2022 (7) TMI 1216 - AT - Income Tax

Tribunal upholds deletion of penalty for lack of evidence in 2015-16 assessment

DCIT, Central Circle : 17, New Delhi. Versus M/s. Divine Infracon Pvt. Ltd. And (Vice-Versa)

DCIT, Central Circle : 17, New Delhi. Versus M/s. Divine Infracon Pvt. Ltd. And (Vice-Versa) - TMI Issues:1. Validity of reference to DVO by AO and deletion of penalty2. Existence of actual loss of revenue3. Justification of penalty imposition under section 271(1)(c) of the Act4. Quashing of penalty proceedings by CIT(A)5. Merits of the penalty deletion by CIT(A)Issue 1: Validity of reference to DVO by AO and deletion of penalty:The Revenue challenged the CIT(A)'s decision to delete the penalty of Rs. 57,38,358 imposed by the AO under section 271(1)(c) of the Act for the assessment year 2015-16. The AO had referred the case to the District Valuation Officer (DVO) who determined a higher market value compared to the sale value declared by the assessee. However, the Tribunal found that there was no evidence of the assessee receiving more money than declared in the sale deed. Citing judicial precedents, the Tribunal held that penalty imposition under section 271(1)(c) was not justified without evidence of actual receipt of additional funds by the assessee. The Tribunal upheld the CIT(A)'s decision to delete the penalty, concluding that the AO's addition based on the legal fiction of section 43CA could not be sustained under the law.Issue 2: Existence of actual loss of revenue:The Revenue contended that the CIT(A) erred in not acknowledging the reference made by the AO to the DVO as valid and in erroneously deleting the penalty. The Department argued that there was an actual loss of revenue due to the difference in valuation between the DVO and the assessee. However, the Tribunal found that the AO's addition was based on the legal provision of section 43CA without any evidence of the assessee receiving more funds than declared. Therefore, the Tribunal dismissed the Revenue's grounds of appeal, supporting the CIT(A)'s decision to delete the penalty.Issue 3: Justification of penalty imposition under section 271(1)(c) of the Act:The key contention revolved around whether the penalty imposed under section 271(1)(c) was justified. The Tribunal emphasized the importance of evidence regarding the actual receipt of additional funds by the assessee, as opposed to mere discrepancies in valuations. Relying on legal principles and precedents, the Tribunal concluded that the penalty imposition in this case was not sustainable under the law, as there was no proof of the assessee receiving more money than declared in the sale deeds.Issue 4: Quashing of penalty proceedings by CIT(A):The CIT(A) had quashed the penalty proceedings initiated against the assessee, leading to the Revenue's appeal before the Tribunal. The Tribunal analyzed the facts of the case, including the valuation differences and the absence of evidence supporting the AO's penalty imposition. By considering the explanations provided by the assessee and the legal provisions, the Tribunal upheld the CIT(A)'s decision to delete the penalty, emphasizing the lack of evidence of actual receipt of additional funds.Issue 5: Merits of the penalty deletion by CIT(A):The Tribunal extensively discussed the factual aspects and legal provisions while evaluating the CIT(A)'s decision to delete the penalty. The Tribunal highlighted the assessee's disclosure in the tax audit report and the absence of evidence indicating receipt of excess funds. By citing relevant judicial pronouncements, the Tribunal supported the CIT(A)'s decision, ultimately dismissing the Revenue's appeal and upholding the deletion of the penalty. The Tribunal deemed the penalty deletion justified based on the legal principles and factual circumstances of the case.This detailed analysis of the judgment addresses the key issues involved in the case, providing a comprehensive overview of the legal arguments and conclusions reached by the Tribunal.