Income Tax Appellate Tribunal - Chennai
Late Sri B.Manivannan Rep.By L/H ... vs Department Of Income Tax on 16 January, 2013
IN THE INCOME TAX APPELLATE TRIBUNAL
'A' BENCH, CHENNAI
BEFORE Dr. O.K. NARAYANAN, VICE-PRESIDENT
AND SHRI VIKAS AWASTHY, JUDICIAL MEMBER
I.T(SS).A. Nos. 17 & 18/Mds/2012
Block Period : 01.04.1990 to 20.07.2000
The Assistant Commissioner Late B. Manivannan,
of Income-tax, Vs. Rep. by L/H Smt. Shanthi,
Central Circle-IV(2), BRN Apartments,
Chennai - 600 034. No.18, Rajarathinam Street,
Kilpauk, Chennai - 600 010.
PAN - BTCPS4781A
(Appellant) (Respondent)
Appellant by : Shri Shaji P. Jacob, IRS, Addl. CIT
Respondent by : Shri Philip George, Advocate
Date of Hearing : 16th January, 2013
Date of Pronouncement : 22nd January, 2013
O R D E R
PER Dr. O.K. NARAYANAN, VICE-PRESIDENT These two appeals are filed by the Revenue. IT(SS)A No.17/Mds/2012 arises out of the block assessment completed on the assessee. The appeal is directed against the order of the :- 2 -: IT(SS)A 17 & 18/12 Commissioner of Income-tax(Appeals)-I at Chennai dated 19.3.2012. The other appeal in IT(SS)A No.18/Mds/2012 arises out of the penalty order passed under sec.158BFA(2) of the Income-tax Act, 1961 and is directed against the order of the Commissioner of Income-tax(Appeals)-I at Chennai.
2. First, we will consider the quantum appeal. In this case, the assessee has claimed the relief provided under sec.54F from payment of capital gains tax. In the first round of proceedings, the claim of the assessee was rejected by the Assessing Officer but allowed by the Commissioner of Income-tax(Appeals). The matter was taken up by the Revenue before the Tribunal. The Tribunal remitted the matter back to the Assessing Officer to make further enquiries and come to a conclusion. In consequence to the Tribunal's order, the assessment was reframed again and this appeal arises out of the said assessment order passed under sec.158BD read with sec.263/143(3)/251/
254. In this order, the claim of relief made by the assessee under sec.54F was denied.
3. The assessee in fact in the present case has purchased three flats viz., 3A, 3B and 3C and claimed exemption under :- 3 -: IT(SS)A 17 & 18/12 sec.54 on the value of all these three flats. The Assessing Officer held that the relief under sec.54F is available only on one residential house and it cannot be claimed for three residential houses. The Assessing Officer further held that the three flats viz., 3A, 3B and 3C are three residential houses and not one residential unit as argued by the assessee. He, therefore, gave the benefit of sec.54 to flat No.3C which is the largest one and denied exemption for flat Nos. 3A and 3C. In first appeal, the Commissioner of Income-tax(Appeals) relied on the decision of the Hon'ble Karnataka High Court in the case of CIT v. D. Ananda Basappa (309 ITR 329) to hold that "a" residential house would mean only one residential house is not correct. The court held that it should not be understood to indicate a singular number. A combined reading of sections 54(1) and 54F indicates that non- residential building can be sold and the capital gains of the same can be invested in a residential building but it does not exclude for the purchase of more than one flat. The Commissioner of Income-tax(Appeals) also relied on the decision of the ITAT, Mumbai Bench in the case of K.G.Vyas v. ITO dated 6.1.1986 and held that all the three flat Nos. 3A, 3B and 3C should be :- 4 -: IT(SS)A 17 & 18/12 treated as a single house property and exemption under sec.54 should be allowed.
4. The Revenue is aggrieved and, therefore, the appeal before the Tribunal. It is the case of the Revenue that the decision of the Hon'ble Karnataka High Court in the case of D. Ananda Basappa (309 ITR 329) has no application in the present case for the reason that the facts are different. In the case considered by the Hon'ble Karnataka High Court, the apartments were situated side by side and the builder has also stated that he had effected modification to the flats to make them as a one residential unit by opening the door in between those two apartments. In the present case, no such structural unity is available. In the above case decided by the Tribunal, the family had 10 members and, therefore, that much space was necessary to accommodate them to hold the property as a residential unit.
5. We heard Shri Shaji P. Jacob, the learned Commissioner of Income-tax appearing for the Revenue and Shri Philip George, the learned counsel appearing for the assessee.
6. The learned Commissioner of Income-tax relied on the decision of the ITAT, Mumbai Special Bench in the case of ITO :- 5 -: IT(SS)A 17 & 18/12 vs. Ms. Sushila M. Jhaveri [107 ITD 327 (Mum.)(SB)] to support his argument that the three flats cannot be construed as a single residential unit. In the above case, the Special Bench exhaustively considered the scheme of Explanation provided under sec.54. In that case, the assessee was an owner of a residential flat situated at Mumbai. During the previous year, the assessee had sold the said flat and reinvested the total sale consideration in purchasing two residential flats at different locations in Mumbai. The assessee claimed exemption under sec.54 in respect of long-term capital gain arising from the sale of residential flat at Mumbai. The Assessing Officer held that exemption was available only in respect of investment in one residential house. The Assessing Officer, therefore, allowed exemption under sec.54 in respect of the house, which permitted higher exemption. After considering the frame of law on the subject, the Special Bench held that the exemption under sections 54 and 54F would be available in respect of one residential house only. If the assessee has purchased more than one residential house, then the choice would be with assessee to avail the exemption in respect of either of the houses, provided the other conditions are fulfilled. However, where more than one unit are :- 6 -: IT(SS)A 17 & 18/12 purchased which are adjacent to each other and are converted into one house for the purpose of residence by having common passage, common kitchen, etc., then, it would be a case of investment in one residential house and consequently, the assessee is entitled to exemption.
