Loading judgment…
Facts
The assessee's appeal is against an order levying penalty under Section 271(1)(c) of the Income Tax Act for the Assessment Year 2014-15. The penalty was imposed due to the re-computation of capital gains on the sale of land, where the Assessing Officer (AO) believed the assessee had furnished inaccurate particulars of income and concealed income.
Held
The Tribunal held that the initiation of penalty proceedings was bad in law as the AO's satisfaction was not properly recorded and the notice issued did not clearly specify whether it was for concealment of income or furnishing inaccurate particulars. The Tribunal further noted that the valuation of the property was based on an expert's opinion, and a difference in estimation by experts does not automatically imply concealment or inaccurate particulars. The Tribunal also relied on various High Court and Supreme Court judgments stating that penalty is not automatic and requires conclusive material.
Key Issues
Whether penalty under Section 271(1)(c) can be levied solely based on difference in estimation of value and without proper recording of satisfaction by the Assessing Officer.
Sections Cited
271(1)(c), 143(3), 144C, 131, 274, 2(22B), 16A, 23A, 24, 34AA, 35, 37, 50C, 48, 14A
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “A’’ BENCH: BANGALORE
Before: SHRI CHANDRA POOJARI & SHRI KESHAV DUBEY
PER CHANDRA POOJARI, ACCOUNTANT MEMBER:
This appeal by assessee is directed against order of NFAC for the assessment year 2014-15 dated 4.1.2024 relating to levy of penalty u/s 271(1)(c) of the Income Tax Act, 1961 (in short “The Act”). The assessee has raised following grounds of appeal: 1. “The order of the authorities below in so far as levying penalty u/s 271(1)(c) of the Act is against the Appellant is opposed to law, equity, weight of evidence, probabilities, facts and circumstances of the case.
2. The order levying penalty u/s.271(1)(c) of the Act, is bad in law in as much as, the ld. Assessing Officer has neither reached any satisfaction nor has such satisfaction been recorded in the assessment order and consequently, the very initiation of proceedings u/s.271(1)(c) of the Act, is not in accordance with the requirements of Section 271(1) of Rahil Maheshkumar Nizamuddin, Bangalore Page 2 of 24 the Act and consequently, the order of penalty founded on the invalid initiation of penalty proceedings is liable to be cancelled.
3. The order of penalty passed u/s 271(1)(c) of the Act is bad in law as it is not discernable from the notice issued under section 274 rws 271 of the Act as to whether the penalty proceedings is initiated for furnishing of inaccurate particulars of income or concealment of income under the facts and in the circumstances of the Appellant’s case.
4. Without prejudice to the above, the authorities below are not justified in levying a penalty of Rs. 96,41,529/- u/s 271(1)(c) of the Act under the facts and in the circumstances of the Appellant's case.
5. The authorities below failed to appreciate that the Appellant has neither concealed any income nor furnished inaccurate particulars of income to warrant levy of penalty and therefore, the penalty levied u/s.271(1)(c) of the Act requires to be cancelled.
6. Without prejudice to the above, the penalty levied is highly excessive and liable to be reduced substantially.
7. The Appellant craves leave of your Honour to add, alter, amend, rectify, and delete any of the grounds urged above.
8. For the above and other grounds that may be urged at the time of hearing of the appeal, the Appellant humbly prays that the appeal may be allowed, and Justice rendered.
The ld. A.R. submitted that the assessee is a Non-Resident Individual and for the year under appeal, the assessee had filed his return of income on 31/07/2014 vide acknowledgement number 301213670310714 declaring a total income Rs. 5,93,24,110/- which comprised of Income from Capital gains and Other Sources. The said return was subjected to scrutiny assessment proceedings and the assessment order u/s 143(3) r.w.s 144C was passed on 29/12/2016 with assessed income as Rs 39,62,64,341/- resulting in a demand of Rs. 9,77,46,662/-. Also, Penalty proceedings were initiated by issuing a notice u/s 274 rws 271(1)(c) dated 29/12/2016 for concealment of income and furnishing inaccurate particulars of income.
Rahil Maheshkumar Nizamuddin, Bangalore Page 3 of 24 2.1 He submitted that the demand of Rs. 9,77,46,662/- had arisen mainly due to the re-computation of Capital gains on sale of land at Poojanahalli and the tax on Joint development agreement of the Property on Infantry Road. In the course of the assessment proceedings, the learned A.O. had called for various details and particulars. The assessee furnished all the details and particulars called for time to time and thereupon, pursuant to which the learned A.O. concluded the assessment proceedings by an order passed u/s 143(3) r.w.s 144C of the Act dated 29/12/2016. Aggrieved by the aforesaid order of assessment, the assessee filed an appeal before the Hon’ble Commissioner of Income Tax (Appeals). The ld. CIT (A) vide his order dated 30/03/2019 partly allowed the appeal in favour of the assessee.
2.2 Aggrieved by other disallowances sustained by the ld. CIT(A), the assessee preferred an appeal before the ITAT. The proceedings then came to be concluded before the ITAT by the order dated 18/07/2022 wherein certain additions made by the Learned Assessing Officer were sustained. The Assessee with an aim to bring a quietus to the matter, though aggrieved with the order of the Hon’ble ITAT, decided not to pursue the matter further.
