Case Law Details
Varshaben Vipulbhai Bhalani Vs DCIT (ITAT Ahmedabad)
ITAT held that penalty cannot be levied on the difference of addition made by the Ld. AO consequent to the order passed by the Ld. CIT(A) under Section 50C of the Act, since, this is nothing but deeming provision. The Sub-Section (1) of Section 50C of the Act cannot automatically to give rise to penalty proceeding.
Section 50C of the Act would indicate that full sale consideration received by the assessee required to be considered for the purposes of computing capital gain under Section 48 of the Act, is to be replaced with the help of deeming fiction provided in this. This replacement is further subject to determination of FMV as contemplated under Section 2 of the Act. Thus, addition to the income of the assessee with the aid of Section 50C of the Act is only under deeming condition which may vary in the event a reference is made to be District Valuation Officer under Sub-Section (2) to Section 50C of the Act.
Under these circumstances, the assessee cannot be held to be liable for concealment of income or furnishing inaccurate particulars of income. The assessee may stick to the stand that whatever has been paid as consideration amount for the property, the same can only be tested by making reference by District Valuation Officer under Sub-Section (2) to Section 50C of the Act. Thus, the assessee cannot be liable for penalty under Section 271(1 )(c) of the Act when an addition is being made with the help of the deeming provision of Section 50C of the Act.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
The instant appeal at the instance of the assessee is directed against the order dated 22.11.2021 passed by the Ld. Commissioner of Income Tax (Appeals)-12, Ahmedabad (in short ‘CIT(A)’) arising out of the penalty order dated 09.10.2020 passed by the Learned DCIT, Central Circle-2, Vadodara under Section 271(1)(c) of the Income Tax Act, 1961 (hereinafter referred as to ‘the Act’) for Assessment Year 2011-12.
2. This matter relates to levying of penalty under Section 271(1 )(c) of the Act to the tune of Rs.45,690/-.
3. The brief facts reading to the case is this that a search under Section 132 of the Act was conducted on 22.09.20 15 in Akshar Group of cases including the case of the assessee and consequently, notice under Section 1 53A of the Act on 24.05.2016 was issued. The assessee on 18.11.2016 filed the return of income under Section 153A of the Act declaring total income at Rs.2,19,220/- same as the return of income filed under Section 139(1) of the Act on 09.2011. The relevant assessment under Section 153A r.w.s. 143(3) of the Act was finalized on 11.12.2017 determining total income at Rs.5,69,720/-. Subsequently, as per the direction made by the Ld. CIT(A)-12, the assessee’s case was referred to the District Valuation Officer and on the basis of the valuation made by the Asst. Valuation Officer, the total income of the assessee was determined at Rs.4,26,400/-. Penalty proceeding under Section 271(1 )(c) of the Act was further initiated on assessee on the ground of addition made of Rs.2,07,180/- on account of LTCG for furnishing of inaccurate particulars of income.
4. It is the case of the Revenue that the Appellate Authority has partly allowed the appeal of the assessee and further referred the case to the District Valuation Officer under Section 50C(2) of the Act to compute the LTCG in accordance with law. Therefore, upon receipt of the Fair Market Value (FMV) from the District Valuation Officer, Rajkot, order of assessment upon re-computation of income of the assessee was finally determined at Rs.4,26,400/-. Thus, undisclosed LTCG of the assesse was determined at Rs.2,07,1 80/- instead of Rs.3,50,000/- as computed vide earlier assessment order dated 11.12.2017 and penalty was initiated for furnishing inaccurate particulars of income.
