2016 (3) TMI 817 - AT - Income Tax

Penalty u/s 271(1) (C) - difference of surrendered and returned Income - unexplained investment in house property - Held that - The surrender had been based on an estimate made by the assessee which was restricted to the extent of value calculated after getting the proper valuation done by the registered valuer. In such circumstances the assessee was well within his limits to have harbored a belief that the correct value of investment in the house property was that which was determined by the registered valuer and accordingly the disclosure of undisclosed investment in the house property based on the same was not done with intention to defraud the revenue. It cannot in such circumstances be said that the assessee had furnished any inaccurate particulars of income since the particulars of income furnished by him were based on a registered valuer report which has not been rejected by any authority below. In view of the same we hold that the assesse having not furnished any inaccurate particulars of income, levy of penalty under section 271(1)(c) is uncalled for and ought to be dismissed. - Decided in favour of assessee

Summary

Issues:
Levy of penalty under section 271(1)(c) for undisclosed income based on surrendered amount differing from disclosed income.

Detailed Analysis:
The appeal was filed against the order confirming a penalty of Rs. 32,850 under section 271(1)(c) for the variance between surrendered and returned income. The assessee declared total income of Rs. 17,23,442, but during a survey, unaccounted cash, unrecorded stock, and unexplained investment in house property were found. The assessee reduced the undisclosed investment in house property based on a chartered valuer's report. The assessment added the undisclosed investment, leading to penalty proceedings. The CIT(A) upheld the penalty, citing concealment of income. The appellant argued no concealment as the reduced investment was based on the valuer's report.

The appellant contended that the undisclosed investment was based on the valuer's report and not inaccurate particulars. The surrender during the survey was an estimate, and the correct valuation was determined later. The appellant emphasized that the undisclosed investment was disclosed based on the valuer's report, challenging the penalty. The department argued that by not disclosing the surrendered amount, inaccurate particulars were furnished, justifying the penalty.

The Tribunal considered the facts where the surrendered amount differed from the valuer's report. The undisclosed investment was based on the valuer's assessment, not a deliberate attempt to mislead. The surrender was an estimate, and the correct value was determined later. The Tribunal concluded that no inaccurate particulars were furnished, and the penalty under section 271(1)(c) was unwarranted. Consequently, the appeal was allowed, and the penalty was dismissed.