2016 (11) TMI 291 - AT - Income Tax

Penalty u/s 271(1)(c) - capital gain computation - indexed cost of improvement rejected - Held that - Assessee s valuation report itself does not indicate any fact about incurring of any cost of improvement. The valuation report is given by a Registered Valuer, which is relied on by the assessee. Assessee cannot disregard its own evidence based on one Shri M.C. Patel vague statement that over a period of seven years he has incurred expenditure around ₹ 2 lacs on behalf of the assessee. There being no year-wise break-up or objectivity in the statement, the same cannot be relied on as against the statutory valuation report. The assessee s explanation is bereft of any evidence or plausibility. This is grossly against the surrounding circumstances, human conduct and preponderance of possibilities as held by the Hon ble Supreme Court in the case of Sumati Dayal (1995 (3) TMI 3 - SUPREME Court ). The assessee filed valuation report alongwith return of income and its claim of cost of improvement runs contrary to the evidence of valuation report. In view of these glaring inconsistencies, the Hon ble Supreme Court judgment in the case of Reliance Petroproducts Pvt Ltd (2010 (3) TMI 80 - SUPREME COURT ) cannot be applied to assessee s case. Thus no infirmity in the orders of the authorities below confirming the penalty which are upheld. - Decided against assessee.

Summary

Issues involved:
Confirmation of penalty under section 271(1)(c) of the Income-tax Act, 1961 for Assessment Year 2007-08 based on disallowed claim of indexed cost of improvement in the computation of capital gains from the sale of agricultural land.

Analysis:

1. Assessee's Claim of Indexed Cost of Improvement:
The assessee sold agricultural land and declared capital gains, claiming an amount towards indexed cost of improvement. However, the Assessing Officer disallowed this claim as no evidence of expenses incurred on improvement was provided. The Valuer's report did not mention any improvement, and confirmatory statements lacked direct evidence of expenditure. The AO found the explanation unsatisfactory and imposed a penalty under section 271(1)(c).

2. Penalty Proceedings and Assessing Officer's Observations:
The AO initiated penalty proceedings after disallowing the indexed cost of improvement claim. The assessee argued that the rejection of the claim does not automatically lead to penalty imposition and that conscious concealment must be proven. However, the AO found the explanation lacking, as no evidence of expenses was submitted, and confirmed the penalty based on the Valuer's report and confirmatory statements.

3. Appellate Proceedings and Confirmation of Penalty:
The assessee appealed against the penalty, contending that no bills or details were available but emphasizing a confirmatory letter regarding expenditure. The CIT(A) upheld the penalty, stating that the claim lacked evidentiary support, and the AO correctly imposed the penalty under section 271(1)(c). The Tribunal affirmed the penalty, considering the inconsistency between the valuation report and the claimed cost of improvement.

4. Arguments and Decision of the Tribunal:
The assessee argued that the valuation report did not mention the cost of improvement, and reliance on the confirmatory letter should be sufficient. However, the Tribunal held that the assessee's explanation lacked credibility and evidence, contradicting the valuation report. Citing the Hon'ble Supreme Court's judgment in Sumati Dayal, the Tribunal upheld the penalty, emphasizing the importance of evidence and consistency in claims.

In conclusion, the Tribunal dismissed the assessee's appeal, upholding the penalty imposed under section 271(1)(c) for the disallowed claim of indexed cost of improvement in the computation of capital gains. The decision was based on the lack of evidence supporting the claim and the inconsistency between the valuation report and the claimed expenditure.