercial property. The assessee submitted that assessee has made investment in purchase of property, which can be used for residential purposes therefore; assessee is eligible for deduction u/s 54F. The ld Assessing Officer denied the above deduction holding that assessee has purchased property on plot of land for commercial purposes approved by the DDA and further the building plan approved is also in the name of commercial complex named as „Sachdeva Corporate Tower‟. Therefore, according to the ld Assessing Officer the assessee has not purchased a residential house, therefore, deduction was denied. Consequently, the income of the assessee was assessed u/s 143(3) of the Act on 15.04.2009. 6. On appeal before the ld CIT(A) the claim of the assessee was rejected for the similar reason as the copy of purchase deed showed that assessee has not purchased a residential house.. Therefore, the assessee is in appeal before us. Page | 2
The ld AR has submitted a paper book containing the purchase deed of the property, copy of lease deed and copy of property tax document along with a brief synopsis. The ld AR contested that the property purchases by the assessee is a house property and merely because it is constructed on the commercial plot does not disentitle the assessee for the deduction u/s 54F of the Act. He further relied on the circular No. 471 dated 10.10.1982 as well as on decisions rendered under Wealth Tax Act.
The ld Departmental Representative vehemently defended the orders of the lower authorities. 9. We have carefully considered the rival contentions. According to section 54F of the act if the assessee purchases or constructs „a residential house‟ within specified time limits then deduction is allowed to from the capital gain of the cost of such residential house. The main purpose of section 54F of the Act is to give the above relief but one of the condition is that the assessee must purchase „residential house‟ to claim such benefit. In the present case the assessee has not purchased a residential house but has acquired a property which is a commercial property. Therefore, the lower authorities have disallowed the claim of the assessee. The assessee has relied upon the decision of Hon'ble Madras High Court in 245 ITR 800, however, on perusal of the above decision it is apparent that the facts of the case are different. In that particular case it was not an independent residential unit. However, in the present case the asset purchased by the assessee is not a residential unit at all but a commercial property. The second decision relied upon by the ld AR reported in 38 ITD 125 is also not relevant to decide the present issue because in that case the assessee purchased a farm house which is consisting of a swimming pool, room and other utility. In the present case the assessee has purchased only one unit space of 109.23 sq mt having balcony only. The land use of the property also commercial. The property was also purchased with some common facilities however, it neither have the basic facilities for the residence such as kitchen and other amenities. In view of this the above decisions cited before us is distinguishable on facts. The ld AR also could not point out before us any facts which can even remotely persuade us to believe that what is purchased by the assessee is a residential house. In view of this we do not find any infirmity in the orders of the lower authorities in denying the claim of the assessee of deduction u/s 54F of the Act as assessee has not purchased a residential house property but a commercial property. 10. In the result appeal of the assessee is dismissed. (Assessment Year 2007-08) 11. Facts as stated in 54F of the Act the ld Assessing Officer issued penalty notice u/s 271(1)(c) of the Income Tax Act. Consequently Page | 3 vide order dated 30.11.2010 the ld Assessing Officer levied the penalty of Rs. 207900/- u/s 271(1)(c) of the Act. The assessee contested before the ld AO vide letter dated 29.09.2010 that there is no satisfaction recorded in the order u/s 143(3) of the Act about either concealment of income or furnishing of inaccurate particulars of income. The assessee further contended that merely the claim of the assessee denied does not result into penalty.
On appeal before the ld CIT(A) it was held that it is a false claim of deduction and therefore penalty is leviable. Hence, it was confirmed by the ld CIT(A).
Before us the ld AR submitted that there is no satisfaction recorded by the ld AO in the assessment order itself whether the assessee concealed particulars of income or has furnished inaccurate particulars. It was further stated that claim of the assessee is disallowed but in the assessment order or in the penalty order it is nowhere mentioned that assessee has furnished any inaccurate particulars of income. It was further stated that there is no charge against the assessee specified by the ld AO hence, penalty proceedings are bad in law.
The ld DR relied upon the orders of the lower authorities 15. We have carefully considered the rival contentions. For the disallowance made by the ld Assessing Officer, the assessment order dated 15.04.2009 shows that ld Assessing Officer has mentioned “notice u/s 271(1)(c) has been issued separately”. However, there was no satisfaction recorded in the assessment order itself whether the assessee has furnished inaccurate particulars of income or has concealed income. Further penalty order passed u/s 271(1)(c) of the Act dated 30.11.2010 the ld Assessing Officer vide para No. 11 has held that assessee has furnished inaccurate particulars of income. The ld CIT(A) has confirmed the penalty stating as under:- “On the basis of all the above case laws, which include the decision of the jurisdictional High Court also, I hold that in a case of false claim of deduction burden is on the assessee to prove that there was no concealment of income or of true particulars. But in the present case, the appellant has failed to adduce any satisfactory explanation in rebuttal of the presumption that the deduction claimed u/s 54F represented furnishing of inaccurate particulars of income. In my firm view , the angle of concealment is more than established, and, therefore, I uphold the penalty of Rs. 2.0790/-.”
From the order of the ld Assessing Officer as well as the order of the ld CIT(A) the penalty is not sustainable because:- a. There is no satisfaction of the ld Assessing Officer in the assessment proceedings about furnishing of inaccurate particulars of income