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Income Tax Appellate Tribunal, DELHI “SMC” BENCH: NEW DELHI
Before: SHRI KUL BHARAT
ORDER
PER KUL BHARAT, JM :
The present appeal filed by the assessee for the assessment year 2016-17 is directed against the order passed by Ld.CIT(A), National Faceless Appeal Centre (“NFAC”), Delhi dated 15.03.2023.
The assessee has raised following grounds of appeal:-
1. “On the facts and circumstances of the case, the order passed by the learned CIT(A) is bad both in the eye of law and on facts.
2. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the penalty order passed under section 271(1)(c) of the Act by AO ignoring the show cause reply as well as the bona-fide disclosure made by the assessee. 3. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in holding that the assessee did not seek protection under Section 50C(2) of the Act during the course of assessment proceedings and in concluding that the case laws relied upon by the assessee were not required to be differentiated for the factual matrix in present case.
4. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in not giving due importance to the relevant case laws relied upon.
On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in concluding that quantum addition restricted to the extent of variation in the valuation made by DVO and registered valuer, tantamount to furnishing of inaccurate particulars of income by the assessee. 6. That the appellant craves leave to add, amend or alter any of the grounds of appeal
.”
3. Facts giving rise to the present appeal are that in this case, the assessee has filed his return of income on 07.09.2016, declaring income of INR 6,66,370/- on 07.09.2016. The case was taken up for scrutiny assessment. The Assessing Officer (“AO”) while framing the assessment, made addition of INR 42,71,500/- being 20% of the difference between circle rate and sale consideration vide order dated 20.12.2018 and assessed the income of the assessee at INR 49,37,870/-. The AO also initiated the penalty proceedings separately u/s 271(1)(c) of the Income Tax Act, 1961 (“the Act”). In quantum proceedings, the assessee filed appeal before Ld.CIT(A) who restricted the addition to Rs.5,70,404/- on the basis of District Valuation Officer (“DVO”) report. However, the AO in the penalty proceedings, imposed penalty of Rs.1,41,890/- in respect of the additions sustained by Ld.CIT(A).
4. Aggrieved against this, the assessee carried the matter before Ld.CIT(A), who sustained the penalty and dismissed the appeal of the assessee.
5. Aggrieved against the order of Ld.CIT(A), the assessee preferred appeal before this Tribunal.
6. Ld. Counsel for the assessee submitted that basis of imposing penalty is based upon estimation. He contended that it is evident from the fact that Ld.CIT(A) had reduced the quantum addition on the basis of DVO’s report. He contended that no penalty can be levied if the addition is made purely on estimation basis. He further reiterated the submissions as made in the synopsis and also relied on the case laws cited therein.
On the other hand, Ld. Sr. DR opposed these submissions and supported the orders of the authorities below.
I have heard Ld. Authorized Representatives of the parties and perused the material available on record and gone through the orders of the authorities below. The undisputed facts in this case are that the addition was made on the basis of difference between circle rate and the amount disclosed in sale deed. Further, regarding the valuation of the capital asset, the issue was referred to DVO who reduced the valuation adopted by the AO. Therefore, it is not the case where the assessee had concealed any material particulars of income. The assessee has placed reliance on the various case laws to buttress the contention that the valuation made by DVO is an estimate which can be the basis for making addition to the income of the assessee for the purpose of assessment but the same alone cannot be the basis to construe concealment for the purpose of imposing penalty u/s 271(1)(c) of the Act. The assessee has placed reliance on the decision of the Tribunal rendered in the case of DCIT vs JMD Advisors Pvt.Ltd. in and the decision in the case of ACIT vs Prakash Industries Ltd. in ITA No.6230/Del/2013 for the Assessment Year 1996-97 dated 19.02.2016 wherein the Tribunal has held as under:-
“We have heard the rival submissions and perused the material on record. It is undisputed fact that the penalty has been imposed entirely on the basis of difference in value of the fixed assets as per the books of account of the assessee and the valuation arrived at by the DVO. It is also an undisputed fact that apart from the DVO’s report, the AO had no other independent evidence to counter the figures from the assessee’s books of account. It is also seen that while dealing with the assessee’s objections on the DVO’s report, the AO has relied only on the comments of the DVO in response to the assessee’s objections but has failed to give a final finding on the issue. Thus he has not dealt with the assessee’s objections properly. This might have served the Revenue’s purpose in the quantum proceedings but when it comes to imposition of penalty for furnishing of inaccurate particulars and/or concealment, utmost caution has to be exercised. The Department has not been able to substantiate as to how there has been furnishing of inaccurate particulars of income and/or concealment by the assessee when the AO has himself not brought any cogent material on record, apart from the DVO’s report, to justify the imposition of penalty. The Hon’ble High Court of Madras in CIT vs Apsara Talkies 15 Taxman 384 (Mad) has held that, “Penalty cannot be levied on the basis, merely of an estimate of cost of construction of a building built by an assessee with his funds. In the case before that High Court, an addition was made to the income returned on the score that the cost of construction as disclosed in the assessee's book was lower than the estimated cost of the building as rendered by a valuer. The learned Judges held that a mere estimate of cost cannot constitute material on which a finding of concealment can be rendered. In that case, some explanation had been offered by the assessee as to why the construction was at an economical cost. This explanation was not accepted by the ITO. The learned Judges held that even if the assessee's explanation were not acceptable, it would still require some further material to support the finding that the assessee had concealed its taxable income. We respectfully agree with this view. ’’ Similarly, a co-ordinate Bench of Delhi Tribunal has held in DCIT vs. JMD Advisors Page | 4 (P) Ltd. 124 ITD 223 (Delhi Trib.), “…the valuation made by the DVO is an estimate which can be a basis for making addition to the income of the assessee for the purpose of assessment, but the same alone cannot be the basis to construe concealment for the purpose of imposing penalty under section 271(1)(c).
As such, having regard to all the facts of the case as discussed above, we are of the view that considered from any angle, the penalty imposed by the Assessing Officer under section 271(1)(c) was not sustainable and the learned CIT(A) was fully justified in cancelling the same. The impugned order of the learned CIT (A) is, therefore, upheld dismissing this appeal filed by the revenue.” 8.1. Further, the reliance is placed by the Ld. Counsel for the assessee on the judgement of Hon’ble Delhi High Court in the case of CIT vs Lahsa Construction Pvt.Ltd. [2013] 357 ITR 671 (Delhi) wherein Hon’ble High Court has held that “addition cannot be justified solely relying upon the valuation report”.
In the light of above-mentioned binding precedents, I hereby, direct the AO to delete the impugned penatly. Grounds raised by the assessee are thus, allowed.
In the result, the appeal of the assessee is allowed.