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TMI Blog2024 (10) TMI 348X X X X Extracts X X X X X X X X Extracts X X X X ..... e and not based on any positive material and he has adopted the fair market value on the basis of value mentioned in the sale deed of that impugned property as on 17.11.1980 without referring the matter to the DVO and thus the computation of capital gain has been made on the basis of material furnished by assessee itself and already available on record, this was not fit case for imposition of penalty u/s 271(1)(c) of the Act. Impugned penalty has been levied by the ld. AO merely on the basis of findings in the quantum proceedings and have not independently examined the matter in the penalty proceedings u/s 271(1)(c) of the Act, even on this procedural count, the penalty levied cannot be sustained though the addition has been sustained by the Tribunal, that by itself does not prove that there is any conclusive and absolute material to suggest the assessee has concealed any income and or furnished inaccurate particulars of income. In our opinion, penalty cannot be levied in this kind of situation as there was no evidence to suggest that claim of assessee was bogus or malafide and disallowance of the claim itself cannot be reason to levy penalty. The addition of capital gain is comput ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of income or concealment of income under the facts and in the circumstances of the Appellant s case. 4. Without prejudice to the above, the authorities below are not justified in levying a penalty of Rs. 96,41,529/- u/s 271(1)(c) of the Act under the facts and in the circumstances of the Appellant's case. 5. The authorities below failed to appreciate that the Appellant has neither concealed any income nor furnished inaccurate particulars of income to warrant levy of penalty and therefore, the penalty levied u/s.271(1)(c) of the Act requires to be cancelled. 6. Without prejudice to the above, the penalty levied is highly excessive and liable to be reduced substantially. 7. The Appellant craves leave of your Honour to add, alter, amend, rectify, and delete any of the grounds urged above. 8. For the above and other grounds that may be urged at the time of hearing of the appeal, the Appellant humbly prays that the appeal may be allowed, and Justice rendered. 2. The ld. A.R. submitted that the assessee is a Non-Resident Individual and for the year under appeal, the assessee had filed his return of income on 31/07/2014 vide acknowledgement number 301213670310714 declaring a total i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n issued another Notice u/s 274 r.w.s 271(1)(c) of the Act on 16/01/2023 as under: Whereas in the course of proceedings before me for the Assessment Year 2014-15, it appears to me that you have furnished inaccurate particulars of income. 2.5 The Assessee vide his detailed objections filed before the learned A.O on 21/01/2023, objected to the issuance of the two notices and also relying on the decision of the jurisdictional High Court pointed that in the absence of conclusive satisfaction in the Notices, the said Notices would be bad in law. The Assessee also in the same submission pointed out that the issuance of a fresh Notice u/s 274 r.w.s 271(1)(c) of the Act dated 16/01/2023 is barred by limitation. However, the learned A.O ignoring the detailed submissions proceeded to conclude the proceedings by holding as under: As is evident from the aforesaid cl. (c) of s. 271(1) of the Act, the words used are 'has concealed the particulars of his income' or furnished 'inaccurate particulars of such income'. Thus, both in case of concealment and inaccuracy, the phrase 'particulars of income' has been used. The legislature has not used the words 'concealed his in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view of the law laid down in the authorities referred by us, we are of the view that the penalty order not sustainable in law. 2.9 He submitted that the aforesaid view taken by the Hon'ble High Court was again followed in the case of M/s. SSA S EMERALD MEADOWS reported in [2016] 73 taxmann.com 241 (Karnataka). Aggrieved by the same, the department filed an SLP before the Hon ble Supreme Court, which has been dismissed. In view of the above, he submitted that the penalty levied on the basis of the invalid notice issued by the learned AO is opposed to law and facts of the assessee s case and hence, the penalty imposed deserves to be cancelled on this score. 2.10 The ld. A.R. relied on the following precedents: (i) Judgement of Jurisdictional High Court in the case of Commissioner of Income-tax, Bangalore v. Chandrasekaran reported in [2015] 56 taxmann.com 210 (Karnataka), (ii) Order of ITAT Hyderabad in the case of Sunil Kumar Singhania Vs. ACIT reported in (2012) 52 SOT 137 (iii) Order of Tribunal in the case of Tecnotree Convergence Ltd. Vs. DCIT in ITA No.1518/Bang/2017 dated 11.8.2021 for the AY 2009- 10 (iv) Judgement of Hon ble Supreme Court in the case of Dharmendra Textil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith the department. He therefore submitted that the said action cannot be construed as admission of any error on part of the assessee or it cannot lead to an inference that he has concealed any income or furnished inaccurate particulars of income to warrant the levy of penalty. Hence, the penalty imposed by the learned A.O. requires to be cancelled. 2.17 He also invited our attention to the decision of the Apex Court on Dilip Shroff s case [291 ITR 519 (SC)], wherein the Apex Court while considering an identical issue of levy of penalty on account of the difference in valuation of FMV as at 01/4/1981 as adopted by the assessee and as finally concluded by the department on the basis of the report of the Valuation officer has held as under : 79. The assessee could get the valuation done through any other mode of index value, or the assessee could have engaged any other valuer other than a registered valuer also. In the instant case, the assessee had chosen to obtain the opinion of a registered valuer. 