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Income Tax Appellate Tribunal, ‘A’ BENCH, BANGALORE
Before: SHRI VIJAY PAL RAO & SHRI INTURI RAMA RAO
Date of hearing : 19/05/2016 Date of pronouncement : 03/06/2016 O R D E R Per INTURI RAMA RAO, AM :
This is an appeal filed by the revenue directed against the order of the CIT(A), Kolhapur, dated 15/9/2014 deleting penalty levied u/s 271(1)(c) of the Income-tax Act, 1961 [hereinafter referred to as 'the Act' for short] for the assessment year 2005- 06.
Page 2 of 5 2. The revenue raised the following grounds of appeal:
“The order of the learned CIT(A) is opposed 1. to law and facts of the case.
On the facts and in the circumstances of the 2. case the learned CIT(A) erred in canceling the penalty u/s 271(1)(c) without appreciating the fact that the assessee has withdrawn its appeal against the quantum addition and considering the ratio laid down in the order of Apex Court in the case of Mak Data Ltd vs CIT (2014)(1SCC 674).
On the facts and in the circumstances of the 3. case the learned CIT(A) erred in holding that the addition is based on estimation basis, even though the addition is based on the report of the DVO which is a factual finding given by the DVO and the AO has also established the case for levy of penalty u/s 271(1)(c).
For these and other grounds that may be 4. urged at the time of hearing, it is prayed that the order of the CIT(A) in so far as it relates to the above grounds may be reversed and that of the Assessing Officer may be restored.
The appellant craves leave to add, alter, 5. amend and / or delete any of the grounds mentioned above.”
Briefly facts of the case are that the respondent-assessee is a company deriving income from house property. During the course of assessment proceedings for the assessment year 2005- 06, addition of Rs.1 crore was made on account of unexplained investment in the property. It was stated that the said property was purchased from M/s.Golf Link Software Park Pvt. Ltd., for a Page 3 of 5 total consideration of Rs.39 crores. The Assessing Officer made a reference to DVO who valued the property finally at Rs.40 crores. The difference amount of Rs.1 crore was added to the total income. However, the assessee-company had chosen not to agitate the issue of addition before the appellate authorities. While matter stood there, the AO proceeded with levy of penalty u/s 271(1)(c) of Rs.36,61690/-.
On appeal before the CIT(A), the CIT(A) deleted the penalty relying on the decision in the case of CIT vs. Sangrur Vanaspati Mills Ltd.(303 ITR 53) wherein it was held that addition made on the basis of an estimate and not on the basis of any concrete piece of evidence, penalty u/s 271(1)(c) cannot be restored. The CIT(A) also placed reliance on the decision of the Hon‘ble Supreme Court in the case of Dilip N Shroff vs. JCIT (291 ITR 519) where addition was made not accepting the opinion of an expert, penalty cannot be levied.
Being aggrieved, revenue is before us in the present appeal.
Learned CIT-DR placed reliance on the order of the penalty and prayed for confirmation of the penalty. Despite due service of notice, none appeared on behalf of the respondent- assessee. Therefore, we proceed to decide the matter ex parte. Page 4 of 5 We heard learned CIT-DR and perused material on record. The issue in this appeal is about the validity of penalty levied u/s 271(1)(c) of the Act. It is undisputed fact that penalty was levied in respect of addition which was made based on the report of the DVO. It is needless to mention that the report of the DVO is only an opinion or an estimate. The fact that the assessee has not agitated addition in the appellate proceedings does not militate against the assessee in the penalty proceedings. The CIT(A) had deleted penalty considering the legal position that no penalty can be levied in respect of additions which had been made based on export opinion of the DVO. This proposition of law is in line with the ratio laid down by the Hon’ble Supreme Court in the case of Dilip N Shroff (supra) and therefore, we do not find any illegality or fallacy in the reasoning of the CIT(A) for deleting the penalty.
In the result, appeal the filed by the revenue is dismissed.