Income Tax Appellate Tribunal - Pune
C.P. Mohandas,, Pune vs Assessee on 29 May, 2015
IN THE INCOME TAX APPELLATE TRIBUNAL
PUNE BENCH "A", PUNE
Before Ms. Sushma Chowla, Judicial Member
and Shri R.K. Panda, Accountant Member
ITA No. 957/PN/2011
(Assessment Year : 2000-01)
Shri C.P. Mohandas,
B.O. Bhavan, Survey No.47,
Plot No.01, Parvati,
Pune-Satara Road,
Pune - 411009
PAN No.AAXPM1656M .. Appellant
Vs.
DCIT, Central Circle-1(1), Pune .. Respondent
Assessee by : Shri Nikhil Pathak
Revenue by : Shri Rajesh Damor
Date of Hearing : 06-05-2015
Date of Pronouncement : 29-05-2015
ORDER
PER R.K.PANDA, AM :
This appeal filed by the assessee is directed against the order dated 11-11-2010 of the CIT(A)-I, Pune relating to Assessment Year 2000-01.
2. Levy of Penalty of Rs.16 lakhs by the AO u/s.271(1)(c) of the I.T. Act and upheld by the CIT(A) is the only issue raised by the assessee in the various grounds of appeal.
3. Facts of the case, in brief, are that the assessee is an individual and filed his return of income on 31-10-2010 declaring total income of Rs.18,09,360/-. Pursuant to search action u/s.132(1) of the I.T. Act at the residential as well as 2 business premises of the assessee on 24-06-2003 the assessee filed the return of income on 30-09-2005 in response to notice u/s.153A declaring total income of Rs.55,77,038/-. Thus, the assessee had disclosed additional income of Rs.37,67,678/-. The AO completed the assessment for the year under consideration at Rs.79,66,750/-. In appeal the Ld.CIT(A) gave part relief to the assessee. Rejecting the various explanations given by the assessee and observing that the additional income was declared by the assessee only due to search action conducted at his residential cum business premises for which the act of the assessee of disclosing additional income cannot be held to be voluntary and further observing that the assessee concealed particulars of his income, the AO levied penalty of Rs.16 lakhs u/s.271(1)(c) of the I.T. Act on account of various additions.
4. In appeal the Ld.CIT(A) upheld the penalty so levied by the AO. While doing so, he observed that the assessee initially filed his return on 30-10-2010 declaring total income of Rs.18,09,360/- only. After the search the assessee enhanced the income in the return filed u/s.153A at Rs.55,77,038/- which was finally held assessable at Rs.79,66,750/-. He further observed that the act of concealment/filing of inaccurate particulars of income was committed at the time of filing of the original return u/s.139(1) of the I.T. Act and the additional income shown and assessed subsequent to the search is not suomoto but has been the outcome of the search carried out by the department. 3
5. So far as the explanation of the assessee that each and every item was explained during the course of assessment proceedings as well as appeal proceedings is concerned he observed that those explanations were considered at the time of assessment and appeal and the figure has finally crystallized. Those explanations have no relevance for the purpose of levying penalty. Since the assessee has filed inaccurate particulars of income/concealed his income which were not shown in the return originally filed u/s.139(1) of the I.T. Act, therefore, the act of concealment/filing of inaccurate particulars of income can be only established. Relying on the decision of the Hon'ble Supreme Court in the case of Union of India and others Vs. Dharmendra Textile Processors reported in 166 Taxmann (SC) reported in 295 ITR 244 where it has been held that penalty u/s.271(1)(c) is a civil liability, the Ld.CIT(A) upheld the action of the AO and dismissed the grounds raised before him challenging the levy of penalty.