80. The registered valuer has arrived its opinion on certain basis. He while making the valuation report, disclosed all the particulars. He disclosed that he had chosen to the index val ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en denied by the Department, wherein the Hon'ble Supreme Court observed as under: We are not concerned in the present case with the means rea. However, we have to only see as to whether in this case, as a matter of fact, the assessee has given inaccurate particulars. In the Webster's Dictionary, the word inaccurate has been defined as: not accurate, not exact or correct; not according to erroneous; as an inaccurate statement, copy or transcript truth: We have already seen the meaning of the word particulars in the earlier part of this judgement. Reading the words in conjunction, they must mean the details supplied in the return, which are not accurate, not exact or correct, not according to truth or erroneous. We must hasten to add here that in this case, there is no finding that any details supplied by the assessee in its return were found to be incorrect or erroneous or false. Such not being the case, there would not be question of inviting the penalty under section 271[1][c] of the Act. A mere making of the claim, which is not sustainable, in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such claim made in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egistration number Reg No. as CAT-I/Reg No. ICC-I/2006-07 dated 11.08.2006. you are value which class of assets? I have been appointed as a registered valuer for category I for of assets of immovable properties (Other than agricultural lands. plantations. forests. mines quarries). Qn. 15: As per the order of chief commissioner vide your registration number Ans: Reg No. as CAT-I/Reg No. I/CC-1/2006-07 dated 11.08.2006, you been appointed as a registered valuer for category 1 for class of assets of immovable properties (other than agricultural lands, plantations, forests, Whereas as mentioned in your answer to your mines and quarries). answer in question No:10 you have mentioned that you have value agricultural lands. Qn. 16: Since the registration Order in Reg No. as CAT-UReg No. I/CC-1/2006-07 dated 11-08-2006 you have been appointed as valuer Only for Immovable properties (other than agricultural 'ands. plantations. forests. Mines and quarries) AS Such you have violated the instructions mentioned in the said order Do you have anything to say to this? Since the institutions are accepting Our Valuations Of agricultural land and the giving only his opinion and as this the general ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sub-registrar office Devanahalli, Taluk Kasaba Hobli, where the sale Instances In that locality during the year 1980-81 and 1981-82 have been furnished. From the perusal of the sale instances submitted by the S.R.O., there Is no cases where the consideration 15 near to the market rate adopted by you. Please explain all this. Ans. Because this is the general practice that the transacted values are much more than the registered values, | have adopted the market rate in 1851 as Rs 2550 ft. Qn. 25: 11 acres 42 guntas when converted to square feet will come to 5,23,809 sq feet. If the market rate of Rs 25 sq it 18 adopted, the market value for the said property would come to Rs 1,20,95,225/-. This will be 327 times higher than the transacted value. Explain this. Ans. The market rate of Rs 25/ sq ft was taken presuming that a land wil be converted to a residential or a commercial property other than agricultural property in which case, the land is not valued as a whole but on square foot basic and while adopting this value, allowance has been given for non-saleable portion of the land which may go for the purpose of the approach roads etc. Qn. 26: The conversion of the said land happened ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on given are contradictory. You are also not qualified to value agricultural property. What is your explanation to this? Ans. I tried but sale instances were not available and contradiction in the report is typographical error for which I apologize. 4.2 The crux of the above statement is that K. Manjunath is a registered valuer for category-1 for class of assets immovable properties other than agricultural land, plantation, forest, mines and queries and his registered number is CAT-I/REG No.1/CC/200607 dated 11.8.2006 and he has done few valuations for the purpose of income tax computation and also he has done very few valuations of agricultural properties. He was unaware of the fact that there is separate valuation/valuer for agricultural land. He valued the impugned land measuring 11 acres 42 guntas at Rs.25/- p.sq.ft. though the same has been acquired by assessee vide registered document No.1425 of 1980-81 dated 17.11.1980 for a value of Rs.40,000/-. Within a period of 5 months the same has been valued by the present valuer at Rs.25/- p.sq.ft. though the SRO value of the same was Rs.40,000/- before 5 months at the time of registration. Thus, the valuation of 11 acres 42 guntas a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the value adopted for registration of the property with the SRO as per sale deed dated 17.11.1980. Thus, he applied the cost of indexation that is worked out at Rs.40,000x1024/100 and arrived at the cost of acquisition at Rs.2,60,654/- and accordingly, he computed the capital gain. In our opinion, the value adopted by SRO is for determining the stamp value of sale transactions and it could not be the fair market value. Being so, in absence of any evidence of fair market value as on 1.4.1981, not being provided by assessee and revenue, the estimate made for determining the capital gain for the computation of the capital gain may be reasonable but cannot be used to levy penalty u/s 271(1)(c) of the Act without any concrete material to determine the same and the estimation cannot substitute the evidence to show the fair market value. Provisions of section 2(22B) of the Act very clearly defined the fair market value as follows: (i) The price that the capital asset would ordinarily fetch on sale in the open market on the relevant date; and (ii) Where the price referred to in subject clause (i) is not ascertainable, such price as may be determined in accordance with the rules made und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essary that there must be either concealment of income and or furnishing inaccurate particulars of income by the assessee. As the AO or appellate authority arrived at different estimates of income of the assessee, that itself cannot be said that assessee concealed particulars of income and or furnished inaccurate particulars of income so as to attract penalty. Penalty u/ 271(1)(c) of the Act was not imposable in relation to estimated additions because the factum of either concealment of income or furnishing inaccurate particular of income, were not proved. For this purpose, we rely on the following judgements. 