TMI Blog2017 (11) TMI 1065X X X X Extracts X X X X X X X X Extracts X X X X ..... is less than the fair market value. How the ALV disclosed in return of income filed in response to notice to notice u/s 148 is not correct. Thus, on this addition, no penalty can be levied; especially on the difference between the ALV shown by the assessee in the return of income as well as the value adopted by the Registered Valuer, which again is purely based on estimate. Disallowance claim of set off of loss both under the head “income from house property” and “business income” Held that:- As in the assessment order, Assessing Officer has noted that assessee itself has filed a revised computation of its income on 29/9/2009 wherein such a claim was withdrawn or was not claimed which has been accepted by the Assessing Officer also. After accepting assessee’s claim, the Assessing Officer has nowhere recorded his satisfaction or has stated, as to whether the assessee has furnished any inaccurate particulars of income, albeit at the end of the assessment order, he frames a charge both under concealment of income as well as furnishing of inaccurate particulars of income which, in our opinion is not correct, because the Assessing Officer has to specify the charge while initiating p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e were heard together and are being disposed of by way of this consolidated order. As a lead case, we are taking up the appeal for the assessment year 2002-03, wherein our finding by and large would be applicable mutatis-mutandis for all the years impugned before us. 4. The main issue permeating through in all the appeals is that, the assessee has leased out its property situated at Khandsa Road, Gurgaon to Punjab National Bank at a lease rent of ₹ 1 lakh, vide lease agreement dated 6/8/2001. Based on the assessment proceedings for assessment year 2006-07, the Assessing Officer issued notice under section 148 for impugned assessment years on the ground that assessee has not shown correct rental income in accordance with the law. In response to notice under section 148, assessee in its return of income showed ALV of the property at ₹ 65,76,835/-. The assessee was later on asked to furnish the valuation report in respect of ALV of the property, in response to which assessee filed valuation report of the Government Approved Valuer, dated 29/9/2009, as per which ALV of the property was worked out at ₹ 76,04,853/-. During the course of assessment proceedings, assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g officer worked out the income for the preceding assessments years accordingly. During the assessment proceedings, for the assessment year 2002-03, the assessing officer asked for furnishing the valuation report as on 1.4.2001 and accordingly valuation report from registered valuer was obtained on 29.09.2009, whereby the ALV was worked out at 76,04,853. It is respectfully submitted that the assessee has duly offered rental income actually received from letting out of the property to M/s Bank of Punjab Ltd. in the return of income and offered the rental income of ₹ 65,76,835/- as ALV worked out backwards on the basis of valuation report. On the above facts there was no failure on the part of the assessee to disclose fully and truly material facts relating to the assessment of the said rental income. It is a settled law that the assessment completed on the basis of the valuation report by the valuer is not amenable to levy of penalty under section 271(l)(c) of the Act. It is further respectfully submitted that it is not a case where any information/document has come to the assessing officer's knowledge or possession, from some third party, which would show that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellate order. His entire finding for confirming the penalty is on the difference of ALV, which has been added by the Assessing Officer. There is no finding on so far as penalty levied by the Assessing Officer on the claim of set off of carried forward losses under the head income from house property and set off of business loss. 9. We have heard both the parties and also perused the relevant finding given in the impugned order. First of all, it appears to us that the addition/ disallowance, on which Assessing Officer has levied the penalty, are as under:- (i) Difference between ALV shown by the assessee in the return of income filed in compliance to notice under section 148 shown at ₹ 65,76,835/- and the ALV determined by the approved Valuer at ₹ 76,04,853/- which comes to ₹ 10,28,018/-. (ii) Disallowance of set off of brought forward losses of ₹ 46,03,784/- from income from house property; and (iii) Set off of business loss of ₹ 5,39,651/-; Aggregating to ₹ 61,71,453/-. 