Case Law Details
Sengoda Gounder HUF Vs DCIT (ITAT Chennai)
In the case of Sengoda Gounder HUF versus DCIT, the appeal was against the penalty imposed under section 271(1)(c) of the Income Tax Act. Here’s the gist of the order by the ITAT Chennai:
- Background: The case involved the sale of ancestral property by legal heirs. The assessee, Sengoda Gounder HUF, filed the income tax return for AY 2010-11, including capital gains. The Assessing Officer (AO) proposed additions based on the Registration Department’s guideline value, which was contested by the assessee. The matter went to the Tribunal, which estimated the fair market value at Rs. 1,50,000 per acre, different from both the guideline value and the assessee’s claimed value.
- Penalty Proceedings: Despite the Tribunal’s decision, the AO initiated penalty proceedings under section 271(1)(c) of the Act. The penalty was upheld by the CIT(A).
- Assessee’s Argument: The assessee contended that their valuation was based on an approved valuer’s report, making it a genuine claim, and thus, there was no concealment of income.
- ITAT’s Decision: The ITAT Chennai observed that differences in valuation opinions are common, and the assessee’s claim based on an approved valuer’s report cannot be deemed as concealment of income. Citing precedents from the Madras High Court and the Supreme Court, the ITAT ruled that an incorrect claim in law does not constitute furnishing inaccurate particulars.
- Conclusion: In light of the above, the ITAT directed the deletion of the penalty levied under section 271(1)(c) of the Act.
The decision underscores the principle that genuine differences in valuation opinions do not amount to concealment of income, especially when based on reports by approved valuers.
FULL TEXT OF THE ORDER OF ITAT CHENNAI
This appeal by the assessee is directed against the order of the learned Commissioner of Income-Tax, National Faceless Appeal Centre, (NFAC) Delhi [CIT(A) dated 29-09-2023vide which he confirmed the penalty under section 271(1)(c) of the Act (hereinafter “the Act”) levied by the ld. AO vide order dated 12-12-2019.
2. The grounds of appeal of the assessee are as under:
“1. The order of the Commissioner of Income Tax(Appeals) dismissing the appeal is contrary to law, erroneous and unsustainable on the facts of the case.
2. The CIT(A) erred in confirming the penalty levied under sec.271(1)(c) ofRs.5,16,640.
3. The CIT(A) was not justified in holding that the value of the property as on 01.4.1981 for computation of capital gains, estimated by the ITAT at Rs.150000 per acre as against the declared value by assessee of Rs.215000 per acre would amount to concealment of income by assessee.
4. The CIT(A) failed to appreciate that the assessee had computed the value of property as on 1.4.1981 based on a proximate sale instance in 1985 and that the ITAT had estimated the value, though the method of assessee was not rejected and hence confirming the penalty is wholly unjustified and untenable in law.
5. The CIT(A) was not justified in confirming the penalty without considering the submissions of assessee in its entirety and erroneously concluding that the assessee has not demonstrated as to why penalty should not be levied.
6. The CIT(A) ought to have considered the decisions of the Supreme Court and Madras High Court referred in the submissions and seen that the assessee cannot be imputed with concealment of income and there was no case for levy of penalty under sec.271(1)(c) of the Act.”
3. The brief facts of the case are that an ancestral property belongs to Sri Sengoda Gounder was sold by his legal heirs Shri S. Rajamani, Shri S. Natarajan, S. Kannan and Smt. Jaya for a consideration of Rs.1,00,10,000/- on 01-03-2010 in favour of two different persons. As the sold property was a HUF property, the return of income for the AY 2010-11 was filed in the name of Shri Sengoda Gounder HUF by his legal heirs on 24-09-2013 admitting total income of Rs. 18,42,150/-. Since, the return of income was filed belatedly, hence, the same was lodged. The returned income of Rs. 18,42,150/- includes the capital gain of Rs. 17,45,290/-.
4. The assessee while computing the capital gain had adopted fair market value of the property as on 01-04-1981 at Rs. 13,06,125/- i.e., Rs.2,14,948/- per acre whereas the guideline value as per the Registration Department is 25,000/- per acre. The Registration Department vide letter dated 28-02-2013 made available under a reference from the Revenue and the assessment was reopened u/s.148 of the Act after prior approval of the Principal Commissioner of Income-Tax, Salem on 28-10-2016.
