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TMI Blog2006 (6) TMI 418X X X X Extracts X X X X X X X X Extracts X X X X ..... d. 3. The assessee filed his return of income declaring total income of Rs. 1,71,530 which was revised and net loss of Rs. 2,22,960 was claimed. The assessment was completed under section 143(3) on a total income of Rs. 2,75,120. The assessee had preferred appeal before the ld. CIT(A) which was partly allowed against which assessee had preferred second appeal before the ITAT which was also rejected inter alia, apropos the addition of Rs. 2 lakhs. 4. The Assessing Officer initiated penalty proceedings and inter alia, levied penalty on account of following additions : ( a )Rs. 2,57,160 on account of disallowance of interest on borrowings invested in the firm wherein the assessee has been partner. ( b )Rs. 30,000 on account of alleged low withdrawals for household expenses. ( c )Rs. 1,500 on account of deposit in bank account source of which has been held to have remained unexplained. ( d )Rs. 2,00,000 on account of deposit in bank account source of which has been held to have remained unexplained. 5. In regard to the addition of Rs. 1,500, the Assessing Officer observed that assessee did not file any explanation regarding the source of deposit and there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r dated 18-12-1998 and observed that it was evident from the same that assessee was in constant touch with Advance Pipes (P.) Ltd. from time to time about the commission which meant that he was also in position to explain the nature of entry dated 7-10-1998 when the quantum appeal was heard. The ld. CIT(A), accordingly, observed that if these evidences were bona fide, nothing prevented the assessee to produce them before the ld. CIT(A). The ld. CIT(A) further noticed that the assessee was in the habit of not disclosing similar amounts in other years. He noted that in assessment year 1996-97 when the Assessing Officer asked him to explain the source of similar credit of Rs. 1,42,250 it was stated that the amount represented commission from M/s. Anand Motors, but had not been disclosed as income pending dispute. This amount was added because no evidence was furnished in respect of the claim. Considering all these aspects, the ld. CIT(A) did not admit the additional evidence. On merits, the ld. CIT(A) observed that when the assessee do not have any explanation at all how could one accept his plea that he had rebutted the presumption within the meaning of Explanation 1 to section 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e from the assessment year in which it has accrued to subsequent assessment year. Since the income of Rs. 2 lakhs had accrued to the assessee for the assessment year 1995-96, we agree with the order of the CIT(A) in confirming the addition of Rs. 2 lakhs as added by the Assessing Officer. Hence, ground No. 5 of the appeal taken by the assessee is rejected." 9. Thus, the addition has been confirmed in the hands of assessee on account of non-furnishing of explanation before the Assessing Officer as well as before the ld. CIT(A) and rejection of these documents by the Tribunal as noted above. In the penalty proceedings before the ld. CIT(A), the assessee had submitted that the additional evidences noted above were not admitted. 10. The main point for consideration is whether these evidences are bona fide or not. 11. The first evidence is in the form of letter dated 27-1-1994 from M/s. Advance Pipes (P.) Ltd. to assessee appointing him as agent for obtaining orders from State Government for which assessee was to get commission of 2 per cent. Thereafter the other evidence is in the form of letter dated 18-12-1998 i.e. after a gap of about 4 years, from the assessee to M/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and on facts in holding that the disallowance on borrowings amounting to Rs. 2,57,160 should not invite penalty under section 271(1)( c ) of the Act. 15. Brief facts apropos this issue are that in the computation of income, the assessee had shown share from partnership firm viz. Sahu Agencies and Sahu Hotel and Restaurant which were claimed as exempt under section 10(2A) of the Act. Apart from this, no income was shown under the head Income from business or profession . The assessee had claimed deduction of Rs. 2,57,160 towards interest on loan taken from M/s. Sahu Investment Mutual Benefit Co. Ltd. The Assessing Officer rejected the assessee s claim for deduction of this sum because assessee had no business income apart from the share from these two firms which was exempt under the provisions of section 10(2A) of the Act. This disallowance was confirmed by the ld. CIT(A) as well as by the Tribunal taking note of the fact that the borrowed funds were utilized in the partnership firm towards his share and the share of profit from the said partnership firm was exempt under section 10(2A) of the Act and therefore, no deduction towards interest on the said borrowed funds coul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 182. Under the circumstances, the assessee s claim could not be said to be mala fide claim, but only because of change in position of law. The claim was made under bona fide belief that since the borrowings were for business purposes for being invested in the firm the claim was advanced. Under such circumstances, it cannot be held that the assessee deliberately furnished inaccurate particulars of his income. As far as assessment part is concerned, the disallowance was fully justified but when it comes to imposition of penalty, it has to be examined whether this whole exercise was a deliberate act on the part of assessee or was on account of bona fide belief that a particular deduction was allowable. Under such circumstances, the assessee cannot be saddled with penalty. We, therefore, confirm the order of the ld. CIT(A) on this issue. 19. As far as penalty with respect to Rs. 30,000 is concerned, the said addition had been made on account of low household withdrawals. The assessee had disclosed the household withdrawals at Rs. 3,500 whereas the Assessing Officer had estimated the household expenses at Rs. 6,000. This addition was confirmed by the ld. CIT(A). In the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate, represented income and that the assessee had concealed particulars of income or had furnished inaccurate particulars thereof. In the backdrop of these principles laid down, if we examine the present case, we find that the Assessing Officer made this addition purely on the basis of a general statement made by him that the addition was made on account of high status of assessee. He did not accept the assessee s submission that he was living with his brother Shri Vijay Kumar Sahu and the household expenditure was jointly met. The assessee s explanation was not accepted because the assessee did not tell as to how much expenditure was made by Shri Vijay Kumar Sahu and other family members. This addition was purely on the basis of general impression about the assessee s family without pointing out any specific item of expenditure which was not met out of the household expenses declared by the assessee. 22. As far as assessment proceedings are concerned, these additions may be justified to some extent but when it comes to penalty proceedings, it has to be examined whether assessee had deliberately furnished inaccurate particulars of income or not or has concealed the particulars ..... X X X X Extracts X X X X X X X X Extracts X X X X
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