LAKSHMI LINGINENI,HYDERABAD vs. INCOME TAX OFFICER, WARD-12(4), HYDERABAD

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ITA 2208/HYD/2017Status: DisposedITAT Hyderabad20 July 2018AY 2008-098 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the facts of the case do not warrant the imposition of penalty under Section 271(1)(c). The Tribunal reasoned that the addition made by the AO was clearly on account of the deeming provisions of Section 50C, which deems the stamp duty valuation to be the sale consideration. The Tribunal noted that even with the admitted higher sale consideration, there would still be a capital loss for the assessee. The addition arose solely because of the invocation of Section 50C. Following the Co-ordinate Bench decision in Bhavya Anant Udeshi Vs. ITO and other similar precedents, the Tribunal concluded that the deeming provision of Section 50C does not ipso facto attract penalty under Section 271(1)(c) in the absence of positive evidence indicating the actual receipt of higher consideration by the assessee. The Tribunal emphasized that for penalty to be imposed, there must be positive evidence of concealment or furnishing inaccurate particulars, which was lacking in this case. The penalty levied was accordingly cancelled. The appeal of the assessee was allowed.

What were the facts?

The assessee, Smt. Lakshmi Lingineni, is an individual who is not a regular income tax assessee. Information was received by the Assessing Officer (AO) that the assessee and her husband sold land. Initially, the assessee claimed a short-term capital loss based on the sale consideration mentioned in the sale deed. However, the AO, invoking Section 50C, adopted the Sub-Registrar's value and computed capital gains of Rs. 4,90,250/-. The assessee subsequently filed a return and paid taxes on this amount. The AO then initiated penalty proceedings under Section 271(1)(c) for alleged concealment of income and willful concealment of filing the return, levying a penalty of Rs. 70,324/-. The Commissioner of Income Tax (Appeals) upheld the penalty.

What were the issues?

1. Whether penalty under Section 271(1)(c) of the Income Tax Act, 1961, can be levied when the addition to income is solely based on the deeming provisions of Section 50C, without positive evidence of actual receipt of higher consideration by the assessee? (Question of law) Assessee's contentions: The assessee argued that no penalty is attracted when Section 50C is invoked, as it's a deeming provision and there was no actual concealment or furnishing of inaccurate particulars. The assessee relied on the Co-ordinate Bench decision in Bhavya Anant Udeshi Vs. ITO. The assessee also contended that she was not aware of the implications of Section 50C as she was not a regular assessee and had a genuine belief that the sale proceeds were not taxable under the Act, and there was no malafide intention. Revenue's contentions: The Revenue submitted that penalty is warranted because proceedings were initiated under Section 147, and the assessee filed a return admitting capital gains. The Revenue relied on the Supreme Court judgment in Union of India & Others Vs. Dharmendra Textile Processors and Others.

Which sections of the Income-tax Act were involved?

Section 271(1)(c),Section 147,Section 50C

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, HYDERABAD BENCHES “B”, HYDERABAD

Before: SHRI B. RAMAKOTAIAH & SHRI CHALLA NAGENDRA PRASAD

PER B. RAMAKOTAIAH, A.M. :

This is an appeal by assessee against the order of Commissioner of Income Tax (Appeals)-1, Hyderabad dated 18-09-2017, confirming the penalty u/s. 271(1)(c) of the Income Tax Act [Act] to an extent of Rs. 70,324/- levied on the reason that assessee has not offered capital gains.

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2.

Briefly stated facts are that assessee is an individual and has no other sources of income and not an assessee on record. On the basis of information received that assessee along with her husband, had sold land admeasuring 182 Sq. Yds., at Visakhapatnam to one M/s. Datla Construction Ltd., Hyderabad, AO has initiated proceedings u/s. 147 of the Act. Initially it was submitted by assessee that assessee has received proportionate sale consideration of Rs. 5,82,400/- out of Rs. 21,31,200/- mentioned in the sale deed and as per assessee, it results in Short Term Capital Loss of Rs. 1,73,350/-. However, AO was of the view that the SRO, Value was at Rs. 53,28,000/- and asked assessee to file return of income accordingly. Assessee admitted that they have received an amount to an extent of Rs. 31,96,800/- from the said party and assessee’s proportionate share was only Rs. 8,73,600/- and if that amount is taken, still there would be no taxable capital gain or income. However, AO did not agree and without specifying that he has invoked provisions of Section 50C adopted the value as per the Sub-Registrar and computed the capital gains at Rs. 4,90,250/- by including income of other sources at Rs. 250/-. Assessee on being told that the provisions of Section 50C are applicable seems to have filed return accordingly and AO has completed the assessment. There is no appeal on the above order and assessee paid the taxes thereon. However, AO has initiated penalty proceedings u/s. 271(1)(c) and levied penalty of Rs. 70,324/- on the reason that assessee has wilfully concealed filing of the return and payment of capital gains arising on sale of land. AO has relied on the Hon'ble Supreme Court judgment in the case of Union

