TaxTMI 
TaxTMI 
2024 (10) TMI 348
X X X X Extracts X X X X
X X X X Extracts X X X X
....s.271(1)(c) of the Act, is not in accordance with the requirements of Section 271(1) of the Act and consequently, the order of penalty founded on the invalid initiation of penalty proceedings is liable to be cancelled. 3. The order of penalty passed u/s 271(1)(c) of the Act is bad in law as it is not discernable from the notice issued under section 274 rws 271 of the Act as to whether the penalty proceedings is initiated for furnishing of inaccurate particulars of income or concealment of income under the facts and in the circumstances of the Appellant's case. 4. Without prejudice to the above, the authorities below are not justified in levying a penalty of Rs. 96,41,529/- u/s 271(1)(c) of the Act under the facts and in the circumstances of the Appellant's case. 5. The authorities below failed to appreciate that the Appellant has neither concealed any income nor furnished inaccurate particulars of income to warrant levy of penalty and therefore, the penalty levied u/s.271(1)(c) of the Act requires to be cancelled. 6. Without prejudice to the above, the penalty levied is highly excessive and liable to be reduced substantially. 7. The Appellant craves leave of your Hono....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ee u/s 271(1)(c) of the Act as under: "9. Penalty Proceedings: As discussed in detail in this order the assessee has concealed his particulars of income and also furnished inaccurate particulars of income. This action of the assessee amounts to Concealment of Income warranting initiation of penalty proceedings u/s 271(1)(c) of the Income Tax. Penalty Proceedings u/s 271(1)(c) are, therefore, initiated by issue of Notice u/s 274." 2.4 The learned Assessing officer then once again issued another Notice u/s 274 r.w.s 271(1)(c) of the Act on 16/01/2023 as under: "Whereas in the course of proceedings before me for the Assessment Year 2014-15, it appears to me that you have furnished inaccurate particulars of income." 2.5 The Assessee vide his detailed objections filed before the learned A.O on 21/01/2023, objected to the issuance of the two notices and also relying on the decision of the jurisdictional High Court pointed that in the absence of conclusive satisfaction in the Notices, the said Notices would be bad in law. The Assessee also in the same submission pointed out that the issuance of a fresh Notice u/s 274 r.w.s 271(1)(c) of the Act dated 16/01/2023 is barred by limitatio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ua non for initiation of proceedings and the penalty proceedings should be confined only to those grounds specifically stated in the notice. As recorded hereinabove, the Assessing Officer had issued notice only with regard to furnishing inaccurate particulars. Whereas the satisfaction recorded is with regard to concealment of income particulars and the very ground has been struck-off. The notice has been issued on the specific premise that assessee had furnished inaccurate particulars of income. 13. In view of the law laid down in the authorities referred by us, we are of the view that the penalty order not sustainable in law." 2.9 He submitted that the aforesaid view taken by the Hon'ble High Court was again followed in the case of M/s. SSA'S EMERALD MEADOWS reported in [2016] 73 taxmann.com 241 (Karnataka). Aggrieved by the same, the department filed an SLP before the Hon'ble Supreme Court, which has been dismissed. In view of the above, he submitted that the penalty levied on the basis of the invalid notice issued by the learned AO is opposed to law and facts of the assessee's case and hence, the penalty imposed deserves to be cancelled on this score. 2.10 The ld. A.R. r....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ition would preclude the imposition of penalty. 2.15 The ld. A.R. for the assessee submitted that the aforesaid addition was mainly on account of an inaccurate estimate in the fair market value as on 01/04/1981 and the assessee as such cannot be held responsible for the lapses in the valuation report furnished as the same was obtained from an independent valuer. 2.16 He submitted that the Assessee being a non-resident, did not contest the said addition only to bring a quietus to the affairs and to avoid protracted litigation with the department. He therefore submitted that the said action cannot be construed as admission of any error on part of the assessee or it cannot lead to an inference that he has concealed any income or furnished inaccurate particulars of income to warrant the levy of penalty. Hence, the penalty imposed by the learned A.O. requires to be cancelled. 2.17 He also invited our attention to the decision of the Apex Court on Dilip Shroff's case [291 ITR 519 (SC)], wherein the Apex Court while considering an identical issue of levy of penalty on account of the difference in valuation of FMV as at 01/4/1981 as adopted by the assessee and as finally concluded by th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....as furnished inaccurate particulars." 2.18 He therefore requested us to appreciate that the aforesaid judgement is applicable on the facts of the case of the assessee and as such there exists no material which leads to the conclusion that there is concealment of any income and the proceedings need to be dropped. 