6. Aggrieved with such order of the CIT(A) the assessee is in appeal before us.
7. The Ld. Counsel for the assessee strongly challenged the order of the CIT(A). He submitted that the assessee is engaged in the business of land developer and also derives income from Rubber plantation. The assessee has filed his original return of income on 31-12-2010 declaring total income of Rs.18,09,360/-. Pursuant to the search in the business as well as residential 4 premises of the assessee on 24-06-2003, the assessee declared additional income of Rs.37,67,678/-. Referring to Page 30 of the paper book the Ld. Counsel for the assessee drew the attention of the Bench to the statement reconciling the returned income and assessed income for levy of penalty u/s.271(1)(c) of the I.T. Act. He submitted that an amount of Rs.31,89,561/- being profit on unrecorded sales was earlier offered to tax in the hands of the brother. After the search the mistake was found and the income was declared in the hands of the assessee. Similarly, the amount of Rs.3,13,118/- was shown as advance receivable by the assessee which was subsequently offered to tax. The amount of Rs.2,65,000/- was originally shown as payable to the land owner which was offered to tax after the search. Thus, the above 3 items totaling to Rs.36,67,679/- were offered to tax in the return filed u/s.153A of the I.T. Act due to the search that took place on 24-06-2003. He drew the attention of the Bench to the statement reconciling returned and assessed income for penalty u/s.271(1)(c) which is as under :
Sr.No. Reason for addition Amount Amount
I Total income as per original return 1809360
u/s.139(1) filed on 31-10-2000
II Less Capital gain included in returned 141270
income
III Total income taxed at Normal rate 1668090
IV Additional income declared in return
u/s.153A filed on 30-09-2005
1 Profit on Unrecorded sales (Sales 3189561
Rs.4442500 less cost of sales Rs.1252939
2 Maintenance Deposit Contribution 313118
3 Credit Balance of land owner Shri Sanjay V. 265000 3767679
Sasar
V Additions made in Asst. Order u/s.154
r.w.s.250 dt. 18-01-2008 (After giving
effect to CIT(A) order dt. 20-12-2007)
4 Unexplained investment in furniture 20000
(Rs.75000 less Rs.55000)
5
5 Capital introduced in M/s. Kirti Developers 100000 (Sourced out of loan from S.S. Soni) 6 Addition for cost of land paid to Shri R.B. 100000 Moze (sourced out of loan from S.S. Soni) 7 Sales not recorded (Disputed consideration 55000 not received from customer) 8 50% of donations Rs.73000 claimed as 36500 advertisement expenses 9 Interest paid to Shriram Soni (Sourced out 81000 of loan from S.S. Soni) 10 Disallowance of Agriculture income claim 595866 added as Business income 11 Estimated disallowance out of car, petrol 54500 1042666 and telephone expenses VI Total income as per order u/s.154 r.w.s. 6478453 250 t. 18-01-2008 VII Total income on which penalty 4810345 u/s.271(1)(c) is levied (IV_V) (i.e. Additional income Rs.3767679 plus Additions in assessment Rs.1042666 VIII Penalty levied u/s.271(1)(c) 1600000
8. The Ld. Counsel for the assessee drew the attention of the Bench to provisions of Explanation 5 as well as Explanation 5A to section 271(1)(c) of the I.T. Act. He submitted that Explanation 5A was inserted by the Finance Act, 2007 w.e.f., 01-06-2007 which speaks of any income based on any entry in any books of accounts or other documents or transactions and the assessee claims that such entry in the books of account or other documents or transactions represents his income (wholly or in part) for any previous year. However, as per Explanation 5 when during the course of any search the assessee is found to be the owner of any money, bullion, jewellery or other valuable article or thing found from the premises of the assessee during the search and the assessee claims that such assets have been acquired by him by utilizing his income etc. Thus, the income which was based on any entry in any books of account or other documents or transactions etc., were not earlier in the 6 Explanation 5. Therefore, the assessee falls under this provision and no penalty u/s. 271(1)(c) of the I.T. Act can be levied. Since the assessee in the instant case has filed a return in response to notice issued u/s.153A of the I.T. Act, therefore, the original return does not survive and the return filed u/s.153A only survives. Since the assessee after the search has declared the above 3 items in the return filed u/s.153A which has been accepted by the AO, therefore, no penalty u/s. 271(1)(c) of the I.T. Act can be levied on the above 3 items. For the above proposition the Ld. Counsel for the assessee relied on the decision of the Pune Bench of the Tribunal in the case of Chandan K. Shewani vide ITA Nos. 235 and 236/PN/2010 order