RAJESH C. SANGHANI,MUMBAI vs. ITO 16(2)(2), MUMBAI

There is a delay of 114 days in filing the present appeal. Assessee has filed a petition seeking condonation of delay supported

Learned Departmental Representative opposed condonation of delay.

We have heard both the parties on the issue of delay in filing the present appeal. After perusing the cause of delay, as explained in delay condonation petition which is supported by affidavit, we are

Reverting back to the issue in dispute, brief facts are, assessee an individual filed his return of income for the impugned assessment year on 30th September 2008, declaring total income of ` 4,92,045. In the course of assessment proceedings, the Assessing Officer noticed that the assessee had purchased two residential flats being flat no.103 and 104, in the first floor of the building at Ghatkopar on 6th November 2007, the investment in which was claimed as deduction under section 54F against the long term capital gain received on sale of shop. The Assessing Officer observed, the assessee was already owner of one residential house at Andheri. As per section 54F, the assessee can be eligible for deduction under section 54F,if he invested in one more residential house. However, the assessee had purchased two flats, hence, deduction 54F is not allowable. He also observed that as per section 71, the assessee was required to adjust the business loss against long term capital gain whereas the assessee without doing so has carried forward his business loss. Therefore, while disallowing assessee’s claim of deduction under section 54F at the time of completion of assessment, the Assessing Officer initiated proceedings for imposition of penalty under section 271(1)(c). In response to the

The learned Commissioner (Appeals) having not found merit in the submissions of the assessee confirmed the penalty imposed under section 271(1)(c).

Learned Authorised Representative submitted before us, though, the assessee in the course of assessment proceedings, had agreed disallowance of claim under section 54F but legally assessee is eligible for deduction under section 54F. Learned Authorised Representative relying upon certain judicial precedents submitted, Flats no.103 and 104, purchased by the assessee being contiguous should be treated as one flat, hence, conditions of section 54F are not violated.

Learned Departmental Representative on the other hand relied upon the reasoning of the Assessing Officer and the learned Commissioner (Appeals).

We have considered the submissions of the parties and perused the material available on record. Undisputedly, the basis for imposition of penalty under section 271(1)(c) is, assessee has wrongly claimed deduction under section 54F. As could be seen, it is the claim of the assessee that capital gain arising from sale of shop is not taxable as the assessee has invested in flats no.103 and 104, in the first floor of a building at Ghatkpoar. The Department also does not dispute this fact. Only ground on which the assessee’s claim of deduction 54F was disallowed was flats no.103 and 104 are two separate properties. It is the claim of the assessee that these two flats are adjacent to each other and contiguous, hence, to be treated as one flat. In this regard, it is to be noted that the expression “a residential house” as provided under section 54F is subject matter of judicial interpretation in number of cases and it has been held that “a” would not denote one residential house. Therefore, in our view, the issue relating to assessee’s claim of deduction under section 54F, is debatable in nature. Merely because the assessee in the course of assessment proceedings, agreed for disallowance of its claim for deduction under section 54F, will not lead to conclusion that the assessee has either furnished inaccurate particulars of income or concealed particulars of his income. That being the case, in our view, it is not a fit case for imposition of penalty under section 271(1)(c). Accordingly, accepting assessee’s

In the result, assessee’s appeal is allowed. Order pronounced in the open Court on 06.05.2016