Penalty won’t attract When the Addition on Account of Deeming Fiction is based on some kind of estimate given by Govt. Valuer: ITAT [Read Order]

Imposing Penalty - ITAT - Taxscan

The Kolkata bench of Income Tax Appellate Tribunal comprising N.K. Saini, (Accountant Member) and Amit Shukla, (Judicial Member) said that penalty cannot be levied when the addition on account of deeming fiction is based on some kind of estimate given by a Government Valuer.

The Tribunal was considering an appeal filed by the Assessee, Splender Infotech (P) Ltd. against the order passed by CIT(A) New Delhi in relation to the penalty proceedings u/s 271(1)(c) for the assessment year 2006-07.

The fact of the case is that Assessee purchased two identical plots from M/s Nalini sarees. Subsequently, the AO made an addition on the ground that two plot on the same date with same party, having identical size but there is a difference in the consideration paid. Accordingly, he referred the determination of valuation to the Valuation Officer in terms of section 142A, who has computed the value at Rs. 42,40,960/- as against the declared value of Rs. 38,50,000/-. The difference of Rs. 3,90,960/- was added.

Sanjay Malik, Advocate behalf of Assessee submitted that Merely because there was a difference of circle rate and estimate by the DVO, there cannot be the ground for levy of penalty under section 271(1)(c). He further submitted that AO while initiating the penalty proceedings had not specified the charge as to under which limb of the provision of section 271(1)(c) he is initiating the penalty.

On counterpart, the Revenue pointed out that Assessee failed to explain that why two similar adjacent plots with same size was purchased at two different value and all the contentions raised by the assessee to bring out the difference has been negated by the Valuation Officer which has been confirmed by the Tribunal also.

The Tribunal heard both the parties contention and observed the fact of case that the discrepancy found in the value of plot was referred to the Valuation Officer by the AO who had estimated the value at Rs. 42,40,960/-.

The Tribunal observed that “If no material has been brought either by way of inquiry by the AO or some tangible information has into his knowledge that the purchase consideration of Rs. 38,50,000/- for the plot No. D-101 is less or assessee has paid extra than what has been mentioned in the registered sale document, then no penalty for either concealment of income or furnishing of inaccurate particulars can be levied. Though section 69B is a deeming fiction but in the matter of penalty proceedings, such deeming fiction cannot be extended so as to hold assessee guilty of concealment of income or furnishing of inaccurate particulars when the addition on account of deeming fiction is based on some kind of estimate given by a Govt. Valuer”

The tribunal further noted that the difference in value of adjacent plot having same size is quite possible that they can influence the factors like different location in terms of direction, facing of the plot, geometrical shape, Vastu factors, etc.

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