Income Tax Appellate Tribunal - Delhi
M/S Splendor Infotech (P) Ltd.,, Meerut vs Ito, New Delhi on 19 January, 2018
INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH "G": NEW DELHI
BEFORE SHRI N.K. SAINI, ACCOUNTANT MEMBER
AND
SHRI AMIT SHUKLA, JUDICIAL MEMBER
ITA No.:- 5374/Del /2013
Assessment Year: 2006-07
Splender Infotech (P) Ltd. ITO
c/o M/s. Malik & Co. Ward 9 (2)
305, Thapar Nagar, Vs. New Delhi.
Meerut
PAN AAJCS0817P
(Appellant) (Respondent)
Assessee by: Shri Sanjay Malik, Advocate
Department by : Shri S.S. Rana, CIT DR
Date of Hearing 15/01/2018
Date of 19/01/2018
pronouncement
ORDER
PER AMIT SHUKLA, J.M.
The aforesaid appeal has been filed by the assessee against impugned order dated 22.8.2013, passed by Ld. CIT(Appeals) XII, New Delhi in relation to the penalty proceedings u/s 271(1)(c) for the assessment year 2006-07. The assessee is mainly aggrieved by levy of penalty of Rs. 3,09,040/- on account of following additions:- ITA No. 5374/DEL/2013
Splendor Infotech (P) Ltd. vs. ITO
i) Deemed dividend: Rs. 5,27,429/-
ii) Unexplained investment u/s 69B: Rs. 3,90,696/-
2. At the outset Ld. Counsel for the assessee submitted that, the Tribunal vide order dated 6.9.2013 in ITA No. 4280/Del/2010 in the quantum proceedings has deleted the addition on account of deemed dividend and therefore, the penalty on this addition should be deleted.
3. On the issue of addition of Rs. 3,98,696/- made u/s 69B, Ld. Counsel submitted that the same has been made on account of difference of value as shown in the registered sale deed and the estimate made by the Valuation Officer of the department for determining the value of the plot purchased by the assessee. The assessee has purchased two plots from M/s. Nalini Sarees, the details of which are as under:-
SL. Address of Purchas Date of Consideration Value as per circle Size of Plot No. the ed from purchase paid (Rs.) rates prevailing at property that time
1. D-101, Nalini 21/10/2005 38,50,000/- 42,40,960/- 731.20 Sq.
Sector-2, Sarees mts.
NOIDA, UP
2. D-102, Nalini 21/10/2005 42,50,000/- 42,40,960/- 731.20 Sq.
Sector-2, Sarees mts
NOIDA, UP
The AO has made the addition on the ground that, since these were two adjacent plots purchased on the same date with same party and 2 ITA No. 5374/DEL/2013 Splendor Infotech (P) Ltd. vs. ITO identical size and then also there was a difference in the consideration paid. Accordingly, he referred the determination of valuation to the Valuation Officer in terms of section 142A, who vide his report has computed the value at Rs. 42,40,960/- as against the declared value of Rs. 38,50,000/-. The difference of Rs. 3,90,960/- was added.
4. Ld. Counsel further pointed out that this addition stands confirmed by the Tribunal also. However he submitted that, even though the addition may have been confirmed, but no penalty u/s 271(1)(c) can be levied either for furnishing of inaccurate particulars of income or for concealment of income, because the purchase value is flowing from the sale deed and there is no other material on record to show that assessee has paid any sum over and above the value shown in the registered document. Merely because there was a difference of circle rate and estimate by the DVO, there cannot be the ground for levy of penalty under section 271(1)(c). He further submitted that AO while initiating the penalty proceedings had not specified the charge as to under which limb of the provision of section 271(1)(c) he is initiating the penalty. This he pointed out is evident from the assessment order, wherein he has tried to levy the penalty for both the charges, i.e., 'concealment of income' and 'furnishing of inaccurate particulars of income'. Without specifying the charge such penalty 3 ITA No. 5374/DEL/2013 Splendor Infotech (P) Ltd. vs. ITO cannot be levied as held by various judicial pronouncement for which he filed separate synopsis of such judgements.
5. On the other hand CIT DR, submitted that the assessee could not explain as to why two similar adjacent plots with same size was purchased at two different value and all the contentions raised by the assessee to bring out the difference has been negated by the Valuation Officer which has been confirmed by the Tribunal also. Thus, not only the addition has been rightly confirmed but also the penalty deserves to be upheld. He also filed separate synopsis of various case laws and specially relied upon the judgment of Hon'ble Supreme Court in the case of MAK Data P. Ltd. vs. CIT (2013) 358 ITR 593 (SC) ; CIT vs. Zoom Communication (P) Ltd. (2010) 327 ITR 510 (Delhi) ; CIT vs. Escorts Finance Ltd. (2010) 328 ITR 44 (Delhi).
