C.P. Mohandas,, Pune vs Assessee

This appeal filed by the assessee is directed against the

order dated 11-11-2010 of the CIT(A)-I, Pune relating to

Assessment Year 2000-01.

2. Levy of Penalty of Rs.16 lakhs by the AO u/s.271(1)(c)

of the I.T. Act and upheld by the CIT(A) is the only issue raised

by the assessee in the various grounds of appeal.

3. Facts of the case, in brief, are that the assessee is an

individual and filed his return of income on 31-10-2010

declaring total income of Rs.18,09,360/-. Pursuant to search

action u/s.132(1) of the I.T. Act at the residential as well as 2

business premises of the assessee on 24-06-2003 the assessee

filed the return of income on 30-09-2005 in response to notice

u/s.153A declaring total income of Rs.55,77,038/-. Thus, the

assessee had disclosed additional income of Rs.37,67,678/-.

The AO completed the assessment for the year under

consideration at Rs.79,66,750/-. In appeal the Ld.CIT(A) gave

part relief to the assessee. Rejecting the various explanations

given by the assessee and observing that the additional income

was declared by the assessee only due to search action

conducted at his residential cum business premises for which

the act of the assessee of disclosing additional income cannot be

held to be voluntary and further observing that the assessee

concealed particulars of his income, the AO levied penalty of

Rs.16 lakhs u/s.271(1)(c) of the I.T. Act on account of various

additions.

4. In appeal the Ld.CIT(A) upheld the penalty so levied by

the AO. While doing so, he observed that the assessee initially

filed his return on 30-10-2010 declaring total income of

Rs.18,09,360/- only. After the search the assessee enhanced the

income in the return filed u/s.153A at Rs.55,77,038/- which was

finally held assessable at Rs.79,66,750/-. He further observed

that the act of concealment/filing of inaccurate particulars of

income was committed at the time of filing of the original return

u/s.139(1) of the I.T. Act and the additional income shown and

assessed subsequent to the search is not suomoto but has been

the outcome of the search carried out by the department. 3

5. So far as the explanation of the assessee that each and

every item was explained during the course of assessment

proceedings as well as appeal proceedings is concerned he

observed that those explanations were considered at the time of

assessment and appeal and the figure has finally crystallized.

Those explanations have no relevance for the purpose of

levying penalty. Since the assessee has filed inaccurate

particulars of income/concealed his income which were not

shown in the return originally filed u/s.139(1) of the I.T. Act,

therefore, the act of concealment/filing of inaccurate particulars

of income can be only established. Relying on the decision of

the Hon'ble Supreme Court in the case of Union of India and

others Vs. Dharmendra Textile Processors reported in 166

Taxmann (SC) reported in 295 ITR 244 where it has been held

that penalty u/s.271(1)(c) is a civil liability, the Ld.CIT(A)

upheld the action of the AO and dismissed the grounds raised

before him challenging the levy of penalty.

6. Aggrieved with such order of the CIT(A) the assessee is

in appeal before us.

7. The Ld. Counsel for the assessee strongly challenged the

order of the CIT(A). He submitted that the assessee is engaged

in the business of land developer and also derives income from

Rubber plantation. The assessee has filed his original return of

income on 31-12-2010 declaring total income of Rs.18,09,360/-.

Pursuant to the search in the business as well as residential 4

premises of the assessee on 24-06-2003, the assessee declared

additional income of Rs.37,67,678/-. Referring to Page 30 of

the paper book the Ld. Counsel for the assessee drew the

attention of the Bench to the statement reconciling the returned

income and assessed income for levy of penalty u/s.271(1)(c) of

the I.T. Act. He submitted that an amount of Rs.31,89,561/-

being profit on unrecorded sales was earlier offered to tax in the

hands of the brother. After the search the mistake was found

and the income was declared in the hands of the assessee.