dated 29-08-2012 for A.Yrs. 2002-03 and 2003-04. He submitted that the Tribunal after considering various decisions has observed that although the parliament has inserted Explanation 5A to section 271(1)(c), the said explanation is applicable in respect of the search initiated u/s.132 on or after 01-06-2007. Section 5A is introduced to patch out the lacunae in the existing provisions more particularly to overcome the judicial interpretation of Explanation 5. If the search is initiated u/s.132 on or after 01-06-2007 then there is a legal presumption that any income based on any entry in the books of account or other documents or transactions which is claimed as income by the assessee, the same would be treated as deemed concealment of the particulars of income or furnishing of inaccurate particulars of income. It was further observed that Explanation 3 to provisions of section 271(1)(c) of the I.T. Act has no 7 application when the return is filed in response to notice u/s.153A. In that case since penalty so levied was not on the addition based on any money, bullion, jewellery, etc. found during the course of search and since the income was declared by the assessee in the return of income in response to notice u/s.153A which was based on some entries found in the diaries or other documents and bank accounts found during the course of search, the Tribunal directed to delete the penalty.
9. So far as the penalty levied on account of unexplained investment in Furniture-Rs.20,000, Capital introduced in Kirti Developers-Rs. 1 lakh and cost of land paid to M/s. R.B. Moze- Rs. 1 lakh, the Ld. Counsel for the assessee did not press for the levy of penalty on the above additions. Similarly, he also did not press for the addition sustained by the Ld.CIT(A), i.e. Rs.81,000/- being interest paid to Shriram Soni.
10. Now coming to the addition of Rs.55,000/- sustained by the Ld.CIT(A) on account of sales unrecorded he submitted that the assessee had sold a plot for Rs.44,97,500/- against which he has received only Rs.44,42,500/-. The balance amount of Rs.55,000/- was not received even till today. Therefore, the taxability of the amount not received by the assessee on account of sale of plot where the assessee is a land developer is a debatable issue. Relying on various decisions he submitted that no penalty is leviable u/s.271(1)(c) on debatable issues.
8
11. So far as the penalty levied on addition of Rs.36,500/- being 50% donation claimed as Advertisement Expenses and Rs.54,500/- on account of estimated disallowance in respect of Car, Petrol and Telephone expenses etc., is concerned, he submitted that the disallowances were on estimate basis and the entries were recorded in the books of account prior to the date of search. Relying on the decision in the case of CIT Vs. Vijay Kumar Jain reported in 325 ITR 378 and the decision in the case of CIT Vs. Ajaib Singh and Co reported in 253 ITR 630 he submitted that penalty cannot be levied on estimated addition.
12. As regards the agricultural income treated as business income amounting to Rs.5,95,866/- on which penalty has been levied he submitted that the assessee has Rubber plantation in Kerala. The assessee was declaring income from Rubber trees owned by self, his father, his mother and his wife.
13. Referring to the chart filed at page 149 of the paper book he submitted that the assessee was showing regularly agricultural income in his income-tax return and for the impugned assessment year the assessee had declared agricultural income of Rs.14,55,300/- which was reduced by the AO to Rs.4,44,570/-. In appeal the Ld.CIT(A) determined such agricultural income at Rs.8,59,434/- and penalty was levied on the difference of Rs.5,95,866/-. He submitted that the issue of holding the number of rubber trees has been settled by the order of CIT(A). The only dispute is regarding the quantity of rubber that can be produced per tree. If the minimum quantity of 9 6kg/tree is considered then the difference comes, however, if the maximum production of 10kg/tree is considered then the income declared by the assessee will be less than the agricultural income that can be derived. Referring to the copy of the assessment order for A.Y. 1998-99, a copy of which is placed at paper book pages 43 to 64 he submitted that the AO had made addition of Rs.16,53,090/- as undisclosed income out of agricultural income declared at Rs.20,67,000/-. Referring to the order of the CIT(A) for the same assessment year, a copy of which is placed at pages 65 to 108 of the paper book, the Ld. Counsel for the assessee submitted that a part of the addition was confirmed by CIT(A) as income from undisclosed sources of such agricultural income. However, no penalty was levied u/s.271(1)(c) of the I.T. Act on this issue.
