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Shri Chandrbhan M. Ugale Versus ACIT, Central Circle – 2, Nashik

Levy of penalty u/s. 271(1)(c) - addition made on the basis of DVO’s report - Held that:- The DVO’s report is merely an expression of opinion. Thus, on the basis of opinion and assumption no penalty u/s. 271(1)(c) is leviable. Offence of concealment is not proved in such situation which is the co-requirement for levy of penalty u/s. 271(1)(c) of the Act. Similarly, in the case of Sathe Biscuits Vs. DCIT (2012 (3) TMI 468 - ITAT PUNE) the Co-ordinate Bench has held that no penalty can be levied o .....

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ferred to as the Act ) in the assessment year 2007-08. 2. The brief facts of the case are : The assessee had purchased land measuring 1.11 Hectare from one Shri Govind Sitaram Dhemse. The sale consideration of the land as per registered sale deed is ₹ 12,50,000/-. The assessee filed his return of income for the assessment year 2007-08 on 29-10-2007 declaring income of ₹ 30,33,797/-. During the course of scrutiny assessment the Assessing Officer held that the assessee had made cash pa .....

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8377; 20,80,000/- i.e. the difference between the value determined by the DVO and the purchase price of land mentioned in the registered sale deed. (Rs.33,30,000/- ₹ 12,50,000/-) as unexplained investment u/s. 69 of the Act. Penalty proceedings u/s. 271(1)(c) were initiated against the assessee. The Assessing Officer vide order dated 28-12- 2010 levied penalty of ₹ 7,00,130/-. The assessee preferred an appeal against the order levying penalty u/s. 271(1)(c). The Commissioner of Incom .....

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proceedings was dismissed by the Commissioner of Income Tax (Appeals). In second appeal, the Tribunal also confirmed the addition. The assessee thereafter, accepted the addition. However, there is no evidence on record to show that the assessee has paid cash towards part payment of sale consideration. The quantum addition has been sustained merely on the theory of probability. However, penalty cannot be levied on the additions made on probability, assumptions and estimations. The ld. AR further .....

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en the DVO s valuation report and the sale price quoted by the assessee, whereas, if the contentions of the Revenue are to be accepted, the addition should have been of ₹ 25,28,000/- i.e. the amount allegedly received in cash by Shri Dhemse. The ld. AR while concluding his argument submitted that penalty and quantum proceedings are independent. While deciding penalty conclusive inference cannot be drawn from the assessment proceedings. In support of his argument, the ld. AR placed reliance .....

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8,000/- as on-money to Shri Dhemse. The vendor had deposited the said amount in his bank and has disclosed the same in his return of income. It is a well known fact that where on-money is paid, no transactions are recorded in the books of account, thus, leaving no trial of evidence. The ld. DR prayed for dismissing the appeal of the assessee. 5. Both sides heard, orders of the authorities below perused. Addition u/s. 69 of the Act has been made in the income returned by the assessee on the basis .....

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of land. Thus, the total consideration allegedly paid by the assessee for purchase of land is ₹ 37,78,000/-. However, the addition has been made only to the extent of difference between the value determined by the DVO and the purchase price mentioned in the registered sale deed. It would be pertinent to mention here that the assessee has also obtained valuation report from the Government approved valuer. He has determined the value of land in question at ₹ 12,21,000/- @ 11,00,000/- p .....

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able to draw nexus between the amount deposited in the bank account of the vendor and the payment made by the assessee except the statement of Shri Dhemse. It is a well settled law that addition can be made on the theory of probability. However, penalty cannot be levied on the addition made on such theories, however, strong it may be. Another reason for levy of penalty is admission of Shri Dhemse. The assessee was not afforded opportunity to cross-examine Shri Dhemse. The Assessing Officer autho .....

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e person on whose confession penalty was levied, the Hon'ble High Court held: 6. We have already stated the facts and circumstances of this case as appearing from the order of the Tribunal. The Tribunal has found that the department has not proved by any cogent evidence that the amount credited as loan taken from Raj Kumar Jain & Co. was the income of the assessee and that the assessee failed to disclose that income in his return. The Tribunal, on the facts, came to the finding that ther .....

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conclusion. 8. The Hon'ble Bombay High Court in the case of Shree Nirmal Commercial Limited. Vs. CIT (supra) deleted the penalty levied u/s. 271(1)(c) on the ground that the assessee was not given opportunity to confront the depositors by way of cross-examination. The relevant extract of the findings of the Hon'ble High Court are as under: 11. ............................The assessee has throughout taken a consistent stand that the contention of the tax authorities that the person/s who .....

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de and the income-tax authorities themselves at the time of reassessment of the assessee's income pertaining to the assessment year 1967-68 and the assessment year 1968-69 once again tried to summon the parties who had given loans to the assessee. The assessing authority surely did not expect all the parties to come forward with records which by that time were about 15/16 years old. Despite that four of the parties who had given loans to the assessee in the assessment year 1966-67 and whose .....

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w that no penalty could have been levied on the assessee pertaining to the assessment year 1966-67 and the assessment year 1967-68 on the ground that the assessee could not produce the depositors after a lapse of 17 years from the date of the loan received from the parties by the assessee. The Tribunal was also wrong in confirming the penalty levied by the Income-tax Officer in the year 1985, relying upon the purported statements made by the depositors in some other proceedings before some other .....

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