2016 (7) TMI 1133 - AT - Income Tax

Penalty u/s 271(1)(c) - Held that - As the quantum addition is deleted, there remains no basis at all for levying the penalty for concealment or furnishing inaccurate particulars. The penalty cannot stand on its legs when addition on the basis of which the penalty was imposed remains no more in existence, thus, appeal allowed in favour of assessee.

Summary

Issues:
- Penalty imposed under section 271(1)(c) of the Income Tax Act, 1961 based on quantum addition deleted by the Tribunal.
- Allocation of value towards building and land for computation of capital gains.
- Consideration of market value for building more than 40 years old.

Analysis:

1. Penalty under Section 271(1)(c):
The Revenue challenged the penalty imposed under section 271(1)(c) based on quantum addition, which was subsequently deleted by the Tribunal. The Tribunal referred to previous judgments to support its decision that when the basis for the penalty imposition is no longer valid due to deletion of the quantum addition, the penalty cannot be sustained. Citing relevant legal precedents, the Tribunal allowed the appeal of the assessee and directed the Assessing Officer to delete the penalty.

2. Allocation of Value for Capital Gains:
The dispute revolved around the allocation of value between the building and land for computing capital gains. The Assessing Officer (AO) had allocated a significant portion of the consideration towards the building, disregarding the claim that the land value was the dominant factor in the transaction. The Commissioner of Income Tax (Appeal) correctly considered that the market value was not factored into the calculation of differential premium, leading to an improper segregation of the consideration towards the building. The Tribunal upheld the decision of the Commissioner, dismissing the Revenue's appeal.

3. Market Value for Old Building:
Regarding the computation of capital gains for a building over 40 years old, the assessee contended that the market value should be considered as per Section 55(2)(b) of the Act. The Tribunal noted the claim that the building's value should be depreciated based on the Ready Reckoner method, resulting in a different valuation than the one calculated by the AO. While the Tribunal did not delve deeply into this issue, it was considered in the overall decision to dismiss the Revenue's appeal.

In conclusion, the Tribunal upheld the decisions of the Commissioner of Income Tax (Appeal) regarding the allocation of value for capital gains and the deletion of quantum addition, leading to the dismissal of the Revenue's appeal and the allowance of the assessee's appeal. The judgment highlighted the importance of considering market values and legal precedents in determining tax liabilities and penalties under the Income Tax Act, 1961.