2.3 The learned A.O. in the course of the assessment proceedings had in the order dated 29-12-2016 had come to the conclusion that penalty proceedings ought to be initiated against the assessee u/s 271(1)(c) of the Act as under:
9. Penalty Proceedings: As discussed in detail in this order the assessee has concealed his particulars of income and also furnished inaccurate particulars of income. This action of the assessee amounts to Concealment of Income warranting initiation of penalty proceedings u/s 271(1)(c) of the Income Tax. Penalty Proceedings u/s 271(1)(c) are, therefore, initiated by issue of Notice u/s 274.
Rahil Maheshkumar Nizamuddin, Bangalore Page 4 of 24 2.4 The learned Assessing officer then once again issued another Notice u/s 274 r.w.s 271(1)(c) of the Act on 16/01/2023 as under:
“Whereas in the course of proceedings before me for the Assessment Year 2014-15, it appears to me that you have furnished inaccurate particulars of income.”
2.5 The Assessee vide his detailed objections filed before the learned A.O on 21/01/2023, objected to the issuance of the two notices and also relying on the decision of the jurisdictional High Court pointed that in the absence of conclusive satisfaction in the Notices, the said Notices would be bad in law. The Assessee also in the same submission pointed out that the issuance of a fresh Notice u/s 274 r.w.s 271(1)(c) of the Act dated 16/01/2023 is barred by limitation. However, the learned A.O ignoring the detailed submissions proceeded to conclude the proceedings by holding as under:
“As is evident from the aforesaid cl. (c) of s. 271(1) of the Act, the words used are 'has concealed the particulars of his income' or furnished 'inaccurate particulars of such income'. Thus, both in case of concealment and inaccuracy, the phrase 'particulars of income' has been used. The legislature has not used the words 'concealed his income'. From this it would be apparent that penal provision would operate when there is a failure to disclose fully or truly all the particulars. The words 'particulars of income' refer to the facts which lead to the correct computation of income in accordance with the provisions of the Act. So, when any fact material to the determination of an item as income or material to the correct computation is not filed or that which is filed is not accurate, then the assessee would be liable to penalty under s. 271(1)(c) of the Act.”
2.6 The ld. A.R. submitted that the Learned A.O has then passed the impugned order imposing penalty u/s. 271(1)(c) of the Act for the assessment year 2014-15 by levying a penalty of Rs. 96,41,529/- being the amount of penalty levied by concluding that the assessee has furnished inaccurate particulars of income and concealed his income.
Rahil Maheshkumar Nizamuddin, Bangalore Page 5 of 24 2.7 At the outset, the ld. A.R. submitted that the initiation of the penal proceedings itself is bad in law and is also not in accordance with law. The notice of penalty issued under section 271(1)(c) of the Act is without assumption of proper jurisdiction and also not as per the scheme of the Act and also not compliant with the various parameters as laid down by the Hon’ble Jurisdictional High Court of Karnataka in the case of CIT Vs. Manjunatha Cotton & Ginning Factory, reported in 359 ITR 565. The ld. A.R. therefore submitted that the initiation of penalty proceedings is bad in law and therefore the same needs to be deleted for the advancement of substantial cause of justice. 2.8 In this regard, he referred to the decision of Jurisdictional Karnataka High Court in Kshema Geo Holdings (P.) Ltd. v. ITO - [2023] reported in 151 taxmann.com 293 (Karnataka), wherein the Hon’ble High Court held as under:-
“12. ……an inference that the satisfaction of existence of ground under section 271(1)(c) is the sine qua non for initiation of proceedings and the penalty proceedings should be confined only to those grounds specifically stated in the notice. As recorded hereinabove, the Assessing Officer had issued notice only with regard to furnishing inaccurate particulars. Whereas the satisfaction recorded is with regard to concealment of income particulars and the very ground has been struck-off. The notice has been issued on the specific premise that assessee had furnished inaccurate particulars of income.
13. In view of the law laid down in the authorities referred by us, we are of the view that the penalty order not sustainable in law.”
