THE COMMISSIONER OF INCOME TAX, TRICHUR vs. K.ABBAS HAJI

The assessee, a Non-Resident Indian, was found to have made various investments, the sources of which were sought for in the course of income tax assessments for the above 4 years. Even though the assessee contended that an amount of Rs. 12 lakhs was received by him every year from his farm land as agricultural income, on detailed enquiry, he could not prove having earned agricultural income for so much amount or prove the receipts and expenditure claimed by him. However, the assessee agreed for an addition of Rs.3,39,000/- in the assessment for all these years. In other words, his explanation for the source of investment in excess of Rs.3,39,000/-, Rs.8,61,000/- was accepted by the officer merely because he agreed for addition of balance amount of Rs.3,39,000/-. However, after completing assessments in all these years, on an agreed basis, the assessing officer proposed penalty under section 271(1)(c) of the I.T.Act for concealment of income to the tune of Rs.3,39,000/-. The assessee specifically raised objection stating that assessments were agreed assessments and additions for the first three years at the rate of Rs.3,39,000/- and for 2004-05, Rs.3.5 lakhs were agreed by the assessee. However overruling the objection by the assessee, the assessing officer levied penalty under section 27(1)(c) of the Act. Besides this, it seems that for 2002-03 assessee had agreed for some other additions. In the appeals filed, the appellate authority allowed the appeals against which the Departmental appeals filed were dismissed by the Tribunal. While for the three years, cases were not decided on merits, for the remaining years, the Tribunal confirmed the order of the C.I.T (Appeals). It is against these orders of the Tribunal, Revenue has filed these appeals.

We have heard the Standing Counsel appearing for the appellants, and Sri P. Raghunath, the counsel appearing for the respondent.

We are in agreement with the contention of the assessee that the assessments were agreed assessments and so much so, there was no justification to levy penalty under section 271(1)(c) of the IT Act. Since the assessments were agreed assessments, no appeals are maintainable against the assessment orders and assessee was in fact compelled to challenge assessments only because he had to defend penalty orders which could be effectively done by challenging assessments. The Tribunal's finding that appeals are not maintainable, because the tax amount involved is below the threshold limit fixed by the CBDT circular is not applicable in these cases where the assessments are agreed assessments against which assessee has filed appeals. This is because, if assessee had not agreed for specific addition, the officer was not bound to maintain addition at the level agreed by the assessee. However, the assessee cannot be blamed for filing appeals because the officer levied penalty based on addition made in agreed assessments. It is obvious that the assessee agreed for specific additions in assessments to purchase piece and obviously no penalty could have been levied against assessee. In this view of the matter we dispose of these appeals by vacating the orders of the Tribunal, first appellate authority and by restoring assessments but by confirming cancellation of penalty orders for all the years. C.N.RAMACHANDRAN NAIR JUDGE