SHRI DHANSUKHBHAI G. SHAH, (HUF),VAPI vs. THE ACIT, VAPI CIRCLE, VAPI

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ITA 1237/AHD/2014Status: DisposedITAT Ahmedabad19 September 2017AY 2006-073 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal found that the sole basis for the fair market value was comparable sale instances, which are unreliable for transactions from the late seventies and early eighties due to rampant use of unaccounted money. The penalty was therefore not sustainable.

What were the facts?

The assessee claimed a fair market value of land as on 01.04.1981, but failed to provide supporting evidence. The Assessing Officer substituted a lower value based on comparable sales, leading to increased capital gains. Consequently, a penalty under section 271(1)(c) was imposed.

What were the issues?

Whether penalty under section 271(1)(c) is leviable when the fair market value of an asset as on 01.04.1981 is determined based on comparable sale instances without sufficient evidence.

Which sections of the Income-tax Act were involved?

Section 271(1)(c)

AI-generated summary — verify with the full judgment below

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Income Tax Appellate Tribunal, AHMEDABAD ‘D’ BENCH, AHMEDABAD

Per Pramod Kumar, AM:

This appeal, filed by the assessee against learned CIT(A)’s order dated 13th 1. March, 2014, in the matter of penalty under section 271(1)(c) of the Income Tax Act 1961, for the assessment year 2006-07. The grievances raised are as follows :-

“1. On the facts and in circumstances of the case as well as law on the subject, the learned Commissioner of Income tax (Appeals) has erred in confirming penalty u/s.271(1)(c) of the act of Rs.5,87,330/-. 2. It is prayed that above penalty levied by Assessing Officer and confirmed by Commissioner of Income Tax (Appeals) may please be deleted.”

2.

To adjudicate on the above grievances, a few material facts need to be taken note of. During the course of scrutiny assessment proceedings, the Assessing Officer

ITA No.1237/Ahd/2014 Assessment Year : 2006-07 Page 2 of 3 noticed that the fair market value as on 01.04.1981, in respect of a piece of land sold by the assessee, was taken at Rs.8,28,780/- but the assessee has not been able to prove the same “with evidences of sale instances”. The Assessing Officer thus substituted the fair market value as on 01.04.1981, on the basis of comparable sale instances, at Rs.2,82,038/-. The taxable capital gains were, accordingly, recomputed. It was in this backdrop that as against returned taxable capital gain of Rs.16,00,000/- the Assessing Officer brought to tax capital gains at Rs.60,98,301/-. The matter did not rest there. The Assessing Officer also imposed the concealment penalty under section 271(1)(c) which has been confirmed by the learned CIT(A). The assessee is in further appeal before me.

3.

We have heard the rival submissions, perused the material on record and duly considered facts of the case in the light of the applicable legal position.

4.

We find that the only basis of fair market value of land as on 01.04.1981 is comparable sale instances registered with the authorities. It is a well known fact that at that point of time, i.e. late seventies and early eighties, use of unaccounted monies was so rampant in real estate transactions that registration value seldom provided safe and reasonable basis of real estate. In the case of Dilip N. Shroff vs. JCIT [(2007) 291 ITR 519 (SC)], Hon’ble Supreme Court was dealing with a case in which fair market value as on 01.04.1981, as per registrar’s records, of a property was Rs.1,44,92,907/- but the market reports, based on rates published in ‘Accommodation Times’ was Rs.2,52,00,000/-. The huge variations between value at which sales were recorded and the market prices were thus, more often than not, a ground reality. There is nothing more than sale instances to substantiate the stand taken by the Assessing Officer. While these sale instances may or may not be sufficient basis for making quantum addition in the cost of acquisition, which is anyway not our concern at present. These inputs per se cannot constitute legally sustainable foundation for the impugned concealment penalty under section 271(1)(c). In this backdrop, we are of the considered view that impugned penalty, which rests on the reliability of registration value of property as on 01.04.1981, was not really justified. We, therefore, delete the impugned penalty.

ITA No.1237/Ahd/2014 Assessment Year : 2006-07 Page 3 of 3 5. In the result, the appeal is allowed. Pronounced in the open court today on the 19th day of September, 2017.

Sd/- Sd/- Mahavir Prasad Pramod Kumar (Judicial Member) (Accountant Member) Ahmedabad, the 19th day of September, 2017 PBN/* Copies to: (1) The appellant (2) The respondent (3) Commissioner (4) CIT(A) (5) Departmental Representative (6) Guard File By order TRUE COPY Assistant Registrar Income Tax Appellate Tribunal Ahmedabad benches, Ahmedabad

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