2020 (8) TMI 466 - AT - Income Tax

Penalty u/s. 271(1)(c) - assessee voluntarily admitted income out of his agricultural income - AO rejected the assessee s agricultural income claim to the extent of ₹ 10 lakhs for want of details/evidences and completed the assessment, which the assessee itself accepted by its letter - HELD THAT - Assessee has furnished confirmation letters from the purchasers of Casurina and necessary certificates from the Village Administrative Officer to prove that the assessee is owner of the land and he has grown a Casurina Plant etc. The assessee has also explained that the transactions were undertaken through his bank accounts and receipts are through banking channels. Thus, the assessee has clearly explained that he was in receipt of the impugned sum from the sale of Casurina plant. It is also seen from the orders of the lower authorities that the AO issued summons to the purchaser, Shri. Chandrakesavan and levied penalty for non-compliance of the purchaser and compelled the assessee to appear u/s. 131. The assessee agreed to admit additional income on a condition that penalty proceedings should not be initiated. However, when the AO has initiated penalty proceedings and sought for explanation, the assessee explained his transactions and brought to the notice of the AO that the impugned transactions were undertaken through banking channel. Therefore, the assessee prima facie, placed relevant materials and explained the transaction. Penalty proceedings being a separate proceeding, if at all, the AO intends to levy penalty, then the AO is bound to record the satisfaction that the explanation offered by the assessee is false. In this case, since the AO has not recorded such findings, we are of the opinion that the penalty levied is un-sustainable and hence it is deleted. The corresponding grounds of the assessee are allowed.

Summary

Issues:
1. Disallowance of agricultural income claim by Assessing Officer.
2. Penalty levied under section 271(1)(c) of the Income Tax Act.

Analysis:
1. The assessee, an HUF, filed appeals against the Commissioner of Income Tax (Appeals) orders for the assessment year 2016-17, challenging the disallowance of its agricultural income claim. The Assessing Officer rejected the claim due to lack of details/evidences. The assessee voluntarily admitted to a portion of the income but later faced penalty proceedings under section 271(1)(c) of the Act. The CIT(A) dismissed the appeals, leading to the appeals filed by the assessee before the ITAT Chennai.

2. On the quantum appeal, the Ld. AR argued that the CIT(A) erred in confirming the addition made by the AO without considering the evidences provided by the assessee. The Ld. DR, however, pointed out that the assessee had admitted to the income voluntarily. The ITAT Chennai observed that the assessee had indeed admitted to a portion of the income voluntarily, leading to the dismissal of the appeal on this issue.

3. Regarding the penalty proceedings, the Ld. AR contended that the penalty should not have been levied as the assessee had cooperated and offered additional income voluntarily. The assessee provided confirmation letters, certificates, and bank details to support the transactions. The AO initiated penalty proceedings despite the explanations provided by the assessee. The ITAT Chennai held that since the AO did not record a finding that the explanation offered by the assessee was false, the penalty levied was unsustainable. Therefore, the penalty was deleted, and the appeal on this issue was allowed.

4. In conclusion, the ITAT Chennai dismissed the assessee's appeal in ITA No. 2348/Chny/2019 related to the disallowance of agricultural income claim but allowed the appeal in ITA No. 2349/Chny/2019 concerning the penalty proceedings. The judgment was pronounced on Wednesday, 4th March 2020 in Chennai.