THE ITO 2(2), INDORE vs. SMT. MANORAMA DEVI AGRAWAL, INDORE

आदेश / O R D E R

PER KUL BHARAT, J.M: This appeal by the revenue is directed against order of

the CIT(A)-I, Indore dated 29.3.2017 pertaining to the

[ITA 424/Ind/2017] [Smt. Manorama Devi Agrawal, Indore] assessment year 2008-09. The revenue has raised

following grounds of appeal:

against deletion of penalty as imposed by the Assessing

Officer in respect of the deemed market value of property

u/s 50C of the Act.

picked up for scrutiny assessment u/s 143(3) of the Act

(hereinafter called as ‘the Act’) was framed vide order dated

16.12.2010. The A.O. while framing the assessment made

addition of capital gain of Rs.2,28,28,961/- by invoking the

provisions of section 50C of the Act. The A.O. also initiated

penalty u/s 271(1)(c) of the Act. Subsequently, the A.O.

[ITA 424/Ind/2017] [Smt. Manorama Devi Agrawal, Indore] vide order dated 9.3.2015 imposed penalty u/s 271(1)(c) of

the Act amounting to Rs.51,69,316/-.

before Ld. CIT(A), who after considering the submissions,

partly allowed the appeal. The Ld. CIT(A) thereby deleted

the penalty in respect of the valuation adopted by the A.O.

by invoking provisions of section 50C of the Act. Against

this, revenue is in present appeal.

submitted that the Ld. CIT(A) was not justified in deleting

the penalty. He further submitted that the assessee

deliberately did not adopt the true consideration, therefore,

he submitted that the A.O. was justified in imposing the

penalty.

submissions of the Ld. D.R. and reiterated the submissions

[ITA 424/Ind/2017] [Smt. Manorama Devi Agrawal, Indore]

as made in the written submissions. The submissions of

the assessee are as under:

“The assesee submits before your office; in connection with the appeal filed by the Ld. ITO-2(2) against the order passed by CIT(A) for deleting the penalty of Rs.51,69,319/- levied u/s 271(1)(c) of the Income Tax Act, 1961. The point wise submission is presented as under:- 1. The Ld. CIT(A) was justified in law by deleting the penalty of Rs.51,69,316/- levied by the A.O. u/s 271(1)(c) of the Act. 2. On the facts and circumstances of the case the Ld. CIT(A) deleted the penalty u/s 271(1)(c) of the Income Tax Act, 1961 levied by the A.O. on the addition made u/s 50C of the Act. Hence under the same facts the CIT(A) was justified in deleting such penalty proceedings. 3. The assessee requests before your office kindly allow us to elaborate the current provisions of laws and rulings of Tribunals and The Hon'ble Courts in respect of the case, which presented as under:- Firstly, section 271(1)(c) of Income Tax Act, 1961 specifically and clearly determines the nature and extent of its applicability, the provisions of section 271(1)(c) provides for imposition of penalty for; (a) Concealed the particulars of his income; or (b) Furnished inaccurate particulars of income. Concealment of particulars of income or furnishing inaccurate particulars of income is the condition precedent for levy of penalty and such satisfaction must be arrived at in the course of any proceeding under the Act. Furthermore, such satisfaction is to be arrived at from the accounts of the assessee. It is submitted that the penalty proceedings initiated are not automatic and requires more clarity. It is presumed by the department that in every case where addition is made, penalty is a sine qua non. In the concerned case present before your office the assessee has not at all furnished any inaccurate particulars or concealed income, in any manner. However, the learned assessing officer has made addition under section 50C of Income Tax Act, 1961 which is clearly and specifically a deeming provision. Further various decisions and judgements has been pronounced by various appellate authorities in favour of assessee clarifying the fact that penalty

[ITA 424/Ind/2017] [Smt. Manorama Devi Agrawal, Indore] proceedings u/s 271(1)(c) are bad in law and do not sustain, where additions are based on deeming fiction.” 6. We have heard the rival submissions, perused the

materials available on records and gone through the orders

of the authorities below. We find that Ld. CIT(A) has

decided this issue in para Nos.5.1 to 5.6 of the order,

which is reproduced as under for the sake of clarity.

