TANAJI DATTATARAYA CHAVAN,MUMBAI vs. ITO 12(1)(2), MUMBAI

Per Rajesh Kumar, Accountant Member:

by the assessee are as under:

1. The learned CIT(A) erred in holding that the AO was justified in levying penalty u/s.271(1)(c) of the Act at Rs.60,074/-. It is prayed that the said addition be directed to be deleted.

2. Not withstanding the fact that penalty is not leviable, the learned CIT(A) erred in holding that the assessing officer was justified in levying penalty oil alleged concealed income at the maximum marginal rate of tax at Rs.60,074/- as against penalty correctly leviable on the tax computed at the normal rates at Rs.7,036/-. It is prayed that the AO be directed

2 Mr. Tanaji Dattatraya Chavan to delete the penalty levied in excess. 3. The appellant craves leave to amend, alter or modify the above grounds of appeal or to add fresh grounds of appeal if found necessary.”

3 Mr. Tanaji Dattatraya Chavan and also carries on the business of fruits and vegetables on commission basis. The said cash was deposited in Sangli Urban Co-operative Bank Ltd. bearing saving account No.10903. According to the assessee the said account was opened by Mr. Babasaheb Bhimrao Chavan (Patil) who is cousin of the assessee. Thereafter, the assessee’s uncle name Mr. Bhimrao Chavan was also included in the said bank account. However, the ownership of the said account vested with the Mr. Babasaheb Bhimrao Chavan (Patil) and Mr. Babasaheb Bhimrao Chavan (Patil) expired on 24.11.2008. The assessee replied before the AO that due to old age assessee’s uncle and father’s name were added to the account for the purpose of convenience in operation. It is pertinent to state that Mr. Babasaheb Bhimrao Chavan (Patil) was running kiryana shop and has to deposit various proceeds from time to time related to the business of the assessee in the said account. During the assessment proceedings the assessee denied to have any connection with the said account whatsoever. After the death of the Mr. Babasaheb Bhimrao Chavan (Patil), the business was bound up by selling the unsold stocks and the sale proceeds were deposited in the said account. The assessee also furnished the copy of death certificate, copy of bank passbook and certificate from the bank certifying that the name of the Mr. Bhimrao Chavan was added to the account only after the death of the Mr. Babasaheb Bhimrao Chavan (Patil). The assessee also submitted that since the Mr. Babasaheb Bhimrao Chavan (Patil) was running a kiryana shop and the turnover was below

4 Mr. Tanaji Dattatraya Chavan Rs.40 lakhs and same should be assessed under section 44F of the Act. Assessee denied to have any connection with the said business. However, in order to buy peace of mind assessee offered 5% of the total deposits in the said account as income of the assessee with the condition that no penalty proceeding would be initiated. The AO came to the conclusion that assessee was indirectly carrying on the business after dealth of Mr. Babasaheb Bhimrao Chavan (Patil) cousin of the assessee and failed to prove that he was not having any connection with the kiryana shop and consequently assessed the income in the hand of the assessee @ 10% thereby adding a sum of Rs.1,94,414/- to the income of the assessee by framing assessment vide order dated 26.11.2011. The said order was not challenged before the appellate authority as assessee voluntarily offered the income as his own income. Thereafter, the penalty proceedings were initiated under section 271(1)(c) for concealment of particulars of income and the AO levied a penalty of Rs.60,074/- at marginal rate for concealment of particulars of income within the meaning of Explanation-1 to section 271(1)(c) of the Act after taking into account the contentions and submissions of the assessee.

In the result, appeal of the assessee is allowed. 8.

Order pronounced in the open court on 06.08.2018.