14. Referring to the decision of the Pune Bench of the Tribunal in the case of Dynamic Logistics Pvt. Ltd., Vs. DCIT vide ITA No.07/PN/2006 order dated 29-02-2008 for A.Y. 2001-02 he submitted that the Tribunal in the said decision has held that when similar notes enclosed with return for A.Yrs. 2000-01, 2002-03 and 2003-04 and the AO has dropped penalty proceedings for those years then it was not open to the AO to impose penalty on the admitted identical facts for the impugned assessment year. While doing so, the Tribunal has followed the decision of the Coordinate Bench of the Tribunal in the case of Orient Press Ltd., reported in 99 TTJ 1091 where it has been held that if the AO has dropped penalty on similar set of facts in 10 the other years, the penalty needs to be dropped on that ground alone. He accordingly submitted that no penalty is leviable on the agricultural income treated as undisclosed income.
15. The Ld. Departmental Representative on the other hand heavily relied on the order of the CIT(A). He submitted that the additional income was declared by the assessee only due to the search. Had there been no search the assessee would not have declared the additional income. Referring to the decision of the Hon'ble Delhi High Court in the case of CIT Vs. Zoom Communications reported in 327 ITR 510 he submitted that the Hon'ble High Court in the said decision considering the decision of the Hon'ble Supreme Court in the case of Reliance Petroproducts Pvt. Ltd. reported in 322 ITR 158 has held that so long as the assessee has not concealed any material fact or the factual information given by him has not been found to be incorrect he will not be liable to penalty u/s.271(1)(c) of the I.T. Act even after the claim made by him is unsustainable in law provided that he either substantiates the explanation offered by him or the explanation even if not substantiated is found to be bonafide. If the explanation is neither substantiated nor shown to be bonafide Explanation 1 to section 271(1)(c) would come into play and the assessee will be liable for the prescribed penalty. Since in the instant case the assessee was unable to substantiate and the explanation does not appear to be bonafide, therefore, the penalty is leviable.
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16. Referring to the decision of the Hon'ble Supreme Court in the case of Tribhovandas Bhimji Zaveri Vs. Union of India and others reported in 204 ITR 368 he submitted that the Hon'ble Supreme Court in the said decision has held that disclosure made pursuant to search action is not voluntary. Referring to the decision of the Mumbai Bench of the Tribunal in the case of Sreeji Traders Vs. DCIT reported in 149 TTJ 52 he submitted that the Tribunal in the said decision following various decisions including the Third Member decision of the Ahmedabad Bench of the Tribunal in the case of ACIT Vs. Kirti Dahyabhai Patel reported in (2009) 129 ITD 159 (Ahd) (TM) has held that penalty on additional income declared in the returns pursuant to search is clearly leviable. He accordingly submitted that the order of the CIT(A) should be upheld and the grounds raised by the assessee should be dismissed.
