BASERA CONSTRUCTION,MUMBAI vs. ACIT CEN CIR 9, MUMBAI

The assessee is engaged in the business of undertaking civil works contract from the Government, Semi Government bodies. It filed its return of income declaring total income of ` 9,31,535/-. In the statement of total income the assessee had claimed exemption for agricultural income of ` 15,47,860/-. During the course of assessment proceedings the Assessing Officer noticed that the expenses claimed by the assessee included a sum of ` 5,71,328/- relating to agricultural activities, but the assessee did not disallow the same while computing the total income. When the Assessing Officer pointed out the same, the assessee agreed for disallowance of the same and also filed a revised computation of total income. The Assessing Officer accordingly completed the assessment and thereafter levied penalty u/s. 271(1)(c) of the Act on 2 M/s. Basera Construction agricultural expenses of ` 5,71,328/- disallowed in the assessment proceedings.

The assessee submitted that it has inadvertently omitted to disallow agricultural expenses and it was also due to typographical error. It was submitted that net agricultural income of 9,76,532/- should have been deducted from the profit shown in the profit and loss account, but the gross agricultural amount of ` 15,47,860/- was deducted. The Assessing Officer was not convinced with the above said explanations and accordingly levied penalty of ` 1,76,540/- u/s. 271(1)(c) of the I.T. Act. Learned CIT(A) also confirmed the same and hence the assessee has filed this appeal

We have heard the parties and perused the record. The profit and loss account of the assessee is placed at page No. 57 of the paper book. A perusal of the same would show that the assessee has shown gross agricultural income of ` 15,47,860/- separately in the income side, where as agricultural expenses has not been shown separately in the Expenditure side. We notice that it has been clubbed with other expenses. While computing the total income, the assessee should have deducted net agricultural income (Gross agricultural income less expenses) from the profit declared in the profit and loss account. Instead, the assessee has deducted gross agricultural income shown in the income side from profit. According to the assessee mistake has occurred by inadvertence and hence the assessee has immediately agreed to the disallowance of agricultural expenses, when it was pointed out by the Assessing Officer. We noticed that the assessee has also filed revised computation of income before the Assessing Officer during the course of assessment proceedings. From the facts narrated above, we are of the view that there is merit in the submissions of the assessee that the mistake has occurred by inadvertence. We notice that all the material relating to the computation of income has been filed by the assessee before the Assessing Officer.

Explanation 1 to sec. 271(1)(c) provides for the situations as to when an addition shall be deemed to be taken as concealment of income, i.e., (a) when a person fails to offer an explanation or offers an explanation which is found to be false or (b) though the person offers an explanation which he is not able to substantiate and also fails to prove that such explanation is bona fide and all the facts relating to the same and material to the computation of income have been disclosed.

The assessee, in the instant case, has explained that the agricultural expenses were omitted to be disallowed by inadvertence. We have noticed that the assessee has not shown the agricultural expenses separately in the profit and loss account, but it has clubbed the same along with “Other expenses”. Hence, on the face of the Profit and Loss account, the agricultural income was taken at Gross income and there was a possibility of not considering the expenses. Otherwise, we notice that the assessee has furnished all the details material and relevant to the computation of income. Accordingly, we are of the view that the assessee has discharged the burden placed upon it under Explanation (1) to section 271(1)(c) of the Act by placing all material available before it and offering an explanation, though it could not be substantiated. Accordingly, we are of the view that learned CIT(A) was not justified in confirming the penalty u/s. 271(1)(c) of the Act. Accordingly, we set aside the order of learned CIT(A) and direct the Assessing Officer to delete the impugned penalty.

In the result, appeal filed by the assessee is allowed.