2.9 He submitted that the aforesaid view taken by the Hon'ble High Court was again followed in the case of M/s. SSA’S EMERALD MEADOWS reported in [2016] 73 taxmann.com 241 (Karnataka). Aggrieved by the same, the department filed an SLP before the Hon’ble Supreme Court, which has been dismissed. In view of the above, he submitted that the penalty levied on the basis of the invalid
Rahil Maheshkumar Nizamuddin, Bangalore Page 6 of 24 notice issued by the learned AO is opposed to law and facts of the assessee’s case and hence, the penalty imposed deserves to be cancelled on this score. 2.10 The ld. A.R. relied on the following precedents: (i) Judgement of Jurisdictional High Court in the case of Commissioner of Income-tax, Bangalore v. Chandrasekaran reported in [2015] 56 taxmann.com 210 (Karnataka), (ii) Order of ITAT Hyderabad in the case of Sunil Kumar Singhania Vs. ACIT reported in (2012) 52 SOT 137 (iii) Order of Tribunal in the case of Tecnotree Convergence Ltd. Vs. DCIT in dated 11.8.2021 for the AY 2009- 10 (iv) Judgement of Hon’ble Supreme Court in the case of Dharmendra Textile Processor (212 CTR 432) 2.11 He placed reliance on the parity of reasoning of the unreported decision of the Hon'ble Jurisdictional Tribunal in the case of M/s. Sree Lakshmi Silks Vs. ITO, ITA No. 229/Bang/2011, order dated 20/04/2012, wherein the Tribunal has held that the levy of penalty is not automatic, but there should be some positive evidence to come to the conclusion that the assessee has furnished inaccurate particulars of income or concealed its income. 2.12 Further, he placed reliance on the decision of the Hon'ble Madhya Pradesh High Court in the case of Addl. CIT Vs. Kalyanmal Mills Tent Factory, reported in 116 ITR 881 wherein the Hon'ble Court has held as under:
"where the law authorizes the authority to impose the penalty, the penalty could not be imposed without examining as to whether there was a deliberate defiance of law or a conscious disregard of the obligations…"
2.13 He also submitted that the claim of the assessee has been made in good faith and it is thus very clear that the Assessee has not committed any act which falls within the mischief of Section 271(1)(c)
Rahil Maheshkumar Nizamuddin, Bangalore Page 7 of 24 of the Act which warrants levy of penalty and the same, therefore needs to be deleted. 2.14 He submitted that the assessee has, in his return of income, disclosed fully all material facts pertaining to the purchase of land at Poojanahalli and since the assessee had relied on a professional valuation report for adopting the value as on 01/01/1981, the assessee cannot be said to have furnished inaccurate particulars of his income or concealed his income. He further submitted that the matter of determining the valuation of the land as on 01/04/1981 is subjective and is an estimation. Therefore, he submitted that there cannot be a penalty for not making an accurate estimation The very use of an estimation to determine the original cost of acquisition would preclude the imposition of penalty. 2.15 The ld. A.R. for the assessee submitted that the aforesaid addition was mainly on account of an inaccurate estimate in the fair market value as on 01/04/1981 and the assessee as such cannot be held responsible for the lapses in the valuation report furnished as the same was obtained from an independent valuer. 2.16 He submitted that the Assessee being a non-resident, did not contest the said addition only to bring a quietus to the affairs and to avoid protracted litigation with the department. He therefore submitted that the said action cannot be construed as admission of any error on part of the assessee or it cannot lead to an inference that he has concealed any income or furnished inaccurate particulars of income to warrant the levy of penalty. Hence, the penalty imposed by the learned A.O. requires to be cancelled. 2.17 He also invited our attention to the decision of the Apex Court on Dilip Shroff’s case [291 ITR 519 (SC)], wherein the Apex Court while considering an identical issue of levy of penalty on account of the difference in valuation of FMV as at 01/4/1981 as adopted by the assessee and as finally concluded by the department on the basis of the report of the Valuation officer has held as under :
Rahil Maheshkumar Nizamuddin, Bangalore Page 8 of 24 “79. The assessee could get the valuation done through any other mode of index value, or the assessee could have engaged any other valuer other than a registered valuer also. In the instant case, the assessee had chosen to obtain the opinion of a registered valuer.
The registered valuer has arrived its opinion on certain basis. He while making the valuation report, disclosed all the particulars. He disclosed that he had chosen to the index value method. He did not rely upon any sale instance. He might have referred to the valuation of the property as mentioned in a local newspaper. But it is not in dispute that he did not furnish any inaccurate particulars. It is true that he has not enclosed the sheet showing sale instance but nothing turns out thereupon as he had not relied upon any sale instances.
There can be a genuine difference of opinion between two experts. The District Valuer, as noticed hereinbefore, having regard to the sale instances of 1979 wherein the value of the land was fixed at Rs. 500 per sq. ft., took notice of the fact that the valuation in terms of another sale instance of 19-10-1982 wherein the land was valued at about Rs. 1,823 per sq. ft. A valuation was to be arrived at on 1-4-1981. He picked up a figure of Rs. 897 per sq. ft. No reason had been assigned in support thereof. No other or further sale instances had been given. We do not know as to whether any other sale instances were available. He merely stated that such valuation had been arrived at after taking into account the, time size-shape, time gap, location-situation and also the factors like physical, social, legal and economical. Some other officer could have picked up holes in the said report. On the other hand, the opinion of the registered valuer, as would appear from the report, was that he had taken into consideration the value of the shop as Rs. 1,525 per sq. ft.
A duty may be enjoined on the assessee to make a correct disclosure of income but if such disclosure is based on the opinion of an expert, who is otherwise also a registered valuer having been appointed in terms of a statutory scheme, only because his opinion is not accepted or some other expert gives another opinion, the same by itself may not be sufficient for arriving at a conclusion that the assessee has furnished inaccurate particulars.”
2.18 He therefore requested us to appreciate that the aforesaid judgement is applicable on the facts of the case of the assessee and as such there exists no material which leads to the conclusion that there is concealment of any income and the proceedings need to be dropped.