17. The Ld. Counsel for the assessee in his rejoinder submitted that the decision of the Hon'ble Delhi High Court in the case of Zoom Communications (Supra) is based on regular assessment and not relating to penalty levied on the basis of search proceedings. So far as the decision of the Ahmedabad Bench of the Tribunal in the case of Kirti Dahyabhai Patel (Supra) is concerned which has been relied on by the Mumbai Bench of the Tribunal in Sreeji Traders (Supra) he submitted that the Hon'ble Gujarat High Court has recently reversed the same. He submitted that the decision of the Pune Bench of the Tribunal in the case of Chandan K. Shewani has neither been 12 reversed nor the Ld. Departmental Representative could distinguish the said decision. If the contention of the Departmental Representative that penalty is leviable on account of additional income declared due to the search and therefore penalty is leviable is accepted then there was no reason to insert the Explanation 5A to provisions of section 271(1)(c) of the I.T. Act. So far as the decision of Hon'ble Supreme Court in the case of Tribhovandas Bhimji Zaveri (Supra) is concerned the said decision relates to VDIS scheme and not on the issue of additional income declared due to search/survey. He accordingly submitted that the order of the CIT(A) be reversed.
18. We have considered the rival arguments made by both the sides, perused the orders of the Assessing Officer and the CIT(A) and the Paper Book filed on behalf of the assessee. We have also considered the various decisions cited before us. There is no dispute to the fact that due to a search conducted at the residential cum business premises of the assessee the additional income of Rs.37,67,679/- was declared in the return filed in response to notice u/s.153A. This additional income was accepted by the AO in the order passed u/s.143(3) r.w.s.153A. Similarly, the AO also made certain other additions and after the part relief given by the CIT(A) the addition to the extent of Rs.10,42,666/- made by the AO was sustained. Penalty has been levied on account of above additions which has been upheld by the CIT(A) and the additional income of Rs.37,67,679/- declared in the return filed in response to notice 13 u/s.153A. Thus, from the various details furnished by the assessee we find penalty has been levied on account of 2 types of additions.
18.1 The addition of Rs.37,67,679/- relates to the additional income declared by the assessee pursuant to the search action which consist of 3 items, the details of which are as under :
1 Profit on Unrecorded sales (Sales Rs.4442500 less 3189561 cost of sales Rs.1252939 2 Maintenance Deposit Contribution 313118 3 Credit Balance of land owner Shri Sanjay V. Sasar 265000
19. So far as the levy of penalty u/s.271(1)(c) of the I.T. Act on account of above 3 additions are concerned we find the same are based on the loose papers found and seized during the course of search which took place on 24-06-2003. The assessee declared the additional income on the basis of the entries found in those loose papers and filed the return in response to notice u/s.153A which has been accepted by the AO and no further addition on this account has been made. Therefore, the question that arise is as to whether penalty can be levied u/s. 271(1)(c) of the I.T. Act on account of the above 3 additions. Admittedly, the above additions are not due to any money, bullion or jewellery or other valuable article or thing found during the course of search which was owned by the assessee. We find the addition to income was based on entries found in the books of account and other documents or transactions which is covered under Explanation 5A to provisions of section 271(1)(c) of the I.T. Act which was inserted by the Finance Act, 2007 w.e.f. 01- 04-2006. Therefore, the penalty, if any, can be levied in such 14 type of cases as per Explanation 5A to section 271(1)(c) of the I.T. Act and that too in case of an assessee where the search took place on or after 01-06-2007. Since the search has taken place in the instant case on 24-06-2003, therefore, the Explanation 5A to provisions of section 271(1)(c) of the I.T. Act is not applicable to the facts of the present case.
20. Identical issue had come up before the Tribunal in the case of Chandan K. Shewani (Supra). The Tribunal after considering various decisions has held that Explanation 5 to section 271(1)(c) of the I.T. Act has no application to a case where no addition is made on the basis of any money, gold, jewellery etc. found during the course of search. The Tribunal further observed that even though the parliament has inserted Explanation 5A to section 271(1)(c) of the I.T. Act, the said explanation is applicable in respect of the search initiated u/s.132 on or after 01-06-2007. Explanation 5A was introduced to patch out the lacunae in the existing provisions more particularly to overcome the judicial interpretation of Explanation 5. When the search is initiated u/s.132 on or after 01-06-2007 then there is a legal presumption that any income based on any entry in the books of accounts or other documents or transactions which is claimed as income by the assessee, the same would be treated as deemed concealment of particulars of income or furnishing of inaccurate particulars of income. Therefore, since the date of search in that case was 15-06-2004 and the addition was not made on the basis of any money, 15 bullion, jewellery etc. found during the course of search it was held that Explanation 5A to section 271(1)(c) of the I.T. Act is not applicable and the penalty was accordingly deleted.
