MRS. SPUREET KAUR NAGI,MUMBAI vs. ACIT CC-20, MUMBAI

O R D E R

PER PAVAN KUMAR GADALE, JM:

1. The Ld. CIT(A) has erred in law and on the facts of the case in confirming the action of AO levying penalty of Rs. 5,51,500/- u/s 271(1)(c) of the Act. The action is unjustified and unwarranted.

Mrs. Spureet Kaur Nagi, Mumbai - 2 - 2.The Brief facts of the case are that the assessee is a painter and artist in Mural work and has income from House property, Income from business/profession and income from other sources. The assessee has filed return of income electronically for the A.Y 2011-12 with a total income of Rs.11,60,383/- on 15.12.2011 and the return of income was processed u/s 143(1) of the Act. Subsequently, the case was selected for scrutiny and notice u/s 143(2) and 142(1) of the Act are issued. The A.O found as per the AIR information, the assessee has made cash deposits in savings bank account with Citi Bank Mumbai aggregating to Rs.45,67,500/- and explanations were called.The assessee explained that out of deposits of Rs45,67,500/- the cash sales of Rs.17,10,614/- was ignored by the accountant while compiling cash book and bank accounts and the same was not disclosed the return of income and was offered for taxation in A.Y.2011-12. Whereas the A.O found that the assessee has not discharged the bonafide proof of income and explanations are not satisfactory hence made an addition u/s 68 of the Act. Similarly, the AO made addition of interest on deposits of Rs. 74,188/- which could not be reconciled with the Form 26AS. Finally the A.O has determined the total income of Rs.30,90,190/- and passed order u/s 143(3) of the Act dated 28.03.2014.

Mrs. Spureet Kaur Nagi, Mumbai - 3 - Subsequently, the A.O. has initiated penalty proceedings u/s 271(1)(c) of the Act. The A.O dealt on the observations of the A.O in the scrutiny proceedings, the facts and explanations of the assessee that due to mistake of the accountant in compiling with cash deposits with bank book the same could not be offered in the return of income and was offered in scrutiny proceedings. But the A.O. was not satisfied with the explanations and observed that the assessee has furnished inaccurate particulars of income and levied penalty of Rs. 5,51,500/- and passed the order u/s 271(1)(c) of the Act dated 20.09.2014.

Mrs. Spureet Kaur Nagi, Mumbai - 4 - to penalty levied u/s 271(1)(c) of Rs. 5,51,500/- by the A.O. as the assessee has failed to disclose the information of sales in the current assessment year. We on the perusal of the assessment order at para -3 found that, as per the AIR information the assessee has made a cash deposits in the savings bank accounts and the assessee was called for the explanations. The assessee has submitted the explanations in detail, whereas out of the total cash deposits, an amount of Rs. 17,10,614/- cash sales was ignored by the accountant of the assessee in compiling the cash book and bank account and therefore could not be disclosed in the return of income and the same was offered as income in the assessment proceedings. The assessee has submitted that it is the mistake of the accountant and the assessee is engaged in the profession as painter and artist of Mural work and carries on the business/profession as proprietary concern. The AO has discussed this issue and made the addition which the assessee has accepted and not preferred any appeal and paid the taxes. The explanations of the assessee in the penalty proceedings that she had done so to buy peace of mind with the income tax department and to avoid litigation and should be treated as bona fide.Considering the facts that the assessee has offered the income and explanations are filed.The addition made in the assessment order by the Mrs. Spureet Kaur Nagi, Mumbai - 5 - A.O cannot be a gateway for automatic levy of penalty. The Ld.CIT(A) has passed a elaborate order confirming the penalty, overlooking the facts and the nature of profession. We are of the view that penalty cannot be automatic and rely on the principles in the decision of the CIT Vs. Manjunatha Cotton and Ginning factory, [2013] 359 ITR 564 (Kar) and accordingly, we direct the Assessing officer to delete the penalty and allow the grounds of appeal of the assessee.