Similarly, the amount of Rs.3,13,118/- was shown as advance

receivable by the assessee which was subsequently offered to

tax. The amount of Rs.2,65,000/- was originally shown as

payable to the land owner which was offered to tax after the

search. Thus, the above 3 items totaling to Rs.36,67,679/- were

offered to tax in the return filed u/s.153A of the I.T. Act due to

the search that took place on 24-06-2003. He drew the attention

of the Bench to the statement reconciling returned and assessed

income for penalty u/s.271(1)(c) which is as under :

Sr.No. Reason for addition Amount Amount

I Total income as per original return 1809360 u/s.139(1) filed on 31-10-2000 II Less Capital gain included in returned 141270 income III Total income taxed at Normal rate 1668090 IV Additional income declared in return u/s.153A filed on 30-09-2005 1 Profit on Unrecorded sales (Sales 3189561 Rs.4442500 less cost of sales Rs.1252939 2 Maintenance Deposit Contribution 313118 3 Credit Balance of land owner Shri Sanjay V. 265000 3767679 Sasar V Additions made in Asst. Order u/s.154 r.w.s.250 dt. 18-01-2008 (After giving effect to CIT(A) order dt. 20-12-2007) 4 Unexplained investment in furniture 20000 (Rs.75000 less Rs.55000) 5

5 Capital introduced in M/s. Kirti Developers 100000 (Sourced out of loan from S.S. Soni) 6 Addition for cost of land paid to Shri R.B. 100000 Moze (sourced out of loan from S.S. Soni) 7 Sales not recorded (Disputed consideration 55000 not received from customer) 8 50% of donations Rs.73000 claimed as 36500 advertisement expenses 9 Interest paid to Shriram Soni (Sourced out 81000 of loan from S.S. Soni) 10 Disallowance of Agriculture income claim 595866 added as Business income 11 Estimated disallowance out of car, petrol 54500 1042666 and telephone expenses VI Total income as per order u/s.154 r.w.s. 6478453 250 t. 18-01-2008 VII Total income on which penalty 4810345 u/s.271(1)(c) is levied (IV_V) (i.e. Additional income Rs.3767679 plus Additions in assessment Rs.1042666 VIII Penalty levied u/s.271(1)(c) 1600000

8. The Ld. Counsel for the assessee drew the attention of the

Bench to provisions of Explanation 5 as well as Explanation 5A

to section 271(1)(c) of the I.T. Act. He submitted that

Explanation 5A was inserted by the Finance Act, 2007 w.e.f.,

01-06-2007 which speaks of any income based on any entry in

any books of accounts or other documents or transactions and

the assessee claims that such entry in the books of account or

other documents or transactions represents his income (wholly

or in part) for any previous year. However, as per Explanation

5 when during the course of any search the assessee is found to

be the owner of any money, bullion, jewellery or other valuable

article or thing found from the premises of the assessee during

the search and the assessee claims that such assets have been

acquired by him by utilizing his income etc. Thus, the income

which was based on any entry in any books of account or other

documents or transactions etc., were not earlier in the 6

Explanation 5. Therefore, the assessee falls under this provision

and no penalty u/s. 271(1)(c) of the I.T. Act can be levied.

Since the assessee in the instant case has filed a return in

response to notice issued u/s.153A of the I.T. Act, therefore, the

original return does not survive and the return filed u/s.153A

only survives. Since the assessee after the search has declared

the above 3 items in the return filed u/s.153A which has been

accepted by the AO, therefore, no penalty u/s. 271(1)(c) of the

I.T. Act can be levied on the above 3 items. For the above

proposition the Ld. Counsel for the assessee relied on the

decision of the Pune Bench of the Tribunal in the case of

Chandan K. Shewani vide ITA Nos. 235 and 236/PN/2010

order dated 29-08-2012 for A.Yrs. 2002-03 and 2003-04. He

submitted that the Tribunal after considering various decisions

has observed that although the parliament has inserted

Explanation 5A to section 271(1)(c), the said explanation is

applicable in respect of the search initiated u/s.132 on or after

01-06-2007. Section 5A is introduced to patch out the lacunae

in the existing provisions more particularly to overcome the

judicial interpretation of Explanation 5. If the search is initiated

u/s.132 on or after 01-06-2007 then there is a legal presumption

that any income based on any entry in the books of account or

other documents or transactions which is claimed as income by

the assessee, the same would be treated as deemed concealment

of the particulars of income or furnishing of inaccurate

particulars of income. It was further observed that Explanation

3 to provisions of section 271(1)(c) of the I.T. Act has no 7

application when the return is filed in response to notice

u/s.153A. In that case since penalty so levied was not on the

addition based on any money, bullion, jewellery, etc. found

during the course of search and since the income was declared

by the assessee in the return of income in response to notice

u/s.153A which was based on some entries found in the diaries

or other documents and bank accounts found during the course

of search, the Tribunal directed to delete the penalty.