21. Since admittedly in the instant case no money, bullion, jewellery or any valuable article were found which were owned by the assessee and the additional income was declared in the return filed in response to notice u/s.153A on the basis of entries in loose papers etc. found during the course of search, which has been accepted by the AO in assessment, therefore, we are of the considered opinion that no penalty u/s. 271(1)(c) of the I.T. Act is leviable on account of above 3 additions. We therefore direct the AO to cancel the penalty on account of the above 3 additions.
22. The Ld. Counsel for the assessee could not substantiate as to why penalty shall not be levied u/s. 271(1)(c) of the I.T. Act on account of the following additions:
Unexplained investment in Furniture Rs.20,000/- Capital introduced in Kirti Developers Rs. 1 lakh Cost of land paid to R.B., Moze Rs. 1 lakh Interest paid to Shriram Soni Rs.81,000/-
We therefore uphold the order of the CIT(A) in confirming the levy of penalty on the above 4 additions.
23. So far as the levy of penalty on account of sales unrecorded amounting to Rs.55,000/- is concerned, we find some force in the submission of the Ld. Counsel for the assessee that the addition being debatable, no penalty on this addition is warranted. The submission of the Ld. Counsel for 16 the assessee that as against the sale consideration of Rs.44,97,500/- the assessee has received only Rs.44,42,500/- and the balance amount of Rs.55,000/- has not been received even till date could not be controverted by the Ld. Departmental Representative. Since the assessee is a land developer and the addition of Rs.55,000/- made by the AO was on account of sales unrecorded which was due to non receipt of the amount, therefore, we find force in the submission of the Ld. Counsel for the assessee that it is a debatable issue as to whether the amount received has to be offered as the sale proceeds or the amount agreed to be received has to be offered as sale proceeds. In view of this, we are of the considered opinion that penalty cannot be levied on this amount of Rs.55,000/-, the issue being debatable.
24. So far as the levy of penalty on account of addition of Rs.36,500/- on account of 50%of donations claimed as Advertisement Expenses and addition of Rs.54,500/- on account of estimated disallowance of Car, Petrol and Telephone expenses are concerned, we agree with the Ld. Counsel for the assessee that penalty cannot be levied on account of estimated addition. The Hon'ble Punjab & Haryana High Court in the case of CIT Vs. Ajaib Singh and Co reported in 253 ITR 630 has held that penalty cannot be levied on account of addition to income based on estimate and disallowance of expenditure. The Hon'ble Chattisgarh High court in the case of CIT Vs. Vijay Kumar Jain reported in 325 ITR 378 has also upheld the 17 decision of the Tribunal where the Tribunal has upheld the order of the CIT(A) in cancelling the penalty levied on account of estimated GP addition.
25. In view of above decisions we hold that penalty is not leviable on account of addition of Rs.36,500/- being 50% of donations claimed as Advertisement expenses and Rs.54,500/- on account of estimated disallowance in respect of Car, Petrol and Telephone expenses.
26. So far as the penalty levied on account of agricultural income treated as business income is concerned we find similar addition was made in A.Y. 1998-99 which was upheld by the CIT(A). However, no penalty was levied by the AO on such treatment of agricultural income as undisclosed income. The Pune Bench of the Tribunal in the case of Dynamic Logistics Pvt. Ltd., (Supra) following the decision of the Coordinate Bench of the Tribunal in the case of Orient Press Ltd., reported in 99 TTJ 1091 has held that under identical facts when the AO had not levied penalty u/s.271(1)(c) of the I.T. Act in the preceding year, therefore, it is not open to the AO to impose penalty on the admittedly identical facts for the impugned assessment year. The relevant observation of the Tribunal at para 4 to 6 of the order read as under :
"4. We have considered the rival contentions, perused the relevant material on record and duly considered, the factual matrix of the case as also the applicable legal position.
