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Penalty u/s. 271(1)(c) on section 50c

SURANA (PROPRIETOR) (515 Points)

21 February 2014

Whether Penalty under section 271(1)(c) is appilable in case of addition in return income was due to difference in fair Market Value adopted by DVO & Sales Agreement.

and any case law with similar fact?

Fact of the Case:

1. AO has invoked section 50C and computed capital gain as per the Stamp Duty Valuation, and also initiated penalty under section 271(1)(c)

2. CIT Appeal has partly allowed the appeal and refered for Valuation to Department Valuation Officer.

3. Report as per DVO was just increase by 2Lacs, hence income was recomputed accordingly (giving the effect as per DVO Report as per order of CIT appeal).

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3 Replies

Nishil (Student) (32 Points)
Replied 21 February 2014

Similar case ... Hope this helps ... /mobile/experts/details.asp?mod_id=1236204

Z ( ) (2960 Points)
Replied 21 February 2014

If the actual consideration is more than what is declared then there is a concealment. s.271(1)c can not be invoked on the basis of deeming fiction

There is case of CIT Vs. Madan Theatres (calcutta HC), wherein it was held that Penatly u/s 271(1)(c) can not be levied

The assessee sold property for a consideration of Rs. 2.50 crore. However, for the purpose of stamp duty, the property was valued at Rs. 5.19 crore and stamp duty was paid on that value. The assessee offered capital gains on the basis that the sale consideration was Rs. 2.50 crore. The AO invoked s. 50C and held that the sale consideration had to be taken at Rs. 5.19 crore and capital gains computed on that basis. The AO imposed penalty u/s 271(1)(c) which was deleted by the CIT(A) and the Tribunal by relying on Renu hingorani (Simillar facts) [ITAT] On appeal by the department to the High Court, HELD dismissing the appeal:

Though the assessee could have disputed the valuation on the basis of the deemed value and chose not to do so, the fact remains that the actual amount received was offered for taxation. It is only on the basis of the deemed consideration that the proceedings u/s 271(1)(c) started. The revenue has failed to produce any iota of evidence that the assessee actually received one paise more than the amount shown to have been received by him. As such, there is no scope to admit the appeal

There is also Chimanlal Manilal Patel V ACIT (ITAT Ahmedaba) on the same lines

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