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TMI Blog2010 (7) TMI 838X X X X Extracts X X X X X X X X Extracts X X X X ..... s, M/s. Vadiraja Travel Agency, M/s. Vadiraja Credits and Investments, M/s. Vadiraja Medicals and M/s. Vadiraja Estate Developers. The assessee is regularly assessed to income-tax and had filed returns along with audited statement of accounts for and up to the assessment year 1997-98. But for the impugned assessment year 1998-99, no return was filed by the assessee. Therefore, the assessment was completed under section 144 read with section 147 of the Income-tax Act, 1961. There was a survey action under section 133A conducted at the residential as well as business premises of the assessee on December 9, 1997. In the course of survey, a register relating to sale of flats belonging to N. R. Towers at Udupi was found from which a case was m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar 1997-98, the Assessing Officer had granted deduction by way of expenses to the extent of Rs. 18,36,602. Thus, the net amount of addition made for the assessment year 1997-98 was Rs.27,54,903. As the Commissioner of Income-tax (Appeals) has confirmed the addition of Rs. 45,91,505 for the impugned assessment year, the Assessing Officer favourably acted upon the rectification petition filed by the assessee and excluded the amount of Rs. 27,53,903 from the assessable income for the assessment year 1997-98. In the same scenario, the assessee has further moved a rectification petition before the assessing authority in respect of the impugned assessment year 1998-99 to give deduction by way of expenses to the extent of Rs.18,36,602 which was g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts from various parties for carrying on his real estate business. As the market crashed, his real estate and construction activities came to a stand still and he landed in serious financial problems. He was not in a position to service even the interest on various borrowings availed of by him from various financial institutions and others. As there were defaults in making repayments of the loan, according to the assessee, even his life was threatened and he had to abscond the scene and keep away from the public eye for a long time. This is the reason that he could not file even the return for the impugned assessment year 1998-99. These personal circumstances as well as harping of hope on the outcome of the section 154 petition, both togethe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the assessee. The Commissioner of Income-tax (Appeals) has not at all applied his mind towards the question of deducting the corresponding expenses even when the original ex parte order placed before him clearly reflected the deduction originally granted by the assessing authority. When the matter was remitted back to the Commissioner of Income-tax (Appeals) to re-examine the question of addition by the Tribunal, it was the bounden duty of the Commissioner of Income-tax (Appeals) to examine the said issue in the light of the earlier assessment order itself, so also in the light of the plausible arguments advanced by the assessee. In order to decline the deduction already given by the assessing authority in the original assessment order, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reasonable amount by way of deduction towards expenditure settled against on-money receipts. We also find that the quantum of deduction at 40 per cent. determined by the assessing authority in the original ex parte assessment is fair and reasonable. Where the Assessing Officer has shown the necessary fairness even in a case of ex parte assessment, the Commissioner of Income-tax (Appeals) who is a quasi-judicial authority has been vindictive in deciding the appeal placed before him. In the facts and circumstances of the case, we direct the assessing authority to deduct 40 per cent. of the on-money receipts by way of expenditure. The differential amount of Rs. 27,54,903 was to be added as onmoney receipts. The assessee is successful in its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee would be liable under section 44AB or not and it is to be further seen that the assessee had not filed any return for the assessment year 1998-99 voluntarily and also the assessment was completed ex parte. In these circumstances, we do not find any justification to impose penalty under section 271B. The penalty is accordingly deleted. Next we will consider the penalty appeal under section 271(1)(c). The penalty has been levied by the assessing authority on the basis of the initial addition made of Rs. 45,91,505. As already stated many times in paragraphs above, it was not even certain whether the addition should be made for the assessment year 1997-98 or 1998-99. It is also pertinent to note that even in the original assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X
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