Section 54F ownership can extend to possession and dominion; a bona fide debatable claim may still avoid penalty.

Section 54F exemption may be denied where the assessee, though lacking formal title, has possession, dominion and beneficial control of a residential flat in his own right under a hire-purchase allotment; on those facts, the flat can be treated as a house "owned" by the assessee for the proviso. For penalty under section 271(1)(c), disclosure of all material facts and a bona fide, debatable interpretation of "owns" do not amount to concealment or furnishing inaccurate particulars. A disallowed exemption claim, by itself, is not enough to sustain penalty when the claim is arguable and made on disclosed facts.

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Issues: (i) whether the assessee was entitled to exemption under section 54F despite holding possession and beneficial control of a flat allotted on hire-purchase basis by the housing authority; and (ii) whether penalty under section 271(1)(c) was leviable for the disallowance of that exemption claim.

Issue (i): whether the assessee was entitled to exemption under section 54F despite holding possession and beneficial control of a flat allotted on hire-purchase basis by the housing authority

Analysis: The proviso to section 54F denies the exemption where the assessee owns, on the date of transfer of the original asset, any residential house other than the new asset. The expression "owns" was construed in the context of the section by reading it with the scheme of the Act, the concept of ownership under sections dealing with house property income, and the principles that ownership may extend beyond formal legal title where the assessee has dominion, possession, and the right to use and occupy the property in his own right. The flat had been allotted to the assessee on hire-purchase, instalments were fully paid, possession had continued for years, and no eviction proceedings under the housing statute had been initiated. On these facts, the flat was treated as a residential house owned by the assessee for the purpose of the proviso.

Conclusion: The exemption under section 54F was rightly denied and the finding was against the assessee.

Issue (ii): whether penalty under section 271(1)(c) was leviable for the disallowance of that exemption claim

Analysis: Penalty under section 271(1)(c) with its Explanation requires a false or non-bona fide explanation or concealment through inaccurate particulars. The exemption claim turned on an arguable interpretation of the word "owns" in section 54F, and all material facts relating to the flat, the allotment, possession, instalments, and capital gain deposit were disclosed. The claim was ultimately disallowed, but it was not shown to be a false claim or a claim made without bona fide belief. A debatable legal claim, by itself, does not attract penalty.

Conclusion: Penalty under section 271(1)(c) was not leviable and the issue was in favour of the assessee.

Final Conclusion: The assessee did not succeed on the exemption claim under section 54F, but succeeded in getting the penalty deleted because the claim was bona fide and debatable on the facts and law.

Ratio Decidendi: For section 54F, ownership includes possession and dominion over a residential house in the assessee's own right even without formal conveyance, but a bona fide and debatable claim on that issue does not justify penalty for concealment.

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