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2017 (5) TMI 1037 - AT - Income TaxPenalty under Section 271(1)(c) - addition on account of unexplained expenses for earning agricultural income - Held that - Nowhere any details filed by the assessee has been held to be incorrect by the lower authorities with the support of any evidence which can show that the assessee has concealed any particulars of income or furnished inaccurate particulars of income. It is evident that if an assessee who is holding agricultural land and has earned income and if such net agricultural income is not disputed then certainly some expenses must have been incurred to earn the agricultural income. It is well known fact that the agriculturists are not so well-versed in keeping the regular accounting of day-to-day expenses of agricultural operations but that does not mean that the expenses have not been incurred. In the case of assessee for all the three assessment years an ad-hoc disallowance has been made by AO and some relief has been granted by the ld. CIT(A). Certainly in these circumstances assessee do not deserve to be visited with penalty under Section 271(1)(c) for concealment of particulars of income or furnishing of inaccurate particulars of income. We accordingly delete the penalty imposed under Section 271(1)(c) for all the three years calculated on the sustained addition on account of unexplained expenses for earning agricultural income. Unaccounted profit/unexplained investment in share business - Held that - Most of the additions which have been scaled down by the CIT(A) were on the basis of verification of bank statement showing amount received from other parties which were enough to cover the unaccounted investment. In these total series of facts there is no firm conclusion drawn by the AO in order to satisfy the conditions for imposing penalty under Section 271(1)(c). We are therefore of the considered view that the assessee in the given case has furnished details which were mostly found correct by ld. CIT(A) and the additions of concealed income was mainly made on hypothetical basis and also not firmly concluded by giving set off of the loss in share trading business appearing in the seized documents. We are therefore of the view that the penalty imposed under Section 271(1)(c) of the Act on the sustained additions for AYs 2004-05 and 2009-10 related to unaccounted profit and unexplained investment at 5, 00, 000/- and 6, 50, 000/- respectively need to be deleted. We order accordingly. Penalty u/s 271AAA(2) - Held that - It is well established that the AO has not taken the basis of undisclosed income surrendered during the course of search a 25, 00, 000/- as the basis for computing the penalty under Section 271AAA of the Act. He has rather taken the basis of sustained addition of 2, 93, 000/-. Once the Assessing Officer has missed the starting point provided in Section 271AAA(2) of the Act relating to admission of undisclosed income under Section 132(4) of the Act then the amount disclosed by the assessee in the return of income should be taken as basis. In the case of assessee the assessee has admitted to have earned unaccounted commission income during the course of search proceedings and has declared 3, 00, 000/- has commission earned from the land deal specified above and has paid due taxes along with interest then in our considered view as he has satisfied all the three conditions of Section 271AAA(2) then he does not deserve to be visited with penalty under Section 271AAA of the Act at 29, 300/-. We accordingly delete the same. In the result this appeal of the assessee is also allowed.
Issues Involved:
1. Maintainability of Revenue’s appeals based on CBDT Circular. 2. Assessee’s appeals against additions confirmed by CIT(A). 3. Condonation of delay in filing appeals by the assessee. 4. Penalty imposed under Section 271(1)(c) of the Income Tax Act. 5. Penalty imposed under Section 271AAA of the Income Tax Act. Detailed Analysis: 1. Maintainability of Revenue’s Appeals: The Revenue appealed against the deletion of additions by CIT(A) for AYs 2004-05, 2009-10, and 2010-11. The additions included ?30,00,000/- (unaccounted income), ?15,00,000/- (unaccounted investment), and ?19,06,800/- (unaccounted commission income). However, these appeals were dismissed as non-maintainable based on CBDT Circular No. 21/2015, which states that appeals should not be filed if the tax effect is below ?10 lacs, unless specific exemptions apply. The Tribunal found that these cases did not fall within the exemption clause, and the tax effect was less than ?10 lacs, leading to the dismissal of the appeals. 2. Assessee’s Appeals Against Additions: The assessee appealed against the confirmation of various additions by CIT(A) for AYs 2004-05, 2009-10, and 2010-11. These included: - ?5,00,000/- (unaccounted investment in share trading) for AY 2004-05. - ?20,560/- (unexplained expenditure in agricultural activities) for AY 2004-05. - ?6,50,000/- (unaccounted investment in land) for AY 2009-10. - ?77,010/- (unexplained expenditure in agricultural activities) for AY 2009-10. - ?2,93,000/- (unaccounted commission income) for AY 2010-11. - ?95,070/- (unexplained expenditure in agricultural activities) for AY 2010-11. The Tribunal found that the assessee's appeals were filed late by 351 days. The delay was attributed to the assessee's reliance on incorrect advice from his accountant, which was deemed insufficient for condonation of delay. The Tribunal rejected the condonation application, citing negligence and lack of diligence on the part of the assessee. Consequently, the appeals were dismissed in limine. 3. Condonation of Delay: The assessee filed appeals late by 351 days and sought condonation of the delay, citing reliance on incorrect advice from his accountant. The Tribunal, referencing various judgments, found that the delay was due to negligence and lack of diligence. The Tribunal emphasized that timely action is crucial and that the reasons provided did not constitute "sufficient cause" for the delay. Therefore, the condonation application was rejected, and the appeals were dismissed in limine. 4. Penalty Under Section 271(1)(c): The assessee appealed against penalties imposed under Section 271(1)(c) for AYs 2004-05, 2005-06, and 2009-10. The penalties were related to: - Unexplained expenses for agriculture. - Unaccounted profit/unexplained investment in share business. The Tribunal observed that the penalties for unexplained agricultural expenses were based on ad-hoc disallowances without evidence of incorrect particulars. The Tribunal deleted these penalties, noting that the assessee had provided details that were not found to be incorrect. Regarding the penalties for unaccounted profit/investment in share business, the Tribunal found that the assessee consistently denied involvement in share trading, and the evidence provided was insufficient to justify the penalties. The penalties were deleted for all three years. 5. Penalty Under Section 271AAA: For AY 2010-11, the assessee was penalized ?29,300/- under Section 271AAA for undisclosed commission income. The Tribunal found that the assessee had disclosed ?3,00,000/- as commission income and paid taxes accordingly. The penalty was imposed on a sustained addition of ?2,93,000/-, but the Tribunal noted that the conditions under Section 271AAA(2) were fulfilled by the assessee. The penalty was deemed unjustified and was deleted. Conclusion: - The Revenue’s appeals were dismissed as non-maintainable based on CBDT Circular No. 21/2015. - The assessee’s appeals were dismissed due to the rejection of the condonation application for the delay in filing. - Penalties under Section 271(1)(c) were deleted for unexplained agricultural expenses and unaccounted profit/investment in share business. - The penalty under Section 271AAA was deleted as the assessee fulfilled the conditions under Section 271AAA(2).
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