2.19 He further relied on the judgement of the Hon'ble Supreme Court in the case of RELIANCE PETRO PRODUCTS reported in 322 ITR 158 wherein it has been held that no penalty can be levied in respect of any claim made that has been denied by the Department, wherein the Hon'ble Supreme Court observed as under: "We are not concerned in the present case with the means rea. However, we have to only see as to whether in this case, as a matter of fact, the assessee has given inaccurate particulars. In the Webster's Dictionary, the word "inaccurate" has been defined as: not accurate, not exact or correct; not according to erroneous; as an inaccurate statement, copy or transcript" truth: We have already seen the meaning of the word "particulars" in the earlier part of this judgement. Reading the words in conjunction, they must mean the details supplied in the retu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sessee concealed the two incomes and assessee liable for penalty to the extent of 100% of tax to be evaded. The main contention of the ld. AO is that assessee has furnished the wrong valuation report from the valuer and consequently, ld. AO enquired with the valuer regarding method of valuation followed by the valuer and recorded his statement of the valuer. The relevant sworn statement of the valuer Mr. K. Manjunath was recorded u/s 131 of the Act recorded on 20.6.2014 and 17.10.2016 which are as follows: Qn. 14: AS per the order of Chief commissioner your registration number Reg No. as CAT-I/Reg No. ICC-I/2006-07 dated 11.08.2006. you are value which class of assets? I have been appointed as a registered valuer for category I for of assets of immovable properties (Other than agricultural lands. plantations. forests. mines quarries). Qn. 15: As per the order of chief commissioner vide your registration number Ans: Reg No. as CAT-I/Reg No. I/CC-1/2006-07 dated 11.08.2006, you been appointed as a registered valuer for category 1 for class of assets of immovable properties (other than agricultural lands, plantations, forests, Whereas as mentioned in your answer to your mines an....
X X X X Extracts X X X X
X X X X Extracts X X X X
....1 gunta, Qn. 23 I am showing you the registered document 1425 of 80-81 dated 17.11.1980, where the property in question extending to 11 acres 25 guntas was purchased by Mr Mahesh Rahil Rahim for a consideration of Rs 40,000/, In the details of the property, the market value of the said land is reported as Rs 40,000/-. Within a period of months, what is the basis for arriving at the market value of Rs 25/sq ft by you? Ans, As the transacted values are much more than the registered values, | have adopted the market rate in 1981 as Rs 25/sq ft. Qn. 24: Now I am showing the letter sent by sub-registrar office Devanahalli, Taluk Kasaba Hobli, where the sale Instances In that locality during the year 1980-81 and 1981-82 have been furnished. From the perusal of the sale instances submitted by the S.R.O., there Is no cases where the consideration 15 near to the market rate adopted by you. Please explain all this. Ans. Because this is the general practice that the transacted values are much more than the registered values, | have adopted the market rate in 1851 as Rs 2550 ft. Qn. 25: 11 acres 42 guntas when converted to square feet will come to 5,23,809 sq feet. If the market rate....
X X X X Extracts X X X X
X X X X Extracts X X X X
....een that the two valuation reports are made in the gap of 2 years. What is the fees charged for the submission of these valuation reports and the mode of receipt of fees? Ans: I have received Rs 15,000 by cheque for the report dated 17 10.2016 and for the report dated 20 06. 2014, I remember of receiving Rs 10,000 by cash don't remember the exact date. Qn. 33: There are lot of infirmities with regards to valuation report submitted by you. Some of the infirmities are the sale Instances are not available, the report of valuation Is not in the prescribed form, the purpose mentioned in the report and the report of actual valuation given are contradictory. You are also not qualified to value agricultural property. What is your explanation to this? Ans. I tried but sale instances were not available and contradiction in the report is typographical error for which I apologize. 4.2 The crux of the above statement is that K. Manjunath is a registered valuer for category-1 for class of assets immovable properties other than agricultural land, plantation, forest, mines and queries and his registered number is CAT-I/REG No.1/CC/200607 dated 11.8.2006 and he has done few valuations for th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r, the valuer has withdrawn by stating that he is not a technical expert to value the agricultural property. The ld. AO has adopted the value on the basis of valuation details produced by the SRO. 4.4 Further, in our opinion, fair market value of a capital asset is the value which would ordinarily fetch in the open market on sale of same on the relevant date and not on the value adopted for registration by sub-registrar for stamp duty purpose. In the absence of confirmed fair market value as on 1.4.1981, the ld. AO is also not referred the matter to the DVO for valuation of the property as on 1.4.1981. On the other hand, he considered the value adopted for registration of the property with the SRO as per sale deed dated 17.11.1980. Thus, he applied the cost of indexation that is worked out at Rs.40,000x1024/100 and arrived at the cost of acquisition at Rs.2,60,654/- and accordingly, he computed the capital gain. In our opinion, the value adopted by SRO is for determining the stamp value of sale transactions and it could not be the fair market value. Being so, in absence of any evidence of fair market value as on 1.4.1981, not being provided by assessee and revenue, the estimate ma....