Rahil Maheshkumar Nizamuddin, Bangalore Page 9 of 24 2.19 He further relied on the judgement of the Hon'ble Supreme Court in the case of RELIANCE PETRO PRODUCTS reported in 322 ITR 158 wherein it has been held that no penalty can be levied in respect of any claim made that has been denied by the Department, wherein the Hon'ble Supreme Court observed as under:
"We are not concerned in the present case with the means rea. However, we have to only see as to whether in this case, as a matter of fact, the assessee has given inaccurate particulars. In the Webster's Dictionary, the word "inaccurate" has been defined as: not accurate, not exact or correct; not according to erroneous; as an inaccurate statement, copy or transcript" truth:
We have already seen the meaning of the word "particulars" in the earlier part of this judgement. Reading the words in conjunction, they must mean the details supplied in the return, which are not accurate, not exact or correct, not according to truth or erroneous. We must hasten to add here that in this case, there is no finding that any details supplied by the assessee in its return were found to be incorrect or erroneous or false. Such not being the case, there would not be question of inviting the penalty under section 271[1][c] of the Act. A mere making of the claim, which is not sustainable, in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such claim made in the return cannot amount to the inaccurate particulars."
2.20 He once again reiterated that there is no mensrea or a willful act to deceive the department from not paying the taxes. He also submitted to not to arrive at a conclusion that the assessee has furnished inaccurate particulars of income willfully and come to a conclusion to levy penalty under section 271(1)(c) of the Income-Tax Act, 1961. The whole issue should be looked in a broader way and a lenient view ought to have been taken by the learned Assessing Officer.
2.21 The ld. A.R., in view of the above, prayed before us that the penalty as levied by the Learned Assessing Officer may be deleted and the appeal may be allowed for the advancement of substantial cause of Justice.
Rahil Maheshkumar Nizamuddin, Bangalore Page 10 of 24 3. On the other hand, ld. D.R. submitted that the value adopted by the assessee as FMV value have no basis, whereas the guideline value of the sub-registrar which has been followed by ld. AO is passed on actual sales consideration collected from the SRO in that area. The ld. AO has correctly adopted the value of the impugned property to determine the capital gain. Further, he submitted that the judgement of Hon’ble Supreme Court in the case of Dharmendra Textile Processor (212 CTR 432) have no application to the facts of the present case. Hence, it cannot be applied.
We have heard the rival submissions and perused the materials available on record. In this case, the capital gain is arisen on account of re-computation of capital gain on sale of land at Pujanahalli on which according to the ld.AO, there was furnishing of inaccurate particulars of income and concealment of income and consequently, he levied penalty u/s 271(1)(c) of the Act. 4.1 In the present case, the ld. AO was of the opinion that the assessee has furnished the wrong valuation as on 1.4.19981. As such, the assessee concealed the two incomes and assessee liable for penalty to the extent of 100% of tax to be evaded. The main contention of the ld. AO is that assessee has furnished the wrong valuation report from the valuer and consequently, ld. AO enquired with the valuer regarding method of valuation followed by the valuer and recorded his statement of the valuer. The relevant sworn statement of the valuer Mr. K. Manjunath was recorded u/s 131 of the Act recorded on 20.6.2014 and 17.10.2016 which are as follows:
Rahil Maheshkumar Nizamuddin, Bangalore Page 11 of 24 Rahil Maheshkumar Nizamuddin, Bangalore Page 12 of 24 Rahil Maheshkumar Nizamuddin, Bangalore Page 13 of 24
Rahil Maheshkumar Nizamuddin, Bangalore Page 14 of 24 4.2 The crux of the above statement is that K. Manjunath is a registered valuer for category-1 for class of assets immovable properties other than agricultural land, plantation, forest, mines and queries and his registered number is CAT-I/REG No.1/CC/200607 dated 11.8.2006 and he has done few valuations for the purpose of income tax computation and also he has done very few valuations of agricultural properties. He was unaware of the fact that there is separate valuation/valuer for agricultural land. He valued the impugned land measuring 11 acres 42 guntas at Rs.25/- p.sq.ft.
