IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, MUMBAI BEFORE SHRI SANJAY ARORA, ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO, JUDICIAL MEMBER ITA NO. 5517/Mum/2012 Assessment Year. 2007-08 Rajpal H. Chhabra 302, White Orchid Pali Road, Bandra (W) Mumbai – 400 050 PAN: AAAHR0518Q Appellant Vs. ITO-19(3)(2) Piramal Chambers Lower Parel, Mumbai - 400013. Respondent Assessee by Revenue by Shri. Snehal Shah Shri Deepak Sutariya Date of hearing Date of pronouncement 04.02.2014 07-03-2014 ORDER Per Vijay Pal Rao, JM This appeal by the assessee is directed against the order dated 25.6.2012 of CIT(A) arising from penalty order passed u/s 271(1)(C) of Income Tax Act for A.Y. 2007-08. The assessee has raised following grounds in appeal:The appellant objects to the order dated 25/6/2012 passed by Income Tax Officer, Ward 19(3)(2), Mumbai passed u/s 271(1)(C) of the Income Tax Act, 1961 for the Assessment Year 2007-08 on the following amongst other grounds: 1. The Ld. Assessing Officer has initiated penalty proceedings u/s 271(1)(C) of Rs. 4,51,530/- on account of long term capital gains without appreciating the facts of the case in the right perspective. 2. The ground of appeal is without prejudice to the other 1 2. The assessee has shown long term capital loss of Rs. 3,61,076/- on sale of immovable property by taking a fair market value as on 01.04.1981, Rs. 19,84,120/-. The AO found that the fair market value as on 01.4.1981 was computed by taking the rate of Rs. 2,000 sq. mt. whereas as per Directory & Reference Book of Indian Valuers – Incorporating market value of property in Mumbai, the value of land situated in the same area is only valued at Rs. 112 psq ft. as on 01.4.1981. Accordingly, the AO adopted fair market value of the property as on 01.4.1981 at Rs. 14,44,635/- only against Rs. 19,84,120/- and assessed the capital gain at Rs. 20,02,345/-. The AO has also initiated the proceedings for levy of penalty u/s 271(1)(C) and levied the penalty of Rs. 4,51,530/- at the rate of 100% of tax sought to be evaded in respect of the income added by the AO towards long term capital gain. The assessee challenged the action of the AO in levying penalty before CIT(A) but could not succeed. 3 Before us, the Ld AR of the assessee submitted that the addition in question has been made by the AO by taking a different fair market value as on 01.04.1981 which cannot be the basis for levy of penalty. He has further submitted that the fair market value as on 01.04.1981 was considered by the assessee on the basis of valuation report of the registered valuer M/s N.M. Muley & Companies. The assessee had duly clarified the basis of the value of the property as the valuation report. The AO disputed the valuation report but did not refer the same to the DVO and took the fair market value of the property as on 01.04.1981 on the basis of the reference book written by Shri Santosh Kumar and Shri Sunit Gupta. The Ld. AR has forcefully contended that when the assessee has explained all the relevant facts and the basis on which the fair market value of the property as on 01.04.1981 taken by the assessee being the valuation report of a registered valuer then the non acceptance of the said valuation by the AO cannot be said to be a deliberate false explanation leading to furnishing of inaccurate particulars or concealment of income. The claim of the assessee regarding fair market value is bonafide as it was based on the valuation report of the registered valuer, therefore, the valuation based on the experts opinion which was not accepted by the AO and took a different view which does not amount of making a falls or malafide claim. In support of his contention he has relied upon the following decisions:2 i) ii) iii) Brittania Industries (238 ITR 57) ACIT Vs. Dhariya Construction Co. (328 ITR 515) (SC) Dilip N. Shroff’s case (291 ITR 519) (SC) and submitted that DVO’s report is merely an expression of opinion and on the basis of opinion and estimates no penalty u/s 271(1)(C) is leviable. Accordingly, the Ld AR has urged that the penalty levied u/s 271(1)(C) may be deleted. 4. On the other hand LD DR has relied upon the orders of authorities below and submitted that the valuation report relied upon by the assessee was without any basis as no instance of sale and purchase was recorded. However the value adopted in the valuation report is disproportionately higher than the rates in locality prevailing as on 01.04.1981. The AO has took the rates from the Indian Valuer’s Directory and reference book which is a public document, therefore, the claim of the assessee was found incorrect and false. 5. Having considered the rival submission as well as relevant material on record, we find that the AO made an addition on long term capital gain by taking a different fair market value as on 01-04-1981. There is no dispute that the assessee has computed the capital gain/loss by taking the fair market value of the property in question as it was valued by a registered valuer, therefore, the claim of the assessee was duly supported by the valuation report of the registered valuer who is an expert in the field. The AO rejected the valuation of the assessee by relying upon the Indian valuer’s Directory and reference book written by Mr. Santosh Kumar and Mr. Sunit Gupta. It is to be noted tht 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 addition has been made by the AO on the basis of reference book without referring the valuation to DVO. Even otherwise, 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 3 difference of opinion. The assessee has undisputedly disclosed the basis of valuation of fair market value adopted as on 01.04.1981. It is pertinent to note that the fair market value as on 01.04.1981 is always determined by considering the instance of sale and purchase in the area and by making certain adjustment. Even by taking the utmost care while determining the value. It need not necessarily give the actual value of the property as on 01.04.1981. Since the actual cost or value of the property is based on the opinion, therefore, any addition made on the basis of difference of opinion and estimate would not automatically lead to the conclusion that the assessee has concealed particulars of income or furnished inaccurate particulars of income. The assessee has relied upon the various decisions wherein it has been held that the report of the DVO is merely an expression of opinion and on the basis of opinion and estimates penalty cannot be levied u/s 271(1)(C) as the concealment has not been proved in such a situation. 6. In view of the above facts and circumstances of the case, 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. Hence the penalty u/s 271(1)(c) is deleted and the appeal is allowed. 7. In the result appeal of the assessee is allowed. Order pronounced in the open Court on Sd/- 07 /03/2014 Sd/- (Sanjay Arora) Accountant Member (Vijay Pal Rao) Judicial Member Mumbai dated 07 /03/2014 SKS Sr. P.S 4