2013 (4) TMI 915 - AT - Income Tax

Summary

Issues Involved:
1. Penalty u/s 271(1)(c) of the Income Tax Act, 1961.
2. Addition of unexplained investment in bank deposits.
3. Treatment of agricultural income as undisclosed income.
4. Deletion of penalty related to Long Term Capital Gain (LTCG) on sale of land.
5. Applicability of Section 271AAA for penalty in assessment year 2008-09.

Summary:

1. Penalty u/s 271(1)(c) of the Income Tax Act, 1961:
The common issue in all appeals pertains to the penalty imposed by the Assessing Officer (AO) u/s 271(1)(c) of the Act, following assessments made consequent to a search action on 21.02.2008.

2. Addition of Unexplained Investment in Bank Deposits:
The assessee was found in possession of bank passbooks of accounts held in the name of his driver. The AO considered cash deposits of Rs. 18,69,073/- as unexplained investment and levied penalty u/s 271(1)(c). The CIT(A) upheld the penalty, rejecting the assessee's plea that the penalty should be based on peak deposits net of withdrawals. The Tribunal affirmed the CIT(A)'s decision, noting no co-relation between deposits and withdrawals was established.

3. Treatment of Agricultural Income as Undisclosed Income:
The AO treated the declared agricultural income of Rs. 5,04,200/- as unexplained, noting no evidence of agricultural activity on the stated land. The CIT(A) upheld the penalty, and the Tribunal agreed, stating the assessee's claim of agricultural income was disproved, thus justifying the penalty u/s 271(1)(c).

4. Deletion of Penalty Related to LTCG on Sale of Land:
The AO imposed a penalty on LTCG of Rs. 30,12,878/- from the sale of land, which the CIT(A) deleted, reasoning that the transfer occurred in the financial year 1998-99, making the gain taxable in assessment year 1999-2000, not in the year under consideration. The Tribunal upheld the CIT(A)'s decision, noting the complexity of the transaction and the bonafide nature of the assessee's claim.

5. Applicability of Section 271AAA for Penalty in Assessment Year 2008-09:
For assessment year 2008-09, the Tribunal noted that the search was initiated on 21.02.2008, making Section 271AAA applicable. Consequently, no penalty u/s 271(1)(c) could be levied for the undisclosed income, leading to the deletion of the penalty imposed by the AO.

Conclusion:
The Tribunal dismissed the appeals of the assessee for assessment years 2003-04 to 2007-08, upholding the penalties imposed u/s 271(1)(c) for unexplained investments and agricultural income. However, it allowed the appeal for assessment year 2008-09, directing the deletion of the penalty, and upheld the CIT(A)'s deletion of penalty for LTCG on sale of land. The Tribunal's decisions apply mutatis mutandis to similar issues in related appeals.