S/s. 50C, 271(1)(c) – The mere fact that the AO had invoked section 50C(2) and adopted guideline value for computing capital gains ignoring what was disclosed by the assessee ipso facto cannot be the sole basis for imposing penalty.

S/s. 50C, 271(1)(c) – The mere fact that the AO had invoked section 50C(2) and adopted guideline value for computing capital gains ignoring what was disclosed by the assessee ipso facto cannot be the sole basis for imposing penalty.

The assessee filed its return of income which return of income was subsequently revised. In the original return of income as also in the revised return of income, the assessee had computed and offered for taxation capital gains arising on sale of land. The capital gains were computed by adopting the consideration as per sale agreement to be full value of consideration. In the course of assessment proceedings, the AO noticed that the sale consideration as per agreement was Rs. 28,54,200, whereas the value of the property as per guideline value was Rs. 95,40,000. He assessed total income by computing capital gains by adopting the guideline value to be full value of consideration. He also initiated penalty proceedings. The assessee did not file any appeal against the application of guideline value by the AO. The AO levied penalty u/s. 271(1)(c) of the Act inter alia on the ground that but for information obtained by him from AIR data, correct capital gains would have escaped assessment as the assessee failed to disclose the same either in original return of income or in the revised return of income filed subsequently.

Aggrieved by the levy of penalty, the assessee preferred an appeal to the CIT(A) who upheld the action of the AO. Aggrieved, the assessee preferred an appeal to the Tribunal.

Held

The Tribunal noted that it was not the case of the AO that the assessee has received consideration in excess of the amount stated in the sale deed. The mere fact that the AO had invoked section 50C(2) of the Act and adopted guideline value for computing capital gains ignoring what was disclosed by the assessee ipso facto cannot be the sole basis for the purpose of computing capital gains. The Tribunal noticed that the Mumbai Bench of the Tribunal in the case of Renu Hingorani vs. ACIT has held that penalty merely on the basis of invoking section 50C(2) of the Act cannot be sustained. It further observed that the same law has been reiterated in the case of Shri Chimanlal Manilal Patel vs. ACIT (ITA No. 508/Ahd/2010) and DCIT vs. Japfa Comfeed India Private Limited (2011-TIOL-703-ITAT-DEL). The Tribunal held that section 50C(2) is only a deeming provision which cannot be taken as to be an understatement for the purpose of imposing penalty. In order to attract imposition of penalty, the assessee must be held to have concealed particulars of income or furnished inaccurate particulars. In the instant case, there were no such allegations against the assessee. The Tribunal held that the CIT(A) erred in confirming the penalty imposed by the AO. The Tribunal decided the appeal in favour of the assessee.