2023 (10) TMI 833 - AT - Income Tax

Penalty Under Section 271(1)(c) Vacated Due to Lack of Evidence and Procedural Irregularities in Income Tax Case.

The Tribunal vacated the penalty imposed under Section 271(1)(c) of the Income Tax Act, as it was based on a deeming fiction rather than actual evidence ... Penalty u/s 271(1)(c) - addition of capital gain - addition so made is of the amount being the amount considered for the stamp duty u/s. 50C - HELD THAT:- AO considered the consideration as per stamp duty and that too without considering the fact that the assessee has already received a sum of Rs. 1,20,000 and ld. AO has not considered the cost of acquisition. If reduced the consideration of Rs. 1,20,000/- the balance amount is the difference between the consideration and stamp duty value as per provision of section 50C of the act. Thus, as not disputed by the ld. DR representing the revenue that the amount after reducing the consideration the sustained amount is on account of the stamp duty valuation and there are various decision of the co-ordinate bench of the tribunal holding the there cannot be levy of penalty on the amount sustained on account of the provision of section 50C this view of the tribunal is also confirmed in the case of Fortune Hotels and Estates (P.) Ltd [2014 (10) TMI 783 - BOMBAY HIGH COURT] Thus in this case we note the amount remain to be added [after deducting the initial exemption and consideration] is the only amount added on account of the difference in the stamp duty valuation and the levy of the penalty on that amount is not legal based on the finding of the Bombay High Court we vacate the levy of the penalty in the case and thus, the assessee grounds of appeals are allowed. Issues Involved:1. Legality of penalty levied under Section 271(1)(c) of the Income Tax Act.2. Penalty appeal order preceding the quantum appeal.3. Penalty on sale transaction executed by the appellant as a power of attorney holder.4. Mechanical confirmation of penalty without application of mind.Summary of Judgment:1. Legality of Penalty under Section 271(1)(c):The assessee argued that the penalty levied by the Assessing Officer (AO) under Section 271(1)(c) was based on a deeming fiction and not on actual concealment of income or furnishing of inaccurate particulars. The AO had imposed the penalty for a sale transaction of immovable property valued at Rs. 11,11,200 for stamp duty purposes, while the actual sale consideration was Rs. 3,20,000. The Tribunal noted that the AO did not provide evidence that the assessee received more than the declared sale consideration. The Tribunal referred to various judicial pronouncements, including the case of CIT Vs. Reliance Petroproducts Pvt. Ltd., stating that penalty cannot be levied on deemed income unless proven otherwise.2. Penalty Appeal Order Preceding Quantum Appeal:The assessee contended that the penalty appeal order was passed before the quantum appeal was decided, which was still pending. The Tribunal acknowledged this procedural irregularity and emphasized that penalty proceedings should not precede the conclusion of quantum appeal proceedings.3. Penalty on Sale Transaction by Power of Attorney Holder:The assessee sold the property as a power of attorney holder for Mr. Surya Prakash Nathani and received Rs. 1,20,000 as sale consideration. The Tribunal noted that the AO failed to ascertain the correct facts and did not consider the appellant's role as a power of attorney holder. The Tribunal referred to the case of Sidharth Chaudhary Vs. ITO, which held that capital gain cannot be charged to a power of attorney holder but to the actual owner of the property.4. Mechanical Confirmation of Penalty:The Tribunal found that the CIT(A) mechanically confirmed the penalty without proper application of mind and without considering the facts and submissions made by the assessee. The Tribunal emphasized the need for a thorough examination of facts before confirming such penalties.Conclusion:The Tribunal concluded that the penalty levied under Section 271(1)(c) was not justified, especially since the addition was based on the difference in stamp duty valuation under Section 50C. The Tribunal vacated the penalty, allowing the assessee's appeal. The judgment highlighted the importance of procedural fairness and the necessity of basing penalties on concrete evidence rather than deeming fictions.