Rahil Maheshkumar Nizamuddin, Bangalore Page 15 of 24 though the same has been acquired by assessee vide registered document No.1425 of 1980-81 dated 17.11.1980 for a value of Rs.40,000/-. Within a period of 5 months the same has been valued by the present valuer at Rs.25/- p.sq.ft. though the SRO value of the same was Rs.40,000/- before 5 months at the time of registration. Thus, the valuation of 11 acres 42 guntas at (5,23,800 sq.ft.) at Rs.25/- p.sq.ft. would come to Rs.1,30,95,225/-, which is 327 times higher than the transacted value. The valuer supported the value of the said property on the reason that the property will fetch Rs.25/- p.sq.ft. if it is converted into residential or commercial property and it was mentioned in the valuation report and that valuation was for converted land though it was not agricultural land and he has explained the mistake as it is typographical error. However, he fairly conceded that there is bonafide mistake in the said valuation and he withdrawn the same. However, the ld. AO was not agreed with the contention of the valuer as well as the assessee and levied penalty u/s 271(1)(c) of the Act. 4.3 The assessee herein disclosed all material facts pertinent to the purchase of land at Pujanahalli and the FMV declared by the assessee as on 1.4.1981 which was on the basis of professional valuer report and the said valuation report is an opinion of the technical expert. It may not be accurate as it is only estimation to determine the cost of acquisition being FMV as on 1.4.1981 and there cannot be absolute and exact determination of the FMV by any technical expert in respect of any asset while determining the value of the same. The valuation cannot be accurate and it may be changed from one valuer to another valuer. Even if there is any difference in the valuation made by one person to another person, it is only being estimation, that may be an indicator of value. The assessee who has sold the land, cannot be held responsible for the lapse found or committed by the independent valuer. In the present case, assessee has obtained the valuation report for the property as on 1.4.1981
Rahil Maheshkumar Nizamuddin, Bangalore Page 16 of 24 from the registered valuer. Later, the valuer has withdrawn by stating that he is not a technical expert to value the agricultural property. The ld. AO has adopted the value on the basis of valuation details produced by the SRO. 4.4 Further, in our opinion, fair market value of a capital asset is the value which would ordinarily fetch in the open market on sale of same on the relevant date and not on the value adopted for registration by sub-registrar for stamp duty purpose. In the absence of confirmed fair market value as on 1.4.1981, the ld. AO is also not referred the matter to the DVO for valuation of the property as on 1.4.1981. On the other hand, he considered the value adopted for registration of the property with the SRO as per sale deed dated 17.11.1980. Thus, he applied the cost of indexation that is worked out at Rs.40,000x1024/100 and arrived at the cost of acquisition at Rs.2,60,654/- and accordingly, he computed the capital gain. In our opinion, the value adopted by SRO is for determining the stamp value of sale transactions and it could not be the fair market value. Being so, in absence of any evidence of fair market value as on 1.4.1981, not being provided by assessee and revenue, the estimate made for determining the capital gain for the computation of the capital gain may be reasonable but cannot be used to levy penalty u/s 271(1)(c) of the Act without any concrete material to determine the same and the estimation cannot substitute the evidence to show the fair market value. Provisions of section 2(22B) of the Act very clearly defined the fair market value as follows: (i) The price that the capital asset would ordinarily fetch on sale in the open market on the relevant date; and (ii) Where the price referred to in subject clause (i) is not ascertainable, such price as may be determined in accordance with the rules made under this Act; 4.5 As discussed in the earlier neither the party adopted above provisions of the Act and no effort made by the party concerned to Rahil Maheshkumar Nizamuddin, Bangalore Page 17 of 24 ascertain the price of that property on the date of sale in the open market or it has not been ascertained in accordance with the rules made under this Act. Thus, the value adopted for determining the cost of acquisition so as to compute the capital gain is the stamp duty value for registration of the said property as on 17.11.1980. In our opinion, the valuation adopted by the assessee is only on the estimation basis and that cannot be basis for levy of penalty u/s 271(1)(c) of the Act. In other words, capital gain has been computed by assessee on the basis of estimation of cost of acquisition as on 1.4.1981 and in the opinion of ld. AO, it was excessive and not based on any positive material and he has adopted the fair market value on the basis of value mentioned in the sale deed of that impugned property as on 17.11.1980 without referring the matter to the DVO and thus the computation of capital gain has been made on the basis of material furnished by assessee itself and already available on record, this was not fit case for imposition of penalty u/s 271(1)(c) of the Act. Further, the impugned penalty has been levied by the ld. AO merely on the basis of findings in the quantum proceedings and have not independently examined the matter in the penalty proceedings u/s 271(1)(c) of the Act, even on this procedural count, the penalty levied cannot be sustained though the addition has been sustained by the Tribunal, that by itself does not prove that there is any conclusive and absolute material to suggest the assessee has concealed any income and or furnished inaccurate particulars of income. In our opinion, penalty cannot be levied in this kind of situation as there was no evidence to suggest that claim of assessee was bogus or malafide and disallowance of the claim itself cannot be reason to levy penalty. The addition of capital gain is computed on account of difference in estimation of cost of acquisition between the claim made by assessee and the value adopted by the ld. AO. The ld. AO not able to prove that there was any willful or gross negligence on the part of assessee resulting thereby either any concealment of Rahil Maheshkumar Nizamuddin, Bangalore Page 18 of 24 income and or furnishing inaccurate particulars of income. To levy penalty for concealment, it is necessary that there must be either concealment of income and or furnishing inaccurate particulars of income by the assessee. As the AO or appellate authority arrived at different estimates of income of the assessee, that itself cannot be said that assessee concealed particulars of income and or furnished inaccurate particulars of income so as to attract penalty. Penalty u/ 271(1)(c) of the Act was not imposable in relation to estimated additions because the factum of either concealment of income or furnishing inaccurate particular of income, were not proved. For this purpose, we rely on the following judgements. 4.6 It is to be noted that in case of ACIT Vs. Mrs. Meenakshi (125 TTJ 856) (2009) 28CCH 112 (Chen Trib), wherein Tribunal placed reliance on the judgement of Hon’ble Madras High Court in the case of Tulasi Mani Ammal Vs. CIT (158 CTR 5) (Mad.), and held as under: “8. We have carefully considered the submissions. It is admitted that assessee has inherited the property and no cost had been incurred by her on acquisition. The assessee had obtained the valuer's report for the fair market value of the property as on 1st April, 1981. The AO, on the other hand, has adopted the value obtained from Sub-Registrar's office. Hon'ble jurisdictional High Court in the case of Thulasimani Amma/ vs. CIT (2000) 158 CTR (Mad) 5 has held that, guideline values of Registration Department has evidentiary value and cannot be regarded as conclusive evidence. Hence, from this exposition, it is clear that guideline value is not conclusive proof. If the AO prefers the value obtained from Sub-Registrar's office, it cannot be said that the assessee is guilty of furnishing inaccurate particulars or concealment so as to attract penalty under s. 271(1)(c).
