TMI Blog2015 (5) TMI 1101X X X X Extracts X X X X X X X X Extracts X X X X ..... O 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the various explanations given by the assessee and observing that the additional income was declared by the assessee only due to search action conducted at his residential cum business premises for which the act of the assessee of disclosing additional income cannot be held to be voluntary and further observing that the assessee concealed particulars of his income, the AO levied penalty of ₹ 16 lakhs u/s.271(1)(c) of the I.T. Act on account of various additions. 4. In appeal the Ld.CIT(A) upheld the penalty so levied by the AO. While doing so, he observed that the assessee initially filed his return on 30-10-2010 declaring total income of ₹ 18,09,360/- only. After the search the assessee enhanced the income in the return filed u/s.153A at ₹ 55,77,038/- which was finally held assessable at ₹ 79,66,750/-. He further observed that the act of concealment/filing of inaccurate particulars of income was committed at the time of filing of the original return u/s.139(1) of the I.T. Act and the additional income shown and assessed subsequent to the search is not suomoto but has been the outcome of the search carried out by the department. 5. So far as the exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... due to the search that took place on 24-06-2003. He drew the attention of the Bench to the statement reconciling returned and assessed income for penalty u/s.271(1)(c) which is as under : Sr.No. Reason for addition Amount Amount I Total income as per original return u/s.139(1) filed on 31-10-2000 1809360 II Less Capital gain included in returned income 141270 III Total income taxed at Normal rate 1668090 IV Additional income declared in return u/s.153A filed on 30-09-2005 1 Profit on Unrecorded sales (Sales ₹ 4442500 less cost of sales ₹ 1252939 3189561 2 Maintenance Deposit Contribution 313118 3 Credit Balance of land owner Shri Sanjay V. Sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esents his income (wholly or in part) for any previous year. However, as per Explanation 5 when during the course of any search the assessee is found to be the owner of any money, bullion, jewellery or other valuable article or thing found from the premises of the assessee during the search and the assessee claims that such assets have been acquired by him by utilizing his income etc. Thus, the income which was based on any entry in any books of account or other documents or transactions etc., were not earlier in the Explanation 5. Therefore, the assessee falls under this provision and no penalty u/s. 271(1)(c) of the I.T. Act can be levied. Since the assessee in the instant case has filed a return in response to notice issued u/s.153A of the I.T. Act, therefore, the original return does not survive and the return filed u/s.153A only survives. Since the assessee after the search has declared the above 3 items in the return filed u/s.153A which has been accepted by the AO, therefore, no penalty u/s. 271(1)(c) of the I.T. Act can be levied on the above 3 items. For the above proposition the Ld. Counsel for the assessee relied on the decision of the Pune Bench of the Tribunal in the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e submitted that no penalty is leviable u/s.271(1)(c) on debatable issues. 11. So far as the penalty levied on addition of ₹ 36,500/- being 50% donation claimed as Advertisement Expenses and ₹ 54,500/- on account of estimated disallowance in respect of Car, Petrol and Telephone expenses etc., is concerned, he submitted that the disallowances were on estimate basis and the entries were recorded in the books of account prior to the date of search. Relying on the decision in the case of CIT Vs. Vijay Kumar Jain reported in 325 ITR 378 and the decision in the case of CIT Vs. Ajaib Singh and Co reported in 253 ITR 630 he submitted that penalty cannot be levied on estimated addition. 12. As regards the agricultural income treated as business income amounting to ₹ 5,95,866/- on which penalty has been levied he submitted that the assessee has Rubber plantation in Kerala. The assessee was declaring income from Rubber trees owned by self, his father, his mother and his wife. 13. Referring to the chart filed at page 149 of the paper book he submitted that the assessee was showing regularly agricultural income in his income-tax return and for the impugned assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come was declared by the assessee only due to the search. Had there been no search the assessee would not have declared the additional income. Referring to the decision of the Hon ble Delhi High Court in the case of CIT Vs. Zoom Communications reported in 327 ITR 510 he submitted that the Hon ble High Court in the said decision considering the decision of the Hon ble Supreme Court in the case of Reliance Petroproducts Pvt. Ltd. reported in 322 ITR 158 has held that so long as the assessee has not concealed any material fact or the factual information given by him has not been found to be incorrect he will not be liable to penalty u/s.271(1)(c) of the I.T. Act even after the claim made by him is unsustainable in law provided that he either substantiates the explanation offered by him or the explanation even if not substantiated is found to be bonafide. If the explanation is neither substantiated nor shown to be bonafide Explanation 1 to section 271(1)(c) would come into play and the assessee will be liable for the prescribed penalty. Since in the instant case the assessee was unable to substantiate and the explanation does not appear to be bonafide, therefore, the penalty is leviabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f of the assessee. We have also considered the various decisions cited before us. There is no dispute to the fact that due to a search conducted at the residential cum business premises of the assessee the additional income of ₹ 37,67,679/- was declared in the return filed in response to notice u/s.153A. This additional income was accepted by the AO in the order passed u/s.143(3) r.w.s.153A. Similarly, the AO also made certain other additions and after the part relief given by the CIT(A) the addition to the extent of ₹ 10,42,666/- made by the AO was sustained. Penalty has been levied on account of above additions which has been upheld by the CIT(A) and the additional income of ₹ 37,67,679/- declared in the return filed in response to notice u/s.153A. Thus, from the various details furnished by the assessee we find penalty has been levied on account of 2 types of additions. 18.1 The addition of ₹ 37,67,679/- relates to the additional income declared by the assessee pursuant to the search action which consist of 3 items, the details of which are as under : 1 Profit on Unrecorded sales (Sales ₹ 4442500 less cost of sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions more particularly to overcome the judicial interpretation of Explanation 5. When the search is initiated u/s.132 on or after 01-06-2007 then there is a legal presumption that any income based on any entry in the books of accounts or other documents or transactions which is claimed as income by the assessee, the same would be treated as deemed concealment of particulars of income or furnishing of inaccurate particulars of income. Therefore, since the date of search in that case was 15-06-2004 and the addition was not made on the basis of any money, bullion, jewellery etc. found during the course of search it was held that Explanation 5A to section 271(1)(c) of the I.T. Act is not applicable and the penalty was accordingly deleted. 21. 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. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 reported in 325 ITR 378 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. 25. In view of above decisions we hold that penalty is not leviable on account of addition of ₹ 36,500/- being 50% of donations claimed as Advertisement expenses and ₹ 54,500/- on account of estimated disallowance in respect of Car, Petrol and Telephone expenses. 26. So far as the penalty levied on account of agricultural income treated as business income is concerned 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. The Pune Bench of the Tribunal in the case of Dynamic Logistics Pvt. Ltd., (Supra) following the decision of the Coordinate Bench of the Tribunal in the case of Orient Press Ltd., reported in 99 TTJ 1091 has held that under identical facts when ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er in this year, the penalty proceedings have been dropped for other years, we hold that it was not a fit case for imposition of penalty. The CIT(A) ought to have deleted the same. In any event, even on merits, since assessee had disclosed all material facts by way of a note attached to the income tax return, it cannot be said to be a case of concealment of income or furnishing of inaccurate particulars. Bearing in mind these facts, as also entirety of the case, we deem it fit and proper to delete the impugned penalty of ₹ 95,39,005. The assessee gets the relief accordingly. 27. Since in the instant case the AO has not levied any penalty u/s.271(1)(c) of the I.T. Act on account of treatment of a part of the agricultural income as business income in the assessment year 1998-99, therefore, facts being similar we find no reason as to why penalty should be levied 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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