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TMI Blog2012 (12) TMI 1217X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 The Ld. CIT(A) ought to have appreciated that the action of the assessee in booking the advances under purchases, in debiting personal investments under purchases, in undervaluing the closing stock and un-substantiating commission payments (without TDS compliance) cannot be termed as bonafide omissions. 2.4 The Ld. CIT(A) failed to appreciate that the additions made in the assessment order were not 'agreed additions' but were based on the details and documents collected. The assessee merely admitted to the shortcomings and escapement of taxable income, based on such details and documents. 2.5 The Ld. CIT(A) ought to have appreciated that the decisions based on 'agreed additions.' are thus not applicable to the facts of the assessee's case. 2.6 The Ld. CIT(A) ought to have appreciated that assessee concealed the particulars of income and also furnished inaccurate particulars as envisaged in section 271(1) (c) and the provisions of explanation 1 (A) and (B) are not relevant to the facts of the case. 3. For these and other grounds that may be adduced at the time of hearing, it is prayed that the order of the Commissioner of Income Tax(Appeals) may be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in the assessment order, who were the mediators the same procedures narrated above was followed. Because of numerous mediators and confusion in survey numbers and extent, and lack of knowledge as to whether the transaction was over, the office people booked these three cases also as purchase though under them there were some actual purchases also. The three mediators had to account for to the assessee such details and bring the owners for execution of power of attorney in favour of the assessee. There was no denial of the fact that some purchases by these mediators were over. But, for want of time and lack of such details from these mediators, the assessee was unable to produce such details before the Assessing Officer before completion of the assessment proceedings and hence, agreed for the addition. It was submitted that had the assessee been given some more time, he would have collected the details and submitted before the Assessing Officer and proved major purchases if not wholly. It was therefore, submitted that there was no intentional concealment or furnishing of inaccurate particulars of income with regard to this item. It was also submitted that moreover, it was an agre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing reasons:- 1. The appellant's submission is superfluous. 2. Account should be have been made as per accounting standards. 3. Advance paid were claimed as purchases and not included in closing stock. 4. Personal expenses cannot be claimed as revenue expenses. 5. Disallowance u/s 40(a)(ia) not done suo motu by assessee 6. Mere admission of omission is not a voluntary disclosure. All the above reasoning of the assessing officer in levying the penalty were covered by the explanation offered by the appellant by way of reply to the show cause notice. Assessing officer has not stated in the penalty order as to how the explanation offered did not meet with his above points. As pointed out by counsel he has not recorded in his order as to why he did not consider the case laws relied on by appellant. Clause(A) of Explanation 1 to Sec.271(1)(c) deems that amount added represent income in respect of which particulars have been concealed provided that the explanation offered by the appellant was found FALSE BY THE AUTHORITY. The Assessing Officer has not recorded that the explanation offered by the appellant was false. Appellant has offered his explanation as require ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stablishing this aspect of the manner. All that the assessee can do is to explain the circumstances in which he has acted in a particular manner and set out the related facts. The explanation for bona fides, at the cost of repetition, needs to be considered in a fair and objective manner and in the light of human probabilities. As long as the explanation given by the assessee is in the light of the human probabilities, there are no factual errors or inconsistencies, and it is supported by reasonable supporting evidences regarding factual elements embedded therein, if any, the bona fides should be taken as proved. The assessee's explanation regarding bona fides of the claim does not suffer from any apparent consistencies or factual errors and it is quite in tune with the human probabilities. There is no good reason to reject the same as unacceptable for the purpose of making of the claim of deduction being covered by the deeming fiction under Expln. 1 to s. 271(1)(c). 69. In view of the reasons set out above, the case of the assessee is not even hit by the mischief of any of the three eventualities envisaged by the deeming fiction under Expln. 1 to s. 271 (l)(c). We have alre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r addition does not mean that there has been either fraud or wilful neglect so as to justify levy of penalty. It was so held in CIT v .S.I.Paripushpam [2001] 249 ITR 550(Mad) following Sir Shadilal Sugar General Mills Ltd v. CIT [1987] 168 ITR (SC) and CIT v. Inden Bislers (1999: 240 ITR 943 (Mad). Penalty under s. 271(1)(c) - Concealment Agreed addition -By itself does not establish fraud or willful neglect without something more. The law that assessments and penalty proceedings are different and that penalty does not become eligible, merely because the addition had become final is well settled vide Allahabad High Court decision in the case of CIT v. Mata Prasad [2005] 278 ITR p,354. The other decisions relied on by the counsel also support the view that no concealment of income is involved where appellant agrees for the addition to avoid litigation and to buy peace with the department. 11. In view of the factual position, that additions were agreed to by the appellant which were also brought out in the assessment order by the A.O himself, the explanation I(A) and (B) is not applicable and respectfully following the above judicial decisions cited above, especially ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he CIT(A) deleted the penalty imposed by the Assessing Officer. 16. We find that during the penalty proceedings in respect of the issue of ₹ 1.25 crores the assessee explained before the Assessing Officer as under: At the outset I submit that my nature of business is real estate. For the L T South City Project I acted as a mediator with number of mediators working for me. Theses numerous mediators contact the various land owners in Siruseri and other places and bring them to us. The lands owned by them vary in sizes and dimensions ie., from less than 1 ground to more than one acre. We have to acquire all such lands irrespective of size and price so that we can consolidate them and transfer to L T as power of attorney holder for the said lands. When the mediators go to various villages and owners and after negotiating with them and agree about price, they issue slips to the owners who bring them to our office and we pay them fully in order to clinch the deal. Though the such purchase was completed on the date of payment to them, the process of executing power of attorney in our favour takes some more time. Once the payment is made based on the slips, our office acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the assessee admitted his own omission, confusion and mistakes during the assessment proceedings. The Assessing Officer has not disputed the contention of the assessee that during the assessment proceedings the assessee itself found out that ₹ 1.25 crores were advance and brought the same to the notice of the Assessing Officer. It was not the Assessing Officer but the assessee himself voluntarily brought the position to the notice of the Assessing Officer and agreed for the addition voluntarily. In view of these undisputed facts, in our considered opinion, the decision of the CIT(A) in deleting the penalty u/s 271(1)(c) of the Act in respect of the addition of ₹ 1.25 crores does not warrant any interference. In our considered opinion, for levy of penalty u/s 271(1)(c) of the Act, the return of income of the assessee is not the sole criteria and the conduct of the assessee during the course of assessment proceedings from the filing of the return till the date of completion of assessment proceedings is also a relevant factor which should be taken into consideration. It is not a case where the assessee tried to hide the correct facts during the course of the assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 21. In respect of the last issue relating to levy of penalty u/s 271(1)(c) of the Act in respect of suppression of closing stock of ₹ 22 lakhs, we find that the assessee contended before both the lower authorities that the increased closing stock of this year will become the opening stock of subsequent year and will offset against the income disclosed in the subsequent year. The assessee s contention is that because of the non-inclusion of closing stock of ₹ 22 lakhs the assessee in subsequent year disclosed more profit by ₹ 22 lakhs. In other words, the contention of the assessee is that income of ₹ 22 lakhs is not concealed but the same has been declared in the subsequent year in case of this year under consideration. We find that both the lower authorities have not verified the above contention of the assessee. We find that the CIT(A) was not justified in deleting the penalty in respect of above issue by observing that there was no deficiency in furnishing the material facts whereas the assessee was found to be deficient in furnishing the proper closing stock. However, if the contention of the assessee that because of non-inclusion of ₹ 22 lakhs ..... X X X X Extracts X X X X X X X X Extracts X X X X
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