SAHIDA KHATUN C/O-V.N. PUROHIT & CO.,C.A,KOLKATA vs. ITO, WARD-49(1), KOLKATA, KOLKATA

Brief facts of this issue are that Smt. Sahida Khatun( the assessee herein) is assessed in the capacity u/s. 159 of the Act as legal heir of late Asharaf Hussain Biswas and assessment was completed u/s. 143(3)/159 of the Act on 28-12-2007. One such addition made in the assessment was towards unexplained investment in FDR made on 7- 8-04 to the tune of Rs. 1 lakh which got sustained, finally in the set aside assessment proceedings of ITAT and accordingly, ld. AO proceeded to levy the penalty u/s. 271(1)(c) of the Act in the sum of Rs.30,600/- being 100% of tax sought to be evaded. On 1st appeal, the ld. CIT(A) upheld the levy of penalty u/s. 271(1)(c ) of the Act. Aggrieved, the assessee is in appeal before us on the following ground :-

1. That for the facts and circumstances of the case the Commissioner of Income Tax (Appeal)-XXXII has erred that in his view appellant concealed the income to the tune of Rs. 1 lakh and thereby upholding the penalty order passed by ITO imposing penalty of Rs.30,600/-

Shri V.N. Purohit, FCA, ld. ld.AR argued on behalf of the assessee and Shri Amitabh Choudhuri , ld. Addl.CIT/DR argued on behalf of the revenue.

The ld.AR argued that the assessee is only assessed as legal heir of late Asharaf Hussain Biswas. He argued that her husband died in a road accident in Bangladesh on 21- 04-2006 and the assessee herein is semi literate and purely a housewife and completely is not aware of the books, bank accounts of her husband, business of assessee and income- tax compliance thereon, as they were maintained exclusively by her late husband, who died suddenly due to unforeseen circumstances. He further argued that FDR was invested on 7-8-04. The source for the same is explained as withdrawal made by the assessee from the bank on 6-8-04 to the tune of Rs. 4 lakhs and out of the same, a sum of Rs. 1 lakh was invested as FD on 7-8-2004. He further argued that this aspect was not properly considered in the original assessment proceedings u/s. 143(3) of the Act and also in the set aside assessment proceedings u/s. 143(3) r.w.s 254 on 15-11-2010. He also fairly conceded that this investment in FD to the tune of Rs. 1 lakh was not reflected in the balance sheet filed by the assessee. However, immediate sources for the same are explainable from the bank withdrawals itself. The assessee had duly co-operated with the set aside assessment proceedings and paid full tax in respect of the demand raised thereon. Accordingly, he prayed before us for cancellation of penalty levied of Rs.30,600/-. In response to this, the ld. DR vehemently supported the orders of the lower authorities.

We have heard the rival submissions and perused the material available on record. It is seen that the penalty has been ultimately levied and sustained only on the premise that quantum addition has been ultimately sustained. Penalty proceedings are distinct and separate from the assessment proceedings. Just because an addition has been confirmed. In appeal or the assessee does not challenge the same in appeal, it does not mean automatically that assessee had indeed concealed any particulars of income or furnished any inaccurate particulars of income. In the instant case, it is seen that the assessee, Smt Sahida Khatun is a widow. She is totally ignorant of financial affairs of her husband, which fact is also stated in old ITAT’s order itself while disposing of the quantum appeal. This crucial fact is not disputed by the lower authorities. Moreover, it is seen that the assessee being house wife is also not well conversant with the provisions of Income-tax Act and also the business affairs of her husband. It is also observed that the assessee had fully co-operated with the set aside proceedings and did not prefer any appeal against the same and paid the taxes thereon in full. It is observed that the assessee had indeed given some explanation, which is considered bonafide that there is withdrawal of Rs. 4 lakhs on 6-8-04 to explain the source of investment in FD on 7-8-04 to the tune of Rs. 1 lakh, which fact is neither considered by the AO nor properly represented by the assessee during the set aside assessment proceedings. This does not mean that the explanation given by the assessee is not bonafide. We hold that the assessee should not be penalized that the mistake, if any, committed by her husband. We find that the assessee in the facts and circumstances, despite of her ignorance of the financial affairs of her husband and other personal genuine predicaments had come forward before the ld. AO with bonafide explanation to explain the source of investment in FD to the tune of Rs. 1 lakh on 7-8-04 and also considering the facts and circumstances of this case and smallness of the amount of penalty involved herein, we direct the ld.AO to delete the penalty levied in the sum of Rs.30,600/-.

In the result, the appeal of the assessee stands allowed.