2019 (2) TMI 356 - AT - Income Tax

Penalty levied u/s 271(1)(c) - addition to capital gain invoking section 50C - difference between market value of the property as per the valuation for stamp duty and the sale consideration - Held that - The assessee had sold property and derived income from capital gain. As there was a difference between market value of the property as per the valuation for stamp duty and the sale consideration, section 50C was attracted and consequently there was additional capital gain tax of ₹ 1,01,191/- was levied. We find that the assessee has sold the property i.e. land situated in Village Gourangapur, P.S. Bhadreshwar on 06.04.2010 for ₹ 9,00,000/-. The market value as per ADSR for the above property was ₹ 17,81,815/-. AO records that the required report from the valuation cell is not received and that, as the assessment is getting barred by limitation, the assessment is completed. The valuation as per ADSR as obtained by the Valuation Authority, Chandannagar, Hooghly was not referred to the valuation cell. Under these circumstances, we are of the considered opinion that no penalty can be levied u/s 271(1)(c). The assessee has furnished a reasonable explanation. AO has not based the addition after obtaining valuation report from the valuation officer as required by law. In the result, the penalty levied u/s 271(1)(c) of the Act is cancelled. - Decided in favour of assessee.

Summary

Issues:
Penalty under section 271(1)(c) of the Income Tax Act based on capital gain computation.

Analysis:
The appeal was filed by the assessee against the order of the ld. Commissioner of Income Tax (Appeals) confirming the penalty under section 271(1)(c) of the Act. Despite notice, the assessee did not appear, leading to the disposal of the appeal ex parte. The assessee had sold a property and derived income from capital gain. The difference between the market value of the property and the sale consideration invoked section 50C of the Act, resulting in additional capital gain tax. The property was sold for ?9,00,000, while the market value as per ADSR was ?17,81,815. The Assessing Officer completed the assessment without the required valuation report from the valuation cell, stating that the assessment was getting barred by limitation. The Tribunal noted that the valuation obtained by the Valuation Authority was not referred to the valuation cell. Consequently, it was held that no penalty could be levied under section 271(1)(c) of the Act. The assessee provided a reasonable explanation, and since the Assessing Officer did not base the addition on the valuation report as required by law, the penalty was cancelled. As a result, the appeal of the assessee was allowed. The judgment was delivered on February 1, 2019, by the Appellate Tribunal ITAT Kolkata.

This analysis highlights the crucial aspects of the judgment, focusing on the issues related to the penalty under section 271(1)(c) of the Income Tax Act concerning the computation of capital gains from the sale of a property. The Tribunal's decision was based on the failure to obtain the necessary valuation report and the Assessing Officer's non-compliance with legal requirements, leading to the cancellation of the penalty.