2017 (8) TMI 1685 - AT - Income Tax

Penalty u/s 271(1)(c) - capital gain computation - addition to the income of the assessee with the aid of section 50C - HELD THAT - A peripheral look to the scheme of section 50C would indicate that full sale consideration received by the assessee and required to be considered for the purpose of computing capital gain under section 48 is to be replaced with the help of deeming fiction provided in this. This replacement is further subject to determination of fair market value as contemplated under section 2. Thus an addition to the income of the assessee with the aid of section 50C is only under deeming condition which may vary if a reference to the DVO is being sent under sub-section(2) of section 50C. It would indicate that it is quite difficult to conclusively hold an assessee liable for concealment of facts or furnishing of particulars of income. An assessee may stick to his stand that whatever he has shown as actual consideration and it can be tested by making a reference to the DVO under sub-section (2) of section 50C. Thus an assessee could not be visited with penalty under section 271(1)(c) when an addition is being made with the help of deeming fiction provided in section 50C. Receipt from Astha Buildcon - For other addition no elaborate discussion has been made independently in the penalty order. AO has treated both these amounts at par and took a consolidated figure. He has nowhere made out that the assessee has furnished inaccurate particulars of income. Even in the assessment order much discussion is not available on this issue. We find force in the contentions of the assessee and delete the penalty - Assessee appeal allowed.

Summary

Issues Involved:
Challenge to correctness of penalty under section 271(1)(c) for Assessment Year 2010-11.

Detailed Analysis:

1. Challenge to Penalty Upheld by CIT(A):
The appellant challenged the penalty imposed under section 271(1)(c) by the CIT(A)-XI, Ahmedabad, for the Assessment Year 2010-11. The appellant contended that the penalty was illegal, unlawful, and against the principles of natural justice. The CIT(A) was accused of not fully considering the submissions and evidence regarding the penalty. The specific grievance was related to the confirmation of the penalty of Rs.4,50,383 levied under section 271(1)(c) concerning long-term capital gain and receipt from Astha Buildcon. The appellant argued that the penalty should not have been upheld by the CIT(A).

2. Material Facts and Assessment by AO:
The Assessing Officer found discrepancies in the appellant's income declaration for the Assessment Year 2010-11. The appellant had sold properties with co-owners, and the stamp duty valuation authorities valued the properties higher than declared. The Assessing Officer applied section 50C to adopt a higher sale consideration, resulting in an addition to the appellant's total income. Additionally, unreported income from Astha Buildcon was discovered, leading to further additions. The Assessing Officer issued a show-cause notice under section 271(1)(c) for imposing the penalty equivalent to the tax sought to be evaded.

3. Legal Provisions and Deeming Fiction under Section 50C:
Section 48 and 50C of the Income Tax Act were crucial in determining capital gains and valuation of properties. Section 50C specifically deals with the deeming provision where the value adopted for stamp duty payment replaces the full consideration received for computing capital gains. The section also allows for reference to a Valuation Officer if the fair market value is disputed. The judgment emphasized that additions made under section 50C are based on deeming conditions and an assessee cannot be penalized under section 271(1)(c) solely due to such additions.

4. Decision and Penalty Deletion:
During the appeal, the appellant did not appear, but the Departmental Representative presented the case. After considering the legal provisions and facts, the Tribunal found merit in the appellant's contentions. The Tribunal observed that the Assessing Officer did not provide detailed reasoning for the penalty related to the unreported income from Astha Buildcon. As there was no conclusive evidence of inaccurate particulars of income, the penalty was deleted. The Tribunal allowed the appeal, pronouncing the decision on 29th August 2017.

This detailed analysis of the legal judgment highlights the issues, factual background, legal provisions, and the final decision regarding the challenge to the penalty imposed under section 271(1)(c) for the Assessment Year 2010-11.