The decision of Hon'ble apex Court in the case of Union of India & Ors. vs. Dharamendra Textile Processors & Ors. (2008) 219 CTR (SC) 617: (2008) 14 DTR (SC) 114: (2008) 306 ITR 277 (SC) is not applicable on the facts of the case as the same is applicable only when there is furnishing of inaccurate particulars or concealment by the assessee which leads to addition of income. Similarly, the Hon'ble Punjab & Haryana High Court case law relied upon by the learned Departmental Representative is also found not applicable on the facts of the case. Hon'ble apex Court in the case of CIT vs. Sun Engineering Works (P) Ltd. (1992) 107 CTR (SC) 209 : (1992) 198 ITR 297 (SC) has held as under :
"It is neither desirable nor permissible to pick out a word or a sentence from the judgment of the Supreme Court divorced from the context of the question under consideration and treat it to be the complete law declared by the Court. The judgment must be read as a whole and the observations from the judgment have Rahil Maheshkumar Nizamuddin, Bangalore Page 19 of 24 to be considered in the light of the questions which were before the Court. A decision of the Supreme Court takes its colour from the questions involved in the case in which it is rendered and, while applying the decision to a later case, Courts must carefully try to ascertain the true principle laid down by the decision."
In this case, the addition has been only based upon the estimates and values obtained from Sub-Registrar's office in preference of the value as per valuer's report. As evident from the Hon'ble jurisdictional High Court decision in Thulasimani Ammal case cited above (supra), the guideline value is not conclusive proof.
The Revenue's reliance upon s. 50C of the IT Act, 1961 is also misplaced. The Said section reads as under :
"50C. (1) Where the consideration received or accruing as a result of the transfer by an assessee of a capital asset, being land or building or both, is less than the value adopted or assessed by any authority of a State Government (hereafter in this section referred to as the 'stamp valuation authority') for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed shall, for the purposes of s. 48, be deemed to be the full value of the consideration received or accruing as a result of such transfer. (2) Without prejudice to the provisions of sub-s. (1), where— (a) the asses ee claims before any AO that the value adopted or assessed by the stamp valuation authority under sub-s. (1) exceeds the fair market value of the property as on the date of transfer; (b) the value so adopted or assessed by the stamp valuation authority under sub- s. (1) has not been disputed in any appeal or revision or no reference has been made before any other authority, Court or the High Court, the AO may refer the valuation of the capital asset to a Valuation Officer and where any such reference is made, the provisions of sub-ss. (2), (3), (4), (5) and (6) of s. 16A, cl. (i) of sub-s. (1) and sub-ss. (6) and (7) of s. 23A, sub-s. (5) of s. 24, s. 34AA, s. 35 and s. 37 of the WT Act, 1957 (27 of 1957), shall, with necessary modifications, apply in relation to such reference as they apply in relation to a reference made by the AO under sub-s. (1) of s. 16A of that Act.
Explanation—For the purposes of this section, 'Valuation Officer' shall have the same meaning as in cl. (r) of s. 2 of the WT Act, 1957 (27 of 1957). (3) Subject to the provisions contained in sub-s. (2), where the value ascertained under sub-s. (2) exceeds the value adopted or assessed by the stamp valuation authority referred to in sub-s. (1), the value so adopted or assessed by such authority shall be taken as the full value of the consideration received or accruing as a result of the transfer."
A reading of the above makes it clear that the section is applicable in cases where stamp duty has been paid for transfer. Moreover, this section also postulates Rahil Maheshkumar Nizamuddin, Bangalore Page 20 of 24 that the fair market value may be different from the value adopted by the registration authority and in such cases, procedure for reference to valuation cell is provided. Hence, this section is neither applicable nor it is Rie case of the Revenue that any reference to valuation cell has been made or that the AO has obtained independent instances of comparable sales in that period, of that area.
