No Penalty us 2711c for additions made on DVO report basis as the DVO report is just an opinion or estimate. The mere fact that the assessee had not agitated additions made in the appellate proceedings does not militate against the assessee in the penalty proceedings. This was held by ITAT in a recent judgment.
ABCAUS Case Law Citation:
935 2016 (06) ITAT
Brief Facts of the Case:
The respondent-assessee company was deriving income from house property. During the course of assessment proceedings for the assessment year 2005- 06, an addition of Rs.1 crore was made by the Assessing Officer (AO) on account of unexplained investment in the property. As per the assessee, the said property was purchased from M/s.Golf Link Software Park Pvt. Ltd., for a total consideration of Rs.39 crores. However, the AO made a reference to DVO who valued the property at Rs.40 crores. The difference amount of Rs.1 crore was added to the total income of the company. The assessee-company had chosen not to agitate the issue of addition before the appellate authorities. However, the AO imposed a penalty u/s 271(1)(c) of Rs.36,61690/-.
On appeal before the CIT(A), he deleted the penalty relying on the decision in the case of CIT vs. Sangrur Vanaspati Mills Ltd.(303 ITR 53) wherein it was held that addition made on the basis of an estimate and not on the basis of any concrete piece of evidence, penalty u/s 271(1)(c) cannot be restored. The CIT(A) also placed reliance on the decision of the Hon‘ble Supreme Court in the case of Dilip N Shroff vs. JCIT (291 ITR 519) where addition was made not accepting the opinion of an expert, penalty cannot be levied.
Important Excerpts from ITAT Judgment:
……… The issue in this appeal is about the validity of penalty levied u/s 271(1)(c) of the Act. It is undisputed fact that penalty was levied in respect of addition which was made based on the report of the DVO. It is needless to mention that the report of the DVO is only an opinion or an estimate. The fact that the assessee has not agitated addition in the appellate proceedings does not militate against the assessee in the penalty proceedings. The CIT(A) had deleted penalty considering the legal position that no penalty can be levied in respect of additions which had been made based on export opinion of the DVO. This proposition of law is in line with the ratio laid down by the Hon’ble Supreme Court in the case of Dilip N Shroff (supra) and therefore, we do not find any illegality or fallacy in the reasoning of the CIT(A) for deleting the penalty
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