2018 (6) TMI 1055 - HC - Income Tax

Levy of penalty u/s 271(1)(c) - failure to take stamp duty value of property u/s 50C being land and building for sale - assessee ought to have offered capital gain tax on the basis of valuation adopted by the Stamp Valuation authorities - Held that - As is well settled, capital gain can be levied on actual sale consideration and not on fair market value. Subsection 1 of Section 50C of the Act makes a deviation in this principle and introduces a concept of deemed consideration for the purpose of Section 48 of the Act. There is thus a clear distinction between sale consideration actually received and deemed to have been received in terms of subsection 1 of Section 50C of the Act. Application of subsection 1 of Section 50C therefore cannot automatically give rise to penalty proceedings. In the present case, the assessee had in fact at one stage disputed such valuation by pointing out inter alia that the property was facing certain restrictions from the forest department, and that therefore, the valuation prescribed by the stamp valuation authority could not be automatically adopted. In the facts of the case, we do not find any reason to interfere with judgment of the Tribunal. This is so since the assessee had, as noted above, initially disputed the stamp valuation. However, once the assessee gave up the challenge, revised the return and offered additional deemed income to tax. The judgment of Orissa High Court in the case of Commissioner of Incometax, Orissa v. Ganpatrai Gajanand 1976 (7) TMI 33 - ORISSA HIGH COURT was rendered in the background of Section 68 of the Act which contains vastly different provisions; as compared to Section 50C of the Act.- Decided in favour of assessee.

Summary

Issues:
1. Deletion of concealment penalty under Section 271(1)(c) of the Income Tax Act.
2. Deletion of penalty levied under Section 271(1)(c) of the Income Tax Act for failure to disclose all facts in the return.

Issue 1: Deletion of concealment penalty under Section 271(1)(c) of the Income Tax Act:
The case involved an appeal by the Revenue against the judgment of the Income Tax Appellate Tribunal regarding the deletion of concealment penalty under Section 271(1)(c) of the Income Tax Act. The respondent-assessee, a private company, had sold a property and declared a short-term capital gain in its return. The Assessing Officer, based on stamp duty valuation, determined a higher value for the property, invoking Section 50C of the Act for capital gain calculation. The assessee initially disputed the valuation but later accepted it, revised the return, and offered additional tax. The Assessing Officer imposed a penalty, which the Tribunal deleted. The Tribunal held that the penalty could not be levied based on deeming provisions alone and that the assessee had disclosed all relevant facts. The Revenue contended that Section 50C mandates offering capital gain based on valuation by Stamp Valuation authorities, and the penalty should not have been deleted.

Issue 2: Deletion of penalty under Section 271(1)(c) for failure to disclose all facts in the return:
The second issue revolved around the deletion of a penalty under Section 271(1)(c) of the Income Tax Act for the assessee's failure to disclose all facts in the return. The Assessing Officer believed the assessee lacked bona fide intention as it revised the income only after being prompted by the tax authority. The Tribunal, however, found in favor of the assessee, citing a previous judgment and emphasizing that the assessee had provided all relevant documents and details to the Assessing Officer. The Tribunal held that agreeing to additions based on deeming provisions did not amount to filing inaccurate particulars. The Revenue argued that the assessee should have declared the valuation adopted by the Stamp Valuation authority and offered capital gain accordingly, failing which penalty under Section 271(1)(c) was justified.

In conclusion, the High Court upheld the Tribunal's decision to delete the penalties imposed under Section 271(1)(c) of the Income Tax Act. The Court emphasized the distinction between actual sale consideration and deemed consideration under Section 50C, noting that the assessee had initially disputed the valuation but later revised the return in compliance. The Court highlighted the opportunity provided to the assessee under subsection (2) of Section 50C to challenge the valuation during assessment proceedings. The Court differentiated the present case from previous judgments and indicated a willingness to examine similar issues in the future.