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ncome. In our opinion, penalty cannot be levied in this kind of situation as there was no evidence to suggest that claim of assessee was bogus or malafide and disallowance of the claim itself cannot be reason to levy penalty. The addition of capital gain is computed on account of difference in estimation of cost of acquisition between the claim made by assessee and the value adopted by the ld. AO. The ld. AO not able to prove that there was any willful or gross negligence on the part of assessee resulting thereby either any concealment of income and or furnishing inaccurate particulars of income. To levy penalty for concealment, it is necessary that there must be either concealment of income and or furnishing inaccurate particulars of income by the assessee. As the AO or appellate authority arrived at different estimates of income of the assessee, that itself cannot be said that assessee concealed particulars of income and or furnished inaccurate particulars of income so as to attract penalty. Penalty u/ 271(1)(c) of the Act was not imposable in relation to estimated additions because the factum of either concealment of income or furnishing inaccurate particular of income, were not....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lved in the case in which it is rendered and, while applying the decision to a later case, Courts must carefully try to ascertain the true principle laid down by the decision." 10. In this case, the addition has been only based upon the estimates and values obtained from Sub-Registrar's office in preference of the value as per valuer's report. As evident from the Hon'ble jurisdictional High Court decision in Thulasimani Ammal case cited above (supra), the guideline value is not conclusive proof. 11. The Revenue's reliance upon s. 50C of the IT Act, 1961 is also misplaced. The Said section reads as under : "50C. (1) Where the consideration received or accruing as a result of the transfer by an assessee of a capital asset, being land or building or both, is less than the value adopted or assessed by any authority of a State Government (hereafter in this section referred to as the 'stamp valuation authority') for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed shall, for the purposes of s. 48, be deemed to be the full value of the consideration received or accruing as a result of such transfer. (2) With....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssioner of Income-tax, Bangalore v. Chandrasekaran reported in [2015] 56 taxmann.com 210 (Karnataka), wherein the Hon'ble High Court held as under:- "7......In that context, the claim for depreciation was also a bona fide error. When pointed out, he has paid the tax. Under these circumstances, Appellate Authority on appreciation of entire facts have concurrently held that there is no deliberate suppression of income nor it is a case of furnishing of inaccurate particulars. It is a bona fide mistake and the moment the mistake was pointed out, the assessee has paid the tax. It is well settled that imposition of penalty is not automatic and therefore they have rightly set aside the order imposing the penalty. In fact, the order imposing penalty is contrary to law, declared by this court in the case of CIT v. Manjunatha Cotton & Ginning Factory [2013] 359 ITR 565/218 Taxman 423/35 taxmann.com 250 (Kar.), in as much as, it is clear from the order that there is no direction to initiate penalty proceedings. In the aforesaid judgment, it was held that it is imperative that the assessment order contains a direction. The use of phrases like (a) penalty proceedings are being initiated sep....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... accepted the addition. The lower authorities relied on proceedings before Assessing Officer relating to the assessment for levying the penalty. The same do not constitute admission for the purpose of levying penalty. [Para 8] The admission by the assessee, which was more influenced by extraneous consideration and other factors and was not supported by any incriminating material as explained in course of assessment and penalty proceedings, cannot be q basis to impose a penalty for concealment of income. It was no admission at all as legally understood. Further, the lower authorities have only rested their conclusion both in the assessment and penalty proceeding on the statement of the assessee and certain seized material. These things alone is not sufficient for imposition of penalty. [Para 10] In the instant case, the income of the assessee has been determined on estimate basis. There is no conclusive material to show that there is actual concealment of income. Though the addition is confirmed by the Commissioner (Appeals), it does not prove that the Assessing Officer has the material to suggest that the assessee earned exact amount of profit as determined by the Assessing Off....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he above disallowances in the return of income. The AO made part of the disallowances out of the above expenditure which has been substantially reduced by the learned CIT(A). It would, therefore, show that the assessee disclosed all the relevant facts and materials in the return of income as well as before the authorities below on merit. It is not a case of the AO that the assessee has made false claim or suppressed the facts relating to the above claims of the expenditure. The disallowances have been made on the question of interpretation of law as to whether the assessee would be entitled for deduction and whether the income of the assessee false under the category of business income. Since the assessee disclosed all the facts before the authorities below at proper level, the part disallowances of the expenditure would not par-se lead to an inference that the assessee concealed the particulars of Mastek Limited income or filed inaccurate particulars of income. On disallowance of the expenditure imposition of penalty is not automatic. 6. The Hon'ble Supreme Court in the case of CIT Vs Reliance Petroproducts Pvt. Ltd. 322 ITR 158 (SC) held that "A glance at the provisions of....