The assessee, an individual resident, sold an immovable property jointly owned by him and one Mr. X as per an agreement. The market value of the property as per Stamp Duty Authority was significantly higher and the value determined by the Valuation Officer was a figure intermediate to the selling price and the stamp duty value.

The assessment of the assessee was reopened based on the information received from the assessment proceedings of Mr. X. The learned Assessing Officer made an addition under Section 50C of the Income-tax Act, 1961 (the Act), and levied a penalty under Section 271(1)(c) of the Act. The contention of the Assessee was that addition is made based on DVO report u/s 50 C of the Act. It is a deeming provision; there is no dispute about actual consideration. And that on deeming provision addition, penalty could not be levied.

The assessee appealed against the penalty order before the learned CIT(A), who confirmed the penalty by an ex-parte order. The assessee further appealed before the Tribunal, challenging the ex-parte order and the levy of penalty.

The Tribunal concurred with the Assessee in holding that the penalty under Section 271(1)(c) of the Act is not applicable in a case of addition under Section 50C of the Act, which is a deemed provision. And that on deeming provision addition, penalty could not be levied. (AY.2014-15)