Under such circumstances, if the assessee has accepted addition, it cannot be said that the assessee is guilty of furnishing inaccurate particulars or concealment. Hence, we affirm the order of the learned CIT(A).:
4.7 Further, the judgements relied by the ld. A.R. in the following cases also support our views: (i) Jurisdictional High Court in Commissioner of Income-tax, Bangalore v. Chandrasekaran reported in [2015] 56 taxmann.com 210 (Karnataka), wherein the Hon’ble High Court held as under:-
“7. …….In that context, the claim for depreciation was also a bona fide error. When pointed out, he has paid the tax. Under these circumstances, Appellate Authority on appreciation of entire facts have concurrently held that there is no deliberate suppression of income nor it is a case of furnishing of inaccurate particulars. It is a bona fide mistake and the moment the mistake was pointed out, the assessee has paid the tax. It is well settled that imposition of penalty is not automatic and therefore they have rightly set aside the order imposing the penalty.
In fact, the order imposing penalty is contrary to law, declared by this court in the case of CIT v. Manjunatha Cotton & Ginning Factory [2013] 359 ITR 565/218 Taxman 423/35 taxmann.com 250 (Kar.), in as much as, it is clear from the order that there is no direction to initiate penalty proceedings. In the aforesaid judgment, it was held that it is imperative that the assessment order contains a direction. The use of phrases like (a) penalty proceedings are being initiated separately, and (b) penalty proceedings under section 271(1)(c) are initiated separately, do not comply with the meaning of the word "direction" as contemplated even in the amended provisions of law. The direction should be clear and without any ambiguity. A direction by a statutory authority is in the nature of an order requiring positive compliance. When it is left to the option and discretion of the Income-tax Officer whether or not take action, it cannot be described as a direction. It is settled law that in the absence of the existence of these conditions in the assessment order penalty proceedings could not be proceeded with. The proceedings which are initiated contrary to the said legal position are liable to be set aside. Therefore, the appellate Authority was justified in setting aside the order imposing penalty.
Rahil Maheshkumar Nizamuddin, Bangalore Page 21 of 24 Accordingly, the substantial question of law is answered in favour of the assessee and against the revenue. We do not find any merit in this appeal. Accordingly, the appeal is dismissed.”
(ii) The decision of ITAT Hyderabad in the case of Sunil Kumar Singhania Vs. ACIT reported in (2012) 52 SOT 137, wherein held as under: “In the instant case, the assessee charged different bill discounting charges depending upon the customer. There is no uniform rate of discounting charges. While completing the assessment, the Assessing Officer considered higher discounting charges reflected in the seized material, even though there is seized material that shows the bill discounting charges at a lesser rate. Further, the Assessing Officer disallowed the expenditure on the basis of the assessee's statement recorded during the course of search action. There is no conclusive evidence to suggest that the assessee concealed income by furnishing inaccurate particulars of income. The Assessing Officer is required to satisfy himself about the concealment of income or furnishing inaccurate particulars of such income. [Paras 6 and 7] The provision of section 271(1)(c ) shows that the Assessing Officer is vested with a discretionary power to levy or not to levy any penalty in a deserving case. The instant case is most befitting case to exercise such discretion. It shows that there is no conclusive proof that the assessee concealed income or furnished inaccurate particulars of income. Further, as seen from the facts of the case, to avoid litigation the assessee accepted the addition. The lower authorities relied on proceedings before Assessing Officer relating to the assessment for levying the penalty. The same do not constitute admission for the purpose of levying penalty. [Para 8] The admission by the assessee, which was more influenced by extraneous consideration and other factors and was not supported by any incriminating material as explained in course of assessment and penalty proceedings, cannot be q basis to impose a penalty for concealment of income. It was no admission at all as legally understood. Further, the lower authorities have only rested their conclusion both in the assessment and penalty proceeding on the statement of the assessee and certain seized material. These things alone is not sufficient for imposition of penalty. [Para 10] In the instant case, the income of the assessee has been determined on estimate basis. There is no conclusive material to show that there is actual concealment of income. Though the addition is confirmed by the Commissioner (Appeals), it does not prove that the Assessing Officer has the material to suggest that the assessee earned exact amount of profit as determined by the Assessing Officer out of these unaccounted transactions. The penalty is not mandatory. If the assessee offers convincing reasons or if any reasonable cause demonstrated for non-inclusion of such income, penalty is not attracted. [Para 13] From the entire facts of the case, it would be clear that the income of the assessee was estimated and material on record is not enough to levy penalty for concealment
Rahil Maheshkumar Nizamuddin, Bangalore Page 22 of 24 of income. Unless there is conclusive material showing the exact amount of concealment of income, no penalty is leviable on the addition if made on estimate basis. [Para 14] The assessee has accepted the addition only with the sole intention to avoid litigation and because the assessee has not gone in second appeal against the quantum addition, it does not automatically qualify for levy of penalty and it does not entail the Assessing Officer to levy penalty. Penalty proceedings are not automatic. The assessment proceedings and the penalty proceedings are two different proceedings. The revenue authorities are required to examine the penalty proceedings independently on the basis of material available on record. As seen from the arguments of the assessee, it is amply clear that the assessee had accepted the addition only to avoid litigation and to buy peace with the department. The provisions of section 271(1)(c) give discretionary power to Assessing Officer to levy penalty. This discretion should have been used by the Assessing Officer in favour of the assessee, because the addition was confirmed either by the Commissioner (Appeals) on estimated basis. [Para 20] Therefore, the instant case is not fit case to levy penalty though addition made by the Assessing Officer was confirmed by the Commissioner (Appeals). Accordingly, the entire penalty levied upon the assessee was liable to be deleted. [Para 21].”
