VINOD M. PATEL,MUMBAI vs. ITO WD NO. 24(3)(4), MUMBAI

I heard the parties and perused the record. The assessee is a civil contractor. The Assessing Officer completed the assessment by making following additions:- a) Gift receipts assessed u/s. 68 of the Act : ` 1,56,509/- b) Difference in rental income : ` 31,500/- c) Undisclosed contract receipts : ` 2,08,549/-

The assessee could not win the appeal filed before the learned CIT(A) challenging the above said additions. Thereafter the Assessing Officer levied penalty of ` 1,21,347/- being 100% of the tax sought to be evaded by the 2 Shri Vinod M. Patel assessee on the above said additions. The learned CIT(A) confirmed the same and hence the assessee has filed this appeal before the Tribunal.

The first item on which penalty was levied relates to the assessment of gift receipt of Rs.1,56,509/- received by the assessee from his brother. Even though the assessee furnished a confirmation letter obtained from his brother along with a copy of passport, yet the AO assessed the gift receipts by holding that the credit worthiness of the donor has not been proved by furnishing his bank details. In my view, the above said reason may be a good one for assessing the gift receipts u/s 68 of the Act, but the same may not lead to levy of penalty as the assessee has not concealed any particulars of income or furnished any inaccurate particulars of income. The gift receipt has been assessed as income of the assessee only on account of not proving one of the three main ingredients relating to Cash Credits. Accordingly I am of the view that the Ld CIT(A) was not justified in not deleting the penalty levied on the addition relating to gift receipts. Accordingly we set aside the order passed by Ld CIT(A) on this issue and direct the AO to delete the penalty levied on the amount of gift receipts.

The next issue on which penalty was levied relates to the addition on account of difference in rental receipts. The AO noticed from the rental agreement that the assessee has received rent by way of cheque as well as by way of cash. In the return of income, the assessee declared only cheque portion and did not declare the rent received by way of cash and the same has led to this addition. The assessee submitted that it was a mistake of his accountant in not recording the cash portion of the rent. However, the said explanation has not been substantiated and hence the addition was confirmed by Ld CIT(A). The penalty levied thereon was also confirmed by Ld CIT(A).

I notice that the assessee could not substantiate the explanation that the same was due to mistake of the accountant. The very explanation of the assessee may not also be correct, since it is the assessee who has received the 3 Shri Vinod M. Patel rent by way of cash and hence it is his duty to ensure correct accounting of rent. The mistake of accountant may occur on one occasion and the same may not occur every month. Under these of set of facts, I am of the view that the Ld CIT(A) was justified in confirming the penalty levied on the addition relating to rent receipts.

The last item on which penalty was levied relates to the difference in professional receipts. It is the case of the AO that the assessee has claimed TDS without offering the corresponding income and hence the AO assessed the income relating to the TDS and levied penalty thereon. It is the contention of the assessee that he has accounted for the said income in the succeeding year and the AO, after assessing the income in the instant year, has refused to delete the said income in the succeeding year leading to double assessment of same income. Here I am concerned with the penalty proceedings. If the contention of the assessee that he has accounted for the impugned income in the succeeding year is found to be correct, in my view, the AO was not justified in levying penalty on the income so offered in the succeeding year, since the dispute in this regard relate to the year of assessment of the said income. However, the claim of the assessee requires verification, since the AO has not accepted the theory of double assessment in the succeeding year. Accordingly I set aside the order passed by Ld CIT(A) on this issue and restore the same to the file of the AO with the direction to examine the claim of the assessee. If it is found to be correct, i.e., if it is seen that the assessee has offered the impugned income in the succeeding year, then the AO should delete the penalty levied thereon during the year under consideration. Otherwise the penalty levied by the assessing officer shall remain.

The Ld A.R also raised certain legal grounds, viz., the AO did not mention about initiation of penalty proceedings in respect of all the three additions. I notice that the Ld CIT(A) has addressed this contention of the assessee and further the AO has indicated his intention to initiate penalty proceedings at the end of the assessment order. Accordingly I reject this 4 Shri Vinod M. Patel contention of the assessee. The Ld A.R also contended that the AO did not strike off inapplicable limb in the penalty notice. I notice that the assessee has failed to show that there is lack of application of mind on the part of the AO in respect of this issue and accordingly I reject this contention also.

In the result, the appeal filed by the assessee is treated as partly allowed for statistical purposes.