6. We have heard the rival submissions and also perused the relevant material referred to before us. Admittedly so far the addition of Rs. 5,27,429/- on account of deemed dividend u/s 2(22)(e) is concerned, same stands deleted by the Tribunal and therefore, penalty on said addition cannot be sustained. Accordingly, the same is directed to be deleted. As regards the levy of penalty on account of addition of Rs. 3,98,696/-, the same has been made on account of difference in the purchase value of the plot as shown in the registered 4 ITA No. 5374/DEL/2013 Splendor Infotech (P) Ltd. vs. ITO sale deed and the estimate made by the Valuation Officer to whom reference was made by the AO in terms of section 142A. The assessee had purchased two properties on 21.10.2005, the description of which has already been incorporated above. The location of the plots was adjacent and size was also the same. Since there was a difference in the value of both the plots, the matter was referred to the Valuation Officer by the AO who had estimated the value at Rs. 42,40,960/-. The assessee's contention before the authorities below was that the agreement to sell for both the properties was entered at different times and the locational advantage for both the plots were entirely different and this was demonstrated vide letter dated 5.1.2008 before the AO. The valuation report was rebutted by the assessee in the following manner:-
"Originally the amount of Rs. 38,50,000/- paid to the seller by M/s. Kohinoor Agencies amounting Rs. 26,00,000/- on 16/09/2004 and by Smt. Suman Jain Rs. 12,50,000/- on 24/11/2004. The deal was not matured as there was substantial fall in the market rates at NCR including NOIDA. Finally M/s. Splendor Infotech Pvt. Ltd. had come in between and agreed to get the registry done in its own name and further agreed to return the amount advance by Kohinoor Agencies Pvt. Ltd. and Smt. Suman Jain in due course. Since the location of the plot is not good as is clear from the Govt. Valuer's report and market rates are much lower than the circle rates, it is requested that the valuation report (circle rate) should not be considered and no addition be made. Rs. 38,50,000/- was the actual consideration paid for the said Plot and duly recorded in the books of account of the assessee company, hence it is outside the purview of the unexplained investments."5 ITA No. 5374/DEL/2013
Splendor Infotech (P) Ltd. vs. ITO The AO however has rejected the assessee's explanation and added the difference amount of Rs. 3,90,696/-. The Tribunal too has confirmed this addition. However while confirming the said addition, the Tribunal had observed that the assessee had no explanation to offer for difference except the fact that location of plot No. D-102 was better than D-101. Nowhere in the impugned orders or in the quantum proceedings there is any reference to any material or evidence so as to suggest that assessee has made any kind of extra payment for the purchase of the plots. The addition has been made purely on the basis of the estimate given by the Valuation Officer and the value of the transaction shown in the registered sale document. If no material has been brought either by way of inquiry by the AO or some tangible information has into his knowledge that the purchase consideration of Rs. 38,50,000/- for the plot No. D-101 is less or assessee has paid extra than what has been mentioned in the registered sale document, then no penalty for either concealment of income or furnishing of inaccurate particulars can be levied. Though section 69B is a deeming fiction but in the matter of penalty proceedings, such deeming fiction cannot be extended so as to hold assessee guilty of concealment of income or furnishing of inaccurate particulars when the addition on account of deeming fiction is based on some kind of estimate given by a Govt. Valuer. If nothing incriminating is found against the assessee, 6 ITA No. 5374/DEL/2013 Splendor Infotech (P) Ltd. vs. ITO then such a valuation report alone cannot be the basis for levy of penalty. Apart from that the assessee's explanation that the plot No. D-101 was adversely located in comparison to plot no. D-102 has not been rebutted and it is quite possible that two similar adjacent plots may have different market value, because of different location in terms of direction, facing of the plot, geometrical shape, Vastu factors, etc. All these factors in India do have impact on the value of the property. Such a probable factors cannot be ignored and even under Explanation 1, the assessee's explanation does constitute probable explanation which has not been found to be incorrect by way of any material on record. Thus, we delete the penalty on addition of Rs. 3,98,696/- also. Accordingly appeal of the assessee is allowed.
7. In the result appeal filed by the assessee is allowed.
Order pronounced in the open court on 19th January, 2018.
Sd/- sd/-
(N.K. SAINI) (AMIT SHUKLA)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated: 19.1.2018
Veena
Copy forwarded to
1. Applicant
2. Respondent
3. CIT
4. CIT (A)
5. DR:ITAT
7
ITA No. 5374/DEL/2013
Splendor Infotech (P) Ltd. vs. ITO
ASSISTANT REGISTRAR
ITAT, New Delhi
8