2018 (1) TMI 989 - AT - Income Tax

Penalty proceedings u/s 271(1)(c) - deemed dividend addition u/s 2(22)(e) - additions u//s 69B - Held that - As addition stands deleted by the Tribunal and therefore, penalty on said addition cannot be sustained. Accordingly, the same is directed to be deleted Difference in the purchase value of the plot as shown in the registered sale deed and the estimate made by the Valuation Officer to whom reference was made by the AO - Held that - The addition has been made purely on the basis of the estimate given by the Valuation Officer and the value of the transaction shown in the registered sale document. If no material has been brought either by way of inquiry by the AO or some tangible information has into his knowledge that the purchase consideration of ₹ 38,50,000/- for the plot No. D-101 is less or assessee has paid extra than what has been mentioned in the registered sale document, then no penalty for either concealment of income or furnishing of inaccurate particulars can be levied. Though section 69B is a deeming fiction but in the matter of penalty proceedings, such deeming fiction cannot be extended so as to hold assessee guilty of concealment of income or furnishing of inaccurate particulars when the addition on account of deeming fiction is based on some kind of estimate given by a Govt. Valuer. If nothing incriminating is found against the assessee, then such a valuation report alone cannot be the basis for levy of penalty. Apart from that the assessee s explanation that the plot No. D-101 was adversely located in comparison to plot no. D-102 has not been rebutted and it is quite possible that two similar adjacent plots may have different market value, because of different location in terms of direction, facing of the plot, geometrical shape, Vastu factors, etc. All these factors in India do have impact on the value of the property. Such a probable factors cannot be ignored and even under Explanation 1, the assessee s explanation does constitute probable explanation which has not been found to be incorrect by way of any material on record. Thus, we delete the penalty

Summary

Issues:
Penalty under section 271(1)(c) for additions of deemed dividend and unexplained investment u/s 69B.

Deemed Dividend (Addition of &8377; 5,27,429/-):
The Tribunal had previously deleted the addition on account of deemed dividend u/s 2(22)(e) in the quantum proceedings, leading to the conclusion that the penalty on this addition cannot be sustained. Thus, the penalty on this addition was directed to be deleted.

Unexplained Investment u/s 69B (Addition of &8377; 3,98,696/-):
The addition was made due to a variance in the purchase value of two adjacent plots purchased by the assessee. The Valuation Officer estimated the value higher than the declared value, resulting in the addition. The Tribunal confirmed this addition, but the assessee argued that no penalty under section 271(1)(c) could be levied as the purchase value was based on the sale deed, and there was no evidence of additional payment by the assessee. The AO had not specified the charge for penalty under section 271(1)(c), which was considered fatal for the penalty. The Tribunal noted that the addition was solely based on the Valuation Officer's estimate and the registered sale document, without any incriminating evidence against the assessee. Factors like location, shape, and Vastu impact property value, and the assessee's explanation was deemed probable and not rebutted. Consequently, the penalty on this addition was also deleted, and the appeal of the assessee was allowed.

In conclusion, the Tribunal upheld the deletion of the penalty on both the deemed dividend and unexplained investment additions, emphasizing the importance of concrete evidence and proper charge specification for penalty under section 271(1)(c). The judgment highlighted the necessity of substantial material to support penalty imposition and recognized the significance of plausible explanations in the context of property valuation discrepancies.