Penalty 271(1)(c) deleted for claiming deduction u/s 54 for two residential houses . There was scope of ambiguity before amendment in 2014

INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH “A”, LUCKNOW

ITA No.01/LKW/2015 Assessment year:2006-07

Sandeep Shukla (Appellant)  vs. ACIT (Respondent)

Date of Order: 04-03-2016

ORDER

PER A. K. GARODIA, A.M.

This is assessee’s appeal directed against the order passed by learned CIT(A)-II, Kanpur dated 11/09/2014 for the assessment year 2006-07.

2. The assessee has raised as many as 6 grounds but the only grievance of the assessee is regarding confirming the penalty of Rs.4 lac imposed by the Assessing Officer u/s 271(1)(c) of the Act.

3. Learned A. R. of the assessee submitted that the written submissions filed before CIT(A) are available on pages 1 to 12 of the paper book. He submitted that the same should be considered here also. In addition to this, he placed reliance on the following judicial pronouncements:

1. Price Waterhouse Coopers (P) Ltd. vs. CIT [2012] 25 Taxmann.com 400 (SC)

2. Padra Taluka Co-op. Cotton Sale Ginning & Pressing Society vs. ACIT [2005] 142 Taxman 22 (Ahd.)

3. Majorit Singh vs. ACIT [2012] 27 Taxmann.com 124 (Chandigarh Trib)

4. CIT vs. Compro Technologies (P) Ltd. [2015] 55 Taxmann.com 180 (Delhi)

5. Chandra Pal Bagga vs. I.T.A.T. [2003] 128 Taxman 632 (Raj)

6. Sarv Prakash Kapoor vs. DCIT 54 SOT 185 (Agra) (URO)

7. CIT vs. S.M. Construction [2015] 60 Taxmann.com 135 (Bombay)

4. Learned D. R. of the Revenue supported the orders of the authorities below.

5. We have considered the rival submissions. We find that it is noted by the Assessing Officer in the penalty order that after allowing the relief given by CIT(A), the capital gain came to Rs.39.86 lac and as per the revised return filed by the assessee on 22/03/2007, copy available on pages 37 to 43 of the paper book, the assessee declared capital gain of Rs.22.58 lac and in computing such capital gain of Rs.22.58 lac, the assessee has claimed deduction u/s 54 of the Act at Rs.47.28 lac and this deduction claimed u/s 54 is in respect of investment in two houses; one Rs.30 lac and second at Rs.17.28 lac. In the return of income filed by the assessee after issue of notice u/s 148 of the Act on 05/-09/2008, the assessee has claimed exemption u/s 54 in respect of one house only to the extent of Rs.30 lac and in this manner, the assessee has declared Long Term Capital Gain of Rs.39.86 lac. Hence, it is seen that the only dispute for which the penalty has been imposed by the Assessing Officer is regarding claim of deduction u/s 54 in respect of investment in second house of Rs.17.28 lac. Now in the light of these facts, we examine the provisions of the Act and we find that in section 54(1), the earlier provisions were that the deduction is allowable to the assessee if the assessee has within a period of one year before or two years after purchased or within a period of three years after has constructed a residential house in India. As per Finance (No. 2) Act, 2014 with effect from 01/04/2015, there is amendment in the provisions of section 54(1) as per which now it has been made specific that instead of a residential house, investment has to be in one house in India. Hence, it is seen that by the amendment with effect from 01/04/2015, it has been made clear that the investment, which is eligible for deduction u/s 54 is only for investment in one residential house but before that, there was scope of ambiguity which was clarified by this amendment with effect from 01/04/2015. In view of this legal position, we are of the considered opinion that for the period prior to this amendment by Finance (No. 2) Act, 2014, disallowance in respect of claim of deduction u/s 54 is all right if the deduction is claimed for investment in more than one residential house but because of scope of ambiguity in the provisions itself, the penalty u/s 271(1)(c) is not justified for such claim by the assessee for deduction u/s 54(1) on account of investment in more than one house particularly when such fact has been made clear in the return of income itself that the deduction is claimed for investment in more than one residential house. In the present case, as per the revised return filed on 22/03/2007, copy available on pages 37 to 43 of the paper book, on page No. 41 of the paper book where statement of Long Term Capital Gain is available, it has been clearly spelt out that there is investment of Rs.30 lac in residential flat at Bangalore and there is investment of Rs.13 lac in another land purchased and there is cost of construction of Rs.4.28 lac. Therefore, it is clear that in the return of income itself, this fact has been clearly spelt out by the assessee that the deduction has been claimed for investment in more than one residential house. We have already seen that before amendment by Finance (No. 2) Act, 2014, there was scope of some ambiguity and the same was removed by this amendment and therefore, for the period before this amendment, where the assessee has disclosed all the material facts, penalty is not justified if the assessee has made claim for deduction u/s 54 of the Act in respect of investment in more than one residential house although the matter may be different from assessment year 2015-16 in view of the amendment by Finance (No. 2) Act, 2014 as per which this scope of ambiguity has been removed. In the present case, the assessment year involved is 2006-07 and therefore, we hold that in the facts of the present case, penalty u/s 271(1)(c) is not justified. We, therefore, delete the same.

6. In the result, the appeal of the assessee stands allowed.

(Order was pronounced in the open court on the date mentioned on the caption page)

(SUNIL KUMAR YADAV) Judicial Member  ( A. K. GARODIA ) Accountant Member

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