2022 (11) TMI 1292 - AT - Income Tax

Levying of penalty u/s 271(1)(c) - addition made on account of LTCG for furnishing of inaccurate particulars of income - HELD THAT - As relying on CHINUBHAI AMBALAL PATEL 2017 (8) TMI 1685 - ITAT AHMEDABAD we do not justify the imposition of penalty levelled against the assessee on the basis of the deeming provision of Sub-Section (2) to Section 50C of the Act. Thus, the order passed by the authorities below under Section 271(1)(c) of the Act is found to be erroneous and bad in law and hence, quashed. Assessee s appeal is allowed.

Summary

Issues:
Levy of penalty under Section 271(1)(c) of the Income Tax Act for furnishing inaccurate particulars of income based on addition made under Section 50C of the Act.

Analysis:
The judgment pertains to an appeal against a penalty order under Section 271(1)(c) of the Income Tax Act, 1961, for Assessment Year 2011-12. The penalty was imposed on the assessee for an addition made on account of LTCG due to furnishing inaccurate particulars of income. The case originated from a search conducted under Section 132 of the Act, leading to the assessee filing the return of income under Section 153A, which was later finalized with a revised total income. Subsequently, the District Valuation Officer determined the total income of the assessee at a lower amount, resulting in the initiation of penalty proceedings under Section 271(1)(c).

The crux of the issue revolves around the applicability of Section 50C of the Act, which deals with deeming provisions related to the computation of capital gains. The assessee contended that imposition of penalty based on the addition made under Section 50C was unjustified, as it operates under deeming conditions subject to valuation by the District Valuation Officer. The assessee argued that the full consideration for computing capital gains under Section 48 is replaced by the value adopted for stamp duty purposes under Section 50C, and any discrepancy can be rectified through valuation by the Valuation Officer.

In support of the assessee's argument, reference was made to a previous judgment by a Co-ordinate Bench in a similar case, which emphasized that an assessee cannot be penalized under Section 271(1)(c) solely based on additions made under deeming provisions like Section 50C. The Co-ordinate Bench highlighted that the replacement of full consideration with stamp duty valuation is subject to fair market value determination and can be challenged through valuation by the District Valuation Officer. Consequently, the imposition of penalty solely on the basis of Section 50C deeming provisions was deemed unwarranted.

Ultimately, the Appellate Tribunal, relying on the Co-ordinate Bench's judgment, found the penalty imposed on the assessee to be erroneous and quashed the order under Section 271(1)(c) of the Act. The appeal was allowed in favor of the assessee, emphasizing that penalty cannot be levied based on additions made under deeming provisions like Section 50C without considering the valuation process by the Valuation Officer.

In conclusion, the judgment provides clarity on the interplay between deeming provisions of the Income Tax Act and the imposition of penalties, emphasizing the need for proper valuation procedures before penalizing taxpayers for inaccuracies related to such deeming provisions.