9. So far as the penalty levied on account of unexplained

investment in Furniture-Rs.20,000, Capital introduced in Kirti

Developers-Rs. 1 lakh and cost of land paid to M/s. R.B. Moze-

Rs. 1 lakh, the Ld. Counsel for the assessee did not press for the

levy of penalty on the above additions. Similarly, he also did

not press for the addition sustained by the Ld.CIT(A), i.e.

Rs.81,000/- being interest paid to Shriram Soni.

10. Now coming to the addition of Rs.55,000/- sustained by

the Ld.CIT(A) on account of sales unrecorded he submitted

that the assessee had sold a plot for Rs.44,97,500/- against

which he has received only Rs.44,42,500/-. The balance

amount of Rs.55,000/- was not received even till today.

Therefore, the taxability of the amount not received by the

assessee on account of sale of plot where the assessee is a land

developer is a debatable issue. Relying on various decisions he

submitted that no penalty is leviable u/s.271(1)(c) on debatable

issues.

8

11. So far as the penalty levied on addition of Rs.36,500/-

being 50% donation claimed as Advertisement Expenses and

Rs.54,500/- on account of estimated disallowance in respect of

Car, Petrol and Telephone expenses etc., is concerned, he

submitted that the disallowances were on estimate basis and the

entries were recorded in the books of account prior to the date

of search. Relying on the decision in the case of CIT Vs. Vijay

Kumar Jain reported in 325 ITR 378 and the decision in the

case of CIT Vs. Ajaib Singh and Co reported in 253 ITR 630 he

submitted that penalty cannot be levied on estimated addition.

12. As regards the agricultural income treated as business

income amounting to Rs.5,95,866/- on which penalty has been

levied he submitted that the assessee has Rubber plantation in

Kerala. The assessee was declaring income from Rubber trees

owned by self, his father, his mother and his wife.

13. Referring to the chart filed at page 149 of the paper book

he submitted that the assessee was showing regularly

agricultural income in his income-tax return and for the

impugned assessment year the assessee had declared

agricultural income of Rs.14,55,300/- which was reduced by the

AO to Rs.4,44,570/-. In appeal the Ld.CIT(A) determined such

agricultural income at Rs.8,59,434/- and penalty was levied on

the difference of Rs.5,95,866/-. He submitted that the issue of

holding the number of rubber trees has been settled by the order

of CIT(A). The only dispute is regarding the quantity of rubber

that can be produced per tree. If the minimum quantity of 9

6kg/tree is considered then the difference comes, however, if

the maximum production of 10kg/tree is considered then the

income declared by the assessee will be less than the

agricultural income that can be derived. Referring to the copy

of the assessment order for A.Y. 1998-99, a copy of which is

placed at paper book pages 43 to 64 he submitted that the AO

had made addition of Rs.16,53,090/- as undisclosed income out

of agricultural income declared at Rs.20,67,000/-. Referring to

the order of the CIT(A) for the same assessment year, a copy of

which is placed at pages 65 to 108 of the paper book, the Ld.

Counsel for the assessee submitted that a part of the addition

was confirmed by CIT(A) as income from undisclosed sources

of such agricultural income. However, no penalty was levied

u/s.271(1)(c) of the I.T. Act on this issue.

14. Referring to the decision of the Pune Bench of the

Tribunal in the case of Dynamic Logistics Pvt. Ltd., Vs. DCIT

vide ITA No.07/PN/2006 order dated 29-02-2008 for A.Y.

2001-02 he submitted that the Tribunal in the said decision has

held that when similar notes enclosed with return for A.Yrs.

2000-01, 2002-03 and 2003-04 and the AO has dropped penalty

proceedings for those years then it was not open to the AO to

impose penalty on the admitted identical facts for the impugned

assessment year. While doing so, the Tribunal has followed the

decision of the Coordinate Bench of the Tribunal in the case of

Orient Press Ltd., reported in 99 TTJ 1091 where it has been

held that if the AO has dropped penalty on similar set of facts in 10

the other years, the penalty needs to be dropped on that ground

alone. He accordingly submitted that no penalty is leviable on

the agricultural income treated as undisclosed income.