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of India & Others Vs. Dharmendra Textile Processors and Others [306 ITR 277].

3.

Before the Ld.CIT(A) assessee contended that as per the consideration received by her, the transaction resulted in loss and accordingly, there is no need to file return of income and she was not aware about implications of provisions of Section 50C as she was not an income tax assessee and is not fully conversant with the provisions of Income Tax Act. It was further submitted that having been advised by AO about the provisions of Section 50C, she immediately filed return of income and she has a genuine belief that the sale proceeds of the plot are not covered by the IT Act and there is no malafide intention to avoid tax. Ld.CIT(A), however, did not agree with the contentions and upheld the penalty, stating as under:

“6.4 The submissions of the appellant have been carefully considered. In the present case, the appellant has not disclosed short term capital gain nor filed the return of Income within time. This itself, only shows mens rea for evasion of tax. Appellant has not submitted any submission regarding non-filing of return nor reasons for not offering to tax. Only reason was that the appellant has sold the property for the first time in her life. This itself, is not a valid reasons for not filing return or offering capital gains to tax. It is solely action of the Department which has let to unearthing concealment of capital gain income in her case. Hence, it is a fit case for levying penalty. The Penalty is upheld. -Ground Dismissed

3.1. Assessee has raised the grounds that the notice issued u/s. 271(1)(c) has not specified whether penalty was initiation for concealment of income and for furnishing

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inaccurate particulars. However, in the course of arguments, Ld. Counsel restricted his contentions to the issue on facts that a penalty cannot be levied on the invoking of deemed provisions in the computation. He relied on the Co-ordinate Bench decision in the case of Bhavya Anant Udeshi Vs. ITO in ITA No. 565/Hyd/2015, dt. 04-09-2015 for the proposition that penalty u/s. 271(1)(c) is not attracted when the provisions of Section 50C are invoked.

4.

Ld.DR, however, submitted that the proceedings are initiated u/s. 147 and assessee has filed the return accordingly, admitting capital gains. Therefore, penalty is warranted.

5.

We have considered the rival contentions and perused the facts. As per the sale deed, the sale consideration received by assessee as stated in the document was only Rs. 21,31,200/-, on which assessee’s computation of capital gains out of her share of sale consideration results in capital loss of Rs. 1,73,350/-. However, in the course of assessment proceedings in case of her husband, it seems the assessees have admitted receipt of consideration to an extent of Rs. 31,96,800/- and proportionate share of assessee was determined at Rs. 8,73,600/-. Even with this sale consideration, there would be capital loss arising to assessee. Only with the invocation of provisions of Section 50C, the sale consideration was determined at Rs. 14,56,000/- in the hands of assessee and AO has given deduction to an extent of Rs. 10,47,000/- towards cost price and transfer expenses. Thus,

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the income computed under the head ‘capital gains’ is clearly the amount arising out of the addition because of deeming provisions of Section 50C. Since the deeming provision is invoked by AO, we are of the opinion that the facts does not result in concealment of income. This issue was considered by the Co-ordinate Bench in the case of Bhavya Anant Udeshi Vs. ITO in ITA No. 565/Hyd/2015, dt. 04-09-2015, wherein the issue was discussed elaborately as under:

