PRADIP KUMAR JAIN,KOLKATA vs. I.T..O WD - 11(4),KOLKATA, KOLKATA

In this appeal the assessee has challenged the order of CIT(A) whereby the CIT(A) confirmed the order of AO imposing penalty on the assessee u/s 271(1)((c) of the Act.

The facts and circumstances under which the penalty was imposed on the assessee are as follows :- The Assessee is an individual. He filed the return of income for A.Y.2005-06 declaring total income of Rs.3,48,840/-. In the assessment completed u/s 143(3) of the Income Tax Act, 1961 (Act), the AO disallowed standard deduction of Rs.30,000/- u/s 16(i) of the Act. Besides the above the AO had also disallowed claim of the interest expenditure while computing the income from other sources of Rs.2,75,418/-. The AO also added a sum of Rs.60,000/- on account of low withdrawals. In respect of the three additions penalty was imposed on the assessee by the AO u/s 271(1)(c) of Kumar Jain A.Y.2005-06 the Act and the same was confirmed by CIT(A). Aggrieved by the order of CIT(A) the assessee has preferred the present appeal before the Tribunal.

At the time of hearing of the appeal it was brought to our notice that as against the original order of assessment dated 26.12.2007 passed by AO u/s 144 of the Act making the aforesaid impugned additions the assessee preferred appeal before CIT(A). The CIT(A) allowed the following reliefs :- “i) The claim of standard deduction of rs.30,000.00 u/s 16(i) against salary income disallowed by the AO was allowed by CIT(A). ii) The claim of interest of deduction of interest expenditure of Rs.2,79,418.00 while computing income from other sources, disallowed by the AO was allowed by the CIT(A). iii) The CIT(A) had allowed relief of Rs.40,000.00 against the addition of Rs.60,000.00 on account of personal drawing and sustained addition of Rs.20,000.00 only.”

It was therefore submitted that imposition of penalty would only survive with regard to the addition of Rs.20,000/- on account of low drawings. It was pointed out that this addition on account of low drawings is purely on the basis of estimate and there can be no presumption that the assessee concealed particulars of his income or furnished inaccurate particulars of income. The ld. DR relied on the order of CIT(A).

We have carefully considered the rival submissions and are of the view that the imposition of penalty on the addition made by AO on account of low drawings is purely on estimate basis. It cannot therefore be said that the assessee concealed particulars of income or furnished inaccurate particulars of income. In respect of the other two additions on account of disallowance of standard deduction and disallowance of interest expenditure, the CIT(A) has already deleted the additions made by the AO. Therefore the imposition of penalty on these two additions cannot be sustained. We therefore are of the view that in the given facts and circumstances of the case, order imposing penalty deserves to be cancelled and is hereby cancelled.

In the result the appeal of the assessee is allowed.