15. The Ld. Departmental Representative on the other hand

heavily relied on the order of the CIT(A). He submitted that the

additional income was declared by the assessee only due to the

search. Had there been no search the assessee would not have

declared the additional income. Referring to the decision of the

Hon'ble Delhi High Court in the case of CIT Vs. Zoom

Communications reported in 327 ITR 510 he submitted that the

Hon'ble High Court in the said decision considering the

decision of the Hon'ble Supreme Court in the case of Reliance

Petroproducts Pvt. Ltd. reported in 322 ITR 158 has held that so

long as the assessee has not concealed any material fact or the

factual information given by him has not been found to be

incorrect he will not be liable to penalty u/s.271(1)(c) of the I.T.

Act even after the claim made by him is unsustainable in law

provided that he either substantiates the explanation offered by

him or the explanation even if not substantiated is found to be

bonafide. If the explanation is neither substantiated nor shown

to be bonafide Explanation 1 to section 271(1)(c) would come

into play and the assessee will be liable for the prescribed

penalty. Since in the instant case the assessee was unable to

substantiate and the explanation does not appear to be bonafide,

therefore, the penalty is leviable.

11

16. Referring to the decision of the Hon'ble Supreme Court

in the case of Tribhovandas Bhimji Zaveri Vs. Union of India

and others reported in 204 ITR 368 he submitted that the

Hon'ble Supreme Court in the said decision has held that

disclosure made pursuant to search action is not voluntary.

Referring to the decision of the Mumbai Bench of the Tribunal

in the case of Sreeji Traders Vs. DCIT reported in 149 TTJ 52

he submitted that the Tribunal in the said decision following

various decisions including the Third Member decision of the

Ahmedabad Bench of the Tribunal in the case of ACIT Vs. Kirti

Dahyabhai Patel reported in (2009) 129 ITD 159 (Ahd) (TM)

has held that penalty on additional income declared in the

returns pursuant to search is clearly leviable. He accordingly

submitted that the order of the CIT(A) should be upheld and the

grounds raised by the assessee should be dismissed.

17. The Ld. Counsel for the assessee in his rejoinder

submitted that the decision of the Hon'ble Delhi High Court in

the case of Zoom Communications (Supra) is based on regular

assessment and not relating to penalty levied on the basis of

search proceedings. So far as the decision of the Ahmedabad

Bench of the Tribunal in the case of Kirti Dahyabhai Patel

(Supra) is concerned which has been relied on by the Mumbai

Bench of the Tribunal in Sreeji Traders (Supra) he submitted

that the Hon'ble Gujarat High Court has recently reversed the

same. He submitted that the decision of the Pune Bench of the

Tribunal in the case of Chandan K. Shewani has neither been 12

reversed nor the Ld. Departmental Representative could

distinguish the said decision. If the contention of the

Departmental Representative that penalty is leviable on account

of additional income declared due to the search and therefore

penalty is leviable is accepted then there was no reason to insert

the Explanation 5A to provisions of section 271(1)(c) of the I.T.

Act. So far as the decision of Hon'ble Supreme Court in the

case of Tribhovandas Bhimji Zaveri (Supra) is concerned the

said decision relates to VDIS scheme and not on the issue of

additional income declared due to search/survey. He

accordingly submitted that the order of the CIT(A) be reversed.

18. We have considered the rival arguments made by both the

sides, perused the orders of the Assessing Officer and the

CIT(A) and the Paper Book filed on behalf of the assessee. We

have also considered the various decisions cited before us.

There is no dispute to the fact that due to a search conducted at

the residential cum business premises of the assessee the

additional income of Rs.37,67,679/- was declared in the return

filed in response to notice u/s.153A. This additional income

was accepted by the AO in the order passed u/s.143(3)

r.w.s.153A. Similarly, the AO also made certain other additions

and after the part relief given by the CIT(A) the addition to the

extent of Rs.10,42,666/- made by the AO was sustained.

Penalty has been levied on account of above additions which

has been upheld by the CIT(A) and the additional income of

Rs.37,67,679/- declared in the return filed in response to notice 13

u/s.153A. Thus, from the various details furnished by the

assessee we find penalty has been levied on account of 2 types

of additions.

