TaxTMI 
TaxTMI 
2011 (7) TMI 109
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....ferred to as „the Act‟) by the Assessing Officer, which has been upheld by the CIT(A) as well as the Income Tax Appellate Tribunal („the Tribunal‟ for brevity). This penalty was imposed under the following circumstances: The assessee entered into a Memorandum of Intent dated 24.03.2001 with the Bank of Punjab Limited to let out its property bearing Khasra No.258 & 261, Khevat No.430/250 and Khatauni No.520 situated at Manesar Raod, Gurgaon. Thereafter, the prescribed Form No.37-I was filed on 16.04.2001 before the appropriate authority constituted under the provisions of Chapter XX-C of the Act under Section 269UC of the Act seeking no objection by the appropriate authority. Thereafter, the appropriate authority issued a certificate dated 30.07.2001 under Section 269UL(3) of the Act giving no objection. Thereafter, the appellant by a Lease Agreement dated 06.08.2001 had leased out its aforesaid property to the Bank of Punjab Limited at rental Rs. 1,00,000 per annum. As per the aforesaid Lease Agreement, the property admeasuring 11,499 sq. yds (10,682.83 sq. mts.) situated at Manesar Road, Gurgaon together with five existing buildings or structure s....
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....d penalty of Rs. 17,82,078/- under Section 271(1)(c) of the Act by an order on account of tax allegedly sought to be evaded. 5. The CIT(A) confirmed the levy of penalty under Section 271(1)(c) of the Act. 6. The Tribunal vide order dated 04.02.2011 dismissed the appeal of the assessee and upheld the action of the CIT(A) in confirming the penalty of Rs. 17,82,078/- imposed by the AO under Section 271(1)(c) of the Act. 7. It is clear from the aforesaid narration of facts that the main reason for the AO to imposed the penalty upon the assessee was that the annual rental value of Rs. 1 lac disclosed by the assessee in the income tax return, on the basis of Lease Agreement dated 06.08.2001 was clearly wrong and having regard to the fact that the assessee had also received a sum of Rs. 67 Crores as interest free deposit from the lessee, annual rental value would be much higher, which was ultimately determined at Rs. 75,63,360/- as on 01.04.2005 on the basis of valuation report of the Government registered Valuer submitted by the assessee imposed. In this wake, according to the Revenue, the assessee had concealed material particular and furnished inaccurate p....
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....earned counsel referred to and relied upon the following judgments of the Supreme and this Court and submits that in a case like this, no penalty was sustained: (1) Commissioner of Income Tax Vs. Zoom Communications Pvt. Ltd. [327 ITR 510]. (2) Commissioner of Income Tax Vs. Reliance Petro Products Pvt. Ltd. [322 ITR 158]. (3) Commissioner of Income Tax Vs. M.K. Subba [333 ITR 38]. (4) Commissioner of Income Tax Vs. Suresh Chandra Mittal [251 ITR 9]. (5) K.P. Madhusudhanan Vs. Commissioner of Income Tax [251 ITR 99]. 10. Mr. Deepak Chopra, learned counsel for the Revenue, countered the aforesaid submission. He relied upon the reasoning given by the authorities below in imposing/sustaining the penalty. He also referred to the provisions of Section 23 of the Act on the basis of which he submitted that the annual rent in the Lease Agreement was suppressed. It was the duty of the assessee to state the rent which this property could reasonably fetch which was the duty cast upon him having regard to the provisions of Section 23 of the Act. 11. Thus in every case, it is seen, on the facts of the case, as to whether the ....
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....ual value as so determined does not exceed one thousand two hundred rupees, the amount of such annual value; (ii) In respect of any residential unit whose annual value as so determined exceeds one thousand two hundred rupees, an amount of one thousand two hundred rupees; (c) In the case of a building comprising one or more residential units, the erection of which is completed after the 31st day of March, 1978 but before the 1st day of April, 1982, for a period of five years from the date of completion of the building, be reduced by a sum equal to the aggregate of - (i) In respect of any residential unit whose annual value as so determined does not exceed two thousand four hundred rupees, the amount of such annual value; (ii) In respect of any residential unit whose annual value as so determined exceeds two thousand four hundred rupees, an amount of two thousand four hundred rupees; (d) In the case of a building comprising one or more residential units, the erection of which is completed after the 31st day of March, 1982 but before the 1st day of April, 1992, for a period of five years from the date of completion of the building, be reduced by a sum equal to th....
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....ed area of 1,23,490 sq. ft. at Rs. 75,63,360/-. This was done at the instance of the AO when the assessee was exposed and confronted with the aforesaid facts. Had the assessee kept in mind the provisions of Section 23 of the Act, which it was supposed to, the assessee would have found that the sum for which the property might reasonably be expected from year to year is adjustment than the sum disclosed in the Lease Agreement. In this behalf, the Tribunal has observed, and rightly so, is as under: "The word "reasonably" appearing in Clause (a) is very important. What the landlord might reasonably expect to get from a hypothetical tenant, if the building were let from year to year, affords the statutory yardstick for determining the annual value. The actual rent payable by a tenant to the landlord would, in normal circumstances, afford reliable evidence of what the landlord might reasonably expect to get from a hypothetical tenant, unless the rent is inflated or depressed by reason of extraneous consideration such as relationship, expectation of some other benefit etc. There would be ordinarily be in a free market close approximation between actual rent received by the land....