The Delhi bench of the Income Tax Appellate Tribunal ( ITAT ) deleted the penalty under Section 271(1)(c) of the Income Tax Act, stating that property sale consideration should not be grounds for inaccurate income particulars.
Briefly stated, the assessee filed return of income for Assessment Year 2006-07 in question declaring total income of Rs.2,91,48,317/-.The return so filed was subjected to scrutiny assessment under Section 143(3) of the Income Tax Act. In the course of the assessment, the Assessing Officer inter alia observed that the assessee has purchased a certain parcel of land at Rs.1,60,000/-, Rs.3,20,000/- and Rs.1,35,000 at an aggregate purchase of Rs.6,15,000/-. These plots were in turn sold at an aggregate consideration of Rs.9 lakh and Short Term Capital Gain arising thereon was offered for taxation. However with reference to Section 50C of the Act, the AO revised the sale consideration at the circle rate
The sale consideration of Rs.9 lakh was accordingly revised and adopted at Rs.31,18,460/- and the Short Term Capital Gain was accordingly revised and enhanced. The AO also invoked the provisions of Section 271(1)(c) of the Income Tax Act, and alleged furnishing of inaccurate particulars of income.
Mr. Amit Rai representing the assessee pointed out that the assessee has purchased parcels of land at Rs.6, 15,000 and same were sold in short intervals at a consideration of Rs.9 lakh resulting in short term capital gains. The AO has not disputed the purchase consideration. The AO has questioned the sale consideration owing to higher circle rate with reference to Section 50C of the Income Tax Act.
Further pointed out that the sale consideration substituted under Section 50C of the Act in terms of directions of ITAT by itself was not sufficient to assume furnishing of inaccurate particulars of income per se. It was contended that penalty proceedings are different and distinct from the assessment proceedings and therefore, the parameters applicable to quantum proceedings do not necessarily apply to the penalty proceedings. It was thus submitted that mere deeming of a sale consideration at a different value in the wake of legal fiction of Section 50C do not tantamount furnishing of inaccurate particulars of income
on the other hand, Mr. Kirti Sankratyayan representing the Revenue, supported the action of the Revenue Authorities imposing penalty under Section 271(1)(c) of the Income Tax Act. In the instant case he pointed out that the difference between the actual sale consideration and the deeming sale consideration determined in terms of directions of the order of the Tribunal was quite higher and nearly four times of the actual sale consideration. Such huge difference itself smacks of mala fide
The bench found that the issue was squarely covered in favour of the assessee by the judgment delivered by the Bombay High Court in the case of CIT vs. Fortune Hotels (supra). The High Court observed that higher sale consideration of property determined in terms of Section 50C of the Act by itself would not amount to furnishing inaccurate particulars of income so as to levy penalty under Section 271(1)(c) of the Income Tax Act. Consequently, the notice for continuation of the penalty proceedings being vague and non-descript, penalty cannot be sustained in the impugned first appellate order.
Thus, the single member bench of Pradip Kumar Kediya ( Accountant member ) found force in the plea of the assessee that the action of the AO while imposing the penalty does not meet the requirement of law. Hence, the penalty imposed by the Assessing Officer under Section 271(1)(c) of the Income Tax Act was quashed In the result, the appeal of the assessee was allowed.
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