2019 (2) TMI 1432 - AT - Income Tax

Penalty proceedings u/s 271(1)(C) - unexplained investment u/s 69 - HELD THAT - As undisputed fact that assessee does not have any source of income other than agricultural income and department itself has accepted that in the return of income assessee has shown agriculture income of ₹ 2,50,000/-. Once assessee has no source of income other than agricultural income then to hold that she must have made investment out of her unexplained sources would be very difficult to believe. Further, when factum of agricultural income has been accepted in this year, then assessee must have earned similar agricultural income in the earlier years as stated by her and savings from such an income can be held to explain the investment made in stamp duty in this year. Thus, when amount of ₹ 10 lacs paid for purchase of agricultural land from her father was made in the earlier years then same cannot be added in this year and stamp duty payment as held above stands explained, then addition on account of unexplained investment u/s 69 can be made. Accordingly, addition of ₹ 8,00,880/- as sustained by CIT(A) stands deleted. In so far as levy of penalty u/s 271(1)(C) is concerned, since as already deleted the addition, therefore, the penalty levied on the same amount has no legs to stand. - Decided in favour of assessee.

Summary

Issues:
1. Assessment u/s 144/147 for the assessment year 2008-09
2. Penalty proceedings u/s 271(1)(c) for the same assessment year

Analysis:
1. The appellant filed appeals against orders related to assessment and penalty proceedings. The case involved the purchase of an immovable property valued at a higher amount than declared. The Assessing Officer (AO) made an addition to the income, treating the excess amount as undisclosed income. The appellant claimed to have purchased the property from her father for a total consideration of ?10 lacs, paid over five years from savings, gifts, and agricultural income. The appellant provided supporting documents and affidavits confirming the payment structure. The appellant argued that the addition was unjustified based on the source of income and cited relevant legal precedents.

2. The Commissioner of Income Tax (Appeals) accepted part of the explanation, considering ?5 lacs as explained from agricultural income but confirmed the rest as undisclosed investment. However, the ITAT Delhi, after reviewing the sale deed and supporting documents, found that the payments were made over time, not in the assessment year. The tribunal noted the appellant's sole source of income was agricultural and accepted the declared agricultural income. Consequently, the tribunal concluded that the investment in the property was explained by savings from agricultural income, and no addition under section 69 was warranted. The tribunal deleted the addition upheld by the CIT(A).

3. Regarding the penalty under section 271(1)(c), since the tribunal had already deleted the addition, the basis for the penalty ceased to exist. Consequently, the penalty levied on the same amount was deemed unsustainable and quashed. Both appeals of the assessee were allowed, and the orders were pronounced on 21st February 2019.