7. When we examine the present case in the light of the above Special Bench decision, we find that the claim made by the assessee should fail. The decision of the Hon'ble Karnataka High Court does not clash with the decision of the ITAT, Mumbai Special Bench mentioned above. In the case considered by the Hon'ble Karnataka High Court, the builder himself stated that two units of flats were converted into one dwelling unit by providing interconnection between the flats and for all practical purposes, the flats functioned as a single residential unit. In the light of the above Special Bench decision, other decisions of the Tribunal relied on by the assessee do not hold good.
8. In the present case, the flats 3A, 3B and 3C, even though situated in a single complex, but maintain their independent and separate identity. All the three flats are numbered separately by the Municipal Authorities. All the three flats are having separate :- 7 -: IT(SS)A 17 & 18/12 property tax assessments. These three flats are functionally separate and independent. There is no interconnecting passage between the flats 3A and 3B or 3B and 3C and there is no case of common kitchen or common facilities to be unified as a singular residential unit. Even though technically there might be three flats, it is possible for the assessee to convert them functionally to a single unit by making necessary physical and structural alterations. In such a case, an assessee might have a case but here all the three flats are absolutely independent. There is no commonality among these flats. The law is very specific that exemption is available only to one residential unit. The largest flat amongst the three is flat No.3C. The Assessing Officer has fairly given the benefit of exemption under sec.54 to that flat. The order of the Assessing Officer is in accordance with law. The Commissioner of Income-tax(Appeals) has erred in granting relief to the assessee by holding that all the three flats would be construed as a single residential unit. No circumstances are available in the present case to hold that these three flats are to be treated as a single residential unit. Accordingly, we set aside the order of the Commissioner of Income-tax(Appeals) on this :- 8 -: IT(SS)A 17 & 18/12 point and uphold the order of the Assessing Officer confining the benefits of sec.54 to flat No.3C.
9. This appeal filed by the Revenue is allowed.
10. Next, we will consider the penalty appeal. The scheme of penalty leviable under sec.158BFA provides an arithmetic frame work to impose penalty if the assessed income is more than the returned income. That is for the purpose of modality of computing the quantum of concealment, as the case may be. That frame work cannot be considered to state that levy of penalty under sec.158BFA is compulsory or automatic. For that matter, no penalty in law is automatic or compulsory. The circumstances should demand the imposition of penalty and the concerned authorities should be inclined to levy penalty. Both these conditions must co-exist even if circumstances so exist. It is not compulsory for the concerned authority to levy penalty, if he finds a lenient approach would be justified. Sec.158BFA is a special provision for considering the case of levying of penalty in block assessment. Sec.271(1)(c) is another provision dealing with the penalty in other cases. But for these differences, there is no :- 9 -: IT(SS)A 17 & 18/12 much disparity between the principles governing the levy of penalty either under sec.158BFA or under sec.271(1)(c).
11. If we examine the present case, in the above background of law, we find that there is no hard case to levy penalty. As a matter of fact, we have to make it clear that there is no furnishing of inaccurate particulars in the present case. The assessee has disclosed the sale of the capital asset and computing of long term capital gain arising out of that sale. The assessee has also furnished the details of investment made in three flats viz., 3A, 3B and 3C. These are all necessary factual aspects to examine the claim of exemption made by the assessee under sec.54/54F. Therefore, there cannot be a case against the assessee that there was furnishing of inaccurate particulars.
12. The next limb to examine is that whether there is any concealment of income in the present case. There is no concealment of income as such. In the light of certain analogous decisions of Courts and Tribunal, the assessee thought it fit that he might be entitled for deduction for the entire investments made in purchasing three flats. The most important limb to be considered in the present case is that all these investments were :- 10 -: IT(SS)A 17 & 18/12 made by the assessee only in residential units. So the first qualification to exemption under sec.54 was compiled by the assessee by investing only in residential units. The only dispute arises for consideration is that whether the assessee can claim exemption in respect of all the three flats or only in respect of one flat. By raising such contention before the assessing authority, the assessee has not attempted to conceal his income. The above two limbs of furnishing of inaccurate particulars and concealment of income are apparent in the scheme of sec.271(1)(c) but not apparent in the scheme of sec.158BFA. But the ingredients of a situation necessary to impose penalty under both sections are the same. Only for the reason that the claim of the assessee was disallowed in a block assessment and the income was assessed therein, it does not mean that sec.158BFA would automatically operate.
13. In these circumstances, we find that the Commissioner of Income-tax(Appeals) is justified in cancelling the penalty levied by the assessing authority. In this way, the penalty appeal filed by the Revenue fails.
:- 11 -: IT(SS)A 17 & 18/12
14. In result, the quantum appeal filed by the Revenue is allowed and the penalty appeal filed by the Revenue is dismissed.
Orders pronounced on Tuesday, the 22nd of January, 2013 at Chennai.
Sd/- Sd/- (VIKAS AWASTHY) (Dr.O.K.NARAYANAN) Judicial Member Vice-President Chennai, Dated the 22nd January, 2013 mpo*
Copy to : Appellant/Respondent/CIT/CIT(A)/DR