D.N. DALAL HUF,MUMBAI vs. ASST CIT 16(1), MUMBAI

O R D E R

PER RAJESH KUMAR, AM

2 3. Facts of the case are that the assessee filed his return of income on 29.3.2007 admitting total income of Rs.72,00,439/-. The assessment was completed u/s 143(3) vide order dated 18.12.2007 assessing the total income at Rs.73,65,265/- by making an addition of Rs.2,22,581/- on account of interest receivable from Shri Budhawani on the amount advanced for the IPO issues – M/s Gateway Distriparks and Punjab National Bank on the mercantile system of accounting which was not accounted by the assessee and added by the AO to the income of the assessee accordingly. In the penalty proceedings, the AO issues show cause notice to the assessee as to why the penalty should not be imposed for concealment of income which was received by the assessee letter dated 24.6.2008 by submitting that the assessee had transactions with Mr.Bhudhwani and interest received is accounted for as income as and when actually received. The assessee fairly admitted at the time of finalization of the account that the interest component escaped the attention of the assessee and was not provided for due to pre-occupation of the assessee in attending various authorities as such during survey proceedings u/s 133A by the IT Department in the month of October, 2005 which was followed by the SEBI and CBI in the month of December,2005. The assessee also submitted that he was not aware whether TDS was deducted by Mr.Bhudhwani and under these circumstances the income could not be offered for taxation. The AO came to the conclusion that the assessee has concealed the particulars of income by not showing interest 3 income received as income which came to the light of department only during the course of survey conducted u/s 133A of the Act by Investigation Wing on 24.10.2005 and accordingly levied penalty of Rs.74,898/- u/s 271(1)( c) of the Act at the rate of 100% of the tax sought to be evaded for concealment of income. Before the First Appellate Authority (FAA), the ld. CIT(A) also dismissed the appeal of the assessee by observing and holding as under: “4. I have carefully considered the submissions made by the appellant and also the contents of the penalty order. It is a fact that survey u/s.133A was conducted in the appellant's premises in October, 2005, followed by action of SEBI and CBI. Nevertheless for the year under consideration the appellant got his accounts audited on 27.3.2007 and filed the return of income on 29.3.2007. In other words, ample time of 17 months was available to the appellant from the date of survey to collect the information and to provide for the interest receivable from Mr. Purshottam Budhwani. The very fact that survey u/s.133A was conducted by the department followed by an action of SEBI and CBI should have made the appellant more vigilant while finalizing the accounts and to collect all the relevant details, especially when the appellant had taken 17 months time to get his accounts audited. Having regard to the fact that the appellant had been consistently following mercantile system of accounting and advanced amounts to Mr. Budhwani in the normal course of his business activities, the explanation of the appellant that the omission to offer the said income to tax was inadvertent is not acceptable. In view of the above discussion, I hold that the AO has come to the correct conclusion that there was no valid explanation from the appellant to his penalty notice u/s 271(1)( c ). Accordingly, I hold uphold the penalty levied by the AO.”