At the time of hearing of the instant appeal, the Ld. Counsel appearing for the assessee submitted before us that penalty cannot be levied on the difference of addition made by the Ld. AO consequent to the order passed by the Ld. CIT(A) under Section 50C of the Act, since, this is nothing but deeming provision. The Sub-Section (1) of Section 50C of the Act cannot automatically to give rise to penalty proceeding. According to him, Section 50C of the Act would indicate that full sale consideration received by the assessee required to be considered for the purposes of computing capital gain under Section 48 of the Act, is to be replaced with the help of deeming fiction provided in this. This replacement is further subject to determination of FMV as contemplated under Section 2 of the Act. Thus, addition to the income of the assessee with the aid of Section 50C of the Act is only under deeming condition which may vary in the event a reference is made to be District Valuation Officer under Sub-Section (2) to Section 50C of the Act. Under these circumstances, the assessee cannot be held to be liable for concealment of income or furnishing inaccurate particulars of income. The assessee may stick to the stand that whatever has been paid as consideration amount for the property, the same can only be tested by making reference by District Valuation Officer under Sub-Section (2) to Section 50C of the Act. Thus, the assessee cannot be liable for penalty under Section 271(1 )(c) of the Act when an addition is being made with the help of the deeming provision of Section 50C of the Act. On this account, the Ld. AR relied upon the judgment of the Co-ordinate bench in the matter of Chinubhai Ambalal Patel vs. ITO in ITA No.119/Ahd/2015 dated 29.08.2017, A.Y. 2010-11, a copy of whereof also been annexed to paper book filed before us. Such contention made by the assessee, however, has not been able to be controverted by the Ld. DR.
5. We have carefully perused the judgment passed by the Co-ordinate Bench in the case of Chinubhai Ambalal Patel (supra), wherein we find that the Co-ordinate Bench while granting relief to the assessee observed as follows:
“5. Section 48 of the Income Tax Act provides mode of computation of capital gains. This section contemplates that income chargeable under the head “capital gain” shall be computed by deducting from the full value of the consideration received or accruing as a result of the transfer of the capital asset the following amounts, namely :- (a) expenditure incurred wholly and exclusively in connection with such transfer, (b) the cost of acquisition of the asset and the cost of any improvement thereafter. Section 50C further provides that where the consideration received or accruing as a result of the transfer by an assessee of a capital asset, being land or building or both, is less than the value adopted or assessed by any authority for the purpose of payment of stamp duty in respect of such transaction, the value so adopted or assessed shall, for the purposes of section 48, be deemed to be the full value of the consideration. In other words, full consideration mentioned in section 48 is to be replaced by the consideration on which value of the property was adopted for the purpose of payment of stamp duty.
6. Sub-section (2) of section 50C further contemplates that in case the assessee alleges that stamp duty valuation authority under sub-section (1) exceeds the fair market value of the property, the Assessing Officer may refer the valuation to the capital asset to the Valuation Officer^ A peripheral look to the scheme of section 50C would indicate that full sale consideration received by the assessee and required to be considered for the purpose of computing capital gain under section 48 is to be replaced with the help of deeming fiction provided in this. This replacement is further subject to determination of fair market value as contemplated under section 2. Thus an addition to the income of the assessee with the aid of section 50C is only under deeming condition which may vary if a reference to the DVO is being sent under sub-section(2) of section 50C. It would indicate that it is quite difficult to conclusively hold an assessee liable for concealment of facts or furnishing of particulars of income. An assessee may stick to his stand that whatever he has shown as actual consideration and it can be tested by making a reference to the DVO under sub-section (2) of section 50C. Thus an assessee could not be visited with penalty under section 271(1) (c) when an addition is being made with the help of deeming fiction provided in section 50C.
7. As far as other addition of Rs. 15,750/- is concerned no elaborate discussion has been made independently in the penalty order. The Assessing Officer has treated both these amounts at par and took a consolidated figure. He has nowhere made out that the assessee has furnished inaccurate particulars of income. Even in the assessment order much discussion is not available on this issue. Considering overall facts and circumstances, I find force in the contentions of the assessee and delete the penalty.
8. In the result, appeal is allowed.”
6. We do not find any reason to deviate from the stand taken by the Coordinate Bench on the identical facts of the case. Hence, respectfully relying upon the same, we do not justify the imposition of penalty levelled against the assessee on the basis of the deeming provision of Sub-Section (2) to Section 50C of the Act. Thus, the order passed by the authorities below under Section 271(1 )(c) of the Act is found to be erroneous and bad in law and hence,
7. In the result, assessee’s appeal is allowed.
