The Delhi bench of the Income Tax Appellate Tribunal (ITAT) has held that penalty under Section 271(1)(c) of the Income Tax Act, 1961 cannot be leviable when addition is made by invoking deeming provisions.
The bench clarified that such instances cannot be treated as concealment of income or furnishing inaccurate particulars of income for imposing penalty.
In the instant case, the department-initiated assessment proceedings against the assessee on account of undisclosed investment in property by invoking Section 50C of the Income Tax Act. The department-initiated penalty proceedings for the concealment and furnishing of inaccurate particulars of income.
The assessee contended that the addition is made on account of deemed income being the difference between the stamp duty valuation and the actual price, on which, transaction had taken place.
The bench noted that the show cause notice issued before levy of the penalty is bad in law as it did not specify under which limb of Section 271(1)(c) of the Income Tax Act, the penalty proceedings under section 271(1)(c) of the Act had been initiated i.e., whether for concealment of particulars of income or furnishing of inaccurate particulars of income.
It was further noted that the issue is covered in favour of the assessee by the Judgment of the Hon’ble Karnataka High Court in the case of CIT vs. SSA’s Emerald Meadows and confirmed by Hon’ble Supreme Court in the case of CIT vs. SSA’s Emerald Meadows. “Therefore, the entire penalty proceedings under section 271(1)(c) of the Act are vitiated and penalty is liable to be cancelled,” the bench said.
“The addition is made by the A.O. on account of deeming provisions. The A.O. has not brought any positive evidence on record to show that assessee has concealed the particulars of income or furnished inaccurate particulars of income. In the similar circumstances, in case of addition made under section 50C of the I.T. Act, penalty is not leviable,” the bench said.
Subscribe Taxscan Premium to view the Judgment
