SHRI HASMUKHBHAI PRAJAPATI,,BARODA vs. THE ACIT, CIRCLE-2(1),, BARODA

The assessee has raised following grounds of appeal:- “1 On the facts and in the circumstances of the case the learned A.O. erred on law and on facts in invoking the provision of section 271B and thereby levying penalty under section 271B. The action of A.O. being uncalld for unwarranted your appellant therefore in the interest of justice hereby requests to delete the penalty levied. 2. On the facts and in the circumstances of the case the learned A.O. erred on facts in taking turnover of your appellant at Rs.9,58,79,688/- as against the correct turnover of Rs.97,27,178/

All the three grounds of appeal are inter-connected, therefore, for the sake of convenience they are adjudicated together as under:-

The brief fact of the case is that assessment was completed u/s. 143(3) of the act on 31st December, 2010 and total income was determined at Rs. 78,18,500/-. The main issue in this case was that a survey u/s. 133A of the act was carried out on 18th October, 2010 wherein the assessee had admitted that his activities of investment in land was of the business nature.Therefore, the assessing officer observed that the assessee was liable for audit u/s. 44AB of the act and issued a notice u/s. 271B of the act on 27th Feb, 2013 for not furnishing of audit report u/s. 44AB of the act. The assessee explained that transactions in the land pertained to the land which was purchased long back and regularly shown as investment in the return of income filed. He has further explained that during the course of survey he has agreed to treat the income on sale of said land as business income as against capital gain shown by him in the return of income. He has also submitted that majority of the land in question was shown as investment since 1992 till 2007 and he was not engaged in frequent purchase and sale of land. The assessing officer has not accepted the explanation of the assessee and stated that assessee was liable for audit therefore, imposed the impugned penalty u/s. 271B of the act.

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

During the course of appellate proceedings before us, the ld. authorized representative has contended that survey was carried out after filing of return of income when the financial year was over which is very clear from the date of survey on 18th October, 2010. He has also furnished copy of order passed by the ld. CIT(A) in the case of the assessee on identical issue for assessment year 2007-08 vide which the CIT(A) held that the assessee held a bonafide belief based on past return income that he was carrying out transaction of sale of land which was not in the nature of business activity, therefore, there was no justification to get his account audited. On the other hand, ld. departmental representative has supported the order of ld. CIT(A).

We have heard both the sides and perused the material on record carefully. In the preceding year the asssssee has shown the transaction in the land as investment and income from such investment activities under the head capital gain. We have also perused the order of the ld. CIT(A) order dated 25/01/2017 for assessment year 2007-08 in the case of the assessee deleting the penalty levied u/s. 44AB of the act on identical issue on the ground that assessee used to show income from land transactions regularly under the head capital gain.

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