2013 (5) TMI 838 - AT - Income Tax

Summary

Issues Involved:
1. Levy of penalty under section 271A of the Income Tax Act, 1961.
2. Levy of penalty under section 271(1)(c) of the Income Tax Act, 1961.

Summary:

Issue 1: Levy of penalty under section 271A of the Income Tax Act, 1961

The issue in ITA No.1222/Chd/2012 pertains to the levy of penalty under section 271A amounting to Rs. 25,000/-. During the assessment proceedings, the Assessing Officer (AO) levied the penalty as the assessee failed to produce books of account/documents. The assessee contended that the books were initially produced before the predecessor AO but were later lost due to computer data loss. The CIT (Appeals) upheld the penalty as the assessee failed to provide evidence of presenting the books of account. The Tribunal found that although the books were maintained, they were not produced due to certain lapses. Consequently, the Tribunal directed the AO to delete the penalty of Rs. 25,000/- under section 271A, finding no merit in the levy for non-maintenance of books of account.

Issue 2: Levy of penalty under section 271(1)(c) of the Income Tax Act, 1961

The issue in ITA No.1223/Chd/2012 concerns the levy of penalty under section 271(1)(c) for three additions made by the AO:
a) Addition of Rs. 13,500/- on account of difference in salary.
b) Addition of Rs. 25,000/- on account of disallowance of expenditure.
c) Addition of Rs. 8,52,979/- on account of denial of exemption under section 54F.

The Tribunal observed that:
- For the addition of Rs. 13,500/- due to the difference in salary, the assessee had declared salary on a receipt basis, while the AO included it on an accrual basis. The Tribunal found no merit in the penalty for this addition and directed its deletion.
- For the disallowance of Rs. 25,000/- in expenses, the Tribunal noted that the assessee was unable to substantiate the claim due to non-production of books but found no warrant for penalty as the claim was not false. The Tribunal directed the deletion of the penalty for this disallowance.
- For the disallowance of exemption under section 54, the assessee failed to provide evidence of construction expenses. The Tribunal upheld the penalty, finding the claim to be false as the assessee did not discharge the onus of proving the construction expenses.

In conclusion, the appeal in ITA No.1222/Chd/2012 was allowed, and the appeal in ITA No.1223/Chd/2012 was partly allowed. The order was pronounced on May 17, 2013.