DCIT 22(3), NAVI MUMBAI vs. SUMAN N. BHALLA, NAVI MUMBAI

This appeal has been filed by the Revenue against the order of CIT(A)- 33, Mumbai dated 27.8.2014 by which CIT(A) deleted the penalty levied by Assessing Officer u/s 271(1)(c) of the Income Tax Act, 1961 (in short ‘the Act’).

“5. In view of the above facts and observations, it is clear that the assessee has furnished inaccurate particulars of income on account of additions made in the assessment order on account of claim of exemption u/s 54F of the I.T.Act. I am satisfied that the assessee has committed the default within the meaning of section 271(1)(c) on the additions of Rs.51,30,000/- as discussed above and this is a fit case for the levy of penalty u/s 271(1)(c) of the IT Act. The penalty leviable u/s 271(1)(c) is as under:

Inaccurate particulars of income as discussed above Rs.51,30,000/- Tax thereon (tax+SC+education cess) Rs.15,85,170/- 100% of tax sought to be evaded Rs.15,85,170/- 300% of tax sought to be evaded Rs.47,55,510/-

The minimum penalty leviable @ 100% of the amount of tax sought to be evaded works out to Rs. 15,85,170/- and the maximum penalty @ 300% works out to Rs .47,55,510/-. I levy penalty of Rs.15,85,170/- u/s 271(1)(c) of the Income Tax Act ,1961. This order is passed with the prior approval of the JCIT - Range - 22(3) vide letter No.JT.CIT- 22(3)/Penalty approval/2013-14 dt.17.09.2013.”

When the matter went in appeal before CIT(A), CIT(A) deleted the penalty u/s 271(1)(c) of the Act.

“7. The only question remains as to whether assessee can be said to be the owner of that residential house. 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 is owned by more than one person, it cannot be said that anyone of them is the owner of the property. In such 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 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 fortified by the judgment of the Hon'ble Supreme Court in the case of Seth Banarsi Dass Gupta v. CIT [1987] 166 ITR 783, wherein, it was held that a fractional ownership was not sufficient for claiming even fractional 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 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 not amended the provisions of section 54F, it has to be held that the word "own" in section 54F would include only the case where a residential house is fully and wholly owned by assessee and consequently would not include a residential house owned by more than one person. In the present case, admittedly the house at Sion, Mumbai, was purchased jointly by assessee and his wife. It is nobody's case that wife is benami of assessee. Therefore, the said house was jointly owned by assessee and his spouse. In view of the discussions made above, it has to be held that assessee was not the owner of a residential house on the date of transfer of original asset. Consequently, the exemption under section 54F could not be denied to assessee. The order of the Learned CIT (Appeals) is, therefore, upheld.”

Since the view of assessee, on the basis of which the assessee claimed exemption u/s 54F of the Act, was duly supported by the decision of Mumbai ‘A’ Bench of the Tribunal in the case of Rasiklal N. Satra (supra), we, therefore, are of the opinion that the claim made by assessee u/s 54F of the Act was under a bona fide belief. If assessee had made a bona fide claim, it cannot be said that the assessee has furnished inaccurate particulars of income or concealed the particulars of income. The case of assessee, in our view, is duly covered by the decision of the Hon'ble Supreme Court in the case of CIT vs. Reliance Petroproducts Pvt. Ltd., 322 ITR 158 (SC) in which it was held that where assessee has furnished all the details and the details in themselves were not found to be inaccurate, any claim not accepted would not result in concealment of income. No contrary decision was brought before us by the ld. DR even though he vehemently relied on the order of the Assessing Officer. We accordingly confirm the order of CIT(A) deleting the penalty u/s 271(1)(c) of the Act.

Order pronounced in the open court on 23rd December, 2016.