RAJESH SHARMA,THEOG vs. ITO, W-2, SHIMLA

आदेश/ORDER

This appeal filed by the assessee is directed against the order dated 25.9.2018 of the Commissioner of Income Tax (Appeals), Shimla (in short CIT(A)).

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the assessee had purchased a piece of land measuring

00-21-64 hectare from Mrs. Kamla, Ms. Ramita(Joint

owners) all residents of village Jaish, Tehsil Theog, Distt.

Shimla for a consideration of Rs.3,00,000/- as against

Market Value/Stamp duty value of the said land at

Rs.7,00,000/-. The A.O. was of the view that as per

provisions of clause (vii) of sub-section (2) of section 56 of

the Act, the difference between stamp duty value and

consideration was liable to be assessed as income under the

head "income from other sources". The A.O. asked the

assessee to explain as to why provisions of section 56(2)(vii)

of the Act should not be applied in respect of immovable

property purchased for Rs. 3 lacs as against stamp duty

value of Rs.7,00,000/-. The reply of the assessee was

considered but not accepted by the A.O. and the amount of

Rs.4,00,000/- being difference of stamp duty value and

purchase consideration of land was added to the taxable

income of the assessee under the head "Income from other

sources" u/s 56(2)(vii)(b)(ii) of the Act. The A.O. held that

assessee failed to disclose difference of stamp duty value

and purchase consideration of land for taxation.

Accordingly, the A.O. imposed penalty of Rs. 1,23,600/- u/s

271(1)(c) of the Act.

the CIT(A) and submitted as under:

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“The present appeal has been preferred against the impositions of penalty under Section 271(1)(c) of Rs. 1,23,600/-. In that regard, it is submitted that during the course of assessment proceedings, it was found that assessee had purchased agriculture land at Theog for a consideration of Rs. 3.00 lacs. However, the stamp duty valuation of the same was Rs. 7.00 lacs and thereby, the Ld. A.O. attracted the provisions of Section 56 of the Income Tax Act, 1961 and treated excess as the same deemed income of the assessee under the section aforementioned. Nature of the land was agriculture and the same was out of the municipal area as per the facts admitted and copy of the sale deed in respect of the same is being placed on record for your kind perusal and ready reference. 2. Though, the addition had been made and the same had not been challenged, the issue to be adjudicated upon by this Hon'ble forum are two folds:- a). Whether the additions under Section 56 of the Income Tax Act, 1961 on account of alleged difference could have been made? b). Though the addition in respect of the same has been made and same has not been challenged whether the penalty under Section 271(1)(c) as imposed is legally sustainable? 3. As far as the issue No. 1 is concerned, it is most respectfully submitted that the assessee had purchased the agricultural land measuring 00-21-64 hectares and the land was agriculture in nature outside the municipal area. It is pertinent to mention that Section 56 is only applicable to the assets which are capital assets under the law as defined vide explanation (d) to Section 56 which is being reproduced infra: " (d) property means the following capital asset of the assessee, namely:- 4. In the instant case, the property is agriculture in nature outside the municipal limit and in the instant year under consideration concept of aerial distance was not in the statute and therefore, the same was outside the purview of capital assets within the meaning of Section 2 (14) of the Income Tax Act, 1961. As the land purchased was outside the purview of capital assets within the meaning of Section 2(14), the addition in itself is wrong much less is the question of imposing penalty on the same. 5. As far as the issue No. 2 is concerned, in the instant case the assessee had disclosed true facts to the extent that he had spent money on the purchase of the property under consideration. However, the Ld. A.O. was of the view that provisions of Section 56 were attracted and the differential amount between the amount of actual consideration paid

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and the amount on which stamp duty was valued had treated the same as deemed income of the assessee. Though the said addition had been made and the same has not been challenged, the assessee cannot be treated to have concealed income or filed inaccurate particulars in respect of the same. 6. At the cost of repetition, it is once again submitted that addition in fact in itself is wrong and what had been purchased by the assessee, does not fall within the meaning capita/ assets as elucidated under Section 2(14) of the Income Tax Act, 1961. 7. Filing of inaccurate particulars of income and concealment are positive facts with an intent to defraud the revenue. In the instant case part from the fact that stamp duty valuation was more, no positive facts of the assessee having purchased the property for consideration of more than the agreed consideration has been placed on record by the Ld. A.O. 8. Just because the property was having more value for stamp duty valuation, does not tantamount to the facts of having concealed the income or furnishing inaccurate particulars in respect of the same. 9. As the addition itself is wrong and coupled with the fact that the assessee had disclosed complete particulars, no penalty under Section 271(1)(c) is leviable in the instant case and the same has been illegally imposed. 10. That being the case, it is most respectfully prayed that the penalty be ordered to be deleted or any other relief be given which this Hon'ble deems fit and proper in the facts and circumstances of the case. 6. The Ld.CIT(A) after considering the submissions of the

assessee sustained the penalty by observing in para 5.2.2 of

the impugned order as under:

