2017 (5) TMI 723 - AT - Income Tax

Penalty u/s. 271(1)(c) - valuation of the property - long term capital gains addition being re-computed by the Assessing Officer reducing assessee s rate from 2050/- per sq.mtr. to 250/- per sq.mtr. only as on 01.04.1981 as modified in quantum lower appeal as well as in this tribunal - Held that - There can hardly be any dispute about the settled law that quantum and penalty proceedings are separate wherein each and every addition made in course of former does not ipso facto result in levy of latter penal action. The Revenue s argument that the assessee s valuer intentionally did not highlight the fact of the land in question to be industrial is entirely misconceived as the said valuer makes it crystal clear at the bottom of the page that assessee s land sold is situated in mixed commercial and industrial area. He thereafter certifies in the next page that there are no sale instances commensurating with the land sold on account of location size shape and other factors. This report very well considers all other advantageous factors of civic as well as industrial amenities to arrive at the valuation in question claimed at assessee s behest. There is no dispute that the Assessing Officer thereafter reduced this valuation by citing sale instances of the relevant era i.e. in the years 1981 and 1982 to drastically reduce the assessee s rate of 2050/- per sq.mtr. to 250/- only. The fact however remains that he has not considered even a single sale deed pertaining to any commercial or industrial plot as is the one involved in the instant lis. We further repeat that the said reduced rate stands enhanced to 550/- per sq.mtr. in quantum lower appeal and to that @Rs.980/- per sq.mtr. in this tribunal (supra). It is thus crystal clear that both the assessee as well as the Revenue have been found to be at equal fault in evaluating the land in question. We thus are of the considered opinion that the assessee only cannot be penalized for such an act and conduct of valuation of the property in these peculiar facts and circumstances by terming it as an instance of either concealment of income or furnishing of inaccurate particulars of income u/s.271(1)(c) of the Act. We accordingly direct the Assessing Officer to delete the impugned penalty of 5.33crores as partly confirmed in the lower appellate proceedings. - Decided in favour of assessee.

Summary

Issues:
Assessment of penalties under section 271(1)(c) of the Income Tax Act, 1961 for assessment years 2008-09 & 2009-10 based on cost of acquisition of immovable properties as on 01.04.1981.

Detailed Analysis:

1. Background of Appeals:
The appeals arose against the CIT(A)-I, Baroda's orders affirming penalties imposed by the Assessing Officer for the two assessment years. The main issue was the cost of acquisition of immovable properties as on 01.04.1981, with both parties agreeing on the sale price but disputing the acquisition cost.

2. Valuation Dispute:
The Assessing Officer challenged the cost of acquisition claimed by the assessee for industrial lands, reducing it significantly based on various factors and sale instances. The dispute led to penalty proceedings alleging concealment and furnishing inaccurate particulars of income.

3. Quantum Appeal and Tribunal Decision:
The CIT(A) modified the valuation rate, which was further adjusted by the tribunal in favor of the assessee based on expert valuation and lack of supporting evidence from the Revenue. The tribunal directed the Assessing Officer to adopt a specific cost of acquisition per sq.mtr., considering the available material on record.

4. Penalty Proceedings:
The Assessing Officer imposed penalties based on the revised cost of acquisition, alleging concealment of income. The assessee contested the penalties, arguing that the valuation was based on expert advice and the Revenue failed to provide contrary evidence. The tribunal found fault on both sides in the valuation process and concluded that the assessee should not be penalized for the valuation discrepancies.

5. Tribunal's Decision:
The tribunal allowed both appeals, directing the deletion of the penalties imposed by the Assessing Officer. It emphasized that the valuation discrepancies did not warrant penalties under section 271(1)(c) of the Income Tax Act, 1961, as the assessee's conduct was not indicative of concealment or furnishing inaccurate particulars of income.

6. Final Verdict:
The tribunal pronounced its decision on May 5, 2017, allowing both appeals and directing the deletion of penalties amounting to ?5.33 crores and ?15.60 crores for the respective assessment years.

This detailed analysis highlights the valuation dispute, quantum appeal, penalty proceedings, and the tribunal's decision to delete the penalties imposed on the assessee based on the cost of acquisition of immovable properties.