ITAT rules discrepancies in section 50C not grounds for penalty.

The ITAT allowed the Assessee's appeal, overturning the penalty imposed under section 271(1)(c) of the Income Tax Act. Relying on judicial precedents from the Gujarat High Court and Bombay High Court, the ITAT emphasized that discrepancies between actual and deemed consideration under section 50C do not constitute inaccurate particulars of income. The decision highlighted that the application of section 50C does not automatically trigger penalty proceedings, leading to the deletion of the penalty by the AO.

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Issues:
Levy of penalty under section 271(1)(c) of the Income Tax Act, 1961 based on inaccurate particulars of income.

Analysis:

Issue 1: Levy of Penalty under Section 271(1)(c)
The appeal was filed against the order of the Commissioner of Income Tax (Appeals) sustaining the penalty under section 271(1)(c) of the Act. The Assessee transferred an office space for Rs. 4 lakh, declaring a capital gain of Rs. 1,19,286 only. However, the AO valued the property at Rs. 5,51,000 under section 50C(2) of the Act, resulting in a recomputed capital gain of Rs. 3,17,517. The AO initiated penalty proceedings as the Assessee failed to respond to the notice. The CIT(A) confirmed the penalty, leading to the appeal before ITAT.

Issue 2: Legal Fiction under Section 50C
The Assessee argued that no penalty should be imposed due to the legal fiction created under section 50C, which led to the additional capital gain. The AO adopted the value determined by the DVO, which was less than the stamp duty value. The CIT(A) upheld the penalty, stating that the AO was justified in imposing it as per the Act's provisions. The Assessee's contention that only the document price was declared, ignoring section 50C, was dismissed.

Issue 3: Judicial Precedents
ITAT referred to judgments by the Gujarat High Court and Bombay High Court, emphasizing that the application of section 50C does not automatically warrant penalty proceedings. The courts highlighted that discrepancies between actual sale consideration and deemed consideration do not amount to furnishing inaccurate particulars of income. Following these precedents, ITAT set aside the CIT(A)'s finding and directed the AO to delete the penalty under section 271(1)(c).

In conclusion, ITAT allowed the Assessee's appeal, citing the legal precedents and the distinction between actual and deemed consideration under section 50C. The judgment emphasized that discrepancies in values for stamp duty or DVO determination do not justify penalty imposition under section 271(1)(c).

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