2016 (8) TMI 1141 - AT - Income Tax

Penalty under IT Act set aside by ITAT for lack of consideration exceeding declared amount

The ITAT Ahmedabad allowed the assessee's appeal, setting aside the penalty of Rs. 39,715 imposed under section 271(1)(c) of the Income Tax Act. The ITAT ... Penalty u/s. 271(1)(c) - assessment made by invoking the provisions of Section 50C - Held that:- We find that in its return of income, the assessee has shown capital gains on the basis of the sale consideration in the agreement. Invoking the provisions of Section 50C of the Act, the Stamp Duty Valuation was taken as the full value of consideration. In our understanding, since the assessee has offered capital gains on the basis of the sale consideration received, assessment made by invoking the provisions of Section 50C of the Act would not amount to furnishing of inaccurate particulars because the assessment has been completed by a legal fiction. As decided in case of Madan Theatres Ltd. [2013 (6) TMI 96 - CALCUTTA HIGH COURT] he actual amount received was offered for taxation. It was only on the basis of the deemed consideration that the proceedings u/s. 271(1)(c) started. The revenue had failed to produce any iota of evidence that the assessee actually received one paise more than the amount shown to have been received by him. Thus, penalty order was liable to be set aside - Decided in favour of assessee Issues involved:Challenge to penalty under section 271(1)(c) of the Income Tax Act.Detailed Analysis:1. The appeal challenged the correctness of the order of the Ld. CIT(A)-II, Surat dated 19.07.2013 for the assessment year 2008-09.2. The sole grievance was the confirmation of the penalty of Rs. 39,715/- levied by the A.O. under section 271(1)(c) of the Act.3. The return of income was filed on 09.01.2009 declaring total income at Rs. 5,00,674/-. The assessment was completed under section 143(3) on 29.12.2010, determining the assessed income at Rs. 1,83,81,924/-.4. The First Appellate Authority deleted certain additions made by the A.O., leading to the initiation of penal proceedings on the sustained amount. The A.O. levied a penalty of Rs. 39,715/- despite the assessee's argument that no penalty should be levied as the additions were made under legal fiction.5. The assessee's appeal to the ld. CIT(A) was unsuccessful, leading to the appeal before the ITAT Ahmedabad.6. The ITAT found that the assessment made by invoking the provisions of Section 50C of the Act did not amount to furnishing inaccurate particulars as the assessee had shown capital gains based on the sale consideration received.7. Referring to the decision of the Hon'ble High Court of Calcutta and a Co-ordinate Bench, the ITAT held that penalty cannot be levied based on deeming provisions alone when the assessee has not received consideration over and above that declared.8. Following the precedents, the ITAT set aside the findings of the ld. CIT(A) and directed the A.O. to delete the penalty of Rs. 39,715/-.9. The appeal filed by the Assessee was allowed, and the order was pronounced in Open Court on 17-08-2016.