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2015 (12) TMI 32 - AT - Income TaxPenalty under section 271(1)(c) - wrong computation of long term capital gain - Held that - As far as computation of long term capital gain is concerned, we find that the ld.AO has made this addition by invoking the provision contained in section 50C of the Income Tax Act. The section 50C is a deeming provision which empowers the AO to deem sale consideration equivalent to the amount on which the value has been adopted for the purpose of payment of stamp duty. To our mind, this fiction cannot be extended for visiting the assessee with penalty for concealment of income. It is pertinent to mention here that the stamp duty paid on a sum of ₹ 1,21,72,500/-. This section authorizes the AO to deem this amount as an actual sale consideration for the purpose of computing the long term capital gain. However, on a reference to the DVO, the value has been scaled down to ₹ 46,82,000/-. This drastic change in the value itself indicates that it is an estimated figure. The fiction created for computation of capital gain cannot be extended even for visiting the assessee with penalty under section 271(1)(c) of the Act. As far as the invocation of Explanation 1 and 3 attached to section 271(1)(c) is concerned, we find that the assessee has contended before the AO that she had never taxable income throughout her life. She was not well-conversant with the computation of capital gain and due to bona fide belief that her income is below taxable income, she did not file the return originally. The AO has also not exactly worked out the taxable income of the assessee on the basis of actual sale consideration received by her. Considering the explanation of the assessee, coupled with the fact that for the additions made with the help section 50C, penalty cannot be imposed upon the assessee. Decided in favour of assessee.
Issues:
Confirmation of penalty under section 271(1)(c) of the Income Tax Act, 1961 by the ld.CIT(A) for the Asstt.Year 2005-2006. Analysis: 1. Issue of Penalty Confirmation: The assessee appealed against the penalty of Rs. 1,13,083 imposed under section 271(1)(c) of the Income Tax Act, 1961. The AO had computed long term capital gain of Rs. 4,56,219 and imposed the penalty for furnishing inaccurate particulars and concealment of true income. The ld.CIT(A) confirmed the penalty, considering the addition to the income due to long term capital gain as deemed concealment of income as per Explanation-(1) and (3) of section 271(1)(c). 2. Legal Provisions - Section 271(1)(c) Analysis: Section 271(1)(c) of the Income Tax Act is crucial in this case. It allows for penalties if the assessee concealed income or furnished inaccurate particulars. The penalty can range from 100% to 300% of the tax sought to be evaded. The deeming provisions in Explanation-1 cover situations where the assessee fails to offer an explanation or offers a false explanation, leading to deemed concealment of income. 3. Application of Section 50C and Explanation 1: The AO invoked section 50C to determine long term capital gain, deeming the stamp duty paid amount as the sale consideration. However, the value was later revised by the Valuation Officer, indicating an estimated figure. The deeming provision in section 50C for capital gain computation cannot be extended to impose a penalty under section 271(1)(c). The assessee's explanation that she believed her income was below taxable and did not file a return in good faith was considered. Since the penalty cannot be imposed based on additions made under section 50C, the appeal of the assessee was allowed. 4. Conclusion: The Tribunal allowed the appeal of the assessee, overturning the penalty imposed under section 271(1)(c) for the Asstt.Year 2005-2006. The decision was based on the inapplicability of the penalty due to the nature of the additions made under section 50C and the bona fide belief of the assessee regarding her taxable income status. 5. Judicial Members and Order: The order was pronounced by Shri Rajpal Yadav, Judicial Member, and Shri Anil Chaturvedi, Accountant Member, at Ahmedabad on 26th August 2015.
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