1 IN HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS 10TH DAY OF MARCH 2015 PRESENT HON BLE MR.JUSTICE VINEET SARAN AND HON BLE MRS.JUSTICE S.SUJATHA ITA No. 292 OF 2014 BETWEEN : 1. COMMISSIONER OF INCOME TAX C.R BUILDING, QUEENS ROAD, BANGALORE 2. DY. COMMISSIONER OF INCOME TAX CIRCLE-5 (1), UNITY BUILDING ANNEX, MISSION ROAD, BANGALORE-560 027 ...APPELLANTS (By Sri: K V ARAVIND, ADV.) 2 AND : Dr. HARSHA N.BILIANGADY, NO. 95, 3RD MAIN, DOLLAR LAYOUT, 4TH PHASE, J.P.NAGAR, BANGALORE ... RESPONDENT *** ITA FILED U/S.260-A OF I.T.ACT, 1961 ARISING OUT OF ORDER DATED 21/03/2014 PASSED IN ITA.NO.1333/BANG/2013, FOR ASSESSMENT YEAR 2008-2009, PRAYING THAT THIS HON'BLE COURT MAY BE PLEASED TO: I. FORMULATE SUBSTANTIAL QUESTIONS OF LAW AS STATED ABOVE , II. ALLOW APPEAL AND SET ASIDE ORDER PASSED BY ITAT BANGALORE IN ITA NO.1333/BANG/2013, DATED 21/03/2014 AND CONFIRM ORDER PASSED BY DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-5(1), BANGALORE, IN INTEREST OF JUSTICE AND EQUITY. THIS APPEAL IS COMING ON FOR ADMISSION THIS DAY, VINEET SARAN, J. DELIVERED FOLLOWING: 3 JUDGMENT This is appeal filed by Revenue whereby for assessment year 2008-09 penalty has been imposed on assessee alleging concealment of material facts. order imposing penalty by Assessing Officer was challenged in appeal, which was up held. In further appeal filed by assessee, Tribunal has set aside said order primarily on ground that in facts of case there was neither any material concealment made by assessee nor penalty was imposable. Tribunal while allowing appeal of assessee, cancelled penalty imposed under Section 271(1)(c) of Act as unsustainable. Being aggrieved by said order, Revenue has filed this appeal. 2. We have heard learned counsel Mr. K.V.Aravind, for appellants and perused records. 4 3. brief facts are that: assessee had sold property belonging to him (measuring 3250 sq. ft.) vide sale deed dated 27.03.2007. assessee claimed deduction of amount of Rs.1,32,53,129/- under Section 54 of Act, contending that he had purchased residential house for such amount. Since property sold by assessee was commercial building and deduction under Section 54 of Act could not be claimed, assessee made representation claiming for deduction under Section 54F of Act. claim for deduction under Section 54F of Act was also denied to assessee on ground that house purchased by assessee, though had construction of 1500 sq. ft. in total area of 4960 sq. ft. yet, since at time of inspection of property on 13.12.2010, residential house had been demolished and site was to be 5 used for construction of hospital and maternity home, such benefit was not permissible. matter as to whether benefit under Section 54F of Act has to be granted to petitioner is pending decision before High Court. Such appeal was filed to consider following substantial question of law: (1) Whether Tribunal is right in deleting penalty levied only for reason that assessee s petition has been admitted by Hon ble High Court of Karnataka? (2) Whether on facts and circumstances of case, Tribunal is right in setting aside penalty levied under Section 271(1)(c) of Act even when all ingredients of said section are satisfied in case of assessee for levy of penalty? 6 4. Imposition of penalty under Section 271 (1)(c) of Act is for concealment of material particulars of income by assessee or furnishing inaccurate particulars of such income. It is not case of appellant that assessee had furnished inaccurate details with regard to income derived from sale and purchase of properties. question as to whether assessee is to be given benefit under Section 54 or 54F of Act, or is not to be given benefit of either of these two Sections, is yet to be finalized by High Court, where appeal against assessment proceedings is still pending. 5. As is borne out from records, assessee had given full description of property which was sold by him, and had also given description of property purchased by him. Merely because assessee is not to be given benefit 7 under Section 54 of Act as property sold by assessee was not residential property, in our view, it cannot be said that there was concealment of material information by assessee because, as we have already mentioned above complete details of property sold by assessee had been given by him in returns filed by him. 6. denial of benefit of Section 54F of Act to assessee, which is primarily on ground of inspection carried on 13.12.2010, when it was found that property purchased by assessee had been demolished, is question yet to be determined by High Court. It is not in dispute that at time of purchase of property, it was residential property, and whether in circumstances benefit has to be granted to assessee, is yet not been 8 determined, as such question is pending in appeal before this Court. 7. As such, Tribunal has after considering all aspects of case, concluded on facts that returns had been filed by assessee and claim made by him may not be incorrect, in as much as, there is no doubt that assessee purchased house within such period as contemplated under Section 54F of Act. Tribunal thus held that High Court having admitted appeal of assessee on substantial question of law as to whether deduction under Section 54F of Act is applicable or not, imposition of penalty by Revenue on debatable facts would not make claim of assessee under Section 54F baseless. 9 8. We do not find any reason to hold that finding given and conclusion arrived at by Tribunal as incorrect. We are also of opinion that where penalty is imposed in respect of any addition where High Court has admitted appeal on substantial question of law, then sustainability of addition itself becomes debatable, and in such circumstances penalty cannot be levied under Section 271 (1) (c) of Act. Penalty can only be imposed for concealment of material particulars or furnishing of inaccurate particulars by assessee. In facts of present case, we are of view that assessee cannot be held guilty of 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 Act. 10 9. Appeal is accordingly dismissed at stage of admission itself as no substantial question of law arises for our consideration. There shall be no order as to cost. Sd/- JUDGE Sd/- JUDGE VK Commissioner of Income-tax, Bangalore / Dy. Commissioner of Income-tax Circle-5(1),Bangalore v. Harsha N. Biliangady