“5.2.2 During the appeal proceedings the appellant is contesting that the said land is not a Capital asset, no income was liable to be assessed u/s 56 of the Income Tax Act and the question of levying penalty does not arise . I have considered the submissions of the appellant. Apparently , no appeal has been filed against the assessment order . Thus the settled facts are that the appellant has accepted the valuation of the said property while paying the stamp duty and also during the assessment proceedings. Moreover he has accepted the said asset to be a capital asset by not

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agitating the assessment order. Also nothing has been brought on record to show that the land in question is an agricultural land is not a capital asset as claimed by the appellant . The further issue to be considered is that the appellant had purchased a piece of land wherein the value of investment made and the valuation as per stamp duty were at variance and the difference was required to be offered as deemed income under the head "Income from other sources" u/s 56(2)(vii)(b)(ii) of the Act which the appellant failed to declare. Hence the appellant failed to declare the “deemed” income which required to be offered as income in the return as per law. The appellant did not qualify his return and also failed to make the said disclosure. In this context, it has to be inferred that the appellant tried his luck in not offering the aforementioned income for taxation. The appellant has not been able to establish the bonafide of his claim on that score.” 7. Now the assessee is in appeal. The Ld. counsel for

assessee reiterated the submissions made before the

authorities below and further submitted that nothing was

concealed and the provisions of section 56(2)(vii) of the Act

were not applicable to the facts of the assessee’s case as

the property in question was an agricultural land situated

outside the municipal area, which does not fall in the

definition of capital asset which has been defined vide

Explanation (d) to section 56 of the Act. It was submitted

that the assessee disclosed true facts to the extent that he

had spent money on the purchase of the property under

consideration, hence it cannot be said that the assessee

concealed the income or filed inaccurate particulars of

income.

Reliance was placed on the judgment of the Hon'ble

Supreme Court in the case of Price Waterhouse Coopers Pvt.

Ltd. Vs. CIT & Another, reported in 348 ITR 306 and the

Hon'ble Delhi High Court in the case of CIT Vs. Brahmaputra

Consortium Ltd., reported in 348 ITR 339.

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orders of the authorities below.

and carefully gone through the material available on the

record. In the present case, it is an admitted fact that the

assessee sold the agricultural land for a sum of Rs.3 lacs.

However, the A.O. has taken market value/stamp duty value

at Rs.7 lacs and difference of Rs.4 lacs was added to the

income of the assessee under the provisions of clause (vii)

of sub-section (2) of section 56 of the Act. However, the said

land was not an asset as per the definition provided u/s

2(14) of the Act, which defines the capital asset. The

provisions contained in sub-section (14) of section 2 of the

Act clearly state that the agricultural land beyond the

municipal area is not to be included in the definition of

capital asset. In the present case, the A.O. added the

notional value i.e. the difference in actual consideration

and stamp duty value, in the hands of the assessee under

the head ‘income from other sources’. In the instant case,

the assessee disclosed all the true facts relating to the land

and nothing was concealed, therefore, it may be a good case

for making addition since there was difference between the

actual consideration and the stamp duty value. It is well

settled that the penalty proceedings are different and

distinct from the assessment proceedings. In the present

case, it cannot be said that the assessee had concealed

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income or furnished inaccurate particulars of his income. Considering the peculiar facts of this case, in my opinion, it is not a good case where penalty u/s 271(1)(c) of the Act may be levied, therefore, the penalty levied by the A.O. and sustained by the Ld.CIT(A) u/s 271(1)(c) of the Act is deleted.

Sd/- (N.K.SAINI) VICE PRESIDENT �दनांक /Dated: 24th April, 2019 *रती* आदेश क� ��त�ल�प अ�े�षत/ Copy of the order forwarded to :

आदेशानुसार/ By order, सहायक पंजीकार/ Assistant Registrar