“5. We have considered the submissions of the parties and perused the materials available on record. As can be seen from the facts and materials on record, while the assessee computed capital gain on the basis of sale consideration mentioned in the registered sale deed, the A.O. computed the capital gain by invoking the provisions of section 50C of the Act as the registering authority of the State Government has valued the property for the purpose of stamp duty at Rs.2.55 crores. Though, it may be a fact that the ITAT while deciding assessee’s quantum appeal has upheld application of section 50C of the Act for the purpose of computation of capital gain but that itself will not lead to the conclusion that assessee either has furnished inaccurate particulars of income or concealed the particulars of income. As can be seen from the language of section 50C it is a deeming provision. In a case where A.O. finds that the value determined by the stamp duty authority for the purpose of stamp duty is more than the consideration claimed to have been received by the party, then the value adopted by the SRO shall be deemed to be the consideration received by the assessee for the purpose of computation of capital gain. Thus, for application of section 50C of the Act, it is not necessary for the A.O. to examine whether actually assessee has received anything over and above the amount mentioned in the sale deed as he simply has to go by the valuation adopted by the SRO. However, as far as imposition of penalty is concerned, there must be positive evidence before the A.O. to conclude that assessee has received the amount as valued by SRO for stamp duty purpose. Unless there are positive evidence to indicate receipt of on money to the extent of valuation made by SRO by the assessee, penalty under section 271(1)(c) cannot be imposed. Further, in the present case as is evident from the materials on record, the assessee in the course of assessment proceeding has furnished all necessary and relevant documents relating to the transaction of the property in question including registered sale deed. The assessee has

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not suppressed any material fact from the notice of the A.O. In these circumstances, the imposition of penalty under section 271(1)(c) of the Act alleging furnishing of inaccurate particulars of income or concealment of income, in our view, is not appropriate. The ITAT, Mumbai Bench in the case of Renu Hingorani, Mumbai vs. ACIT, Range 19(3), Mumbai (supra) while considering identical nature of dispute, deleted the penalty under section 271(1)(c) of the Act by holding as under :

“8. We have considered the rival contentions and relevant record. We find that the AO had made addition of Rs.9,00,824/- being difference between the sale consideration as per sale agreement and the valuation made by the Stamp Valuation Authority. Thus, the addition has been made by the AO by applying the provisions of section 50C of the Act. It is evident from the assessment order that the AO has not questioned the actual consideration received by the assessee but the addition is made purely on the basis of deeming provisions of the Income Tax Act, 1961. The AO has not given any finding that the actual sale consideration is more than the sale consideration admitted and mentioned in the sale agreement. Thus it does not amount to concealment of Income or furnishing inaccurate particulars of income. It is also not the case of the revenue that the assessee has failed to furnish the relevant record as called by the AO to disclose the primary facts. The assessee has furnished all the relevant facts, documents/material including the sale agreement and the AO has not doubted the genuineness and validity of the documents produced before him and the sale consideration received by the assessee. Under these facts and circumstances, it cannot be said that the assessee has not furnished correct particulars of income. Merely because the assessee agreed for addition on the basis of valuation made by the Stamp Valuation Authority would not be a conclusive proof that the sale consideration as per this agreement was incorrect and wrong. Accordingly the addition because of the deeming provisions does not ipso facto attract the penalty u/s 271 (1)(c). Hence in view of the decision of the Hon'ble Supreme Court in the case of CIT Vis Reliance Petroproducts Pvt.Ltd (supra), the penalty levied u/s 271 (1)(c) is not sustainable. The same is deleted.”

5.1. The principles laid down in other decisions relied upon by Ld. A.R. also express similar view. Following the consistent view expressed in the decisions referred to above, we are of the opinion that imposition of penalty under section 271(1)(c) of the Act in the present case is not valid. Accordingly, we delete the penalty”.

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5.1. Respectfully following the principles laid down thereon, we hold that the facts of the case do not warrant penalty u/s. 271(1)(c), accordingly, the penalty levied is cancelled.

6.

In the result, the appeal of assessee is allowed.

Order pronounced in the open court on 20th July, 2018

Sd/- Sd/- (CHALLA NAGENDRA PRASAD) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER Hyderabad, Dated 20th July, 2018 TNMM

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Copy to :

1.

Smt. Lakshmi Lingineni, C/o. B. Shanthi Kumar, Advocate, 111, Taramandal Complex, 5-9-13, Saifabad, Hyderabad. 2. Income Tax Officer, Ward-12(4), Hyderabad.

3.

CIT (Appeals)-1, Hyderabad.

4.

Pr.CIT-1, Hyderabad.

5.

D.R. ITAT, Hyderabad.

6.

Guard File.

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