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Penalty on addition on the basis of Valuation Report

  1. Furhter, even on merits, it is submitted that only because the opinion of Govt. Registered valuer is not accepted or some other expert gives another opinion, is not by itself sufficient for arriving at a conclusion that the assessee had concealed his income or furnished inaccurate particulars attracting penalty under Sec. 271(1)(c). In fact, the report of DVO is merely an expression of opinion and on the basis of opinion and estimates no penalty u/s 271(1)(C) is leviable. The instant case is squarely covered by the decision of Dilip N. Shroff’s (291 ITR 519) (SC) wherein it was held by Supreme Court that “Only because the opinion of registered valuer is not accepted or some other expert gives another opinion, is not by itself sufficient for arriving at a conclusion that the assessee had furnished inaccurate particulars attracting penalty under s. 271(1)(c), Expln.; primary burden of proof of furnishing inaccurate particulars of income is on the Revenue and it is only on discharge of primary burden that secondary burden of proof would shift on the assessee.” The facts of the present case are similar and hence it is submitted that the case of the assessee is directly covered by the case of Supreme Court which is binding on the Revenue, and hence no penalty ought to be levied.
  2. Assessee in substance raised the main contention i.e. regarding the fair market value, on 01.04.1981, of the property sold for the purpose of ‘Capital Gains’. The Section 55(2) of the Income Tax Act defines the cost of acquisition of a property for the purpose of section 48 and 49 of the Income Tax Act. The assessee is entitled to take fair market value of asset on 01.04.1981 as the cost of acquisition, if the asset was acquired prior to that date and the asset does not fall u/s. 55(2)(a), 55 (2)(aa) and 55(2)(ab). The assessee claimed fair market value (on 01.04.1981) of the property sold to be Rs. 13,37,088/- on the basis of the report of the Registered Valuer as against fair market Value determined by Department Valuation officer at Rs. 84000/- by adopting rate of Rs. 2 per square meter. Further assessee argued that Sec. 142A is not applicable as it does not deal with reference for the purpose of Sec. 48 and 49 of the I. T. Act but it deals with reference to the valuation officer for the purpose of section 69, 69A, 69B and section 56(2).
  3.  As per the provisions of law prevailing for the said assessment year, the matter can be referred to valuation cell only if the assessing officer is of opinion that value so claimed is less than its fair market value. Though there was an amendment w.e.f 01.07.2012 the said amendment cannot be made applicable as it is not retrospective in nature. Here in the case, valuation report was issued by the Assistant Valuation officer long back on 07.12.2011 and hence only the old provision was applicable. So the reliance placed by the assessee on the decision of the Gujarat High Court in the case of Hiaben Jayantilal Shah v/s. ITO & Anr. – 310 ITR 31 (Guj), on the decision of the Pune Bench in the case of Smt. Krishnabhai Tingre v/s. ITO – 101 ITD 317 (AT) (Pune) and on the decision of Ahmedabad Bench in the case of ITO v/s. Nitin Jayantilal Shah – 48 SOT 16 (Ahd) which hold good in respect of the old provisions and hence the case of the assessee was squarely covered. However, The Tribunal by relying on the decision of Delhi High Court in case of ACC Ltd. vs DVO held that the reference made by AO to DVO is justified even under the old provisions disregarding the decision of the jurisdictional High Court in case of Hiaben Jayantilal Shah v/s. ITO & Anr.
  4.  It is further submitted that the valuation of a particular/ underlying property may differ from the general rate prevailing in the area depending upon the location, size, advantage and disadvantage attached to the particular plot of land and therefore, there was always a scope of variation in the matter of valuation. the matter of valuation is highly subjected and the opinion of two experts vary in most of cases. Thus the addition is purely based on difference of opinion. The assessee has undisputedly disclosed the basis of valuation of fair market value adopted as on 01.04.1981 by adopting the report of Govt. Registered Valuer. Hence, it is submitted that when the value of the property is based on an opinion, therefore even when any addition is made on the basis of difference of opinion and estimate, it would not automatically lead to the conclusion that the assessee has concealed particulars of income or furnished inaccurate particulars of income.
  5. Reliance is also placed on the decision of Rajpal Chhabra vs ITO in ITA 5517/Mum/2012 wherein it was held that “we are of the considered opinion that the penalty u/s 271(1)(c) is not warranted in respect of the addition based on different fair market value as on 01.04.1981 when the assessee has substantiated its claim by the valuation report of a registered valuer.”
  6. Moreover, there is also difference of view between first and second appeal. The fact that the CIT(A) has rendered the decision in favour of the assessee which was reversed by the Tribunal also shows that the issue is debatable and there is difference of opinion. The issue is squarely covered by the decision of Salman Khan vs ACIT in I.T.A. No.2559/Mum/2013 wherein it was held that “Although the Tribunal has reversed the decision of the ld. CIT(A) on this issue, the fact that the claim of the assessee was accepted by the ld. CIT(A) on merit clearly shows that the said claim made by the assessee was based on a possible view of the matter. It also shows that the claim made by the assessee for deduction on account of legal expenses was a bonafide claim” . Furthermore it has been held in CIT vs. Eastern Medikit Ltd. by the Hon'ble Delhi High Court that no penalty is impossible when two views are possible.
  7.  It is pertinent to note that a statutory amendment was made for provision 55A for the Act w.e.f 01.07.2012 by which the words “AO is of the opinion that the value so claimed at variance with fair market value “, have been added in statute. In the instant case the assessment year is 2004-05 which pertains to year before the date of amendment and the reference to DVO was made on 05.10.2011 which is also prior to the date of amendment i.e. 01.07.2012. Even on this issue, the decision was also rendered in favour of the assessee in the latest judgement of Gujarat High Court in case of CIT vs Gauranginiben Shodhan ( 2014) 367 ITR 238. Hence it is submitted that in any case for the purpose of levy of penalty, the explanation of the assessee should be considered as bonafide and no penalty should be levied u/s 271(1)(c)
  8. In view of the above submissions, it is prayed that penalty imposed by assessing officer may kindly be deleted.