10. The Assessing Officer, however, while determining the amount of income concealed for the purpose of levying the penalty, has taken the amount at ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there is no finding by the ld. CIT(A) on this point. However, in the assessment order, Assessing Officer has noted that assessee itself has filed a revised computation of its income on 29/9/2009 wherein such a claim was withdrawn or was not claimed which has been accepted by the Assessing Officer also. After accepting assessee s claim, the Assessing Officer has nowhere recorded his satisfaction or has stated, as to whether the assessee has furnished any inaccurate particulars of income, albeit at the end of the assessment order, he frames a charge both under concealment of income as well as furnishing of inaccurate particulars of income which, in our opinion is not correct, because the Assessing Officer has to specify the charge while initiating penalty proceedings under section 271(1)(c) qua each addition as to on which limb of section 271(1)(c) he is initiating penalty proceedings. We find that while levying penalty, he has again held that penalty is to be imposed under both the charges which is evident from para 12 of the impugned penalty order. 13. Section 271(1) (c) envisages the levy of penalty on two distinct limbs, that is, when the Assessing Officer in the course of any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relevant observation of the Hon'ble Tribunal in this regard reads as under:- 59. As the provision stands, the penalty proceedings can be initiated on various ground set out therein. If the order passed by the Authority categorically records a finding regarding the existence of any said grounds mentioned therein and penalty proceedings is initiated, in the notice to be issued under Section 274, they could conveniently refer to the said order which contains the satisfaction of the authority which has passed the order. However, if the existence of the conditions could not be discerned from the said order and if it is a case of relying on deeming provision contained Explanation-1 or in Explanation-1(B), then though penalty proceedings are in the nature of civil liability, in fact, it is penal in nature. In either event, the conditions mentioned in Section 271 should be made known about the grounds on which penalty on him as the Section 274 makes it clear that assessee has a right to contest such proceedings and should have full opportunity to meet the case of the Department and show that the conditions stipulated in Section 271(1)(c) do not exist as such he is not liable to pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the information, facts and materials in the hands of the authority imposing the penalty at the time the order was passed and further discovery of facts subsequent to the imposition of penalty cannot validate the order of penalty which, when passed, was not sustainable. 61. The Assessing Officer is empowered under the Act to initiate penalty proceedings on any proceedings that there is concealment of income or furnishing of inaccurate particulars of total income under clause (c). Concealment, furnishing inaccurate particulars of income are different. Thus, the Assessing Officer while issuing notice has to come to the conclusion that, whether is it a case of concealment of income or is it a case of furnishing of inaccurate particulars. The Apex Court in the case of Ashok Pai vs. CIT in Appeal (civil) 2747 of 2007 held that inaccurate particulars of income carry different connotations. The Gujarat High Court in the case of MANU ENGINEERING reported in 122 ITR 306 and the Delhi High Court in the case of VIRGO MARKETING reported in 171 Taxman 156, has held that levy of penalty has to be clear as to the limb for which it is levied and the position being unclear penalty is not sust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owance under section 14A is concerned, admittedly disallowance has been made by the Assessing Officer by applying rule 8D, which is not applicable prior to the assessment year 2008-09 and, therefore, no penalty can be levied on such a disallowance worked out on the basis of rule 8D. Accordingly, penalty levied is deleted on this score. 19. So far as levy of penalty on loss of sale of shares and disallowance of set off of business loss, we find that here again the Assessing Officer has sought to levy penalty both for concealment and furnishing of inaccurate particulars of income, which is evident from para 8 of the assessment order as well as paras 6 11 of the impugned penalty order. Without specifying the charge, under which limb he is initiating penalty proceedings, the Assessing Officer cannot levy penalty as held by the Hon'ble Karnataka High Court in the aforesaid case, as discussed while deciding the appeal for assessment year 2002-03. In view of our finding given therein, we hold that under these facts and circumstances, penalty cannot be levied and the same is directed to be deleted. 20. In assessment years 2004-05 and 2005-06, again penalty has been levied on ac ..... X X X X Extracts X X X X X X X X Extracts X X X X
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