Karnataka H.C : The assessee’s petition has been admitted by the Hon’ble High Court of Karnataka

High Court Of Karnataka

CIT & Anothers vs. Dr. Harsha N. Biliangady

Section 271(1)(c), 54, 54F, 260A

Asst. Year 2008-09

Vineet Saran & S. Sujatha, JJ.

ITA No. 292 OF 2014

10th March, 2015

Counsel appeared:

K V Aravind, Adv. for the Appellant: None for the Respondent.


This is an appeal filed by the Revenue whereby for the assessment year 2008-09 penalty has been imposed on the assessee alleging concealment of material facts. The order imposing the penalty by the Assessing Officer was challenged in the appeal, which was up held. In a further appeal filed by the assessee, the Tribunal has set aside the said order primarily on the ground that in the facts of the case there was neither any material concealment made by the assessee nor penalty was imposable. The Tribunal while allowing the appeal of the assessee, cancelled the penalty imposed under Section 271(1)(c) of the Act as unsustainable. Being aggrieved by the said order, Revenue has filed this appeal.

We have heard the learned counsel Mr. K.V.Aravind, for the appellants and perused the records. The brief facts are that:

The assessee had sold the property belonging to him (measuring 3250 sq. ft.) vide sale deed dated 27.03.2007. The assessee claimed deduction of an amount of Rs.1,32,53,129/-under Section 54 of the Act, contending that he had purchased the residential house for such amount. Since the property sold by the assessee was a commercial building and deduction under Section 54 of the Act could not be claimed, the assessee made a representation claiming for deduction under Section 54F of the Act. The claim for deduction under Section 54F of the Act was also denied to the assessee on the ground that the house purchased by the assessee, though had construction of 1500 sq. ft. in the total area of 4960 sq. ft. yet, since at the time of inspection of the property on 13.12.2010, the residential house had been demolished and site was to be used for construction of hospital and maternity home, such benefit was not permissible. The matter as to whether the benefit under Section 54F of the Act has to be granted to the petitioner is pending decision before the High Court. Such appeal was filed to consider the following substantial question of law:
(1) Whether the Tribunal is right in deleting the penalty levied only for the reason that the assessee’s petition has been admitted by the Hon’ble High Court of Karnataka?

(2) Whether on the facts and circumstances of the case, the Tribunal is right in setting aside the penalty levied under Section 271(1)(c) of the Act even when all the ingredients of the said section are satisfied in the case of the assessee for levy of penalty?

Imposition of penalty under Section 271 (1)(c) of the Act is for concealment of material particulars of income by the assessee or furnishing inaccurate particulars of such income. It is not the case of the appellant that the assessee had furnished inaccurate details with regard to the income derived from the sale and purchase of the properties. The question as to whether the assessee is to be given benefit under Section 54 or 54F of the Act, or is not to be given the benefit of either of these two Sections, is yet to be finalized by the High Court, where the appeal against the assessment proceedings is still pending.

As is borne out from the records, assessee had given full description of the property which was sold by him, and had also given description of the property purchased by him. Merely because the assessee is not to be given benefit under Section 54 of the Act as the property sold by the assessee was not a residential property, in our view, it cannot be said that there was concealment of material information by the assessee because, as we have already mentioned above complete details of the property sold by the assessee had been given by him in returns filed by him.

The denial of the benefit of Section 54F of the Act to the assessee, which is primarily on the ground of inspection carried on 13.12.2010, when it was found that the property purchased by the assessee had been demolished, is the question yet to be determined by the High Court. It is not in dispute that at the time of purchase of property, it was a residential property, and whether in the circumstances the benefit has to be granted to the assessee, is yet not been determined, as such question is pending in appeal before this Court.

As such, the Tribunal has after considering all the aspects of the case, concluded on facts that the returns had been filed by the assessee and claim made by him may not be incorrect, in as much as, there is no doubt that assessee purchased a house within such period as contemplated under Section 54F of the Act. The Tribunal thus held that the High Court having admitted the appeal of the assessee on substantial question of law as to whether deduction under Section 54F of the Act is applicable or not, the imposition of penalty by the Revenue on debatable facts would not make the claim of the assessee under Section 54F baseless.

We do not find any reason to hold that the finding given and the conclusion arrived at by the Tribunal as incorrect. We are also of the opinion that where penalty is imposed in respect of any addition where the High Court has admitted the appeal on substantial question of law, then the sustainability of the addition itself becomes debatable, and in such circumstances penalty cannot be levied under Section 271 (1) (c) of the Act. Penalty can only be imposed for concealment of material particulars or furnishing of inaccurate particulars by the assessee. In the facts of the present case, we are of the view that the assessee cannot be held guilty of the concealment of any material particulars of his income or having furnished inaccurate particulars of such income, so as to attract provisions of Section 271 (1) (c) of the Act.

Appeal is accordingly dismissed at the stage of admission itself as no substantial question of law arises for our consideration.

There shall be no order as to cost.

[Citation : 379 ITR 529]