4.6 It is to be noted that in case of ACIT Vs. Mrs. Meenakshi (125 TTJ 856) (2009) 28CCH 112 (Chen Trib), wherein Tribunal placed reliance on the judgement of Hon ble Madras High Court in the case of Tulasi Mani Ammal Vs. CIT (158 CTR 5) (Mad.), and held as under: 8. We have carefully considered the submissions. It is admitted that assessee has inherited the property and no cost had been incurred by her on acquisition. The assessee had obtained the valuer's report for the fair market value of the property as on 1st April, 1981. The AO, on the other hand, has adopted the v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... received or accruing as a result of the transfer by an assessee of a capital asset, being land or building or both, is less than the value adopted or assessed by any authority of a State Government (hereafter in this section referred to as the 'stamp valuation authority') for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed shall, for the purposes of s. 48, be deemed to be the full value of the consideration received or accruing as a result of such transfer. (2) Without prejudice to the provisions of sub-s. (1), where (a) the asses ee claims before any AO that the value adopted or assessed by the stamp valuation authority under sub-s. (1) exceeds the fair market value of the property as on the date of transfer; (b) the value so adopted or assessed by the stamp valuation authority under sub-s. (1) has not been disputed in any appeal or revision or no reference has been made before any other authority, Court or the High Court, the AO may refer the valuation of the capital asset to a Valuation Officer and where any such reference is made, the provisions of sub-ss. (2), (3), (4), (5) and (6) of s. 16A, cl. (i) of sub-s. (1) and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... posing the penalty. In fact, the order imposing penalty is contrary to law, declared by this court in the case of CIT v. Manjunatha Cotton Ginning Factory [2013] 359 ITR 565/218 Taxman 423/35 taxmann.com 250 (Kar.), in as much as, it is clear from the order that there is no direction to initiate penalty proceedings. In the aforesaid judgment, it was held that it is imperative that the assessment order contains a direction. The use of phrases like (a) penalty proceedings are being initiated separately, and (b) penalty proceedings under section 271(1)(c) are initiated separately, do not comply with the meaning of the word direction as contemplated even in the amended provisions of law. The direction should be clear and without any ambiguity. A direction by a statutory authority is in the nature of an order requiring positive compliance. When it is left to the option and discretion of the Income-tax Officer whether or not take action, it cannot be described as a direction. It is settled law that in the absence of the existence of these conditions in the assessment order penalty proceedings could not be proceeded with. The proceedings which are initiated contrary to the said legal posi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in seized material. These things alone is not sufficient for imposition of penalty. [Para 10] In the instant case, the income of the assessee has been determined on estimate basis. There is no conclusive material to show that there is actual concealment of income. Though the addition is confirmed by the Commissioner (Appeals), it does not prove that the Assessing Officer has the material to suggest that the assessee earned exact amount of profit as determined by the Assessing Officer out of these unaccounted transactions. The penalty is not mandatory. If the assessee offers convincing reasons or if any reasonable cause demonstrated for non-inclusion of such income, penalty is not attracted. [Para 13] From the entire facts of the case, it would be clear that the income of the assessee was estimated and material on record is not enough to levy penalty for concealment of income. Unless there is conclusive material showing the exact amount of concealment of income, no penalty is leviable on the addition if made on estimate basis. [Para 14] The assessee has accepted the addition only with the sole intention to avoid litigation and because the assessee has not gone in second appeal again ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e facts before the authorities below at proper level, the part disallowances of the expenditure would not par-se lead to an inference that the assessee concealed the particulars of Mastek Limited income or filed inaccurate particulars of income. On disallowance of the expenditure imposition of penalty is not automatic. 6. The Hon'ble Supreme Court in the case of CIT Vs Reliance Petroproducts Pvt. Ltd. 322 ITR 158 (SC) held that A glance at the provisions of section 271(1) (c) of the Income-tax Act, 1961, suggest that in order to be covered by it, there has to be concealment of particulars of the income of the assessee. Secondly, the assessee must have furnished inaccurate particulars of his income. The meaning of the word particulars used in section 271(1) (c) would embrace the details of the claim made. Where no information given in the return is found to be incorrect or inaccurate, the assessee cannot be held guilty of furnishing inaccurate particulars. In order to expose the assessee to penalty, unless the case is strictly covered by the provision, the penalty provision cannot be invoked. By no stretch of imagination can making an incorrect claim tantamount to furnishing ina ..... X X X X Extracts X X X X X X X X Extracts X X X X
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