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Penalty on addition u/s 50C

  1. It is submitted that penalty cannot be levied on the addition as per valuation made by Stamp Duty Authority. This is so because the provisions of sec 50C of the Act provides that the value as assessed or accessible by Stamp Valuation Authority shall be deemed to be the full value consideration accruing to assessee and thus, these are only presumptive provisions and in absence of any corroborative evidence which indicates that assessee actually received consideration in excess of document price, the penalty cannot be imposed on the amount of capital gains which is in excess of capital gain arising as per document consideration. Reliance is placed on the decision of Honourable Ahmedabad ITAT in the case of Haresh P. Shah [ITA No. 2154/Ahd/2010] dated 08/07/2010 wherein penalty was imposed on the addition made by taking sale consideration at jantri rate u/s 50C of the Act has been deleted & detailed discussion has been made in said order as to why valuation made by stamp valuation authority cannot be made the basis for imposing penalty u/s 271(1)(c). As such, it is clear that jantri rate are not relevant for imposing penalty and thus, in the instant case, no penalty is imposable on the assessee.
  2.  The assessee has sold the immovable properties at the value as declared by him and he had not received any additional sale consideration over and above the declared value. The learned assessing officer who passed the assessment order did not lead any evidence to suggest appellant had actually received any higher amount over and above the sale consideration.
  3.  Also, it is submitted that the assessee has furnished all the relevant facts, documents/material including the sale agreement and the AO has not doubted the genuineness and validity of the documents produced before him and the sale consideration received by the assessee. Under these facts and circumstances, it cannot be said that the assessee has not furnished correct particulars of income. Accordingly the addition because of the deeming provisions does not ipso facto attract the penalty u/s 271(1) (c). Similar decisions were rendered by the other Bench of Tribunal in the following cases:
    • Shukhabhai P Ahir (HUF) ITA No.2454/Ahd/2009
    • Renu Hingorani ITA No. 2210/Mum/2010
    • ACIT V/s. Mrs N Meenakshi 319 ITR 262 (Chennai) 
  4. AO has relied on various judgements but none of them deals with the issue of penalty on addition u/s 50C. Now when there there are direct decisions on the issue which pertain to addition made on application of section 50C. According to decision of Hon’ble Calcutta High Court in the case where addition is made on account of application of section 50C and Revenue failed to produce any evidence to the effect that assessee has actually received more amount than that shown by it on the sale of property then penalty under section 271(1)(c) cannot be levied. 
  5. Reliance is placed on the decision of the Hon’ble Bombay High Court in the case of CIT Vs. Fortune Hotels and Estates (P). Ltd. [232 Taxman 481] wherein the Hon’ble High Court held that ”The Tribunal held that this cannot be taken as a case of furnishing inaccurate particulars of income inasmuch as there was a registered sale deed and there was consideration mentioned therein. That ground was raised and therefore, the document was forwarded to the Valuer for determination of the value, by itself would not mean that the assessee had furnished inaccurate particulars of income or has concealed the income. In this peculiar circumstances the imposition of penalty was not justified, is the conclusion drawn ...... .....With this clarification and finding that the Tribunal’s order does not raise any substantial question of law that we proceed to dismiss the appeal”
  6. Further the reliance is also placed on the decision of recent judgment of Honourable Calcutta High Court in the case of CIT v/s. Madan Teatres Ltd. – 42 taxmann.com 26 (Calcutta HC) held in the favour of the assessee:“Section 271(1)(c), read with section 50C, of the Income-tax Act, 1961 – Penalty - For concealment of income [Disallowance of claim, effect of] - Assessee sold a property for a sum of Rs. 2.51 crore - For purpose of stamp duty, value was estimated at a sum of Rs. 5.19 crore and on that basis stamp duty was realized - Thereupon, Assessing Officer having adopted sale price at Rs. 5.19 crore and passed a penalty order under section 271(1)(c) - Tribunal set aside said penalty order - On appeal, it was noted that actual amount received on sale was offered for taxation and it was only on basis of deemed consideration proceedings under section 271(1)(c) were started - Even otherwise, revenue failed to produce any iota of evidence that assessee actually received one paise more than amount shown to have been received by him - Whether in aforesaid circumstances, Tribunal was justified in setting aside penalty order - Held, yes
  7. In Harish Voovaya Shetty Vs. ITO [ITA No. 6383/Mum/2012] the Hon’ble Mumbai ITAT held that ....Therefore, where addition is made on account of applicability of Section 50C and there is no material on record to show that assessee had received more amount than that shown by it on sale of property then penalty under section 271(1)(c) cannot be levied. In the present case also no such case has been made by the Revenue. Therefore, decision of Hon’ble Calcutta High Court is a direct decision on the issues.... .......In view of above discussions, respectfully following the decisions of Hon’ble Calcutta High Court, we hold that penalty in the present case was not justified and the same is deleted.