2010 (7) TMI 1083 - AT - Income Tax

Summary

Issues Involved:
1. Levy of penalty u/s 271(1)(c) for furnishing inaccurate particulars of income.
2. Disallowance of agricultural income and related expenditure.
3. Treatment of subsidy received as income from other sources.
4. Disallowance of write-off of property.
5. Disallowance of security charges and municipal taxes.
6. Under-valuation of closing stock.

Summary:

1. Levy of Penalty u/s 271(1)(c):
The appeal by the assessee challenges the penalty of Rs. 12,58,350/- levied u/s 271(1)(c) for furnishing inaccurate particulars of income. The A.O. concluded that the assessee attempted to evade taxes by furnishing inaccurate particulars, leading to the imposition of the penalty.

2. Disallowance of Agricultural Income and Related Expenditure:
The A.O. disbelieved the assessee's claim of agricultural income of Rs. 20,64,389/- and treated it as unaccounted income u/s 68. The related expenditure of Rs. 3,43,328/- was also disallowed. The assessee provided evidence such as revenue records, letters from local authorities, and previous assessments to support its claim. The Tribunal noted that the A.O. had accepted similar claims in other assessment years and found no justification for the disallowance in the impugned year.

3. Treatment of Subsidy Received as Income from Other Sources:
The A.O. treated the agricultural subsidy of Rs. 24,113/- received from the Government of Goa as income from other sources. The Tribunal found that the subsidy was related to the assessee's agricultural activities, which were supported by evidence, and thus, the treatment by the A.O. was incorrect.

4. Disallowance of Write-off of Property:
The A.O. disallowed the write-off of Rs. 3,00,000/- related to a property at Mira Road, considering it as capital expenditure. The Tribunal accepted the assessee's explanation that the amount was an advance paid for property development, which was written off due to non-recovery.

5. Disallowance of Security Charges and Municipal Taxes:
The A.O. disallowed security charges of Rs. 1,19,800/- and municipal taxes of Rs. 1,89,968/-, treating them as non-business expenditure. The Tribunal found that these expenses were genuine business expenditures supported by evidence and should not have been disallowed.

6. Under-valuation of Closing Stock:
The A.O. added Rs. 4,65,992/- to the income for under-valuation of closing stock. The Tribunal accepted the assessee's explanation that the under-valuation was a bona fide mistake by the accountant and noted that the correction was reflected in the subsequent year's opening stock, resulting in no revenue loss.

Conclusion:
The Tribunal concluded that the disallowances and reclassifications made by the A.O. did not amount to furnishing inaccurate particulars of income. The penalty u/s 271(1)(c) was not justified as the assessee had provided sufficient evidence and explanations for its claims. The appeal was allowed, and the penalty order was cancelled.