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2012 (3) TMI 468 - AT - Income TaxPenalty u/s 271(1)(c) computation of capital gain on sale of land - Held that - As the assessee was under bonafide impression that the FMV adopted by it for the purposes of computation of capital gain is justified. The Hon ble supreme Court in the case of Reliance Petroproducts Pvt. Ltd. (2010 (3) TMI 80 - SUPREME COURT ) has held that even if the assessee makes an incorrect claim in law same cannot be stated that the assessee has concealed its income or furnished inaccurate particulars of income. Clause (c) of section 271(1) categorically states that the penalty would be leviable if the assessee conceals particulars of his income of furnishes inaccurate particulars thereof. Moreover the valuation by approved valuer or otherwise is a matter of estimate. Under facts and circumstances we hold that the penalty is not justifiable in respect of the addition made on account of computation of capital gain on sale of land at Dhanori. Appeal of the assessee is allowed.
Issues Involved:
1. Penalty levied under Section 271(1)(c) of the Income Tax Act. 2. Fair Market Value (FMV) determination of the land as of 1-4-1981. 3. Non-filing of returns by the assessee for A.Y. 2005-06. 4. The validity of the valuation report by the registered valuer. Issue-wise Detailed Analysis: 1. Penalty Levied Under Section 271(1)(c) of the Income Tax Act: The primary issue in this case was the penalty of Rs. 9,59,31,626/- levied by the Assessing Officer (AO) under Section 271(1)(c) of the Income Tax Act for A.Y. 2005-06. The AO imposed the penalty on the grounds that the assessee had not filed the return and had furnished inaccurate particulars of income, specifically in relation to the capital gains on the sale of land. The Tribunal, however, found that the assessee had adopted the FMV based on a registered valuer's report and that the FMV determination was a matter of estimate. The Tribunal concluded that the penalty was not justified as the assessee's actions were based on bona fide reasons, and there was no intention to conceal income. Consequently, the penalty was directed to be deleted. 2. Fair Market Value (FMV) Determination of the Land as of 1-4-1981: The AO initially computed the FMV of the land at Rs. 15.23 per sq. mtr based on three sale instances, which the Tribunal later found to be non-comparable to the assessee's land. The Tribunal noted that the land was within the Pune Municipal Corporation (PMC) limits and had better infrastructure, which justified a higher valuation. The Tribunal ultimately determined a reasonable FMV of Rs. 665/- per sq. mtr as of 1-4-1981, considering the stamp duty valuation and the specific characteristics of the land. This valuation was significantly higher than the AO's determination but lower than the Rs. 1,230/- per sq. mtr claimed by the assessee. 3. Non-filing of Returns by the Assessee for A.Y. 2005-06: The assessee did not file returns for A.Y. 2005-06, citing financial difficulties and the cessation of business activities since 1996. The Tribunal noted that the assessee had paid advance tax on the long-term capital gain for A.Y. 2008-09 before receiving any notice from the AO, indicating no intention to conceal income. The Tribunal accepted that the non-filing was due to bona fide reasons and that the assessee had lost the chance to carry forward losses by not filing the return. 4. The Validity of the Valuation Report by the Registered Valuer: The AO and CIT(A) questioned the validity of the valuation report by the registered valuer, citing several inconsistencies and unrealistic assumptions. The Tribunal, however, found that the valuer's report, while on the higher side, was based on an expert opinion and that valuation is inherently a matter of estimate. The Tribunal emphasized that the AO should have referred the matter to the District Valuation Officer (DVO) if there were disagreements with the valuer's report. The Tribunal concluded that the adoption of the FMV by the assessee, based on the valuer's report, could not be a basis for penalty under Section 271(1)(c). Conclusion: The Tribunal allowed the appeal of the assessee, directing the deletion of the penalty levied under Section 271(1)(c) of the Income Tax Act. The Tribunal's decision was based on the determination that the FMV of the land was a matter of estimate and that the assessee's actions were bona fide, with no intention to conceal income. The Tribunal also criticized the AO's approach to FMV determination and the non-consideration of comparable sale instances. The judgment underscores the importance of fair and reasonable estimation in tax assessments and the need for authorities to follow due process when disputing valuations.
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