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

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.

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.