TMI Blog2010 (7) TMI 1083X X X X Extracts X X X X X X X X Extracts X X X X ..... ived ₹ 24,113/- iv. Adjustment in finished stock/WIP ₹ 4,65,992/- v. Write off property at Mira Rd. ₹ 3,00,000/- vi. Disallowance of security charges and rates taxes ₹ 3,09,768/- The A.O. also initiated penalty proceedings under section 271(1)(c) of the Act. In respect of the amount of ₹ 20,64,389/-, the A.O. observed from the computation of income that the assessee had shown agricultural income of ₹ 20,64,389/- and claimed expenditure of ₹ 3,43,328/- against the agricultural income. Disbelieving the source of income, the A.O. treated the same as unaccounted income under section 68 and added to the income of the assessee. The expenditure of ₹ 3,43,328/- claimed for agrl. Operations was also added to the income of the assessee by the A.O. The A.O. also treated the subsidy received of ₹ 24,133/- as income from other sources. Regarding the adjustment in finished stock/WIP of ₹ 4,65,992/-, the A.O. observed from the details filed that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, drawing our attention to the orders of the A.O. and the CIT(A) submitted that the A.O. rejected the claim of the assessee to drop the penalty proceedings and levied a penalty of ₹ 12,58,350/- in the order dated 16.06.2008. Page 8 of the penalty order clearly mentions that the penalty was levied by the A.O. for furnishing inaccurate particulars of income. The assessee is a private limited company and along with the return of income for A.Y. 2005-06, its audited accounts and Tax Audit Report were filed. The A.O. did not notice any incorrect particulars in these statements. In fact he has not disputed any of the figures mentioned in the return of income or the statements sent along with the return of income. The A.O. has not brought on record any information to show that the particulars furnished were inaccurate. What the A.O. did was merely rejecting the explanation furnished by the assessee. In support of this claim the assessee relied on the decision of the Mumbai Bench of the ITAT in the case of ACIT vs. VIP Industries reported at 2009-TIOL-193-ITAT Mumbai. In para 6 of his order the CIT(A) observed that as the assessee has not filed an appeal before the CIT(A) against th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ple, papaya, cashew and pepper and vegetables. As the assessee has been producing these, year after year the State Agricultural Department has been paying subsidy to the assessee. In the relevant year the assessee received ₹ 24,113/- as agricultural subsidy vide page 52 of the paper book v) Copy of the appellate order dated 18.10.2002 passed by the CIT(A)-XXV for A.Y. 1997-98 wherein the CIT(A) in para 3.2 of his order directed the A.O. to take the agricultural income of the assessee at ₹ 2,93,000/- instead of ₹ 2,00,000/- adopted by the A.O. while determining taxable income under section 115JA of the I.T. Act vide pages 54 to 56 of the paper book. vi) Copy of the assessment order dated 28.03.2006 passed by the A.O. for A.Y. 2003-04 wherein against item 10 the A.O. mentioned that the assessee carried on the business of construction and development and agriculture vide pages 57 58 of the paper book. As there was no whole sale market for fruits and vegetables near the agricultural land owned by the assessee, the assessee has been selling the agricultural produce to persons at the premises of the assessee. The persons interested in purchasing the above fru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. As already submitted above the assessee has been carrying on business as Real Estate Development Builder. In the course of its business the assessee paid in the year ended 31.03.1996, amounts totalling ₹ 3,00,000/- to seven persons who were in occupation of a site in Mira Road, Mumbai vide pages 93 and 102 of the paper book. This was paid by the assessee as an advance as the seven persons promised to vacate the site occupied by them. The balance was to be paid after the assessee obtained possession of the site. However, in spite of efforts made these seven persons did not vacate the site occupied by them. The assessee could not also recover the advances amounting to ₹ 3,00,000/- made. The same was therefore written off in the year ended 31.03.2005. With reference to the disallowance of expenditure claimed it was submitted that the assessee owns a building in Juhu, Mumbai which houses the registered office of the assessee company. Depreciation is claimed year after year on this building and allowed on the income tax assessments made on the assessee. This expenditure of ₹ 3,09,768/- comprises (a) ₹ 1,19,800/- paid towards security charges, (b) ₹ 1,8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at Sangeum, Goa. The nature of business in the first page of that order also indicates that the assessee is involved in agricultural activity. During that year assessee has received agricultural income of ₹ 8.45 lakhs and subsidy of ₹ 75,343/- and the A.O. has accepted the same. Similar is the position in A.Y. 2008-09 wherein also in the order under section 143(3) assessee s agricultural income as declared was accepted. Only during the impugned year the A.O. disbelieved the agricultural activity treating income returned as income from other sources. In addition he also disallowed the expenditure claimed in agricultural activity. Similar action undertaken in earlier years also has resulted in appellate proceedings and ultimately the assessee s agricultural income was directed to be accepted. In view of these facts, as far as assessee s agricultural activity is concerned, on merits the assessee has supported that that it has earned agricultural income and the A.O. simply disbelieved the agricultural income and treated the same as income under section 68. The expenditure is also disallowed even though the assessee has submitted necessary evidences. Even the agricultural su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accurate particulars. In order to expose the assessee to penalty, unless the case is strictly covered by the provision, the penalty provision cannot be invoked. By no stretch of imagination can making an incorrect claim tantamount to furnishing inaccurate particulars. There can be no dispute that everything would depend upon the return filed by the assessee, because that is the only document where the assessee can furnish the particulars of his income. When such particulars are found to be inaccurate, the liability would arise. The attract penalty, the details supplied in the return must not be accurate, not exact or correct, not according to the truth or erroneous. Where there is no finding that any details supplied by the assessee in its return are found to be incorrect or erroneous or false there is no question of inviting the penalty under section 271(1)(c). A mere making of a claim, which is not sustainable in law, by itself, will no amount to furnishing inaccurate particulars regarding the income of the assessee. Such a claim made in the return cannot amount to furnishing inaccurate particulars. 9. In view of this just because the assessee s claims were not accepted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or closing stock. As explained the inventory was prepared in two sheets and the Accountant by mistake had not considered only one flat in the first sheet. Assessee accepts that it is bonafide mistake. We were informed that increase in closing stock valuation was given as a benefit in the next year as opening stock in the later year. Considering the admission by the assessee as a bonafide mistake and also the fact that closing stock valuation made in this year was given as a benefit in the later year as opening stock which makes no Revenue loss to the exchequer, We are of the opinion that the explanation given by the assessee with reference to this addition made by the A.O. can be accepted as a bonafide explanation and accordingly there is no need for levy of penalty on this amount. 11. The assessee s counsel relied on various case laws in support of various contentions which we have considered. There is no need to repeat the propositions in this order. Suffice to say that the case is examined on facts and on law and we are of the opinion that there is no need to consider the various disallowances/additions/change of head made by the A.O, for penalty under section 271(1)(c). Acco ..... X X X X Extracts X X X X X X X X Extracts X X X X
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