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Facts
The assessee purchased an immovable property for Rs. 1,50,00,000/- against a stamp duty valuation of Rs. 2,88,38,000/-. The Assessing Officer added the difference of Rs. 1,38,38,000/- as deemed income under Section 56(2)(vii)(b). Subsequently, a penalty of Rs. 2,59,383/- was imposed under Section 271(1)(c).
Held
The Tribunal held that penalty cannot be levied on income assessed under the deeming provisions of Section 56(2)(vii)(b), especially when the valuation was disputed and revised by the Valuation Officer. The penalty imposed was deemed not tenable.
Key Issues
Whether penalty under Section 271(1)(c) is leviable on income assessed under the deeming provisions of Section 56(2)(vii)(b) when the valuation was disputed and accepted by the Valuation Officer.
Sections Cited
56(2)(vii)(b), 271(1)(c), 143(3), 142A, 50C, 155(15)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “B” BENCH MUMBAI
Before: SHRI SANDEEP GOSAIN & SHRI GIRISH AGRAWAL
O R D E R
PER GIRISH AGRAWAL, ACCOUNTANT MEMBER:
This appeal filed by the assessee is against the order of Ld. CIT(A), National Faceless Appeal Centre (NFAC), Delhi vide order no. ITBA/NFAC/S/250/2024-25/1068997921(1), dated 23.09.2024 passed against the assessment order by the Income-tax Officer, Ward 2(4), Kalyan, u/s. 271(1)(c) of the Income-tax Act (hereinafter referred to as the “Act”), dated 25.03.2019 for Assessment Year 2015-16.
Ground taken by the assessee is reproduced as under:
1. "On the facts and circumstances of the case, the Id. CIT(A) of National Faceless Appeal Centre erred in confirming the penalty of Rs.2,59,383 levied u/s.271(1)(c)
Shamoon Ahmed Mulla., AY 2015-16 of the Act on the addition made under deemed provisions of section 56(2)(vii) (b) of the Act. 2. "On the facts and circumstances of the case, the Id. CIT(A) of National Faceless Appeal Centre has erred in law and on facts in upholding the levy of penalty u/s 271(1)(c) of the Act ignoring the fact that the penalty is initiated on the deemed income computed by adopting the stamp value of the property as on the date of agreement during which section 56(2)(vii)(b) was not in existence 3. "On the facts and circumstances of the case, the ld. CIT(A) of National Faceless Appeal Centre has erred in upholding the levy of penalty u/s 271(1)(c) of the Act without considering the fact that the penalty u/s.271(1)(c) of the Act cannot be applied as there is no furnishing of inaccurate particulars or concealment as there are well established documents and supporting provided to the Ld. AO during assessment.”
The sole issue raised by the assessee in this appeal is in respect of imposition of penalty of Rs.2,59,383/- u/s.271(1)(c) on addition made by ld. Assessing Officer under deeming provisions of section 56(2)(vii)(b). Contention of the assessee is that penalty is initiated on deemed income, computed by adopting stamp duty value of the property as on the date of agreement during which provisions of section 56(2)(vii)(b) were not in existence.
Brief facts of the case are that assessee carries on business as a contractor who filed his return of income on 31.03.2017, reporting total income at Rs.3,77,350/-. Assessment was completed u/s. 143(3) r.w.s. 142A vide order dated 29.08.2018, whereby total income was assessed at Rs.1,42,15,350/- by making addition of Rs.1,38,38,000/- u/s. 56(2)(vii)(b). In the course of assessment, ld. Assessing Officer observed that assessee had purchased immovable property at Village Juveli, Badlapur Gaon, Badlapur, Taluka Ambernath, Thane, for a total consideration of Rs.1,50,00,000/- against stamp duty valuation of Rs.2,88,38,000/-. Ld. Assessing Officer noted that agreement for sale was entered on 30.07.2012 and conveyance deed was entered on 05.12.2014. On these facts, after considering the submissions made by assessee, ld. Assessing Officer held that property was transferred in the Shamoon Ahmed Mulla., AY 2015-16 year 2014 for which provisions of section 56(2)(vii)(b) are applicable. Accordingly, the difference of Rs.1,38,38,000/- between the stamp duty value and the actual purchase value was added as income from other sources u/s. 56(2)(vii)(b) while completing the assessment.
