2013 (10) TMI 226 - HC - Income Tax

Penalty u/s 271(1)(c) - Valuation of property u/s 50C - Held that - subject matter of the appeal is less than Rs. 10 lakhs and as per the Board Circular, such appeal of the revenue is not tenable - we dismiss this appeal in like terms reserving liberty to the revenue to seek for revival if the disposal of the appeal based on Board Circular is held to be not satisfactory - Decided against Revenue.

Summary

Issues: Valuation of capital assets for income tax assessment; Levy of penalty under section 271(1)(c) of the Income-tax Act, 1961; Applicability of section 50C of the Act in property valuation; Interpretation of substantial questions of law raised by the revenue.

In this case, the High Court of Karnataka heard an appeal by the Revenue against the order of the Income Tax Appellate Tribunal related to the assessment year 2004-05. The controversy revolved around the valuation of capital assets by the assessee, who had not followed the prescribed method under section 50C of the Income-tax Act but adopted his own approach. The Assessing Officer imposed a penalty under section 271(1)(c) for this non-compliance. The Appellate Commissioner upheld the penalty, leading the assessee to appeal to the Tribunal, which set aside the penalty. The Tribunal reasoned that the penalty was imposed due to a difference in valuation methods and not on an actual basis, thus finding it unjustified. The Revenue challenged this decision by raising substantial questions of law regarding the applicability of section 271(1)(c) in cases where the sale consideration is enhanced to market value by the Registration officer. The Court noted an objection regarding the appeal amount being less than Rs. 10 lakhs, which, as per a Board Circular, was deemed untenable for appeal by the revenue. Despite the objection, the Court dismissed the appeal while reserving liberty for the revenue to seek revival if the appeal's dismissal based on the Board Circular was deemed unsatisfactory.