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January 13, 2023

No penalty under Section 271(1)(c) for additions made under Section 50C

by CA Shivam Jaiswal in Income Tax

No penalty under Section 271(1)(c) for additions made under Section 50C

Fact and Issue of the case

The brief facts reading to the case is this that a search under Section 132 of the Act was conducted on 22.09.20 15 in Akshar Group of cases including the case of the assessee and consequently, notice under Section 1 53A of the Act on 24.05.2016 was issued. The assessee on 18.11.2016 filed the return of income under Section 153A of the Act declaring total income at Rs.2,19,220/- same as the return of income filed under Section 139(1) of the Act on 09.2011. The relevant assessment under Section 153A r.w.s. 143(3) of the Act was finalized on 11.12.2017 determining total income at Rs.5,69,720/-. Subsequently, as per the direction made by the Ld. CIT(A)-12, the assessee’s case was referred to the District Valuation Officer and on the basis of the valuation made by the Asst. Valuation Officer, the total income of the assessee was determined at Rs.4,26,400/-. Penalty proceeding under Section 271(1 )(c) of the Act was further initiated on assessee on the ground of addition made of Rs.2,07,180/- on account of LTCG for furnishing of inaccurate particulars of income.

It is the case of the Revenue that the Appellate Authority has partly allowed the appeal of the assessee and further referred the case to the District Valuation Officer under Section 50C(2) of the Act to compute the LTCG in accordance with law. Therefore, upon receipt of the Fair Market Value (FMV) from the District Valuation Officer, Rajkot, order of assessment upon re-computation of income of the assessee was finally determined at Rs.4,26,400/-. Thus, undisclosed LTCG of the assesse was determined at Rs.2,07,1 80/- instead of Rs.3,50,000/- as computed vide earlier assessment order dated 11.12.2017 and penalty was initiated for furnishing inaccurate particulars of income. At the time of hearing of the instant appeal, the Ld. Counsel appearing for the assessee submitted before us that penalty cannot be levied on the difference of addition made by the Ld. AO consequent to the order passed by the Ld. CIT(A) under Section 50C of the Act, since, this is nothing but deeming provision. The Sub-Section (1) of Section 50C of the Act cannot automatically to give rise to penalty proceeding. According to him, Section 50C of the Act would indicate that full sale consideration received by the assessee required to be considered for the purposes of computing capital gain under Section 48 of the

Act, is to be replaced with the help of deeming fiction provided in this. This replacement is further subject to determination of FMV as contemplated under Section 2 of the Act. Thus, addition to the income of the assessee with the aid of Section 50C of the Act is only under deeming condition which may vary in the event a reference is made to be District Valuation Officer under Sub-Section (2) to Section 50C of the Act. Under these circumstances, the assessee cannot be held to be liable for concealment of income or furnishing inaccurate particulars of income. The assessee may stick to the stand that whatever has been paid as consideration amount for the property, the same can only be tested by making reference by District Valuation Officer under Sub-Section (2) to Section 50C of the Act. Thus, the assessee cannot be liable for penalty under Section 271(1 )(c) of the Act when an addition is being made with the help of the deeming provision of Section 50C of the Act. On this account, the Ld. AR relied upon the judgment of the Co-ordinate bench in the matter of Chinubhai Ambalal Patel vs. ITO in ITA No.119/Ahd/2015 dated 29.08.2017, A.Y. 2010-11, a copy of whereof also been annexed to paper book filed before us. Such contention made by the assessee, however, has not been able to be controverted by the Ld. DR.

Observation by the Tribunal

The Tribunal has carefully perused the judgment passed by the Co-ordinate Bench in the case of Chinubhai Ambalal Patel (supra), wherein we find that the Co-ordinate Bench while granting relief to the assessee observed

The Tribunal do not find any reason to deviate from the stand taken by the Co­ordinate Bench on the identical facts of the case. Hence, respectfully relying upon the same, we do not justify the imposition of penalty levelled against the assessee on the basis of the deeming provision of Sub-Section (2) to Section 50C of the Act. Thus, the order passed by the authorities below under Section 271(1)(c) of the Act is found to be erroneous and bad in law and hence,

Conclusion

The tribunal has ruled in favour of the assessee and dismiss the appeal

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