5.1 Briefly stated the facts are that the appellant had shown long term capital loss of Rs.427039/- on sale of land for a consideration of Rs.1826000/-. The cost of acquisition was shown at Rs.408900/- and after indexation it was taken at Rs.2253039/-. During the course of assessment proceedings it was noticed that the land was valued at Rs.25082000/- for the purpose of stamp duty valuation. The appellant contended that the land was agreed to be sold vide agreement dated 6.5.1995 for a consideration of Rs.1251151/-. However, as all the terms of the agreement could not be fulfilled hence the land was sold to another party with the first party consenting to the said sale. There was dispute regarding land. Appellant therefore contended that the valuation adopted for stamp duty purposes was not justified. As the appellant objected to the valuation reference was made to the departmental valuation officer who also estimated the value at Rs.25082000/-. The LTCG was accordingly computed at Rs.22828961/- which was also confirmed in appeal. The A.O. thereafter levied penalty u/s 271(1)(c) of the Act. 5.2 During the course of appellate proceedings the appellate argued that no penalty was attracted as no inaccurate particulars were submitted nor there was any concealment. The penalty has been levied on the addition made by invoking section 50C which is a deeming provision and no penalty is attracted on additions based on deeming fiction. Appellant placed reliance on several decisions already reproduced at Para 3 above. 5.3 The crux of the appellant’s argument is that the provisions of section 50C are deeming provisions and are therefore limited to the purpose for which they have been brought into the statute and cannot be extended for levy of penalty when the deeming provision does not provide fo the same.

[ITA 424/Ind/2017] [Smt. Manorama Devi Agrawal, Indore] 5.4 A perusal of the decisions establishes that the extant judicial position is that no penalty for concealment can be where addition is made on account of deeming provision of sec 50C. However from the record it is seen that the appellant had only disclosed sale consideration of Rs.1826000/-. The appellant had received Rs.1500000/- in addition to the above amount which was not considered by the appellant in the computation of LTCG. The appellant has argued that the above amount was received in the F.Y. 2011-12 and hence it was not considered. It is however to be noted that the amount was receivable on sale of the land and this fact was not disclosed in the return. Therefore notwithstanding the fact that the provisions of section 50C have been invoked in determining the deemed sale consideration the appellant had failed to disclose the consideration of Rs.1500000/- received by it and therefore to that extent was liable for penalty u/s 271(1)(c) of the Act. 5.6 From the above it is thus evident that in the case the appellant had deliberately concealed the material facts. Though the addition to the income which forms the basis for the penalty was only on account of application of the deeming provisions of section 50C however the appellant failed to disclose the consideration of Rs.1500000/- and to that extent was liable for penalty u/s 271(1)(c) of the Act. In view of the above discussion the penalty is sustained on the concealment of Rs.1500000/-. The A.O. is therefore directed to recalculate the penalty on the above amount only. The above grounds of the appellant are therefore partly allowed. 7. There is no dispute with regard to the fact that the sale

consideration was adopted by invoking the provisions of

section 50C of the Act, which is admittedly a deeming

provision. The assessee has relied upon various case laws

in his submissions. However, the revenue has not brought

any contrary decision to our notice. Therefore, taking a

consistent view, we do not see any infirmity in the order of

[ITA 424/Ind/2017] [Smt. Manorama Devi Agrawal, Indore] the Ld. CIT(A) and the same is hereby affirmed. Ground

raised by the revenue is dismissed.

dismissed.

Order was pronounced in the open court on 08 .01.2019.

Sd/- Sd/- (MANISH BORAD) (KUL BHARAT) ACCOUNTANT MEMBER JUDICIALMEMBER

Indore; �दनांक Dated : 08/01/2019 VG/SPS

Copy to: Assessee/AO/Pr. CIT/ CIT (A)/ITAT (DR)/Guard file. By order

Assistant Registrar, Indore