ESWARAMOORTHY VENKATACHALAM,TIRUPUR vs. DCIT, CIRCLE-1,, TIRUPUR

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ITA 2472/CHNY/2025Status: DisposedITAT Chennai28 November 2025AY 2017-18Bench: SHRI SS VISWANETHRA RAVI (Judicial Member), SHRI JAGADISH (Accountant Member)5 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the penalty under section 270A of the Income Tax Act, 1961, was not leviable. The assessee had computed capital gains by adopting the FMV as on 01.04.1981 as the cost of acquisition. The A.O., after referring the matter to the DVO, recomputed the capital gains based on the DVO's estimated FMV as on 01.04.1981, resulting in a difference of Rs. 77,97,750/-. The Tribunal agreed with the assessee's contention that since the capital gains were recomputed solely on the basis of the DVO's estimation of the cost of acquisition, such income falls under clause (b) of sub-section (6) of section 270A, which excludes income determined on the basis of an estimate from the scope of 'under-reported income'. The Tribunal relied on the decision in Satyam Print House v. ACIT, which held that on identical facts, such income is excluded from the definition of unreported income and deleted the penalty. Therefore, the penalty levied was cancelled. No issue was expressly left undecided.

What were the facts?

The assessee, Easwaramoorthy Venkatachalam, filed an appeal against the order of the CIT(A) for Assessment Year 2017-18. The assessee sold properties for Rs. 2,45,00,000/- and Rs. 22,00,000/-, computing capital gains by adopting the Fair Market Value (FMV) as on 01.04.1981 as the cost of acquisition. The Assessing Officer (A.O.) referred the matter to the District Valuation Officer (DVO) to determine the FMV as on 01.04.1981. Based on the DVO's report, the A.O. recomputed capital gains and initiated penalty proceedings under section 270A of the Income Tax Act, 1961. The CIT(A) confirmed the penalty. The dispute centers on the levy of penalty for alleged under-reporting of income.

What were the issues?

1. Whether the penalty under section 270A of the Income Tax Act, 1961, is leviable when the Assessing Officer (A.O.) recomputed capital gains based on the estimated Fair Market Value (FMV) as on 01.04.1981 provided by the District Valuation Officer (DVO)? Assessee's Contention: The assessee argued that there was no under-reporting of income as capital gains were computed based on the FMV adopted as the cost of acquisition. Furthermore, the assessee contended that since the A.O. ultimately computed long-term capital gains (LTCG) based on the DVO's estimated cost of acquisition, penalty was not leviable as per clause (b) of sub-section (6) of section 270A. Reliance was placed on Satyam Print House v. ACIT, Narayanbhai Shivabhai Patel v. ITO, and Narayanan Sundaramahalingam Rajkumar v. ACIT. Revenue's Contention: The revenue supported the orders of the lower authorities, arguing that the addition was made based on the valuation officer's report, which cannot be considered merely an estimate.

Which sections of the Income-tax Act were involved?

Section 270A,Section 154,Section 143(3)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘A’ BENCH: CHENNAI

Before: SHRI SS VISWANETHRA RAVI & SHRI JAGADISH

आदेश / O R D E R

PER JAGADISH, A.M : Aforesaid appeal filed by the assessee for Assessment Year (AY) 2017-18 arises out of the order of Learned Commissioner of Income Tax (NFAC), Delhi [hereinafter “CIT(A)”] dated 15.07.2025.

2.

The assessee had sold properties at Nallur for Rs. 2,45,00,000/- and Perumal Kovil for Rs. 22,00,000/-. The assessee computed capital gains by adopting the Fair Market Value (FMV) as on 01.04.1981 at Rs. 7,25,000/- for the Nallur land and Rs. 1,75,000/- for the Perumal Kovil land as the cost of acquisition. However, the Assessing Officer (A.O.) adopted the FMV as on 01.04.1981 based on the value obtained from the Sub-Registrar’s Office and recomputed the capital gains, and consequently initiated penalty proceedings under section 270A of the Act. Since the assessee objected to the FMV adopted as on 01.04.1981, the A.O. referred the matter to the District Valuation Officer (DVO), Coimbatore. Upon receipt of the valuation report, the A.O. recomputed the capital gains and passed an order under section 154 read with section 143(3) of the Act. The A.O. thereafter levied penalty under section 270A of the Act for under-reporting of income in respect of the capital gains computed on the basis of the DVO’s report.

On appeal, the Ld. CIT(A) confirmed the penalty.

3.

Before us, the Ld. Authorised Representative (A.R.) submitted that there was no under-reporting of income, as the assessee had computed the capital gains in the return of income based on the FMV adopted as cost of acquisition as on 01.04.1981. The Ld. A.R. further submitted that since the A.O. ultimately computed the long-term capital gains (LTCG) on the basis of the DVO’s estimated cost of acquisition, penalty was not leviable as per clause (b) of sub-section (6) of section 270A of the Act. In support of this contention, reliance was placed on the decisions of (i) Satyam Print House v. ACIT in ITA No.

1.

1. 2898/Mum/2023 dated 08.03.2024 (Mum-Trib.); (ii) Narayanbhai Shivabhai Patel v. ITO in dated 18.09.2025 (Ahd-Trib.); and (iii) Narayanan Sundaramahalingam Rajkumar v. dated 30.08.2024 (Chny-Trib.).

4.

The Ld. Departmental Representative (D.R.), on the other hand, supported the orders of the lower authorities and argued the addition has been made on the basis of report of valuation officer which can not be said as estimate.

5.

We have heard the rival submissions and perused the material available on record. The assessee, in the return of income, computed capital gains by adopting the FMV as on 01.04.1981 as the cost of acquisition. The A.O., after referring the matter to the DVO, adopted the FMV as on 01.04.1981 as per the estimate of valuation officer and recomputed the capital gains, arriving at a difference of Rs.

1.

77,97,750/-. The A.O. accordingly levied penalty of Rs. 9,23,644/- under section 270A of the Act at 50% of the tax sought to be evaded.

The Ld. A.R. contended that since the A.O. computed the capital gains based on an estimated FMV provided by the DVO, such income falls under clause (b) of sub-section (6) of section 270A, which excludes income determined on the basis of an estimate from the scope of “under-reported income”. The ITAT Mumbai in Satyam Print House v. ACIT (supra) on identical facts has held such income is excluded from definition of unreported income and deleted the penalty. We, therefore agree with the submission of the Ld. A.R. that the capital gains were recomputed solely on the basis of the DVO’s estimation of cost of acquisition of property, and therefore, penalty under section 270A is not leviable. In view of the above, the penalty levied is hereby cancelled.

6.

In the result, the appeal filed by the assessee is allowed.

Order pronounced on 28th day of November, 2025 at Chennai.

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