DIPAKKUMAR ISHWARLAL PANCHAL,AHMEDABAD vs. THE ITO, WARD-3(3)(6), AHMEDABAD

Effective ground of appeal raised by the assessee reads as under:

“On the facts read with the explanation of the assessee during the course of assessment proceedings as well as considering the penalty reply, there was not justification for levy of penalty of Rs.1,18,965/- under section 271(1)(c) of the Act either factually or legally.”

As transpires from orders of the authorities below, penalty was levied on account of addition made amounting to Rs.3,85,000/- to the income of the assessee on account of a property purchased by the assessee for consideration less than its stamp duty value ,as per the provisions of section 56(2)(x) of the Act. The jantri value /stamp duty value of the property purchased by the assessee being Rs.67,27,000/-, and the consideration actually paid by the assessee being Rs.48 lakhs. The assesses share in the property being 20% ,difference in the aforestated values to this extent therefore , amounting to Rs.3,85,000/-, was added to the income of the assessee and penalty levied thereon u/s 271(1)© of the Act for concealing/furnishing inaccurate particulars of income, @ 100% of the tax sought to be evaded thereon amounting to Rs.1,18,965/-

Before us, the contention of the ld.counsel for the assessee against levy of penalty was that the assessee had given an explanation why jantri value could not be so substituted for the purchase price of the asset, pointing out that the land was compromised for several reasons being situated at the end of the village with a high tension wire running over it and the area being of not much use. That considering the fact that litigation against the stamp duty valuation would entail much cost ,the assessee had accepted the stamp duty value and to buy peace of mind had not agitated the addition made in income tax proceedings also. He contended that his explanation was reasonable enough, and was not found to be false by the Revenue. Our attention was drawn to the same as reproduced at page no.3 of the CIT(A) as under:

On the other hand, the ld.DR relied on the order of the authorities below, stating that the assessee had not disclosed all facts relating to the income and had not given any bona fide explanation to the same, and therefore, penalty had been rightly levied.

We have heard both the parties. Admittedly the concealment/furnishing of inaccurate particulars of income ,for which act penalty under section 271(1)(c) in the present case has been levied, related to the income added as per the provisions of section 56(2)(x) of the Act. More particularly on account of the fact that actual consideration paid for purchase of a property was less than its stamp duty value. It is not the case of the Revenue that the assessee was actually found to have paid any amount over and above actual purchase price of the asset. Moreover section 56(2)(x) of the Act, under which the addition has been made, is a deeming provision only. Further, we have noted that the assessee had given reasons for the property not being capable of fetching the jantri value. There is no finding by the Revenue to the effect that the explanation of the assessee was false or not bona fide. In fact no effort /inquiry or investigation has been made by the Revenue to verify the explanation of the assessee. The surrender made by the assessee of the deemed income has been accepted as such by the Revenue. The assessee had given this explanation, and thereafter surrendered the balance amount to buy peace of mind; meaning thereby that he had accepted the addition under protest; though not in substance agreeing to the proposition of law under which the addition has been made.

In the facts and circumstances, where the assessee had objected to the invocation of section 56(2)(x) of the Act in its case for the purpose of making addition and had given a reason for the same, which the Revenue has not found to be false or not bona fide and in any case the addition having been made on account of deeming fiction, the assessee having not been found to have actually made any payment in excess of the such price, we are of the view that the assessee cannot be said to have concealed or furnished inaccurate particulars of income so as to attract levy of penalty under section 271(1)(c) of the Act amounting to Rs.1,18,965/-.

In the result, appeal of the assessee is allowed.