5. The ld. Assessing Officer [AO] on the basis of the guideline value received from the Registration Department, computed the long term capital gain and proposed to bring the amount computed by him to tax net. Accordingly, the ld. AO asked the assessee to file his reply thereon. In response, the assessee filed his objection to the proposal of the ld. AO. The assessee vide his objection tried to defend his computation of long term capital gain made by him. The ld. AO however, rejected the objection of the assessee and vide order dated 12-12-2019 made an addition of Rs. 60,57,962/- to the total income of the assessee.
6. Being aggrieved, the assessee filed 1st appeal before the ld. CIT(A). The ld. CIT(A) vide order dated 31-01-2019 dismissed the appeal of the assessee.
7. Being aggrieved, the assessee filed appeal in ITA No.817/Chny/2019 before the Tribunal. The Hon’ble Tribunal after considering the case of the assessee vide order dated 10-05-2019 partly allowed the appeal of the assessee. The Hon’ble Tribunal estimated Rs. 1,50,000/- per acre as value of the property.
8. The ld. AO has complied with the order of the Hon’ble Tribunal dated 10-05-2019. However, he initiated penalty proceedings against the assessee by issuing a notice u/s 271(1)(c) of the Act and finally vide order dated 12-12-2019 levied a penalty of Rs.5,16,640/- upon the assessee.
6. Aggrieved, the assessee filed appeal before the ld. CIT(A). The ld. CIT(A) vide order dated 29-09-2023 dismissed the appeal of the assessee. The ld. CIT(A) observed that the assessee taken the rate of property on the basis of appreciation of gold rate and the Hon’ble ITAT granted part relief to the assessee.
7. Aggrieved, the assessee has filed the present appeal before the Tribunal.
8. Heard the representatives of both the parties and perused the materials on record.
9. The Ld. AR reiterated the submissions made before the ld. CIT(A). The Ld. AR submitted that the assessee relied on the valuation report issued by a valuer approved by the Income Tax-Department. The Ld. AR further submitted that the Hon’ble Tribunal had estimated the fair market value of the property at Rs. 1,50,000/- per acre against the guideline value relied on by the ld. AO. On the other hand, the Ld. Sr. D.R supports the order of the ld. Lower authorities.
10. We have carefully considered the submissions of both the parties. We observe that the assessee’s claim on the valuation of the property as well as the guideline value adopted by the ld. AO did not accept by the Hon’ble Tribunal. The Hon’ble Tribunal estimated the fair market value of the property at Rs.1,50,000/- per acre against the guideline value of Rs. 25,000/- as was provided by the Registration Department to the Revenue.
11. We observe that assessee’s claim on the fair market value cannot be termed as concealment of income. Assessee’s claim was based on the valuation report of an approved valuer. As the valuer is an approved valuer, his report is generally reliable. Therefore, we are of the view that the assessee did not conceal any income. The basis of the assessee’s claim is the report of the approved valuer. Further, differences of opinion will always be there regarding the fixation of value of a particular property. Showing of different value of a particular property by different valuers is not uncommon. It is possible. Therefore, there were different opinions on the assessee’s matter and for different opinions penalty cannot be levied on the assessee.
12. Further, the decision of the Hon’ble jurisdictional Madras High Court in the case of Thulasiammal vs. CIT (2000) 158 CTR 5 (Mad), which is relied on by the asseessee held that, the guide line values of Registration Department has evidentiary value and they are intended to give information or instruction to the registering authorities but the guidelines would not establish the market value of the land.
13. The Hon’ble Madras High Court in the case of CIT vs. Apsara Talkies 155 ITR 303 (Mad) held that, a valuation estimate, without more, cannot justify a finding of concealment.
14. The Hon’ble Supreme Court in the case of CIT vs. Reliance Petroproducts Pvt. Ltd. 322 ITR 158 (SC) held that making an incorrect claim in law cannot tantamount to furnishing inaccurate particulars.
15. We observe that the aforesaid decisions of the Hon’ble Madras High Court and Hon’ble Supreme Court fully covers the case of the assessee and accordingly, we direct to delete the penalty levied u/s. 271(1)(c) of the Act upon the assessee.
16. In the result, the appeal filed by the assessee is allowed.
Order pronounced on 15th March, 2024.
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