4.8 Order of the Tribunal in the case of Tecnotree Convergence Ltd. Vs. DCIT in dated 11.8.2021 for the AY 2009-10 wherein they considered the order of the Tribunal in the case of DCIT Vs. Mastek Ltd. in ITA No.118/Ahd/2007 vide order dated 16.4.2010, wherein held as under: “12. The Tribunal in the case of DCIT v. Mastek Ltd. in ITA No.118/Ahd/2007 vide order dated 16.04.2010 held as under:- “5. We have considered the rival submissions and the material available on record. It is admitted fact that assessee disclosed all the particulars of the above disallowances in the return of income. The AO made part of the disallowances out of the above expenditure which has been substantially reduced by the learned CIT(A). It would, therefore, show that the assessee disclosed all the relevant facts and materials in the return of income as well as before the authorities below on merit. It is not a case of the AO that the assessee has made false claim or suppressed the facts relating to the above claims of the expenditure. The disallowances have been made on the question of interpretation of law as to whether the assessee would be entitled for deduction and whether the income of the assessee false under the category of business income. Since the assessee disclosed all the facts before the authorities below at proper level, the part disallowances of the expenditure would not par-se lead to an inference that the assessee concealed the particulars of Mastek Rahil Maheshkumar Nizamuddin, Bangalore Page 23 of 24 Limited income or filed inaccurate particulars of income. On disallowance of the expenditure imposition of penalty is not automatic.
The Hon'ble Supreme Court in the case of CIT Vs Reliance Petroproducts Pvt. Ltd. 322 ITR 158 (SC) held that "A glance at the provisions of section 271(1) (c) of the Income-tax Act, 1961, suggest that in order to be covered by it, there has to be concealment of particulars of the income of the assessee. Secondly, the assessee must have furnished inaccurate particulars of his income. The meaning of the word "particulars" used in section 271(1) (c) would embrace the details of the claim made. Where no information given in the return is found to be incorrect or inaccurate, the assessee cannot be held guilty of furnishing inaccurate particulars. In order to expose the assessee to penalty, unless the case is strictly covered by the provision, the penalty provision cannot be invoked. By no stretch of imagination can making an incorrect claim tantamount to furnishing inaccurate particulars. There can be no dispute that everything would depend upon the return filed by the assessee, because that is the only document where the assessee can furnish the particulars of his income. When such particulars are found to be inaccurate, the liability would arise. To attract penalty, the details supplied in the return must not be accurate, not exact or correct, not according to the truth or erroneous. Where there is no finding that any details supplied by the assessee in its return are found to be incorrect or erroneous or false there is no question of inviting the penalty under section 271(1) ( c ). A mere making of a claim which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such a claim made in the return cannot amount to furnishing inaccurate particulars. Decision of the Gujarat High Court affirmed."
The Hon'ble Punjab and Haryana High Court in the cases of CIT Vs Dhillon Rice Mills [2002] 256 ITR 447 (P. & H.) and in the case of Harigopal Singh Vs CIT [2002] 258 ITR 85 (PH) held that "no penalty for concealment leviable where income assessed is a mater of estimate". Hon'ble Supreme Court in the case of M/s. Rajasthan Spinning & Weaving Mills 2009 - PIOL - 63 - SC held that "on every demand penalty is not automatic".
Considering the facts of the case as noted above in the light of the above decisions and in the light of the findings of the learned CIT(A), it is clear that additions have been sustained partly by disallowing the expenditure on interpretation of the provisions of law and even the disallowance of Rs.2,00,000/- u/s 14A has been restored to the file of the AO for re-consideration. Therefore, it is not a fit case for levy of penalty. The AO has not brought any material on record to prove that the assessee has furnished inaccurate particulars of income or concealed particulars of income. We accordingly do not find any justification to interfere with Rahil Maheshkumar Nizamuddin, Bangalore Page 24 of 24 the order of the learned CIT(A). We accordingly confirm his findings and dismiss the appeal of the Revenue.” 4.9 Further, we note that judgement relied by ld. D.R. in the case of Sundaram Finance Ltd. Vs. ACIT (403 ITR 407), wherein held that where the assessee claimed deprecation on non-existent asset penalty u/s 271(1)(c) of the Act was to be levied for filing inaccurate particulars of income and thereafter confirmed by Hon’ble Supreme Court reported in 259 Taxman 220 (SC).
4.10 However, in the present case, this is not the case and the assessee has not claimed any depreciation of non-existent asset. Hence, not applicable. Hence, the ratio laid down in the above judgement cannot be applied to the facts of present case.
4.11 In view of the above discussion, we delete the penalty levied u/s 271(1)(c) of the Act. 5. In the result, appeal of the assessee is allowed. Order pronounced in the open court on 5th June, 2024