2015 (12) TMI 1457 - AT - Income Tax

Penalty u/s. 271(1)(c) - as per revenue assessee had furnished inaccurate particulars with respect to sale of property at Igatpuri - AO invoked the provisions of section 50C for determining Long Term Capital Gain - Held that - the addition has been made by invoking the provisions of section 50C. It is a well settled law that penalty cannot be levied on the additions based on assumptions, estimations and by invoking deeming provisions. It is an undisputed fact that the assessee has disclosed the sale transaction of land in his return of income and has even computed Long Term Capital Gain thereon. The assessee had computed Long Term Capital Gain on the basis of sale consideration stated in sale deed, whereas, the Assessing Officer has determined Long Term Capital Gain on the basis of valuation certificate submitted by the assessee for the year 2010. The addition has been made by invoking deeming provisions of section 50C. In our considered view in assessment proceedings the provisions u/s. 50C can be invoked for making addition, however penalty cannot be levied on the basis of such deeming provisions. The Department cannot presume that there is a concealment or inaccurate particulars are furnished. There must be independent finding. Once, the assessee has furnished the explanation, the onus shifts on the Revenue to prove that the explanation furnished by assessee is wrong. We observe that the Revenue has not discharged the onus in proving that the sale consideration stated in the sale deed is wrong. Therefore, in the facts of the case, we are of the view that penalty u/s. 271(1)(c) cannot be levied on such additions even if admitted by the assessee in quantum proceedings. - Decided in favour of assessee.

Summary

Issues:
Levy of penalty under section 271(1)(c) of the Income Tax Act, 1961 for furnishing inaccurate particulars of income.

Analysis:
The case involved an appeal by the assessee against the order of the Commissioner of Income Tax (Appeals) confirming the penalty imposed under section 271(1)(c) of the Income Tax Act, 1961. The assessee, an individual, had sold land and declared a taxable income for the assessment year 2008-09. The Assessing Officer invoked section 50C to determine the sale value of the land, resulting in a discrepancy between the declared sale price and the valuation by the Stamp Valuation Authority. The penalty was imposed for understating the Long Term Capital Gain arising from the sale of the land.

Despite repeated notices, the assessee did not appear before the Tribunal, leading to a decision based on the available records. The Department argued in favor of upholding the penalty, stating that the assessee had furnished inaccurate particulars regarding the sale of the property. The Department contended that since the assessee accepted the addition and paid the tax and interest, the penalty was justified.

The Tribunal observed that the addition was made based on section 50C, which allows for valuation adjustments, but noted that penalties cannot be levied solely on assumptions or deeming provisions. The Tribunal emphasized that the burden of proof lies with the Revenue to show inaccuracies in the assessee's explanation. In this case, the Revenue failed to establish that the sale consideration provided by the assessee was incorrect. The Tribunal cited a previous decision where penalties were deleted under similar circumstances.

Relying on the precedent and considering the facts of the case, the Tribunal decided to delete the penalty imposed under section 271(1)(c) and allowed the appeal of the assessee. The decision was based on the principle that deeming provisions alone are insufficient grounds for levying penalties, especially when the assessee has disclosed the transactions and computed the income in good faith.

In conclusion, the Tribunal ruled in favor of the assessee, emphasizing that penalties cannot be imposed merely on the basis of deeming provisions without independent verification of inaccuracies. The decision highlighted the importance of substantiating claims of inaccuracies before penalizing taxpayers for discrepancies in income declarations.