2016 (3) TMI 817 - AT - Income Tax

Tribunal rules penalty unwarranted as appellant's valuation based on expert assessment

The Tribunal ruled in favor of the appellant, dismissing the penalty of Rs. 32,850 imposed under section 271(1)(c) for the variance between surrendered ... Penalty under section 271(1)(c) - furnishing inaccurate particulars of income - concealment of income - reliance on registered valuer report - surrender during survey - intention to defraud the revenuePenalty under section 271(1)(c) - furnishing inaccurate particulars of income - reliance on registered valuer report - surrender during survey - intention to defraud the revenue - Levy of penalty under section 271(1)(c) for alleged inaccurate particulars of income in respect of unexplained investment in construction of house property. - HELD THAT: - The assessee had surrendered an estimated amount for unexplained investment in construction of house property during survey, but subsequently obtained a report from a registered valuer which assessed the cost of construction at a lower figure and the assessee disclosed the undisclosed investment in the return on that basis. The statement recorded at survey shows the surrendered figure was an estimate arrived at by applying per square foot rates and the assessee expressly stated that correct valuation could be made only by a valuer. The Tribunal held that where particulars disclosed in the return are based on a registered valuer's determination and the earlier surrender was an estimate, the disclosure cannot be treated as furnishing inaccurate particulars with an intent to defraud the revenue. Because the registered valuer's report was not rejected by any authority below and the reduction resulted from that valuation, the essential requirement for imposing penalty under section 271(1)(c) - that the assessee furnished inaccurate particulars with culpable intent - was not established. Accordingly the levy of penalty was unwarranted. [Paras 4, 10, 11]Penalty under section 271(1)(c) set aside; appeal allowed.Final Conclusion: The Tribunal allowed the assessee's appeal and cancelled the penalty under section 271(1)(c), holding that disclosure based on a registered valuer's report did not constitute furnishing of inaccurate particulars with intention to defraud the revenue. Issues:Levy of penalty under section 271(1)(c) for undisclosed income based on surrendered amount differing from disclosed income.Detailed Analysis:The appeal was filed against the order confirming a penalty of Rs. 32,850 under section 271(1)(c) for the variance between surrendered and returned income. The assessee declared total income of Rs. 17,23,442, but during a survey, unaccounted cash, unrecorded stock, and unexplained investment in house property were found. The assessee reduced the undisclosed investment in house property based on a chartered valuer's report. The assessment added the undisclosed investment, leading to penalty proceedings. The CIT(A) upheld the penalty, citing concealment of income. The appellant argued no concealment as the reduced investment was based on the valuer's report.The appellant contended that the undisclosed investment was based on the valuer's report and not inaccurate particulars. The surrender during the survey was an estimate, and the correct valuation was determined later. The appellant emphasized that the undisclosed investment was disclosed based on the valuer's report, challenging the penalty. The department argued that by not disclosing the surrendered amount, inaccurate particulars were furnished, justifying the penalty.The Tribunal considered the facts where the surrendered amount differed from the valuer's report. The undisclosed investment was based on the valuer's assessment, not a deliberate attempt to mislead. The surrender was an estimate, and the correct value was determined later. The Tribunal concluded that no inaccurate particulars were furnished, and the penalty under section 271(1)(c) was unwarranted. Consequently, the appeal was allowed, and the penalty was dismissed.