SHRI VITHALBHAI R.PATEL,,NADIAD vs. THE INCOME TAX OFFICER, WARD-4,, NADIAD

The appeal filed by the Assessee for A.Y. 1999-00, arise from order of the CIT(A)-2, Vadodara dated 19.05.2015, in proceedings under section 143(3) r.w.s. 147 of the Income Tax Act, 1961; in short “the Act”.

The solitary ground of appeal

The assessee has filed appeal before the Ld. CIT(A). The CIT(A) has partly allowed the appeal of the assessee and directed the AO to allow deduction of Rs. 2 A.Y. 1999-00 2,28,000/- being rent received from the firm where the assessee was a partner and the house property income was determined at Rs. 8,46,000/-. The CIT(A) has also allowed deduction of Rs. 3,01,689/- out of interest income of Rs. 3,05,502/- on investment out of agriculture income. The CIT(A) has also directed the AO to consider agriculture income at Rs. 8,00,000/- and income from other sources at Rs. 66,36,042/-. The CIT(A) has also confirmed the disallowance of claim of deduction u/s. 80HHC to the amount of Rs. 7,52,295/-.

The assessee filed appeal before the ITAT. The ITAT has partly allowed the appeal of the assessee and directed the AO to consider Rs. 8,00,000/- as income from other sources and amount of Rs. 68,31,343/- as agriculture income. The AO has also initiated penalty proceeding u/s. 271(1)(c) of the Act while passing the order u/s. 147 r.w.s. 143(3) of the Act. The AO has stated that assessee has concealed the income to the tune of Rs. 17,78,409/- and its break up is given as under: “(1) Concealment of salary income : Rs. 27,000/- (2) Disallowance of claim of 80HHC : Rs. 7,52,295/- (3) Reduction of interest income : Rs. 95,301/- (4) Interest addition by ITAT : Rs. 3,813/- (5) Considering Agriculture Income as income from other source : Rs. 8,00,000/-”

Aggrieved assessee has filed before the Ld. CIT(A). The Ld. CIT(A) has dismissed the appeal of the assessee.

We have heard the rival contention and perused the material on record. The AO has made various addition in the assessment completed u/s. 147 r.w.s. 143(3) of the Act. On the quantum of addition which were sustained by the ITAT as supra the AO has imposed penalty to the amount of Rs. 5,28,000/- u/s. 271(1)(c) of the Act. On the perusal of material on record it is observed that assessee has disclosed all the particular pertaining to his claim of deduction 80HHC to the amount of Rs. 7,52,295/- which was not claimed in the original return of income, however, assessee had filed Form No. 10CCA. Considering this fact we observe that claiming deduction u/s 80HHC cannot be treated as concealment of income as the assessee has filed all the particular pertaining to his claim. Therefore, on this account levying of penalty is not A.Y. 1999-00 correct. Regarding other addition pertaining to estimation of income from other sources out of agriculture income to the amount of Rs. 8,00,000/- we observe that there is a no case of furnishing inaccurate particulars of income. The AO has also not established with any relevant supporting evidences that there was case of furnishing any inaccurate particular income in respect of estimation of income from other sources out of agriculture income. Therefore, we consider that it is not justified to levy penalty on the amount of Rs. 8,00,000/-. Similarly on the addition in respect of interest income of Rs. 1,95,307/- and Rs. 3,813/- the AO has not established that there was case of furnishing inaccurate particular of income so we consider that no penalty is required to be levied on the addition made on account of interest expenses. However, we observe that assessee has concealed the particular of income for not disclosing the salary income to the amount of Rs. 27,000/- which was not shown in the original return of income, therefore, we consider that assessee has concealed the particular of income in respect of 27,000/- of salary income. Accordingly, AO is directed to restrict the penalty u/s. 271(1)(c) to the amount of addition made on account of salary income. Therefore, appeal of the assessee is partly allowed.

In the result, the appeal of the assessee is partly allowed.