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2015 (5) TMI 1101 - AT - Income TaxLevy of Penalty u/s.271(1)(c) - addition based on the loose papers found and seized during the course of search - notice u/s.153A - Held that:- Since admittedly in the instant case no money, bullion, jewellery or any valuable article were found which were owned by the assessee and the additional income was declared in the return filed in response to notice u/s.153A on the basis of entries in loose papers etc. found during the course of search, which has been accepted by the AO in assessment, therefore, we are of the considered opinion that no penalty u/s. 271(1)(c) of the I.T. Act is leviable on account of above 3 additions. We therefore direct the AO to cancel the penalty on account of the above 3 additions. Assessee could not substantiate as to why penalty shall not be levied u/s. 271(1)(c) on account of Unexplained investment in Furniture, Capital introduced in Kirti Developers, Cost of land paid to R.B., Moze and Interest paid to Shriram Soni Levy of penalty on account of sales unrecorded since the assessee is a land developer and the addition of ₹ 55,000/- made by the AO was on account of sales unrecorded which was due to non receipt of the amount, therefore, we find force in the submission of the assessee that it is a debatable issue as to whether the amount received has to be offered as the sale proceeds or the amount agreed to be received has to be offered as sale proceeds. In view of this, we are of the considered opinion that penalty cannot be levied on this amount of ₹ 55,000/-, the issue being debatable. Levy of penalty on account of addition on account of 50% of donations claimed as Advertisement Expenses and on account of estimated disallowance of Car, Petrol and Telephone expenses are concerned, we agree with the assessee that penalty cannot be levied on account of estimated addition. As in the case of CIT Vs. Ajaib Singh and Co [2001 (8) TMI 79 - PUNJAB AND HARYANA High Court] has held that penalty cannot be levied on account of addition to income based on estimate and disallowance of expenditure. The Hon’ble Chattisgarh High court in the case of CIT Vs. Vijay Kumar Jain [2010 (4) TMI 386 - CHHATTISGARH HIGH COURT] has also upheld the decision of the Tribunal where the Tribunal has upheld the order of the CIT(A) in cancelling the penalty levied on account of estimated GP addition. Penalty levied on account of agricultural income treated as business income - Held that:- We find similar addition was made in A.Y. 1998-99 which was upheld by the CIT(A). However, no penalty was levied by the AO on such treatment of agricultural income as undisclosed income. As the AO had not levied penalty u/s.271(1)(c) of the I.T. Act in the preceding year, therefore, it is not open to the AO to impose penalty on the admittedly identical facts for the impugned assessment year. We further find merit in the submission of the Ld. Counsel for the assessee that the computation of agricultural income from rubber plantation was purely on estimate basis which is on the basis of minimum quantity of 6kg/tree. However, it cannot be said that the production of rubber from a tree will always be at the minimum of 6kg/tree. It may vary from tree to tree. Sometimes it may be more and sometimes it may be less. Therefore, addition may be justified in quantum proceedings. However, the same in our opinion cannot be the basis for imposing penalty u/s.271(1)(c) of the I.T. Act. Assessee appeal partly allowed.
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