4.1. In the penalty proceedings, ld. Assessing Officer noted that valuation report from Valuation Officer was received, whereby the difference in valuation was reduced to Rs.10,51,000/- on which a show cause notice was issued for imposing the penalty. He thus, held that assessee has furnished inaccurate particulars of income to the extent of Rs.10,51,000/- and thus imposed a minimum penalty at the rate of 100%, amounting to Rs.2,59,383/- u/s. 271(1)(c) of the Act. Ld. CIT(A) confirmed the penalty so imposed in the first appeal by the assessee. Aggrieved, assessee is in appeal before the Tribunal.
Thrust of assessee in his appeal is that it has been imposed on income which has been added under the head ‘Income from other sources’ under a deeming provision of section 56(2)(vii)(b) of the Act. According to the assessee, it is a settled position of law that no penalty is leviable in a case where income is added by applying deeming provisions of the Act. The facts in the present case are not in dispute. Assessee had purchased an immovable property for which ld. Assessing Officer took note of difference in the actual consideration and stamp duty valuation, with difference being Rs.1,38,38,000/- whichafter reference to ld. DVO was reduced to Rs.10,51,000/- and has been accepted by ld. Assessing Officer while imposing penalty on the assessee.
5.1. Section 56(2)(vii)(b)(ii) of the Act pertains to a special provision for full value of consideration in certain cases. As per section 56(2)(vii)(b)(ii), Shamoon Ahmed Mulla., AY 2015-16 where the consideration when the assessee receives from any person, any immovable property which is less than the stamp duty value of the property by an amount exceeding Rs.50,000/-, the stamp duty value of such property as exceeds such consideration shall be chargeable to income tax under the head ‘income from other sources’. Third proviso to section 56(2)(vii)(b) provides that where the stamp duty of immovable property is disputed by the assessee, the Assessing Officer may refer the valuation of such property to a Valuation Officer and provisions of section 50C and section 155(15) shall apply in relation to the stamp duty value of such property for the purpose of sub-clause (b) of clause (vii) of sub-section 2 of section 56, as they apply for valuation of capital asset under those sections.
5.2. Income from other sources can be taxed in the hands of the assessee on receipt or accrual basis, on real income theory. Provisions of section 56(2)(vii)(b) makes a deviation in this principle and introduces the concept of deemed consideration. There is a clear distinction between the actual consideration and stamp duty value of the property which is deemed as a consideration for the purpose of section 56(2)(vii)(b). Under the third proviso to section 56(2)(vii)(b), assessee has opportunity to dispute the stamp duty value of property in question before the ld. Assessing Officer, upon which he would refer the question of valuation to the Valuation Officer. Thus, application of section 56(2)(vii)(b) is not automatic and is subject to an opportunity to the assessee to question such valuation during the assessment proceedings.
In the present case, assessee had infact disputed the valuation and based on valuation by the Valuation Officer, the difference was reduced to Rs.10,51,000/- from Rs.1,38,38,000/-. Thus, it is the Shamoon Ahmed Mulla., AY 2015-16 deemed income which has become the basis of assessment on which the penalty has been imposed. Accordingly, on the given set of facts and provisions of law, where the basis of assessment is deemed income u/s. 56(2)(vii)(b) by adopting the valuation arrived at by ld. DVO on which a penalty has been imposed, in our considered view, the penalty so imposed is not tenable. We delete the penalty so imposed. Grounds raised by the assessee are allowed.
In the result, appeal of the assessee is allowed.
Order is pronounced in the open court on 10 February, 2025