SHRI KESAMAL KHANWANI,JAIPUR vs. INCOME TAX OFFICER, WARD-2-4, JAIPUR

During the course of hearing, the ld. AR submitted that the assessee was involved in agricultural activities and has shown receipt from the agricultural activities which were deposited in the bank account, however due to non-submission of the sale bills of the agricultural produce, the AO has not accepted the assessee’s explanations and found the deposits as unexplained and the ld. CIT(A) has also confirmed the said addition on account of non verification. It was further submitted that on appeal of the assessee, the Tribunal has set-aside the matter to the file of the Assessing Officer and in the set-aside proceedings, the Assessing Officer has accepted the agricultural income as shown by the assessee as genuine and our reference was drawn to the findings of the Assessing Officer in the set-aside proceedings which read as under:

It was accordingly submitted that where the explanation in support of the source of the deposits in the bank account has been accepted by the Revenue in the set aside proceedings, there is no basis for levy of penalty U/s 271(1)(c) of the Act and the penalty so levied and confirmed by the ld CIT(A) may thus be deleted.

Per contra, the ld. DR submitted that there were two grounds of appeal before the Tribunal. One was relating to genuineness of the agriculture produce and the second one was relating to source of deposits in the bank account which was claimed by the assessee as deposits received from sale of agriculture produce. It was submitted that first ground was set-aside by the Tribunal to the file of the Assessing officer, however, the second ground of appeal was dismissed by the Tribunal. It was accordingly submitted that where the addition has been sustained by the Tribunal in the quantum proceedings, the AO has rightly levied the penalty u/s 271(1)(c) of the Act. The ld. DR has thus relied on the findings of the lower authorities.

We have heard the rival contentions and perused the material available on record. We find that the assessee has given the necessary explanation in support of the cash deposits in his bank account being receipt from the sale of the agricultural produce and during the course of set-aside proceedings, the AO has carried out the necessary verification including examination of Shri R. K. Sankla who has purchased the agriculture produce and has also gone through the Jamabandi and Girdavri reports so submitted by the assessee. We therefore, find that where the explanation so furnished by the assessee has been accepted and found genuine in support of agriculture income and the receipts thereof has been explained as the source of deposits in the bank account, there is no basis for levy of penalty U/s 271(1)(c) of the Act as the explanation so furnished has been accepted by the Revenue.

Regarding the contention advanced by the ld DR that there were separate grounds of appeal wherein one ground of appeal has been set- aside and the second ground of appeal has been dismissed, we find that though separate grounds of appeal were taken before the Tribunal, however, the outcome of the second ground of appeal was dependent on outcome of the first ground of appeal as the explanation for source of deposits has been stated to be out of receipts from sale of the agriculture produce. Therefore, without getting into the reasons why the two grounds of appeal were treated differently by the Coordinate Bench as the quantum proceedings have attained finality in absence of any further appeal by either of the parties, the explanation so furnished by the assessee continues to be relevant before any action is taken in terms of levy of penalty u/s 271(1)(c) of the Act. The explanation of the assessee, as we have noted above, has since been accepted by the Revenue in support of genuineness of agriculture produce, the same explanation holds good in support of source of deposits in the bank account as the same is the consistent stand of the assessee from the