5. We find force in the submission of the learned counsel for the assessee that when the similar notes enclosed with the returns for the assessment years 2000-01, 2002-03, and 2003-04, the Assessing Officer had dropped penalty proceedings, it was not 18 open to the Assessing Officer to impose penalty, on the admittedly identical facts, for this assessment year. A co-ordinate bench of this Tribunal, in the case of Orient Press Ltd. [99 TTJ 1091], has held that if the Assessing Officer has dropped penalty on similar set of facts in the other years, the penalty needs to be dropped on that ground alone. In the said case, the Tribunal has observed as follows :
"4. It is difficult to understand as to how can Revenue defend imposition of penalties for assessment years 1993-94 and 1994- 95, when, on the materially similar set of facts, no penalty is imposed for the assessment year 1995-96. The dropping of penalty proceedings for the assessment year 1995-96 is a conscious act by the AO as evident from the specific order dropping the penalty proceedings for that year. During the course of hearing before us, we did ask the Departmental Representative to explain this contradiction in the stand but he was not able to explain the same and he made a vague statement to the effect that the facts of that year may be different. This is unacceptable. In any case, the material facts as evident from the documents before us, were clearly the same so far as the question of declaration was concerned. On one set of facts, in one year, the penalty is dropped, and for the remaining years, the penalties are imposed, are pointed out, for this reason alone, penalties imposed are not sustainable in law."'
6. We have no reasons to take any other view of the matter than the view so taken by a co ordinate bench. The material facts being identical inasmuch as on similar set of facts, as were before the Assessing Officer in this year, the penalty proceedings have been dropped for other years, we hold that it was not a fit case for imposition of penalty. The CIT(A) ought to have deleted the same. In any event, even on merits, since assessee had disclosed all material facts by way of a note attached to the income tax return, it cannot be said to be a case of concealment of income or furnishing of inaccurate particulars. Bearing in mind these facts, as also entirety of the case, we deem it fit and proper to delete the impugned penalty of Rs.95,39,005. The assessee gets the relief accordingly."
27. Since in the instant case the AO has not levied any penalty u/s.271(1)(c) of the I.T. Act on account of treatment of a part of the agricultural income as business income in the assessment year 1998-99, therefore, facts being similar we find no reason as to why penalty should be levied for the impugned assessment year. We further find merit in the submission of the Ld. Counsel for the assessee that the computation of agricultural income from rubber plantation was purely on estimate basis 19 which is on the basis of minimum quantity of 6kg/tree. However, it cannot be said that the production of rubber from a tree will always be at the minimum of 6kg/tree. It may vary from tree to tree. Sometimes it may be more and sometimes it may be less. Therefore, addition may be justified in quantum proceedings. However, the same in our opinion cannot be the basis for imposing penalty u/s.271(1)(c) of the I.T. Act. In this view of the matter we are of the considered opinion that no penalty is leviable on account of treatment of a part of the agricultural income amounting to Rs.5,95,866/- as undisclosed income. We therefore direct the AO to cancel the levy of penalty on this addition. In view of the above discussion, the order of Ld.CIT(A) is modified and the AO is directed to recompute the penalty in the light of the directions given above.
28. In the result, the appeal filed by the assessee is partly allowed.
Pronounced in the open court on 29-05-2015.
Sd/- Sd/-
(SUSHMA CHOWLA) (R.K. PANDA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Pune Dated: 29th May, 2015
Satish
Copy of the order forwarded to :
1. Assessee
2. Department
3. The CIT(A)-I, Pune
4. The CIT-I, Pune
5. The D.R, "A" Pune Bench
6. Guard File
By order
// True Copy //
Senior Private Secretary
ITAT, Pune Benches, Pune