Narayanbhai Shivabhai Patel Vs ITO (ITAT Ahmedabad)
ITAT Ahmedabad Quashes Penalty – Deemed Addition u/s 56(2)(x) Not Underreporting- 270A Penalty Based on Deeming Provisions Unjustified: Relief to Property Buyer
Assessee filed appeal against the order of CIT(A), NFAC, confirming penalty u/s 270A. Assessee had purchased two properties as co-owner at prices lower than the stamp duty valuation. AO invoked s.56(2)(x) & added Rs.30.50 lakh as deemed income, completing assessment u/s 143(3). AO also levied penalty u/s 270A of Rs.4.75 lakh for under-reporting. CIT(A) upheld penalty.
Before Tribunal, Assessee argued that addition was purely under deeming provisions & not on account of suppression or concealment. Since Assessee disclosed all facts in return & explained that properties had defective titles, the case was covered by exceptions in s.270A(6). Reliance was placed on Mumbai ITAT in Alrameez Construction Pvt. Ltd. Vs CIT/NFAC (152 taxmann.com 382), which held that penalty u/s 270A cannot be imposed for addition under s.56(2)(x).
Revenue contended that Assessee had not produced evidence of defective title & had not disputed stamp duty valuation; hence penalty was rightly levied.
Tribunal observed that additions u/s 56(2)(x) arise from deeming fiction, based on stamp duty/DVO valuation, which itself is an estimate. Such addition cannot be equated to under-reporting or misreporting of income. It further held that penalty u/s 270A is not automatic for every addition under s.56(2)(x). Since Assessee disclosed all facts, no concealment or misreporting was established. Applying ratio of Alrameez Construction (Mumbai ITAT), Tribunal quashed penalty. Accordingly, Assessee’s appeal was allowed.