18.1 The addition of Rs.37,67,679/- relates to the additional

income declared by the assessee pursuant to the search action

which consist of 3 items, the details of which are as under :

1 Profit on Unrecorded sales (Sales Rs.4442500 less 3189561 cost of sales Rs.1252939 2 Maintenance Deposit Contribution 313118 3 Credit Balance of land owner Shri Sanjay V. Sasar 265000

19. So far as the levy of penalty u/s.271(1)(c) of the I.T. Act

on account of above 3 additions are concerned we find the same

are based on the loose papers found and seized during the

course of search which took place on 24-06-2003. The assessee

declared the additional income on the basis of the entries found

in those loose papers and filed the return in response to notice

u/s.153A which has been accepted by the AO and no further

addition on this account has been made. Therefore, the question

that arise is as to whether penalty can be levied u/s. 271(1)(c) of

the I.T. Act on account of the above 3 additions. Admittedly,

the above additions are not due to any money, bullion or

jewellery or other valuable article or thing found during the

course of search which was owned by the assessee. We find the

addition to income was based on entries found in the books of

account and other documents or transactions which is covered

under Explanation 5A to provisions of section 271(1)(c) of the

I.T. Act which was inserted by the Finance Act, 2007 w.e.f. 01-

04-2006. Therefore, the penalty, if any, can be levied in such 14

type of cases as per Explanation 5A to section 271(1)(c) of the

I.T. Act and that too in case of an assessee where the search

took place on or after 01-06-2007. Since the search has taken

place in the instant case on 24-06-2003, therefore, the

Explanation 5A to provisions of section 271(1)(c) of the I.T.

Act is not applicable to the facts of the present case.

20. Identical issue had come up before the Tribunal in the

case of Chandan K. Shewani (Supra). The Tribunal after

considering various decisions has held that Explanation 5 to

section 271(1)(c) of the I.T. Act has no application to a case

where no addition is made on the basis of any money, gold,

jewellery etc. found during the course of search. The Tribunal

further observed that even though the parliament has inserted

Explanation 5A to section 271(1)(c) of the I.T. Act, the said

explanation is applicable in respect of the search initiated

u/s.132 on or after 01-06-2007. Explanation 5A was introduced

to patch out the lacunae in the existing provisions more

particularly to overcome the judicial interpretation of

Explanation 5. When the search is initiated u/s.132 on or after

01-06-2007 then there is a legal presumption that any income

based on any entry in the books of accounts or other documents

or transactions which is claimed as income by the assessee, the

same would be treated as deemed concealment of particulars of

income or furnishing of inaccurate particulars of income.

Therefore, since the date of search in that case was 15-06-2004

and the addition was not made on the basis of any money, 15

bullion, jewellery etc. found during the course of search it was

held that Explanation 5A to section 271(1)(c) of the I.T. Act is

not applicable and the penalty was accordingly deleted.

21. Since admittedly in the instant case no money, bullion,

jewellery or any valuable article were found which were owned

by the assessee and the additional income was declared in the

return filed in response to notice u/s.153A on the basis of

entries in loose papers etc. found during the course of search,

which has been accepted by the AO in assessment, therefore,

we are of the considered opinion that no penalty u/s. 271(1)(c)

of the I.T. Act is leviable on account of above 3 additions. We

therefore direct the AO to cancel the penalty on account of the

above 3 additions.

22. The Ld. Counsel for the assessee could not substantiate as

to why penalty shall not be levied u/s. 271(1)(c) of the I.T. Act

on account of the following additions:

Unexplained investment in Furniture Rs.20,000/- Capital introduced in Kirti Developers Rs. 1 lakh Cost of land paid to R.B., Moze Rs. 1 lakh Interest paid to Shriram Soni Rs.81,000/-

We therefore uphold the order of the CIT(A) in confirming the

levy of penalty on the above 4 additions.

23. So far as the levy of penalty on account of sales

unrecorded amounting to Rs.55,000/- is concerned, we find

some force in the submission of the Ld. Counsel for the

assessee that the addition being debatable, no penalty on this

addition is warranted. The submission of the Ld. Counsel for 16

the assessee that as against the sale consideration of

Rs.44,97,500/- the assessee has received only Rs.44,42,500/-

and the balance amount of Rs.55,000/- has not been received

even till date could not be controverted by the Ld. Departmental

Representative. Since the assessee is a land developer and the

addition of Rs.55,000/- made by the AO was on account of sales

unrecorded which was due to non receipt of the amount,

therefore, we find force in the submission of the Ld. Counsel for

the assessee that it is a debatable issue as to whether the amount

received has to be offered as the sale proceeds or the amount

agreed to be received has to be offered as sale proceeds. In

view of this, we are of the considered opinion that penalty

cannot be levied on this amount of Rs.55,000/-, the issue being

debatable.

24. So far as the levy of penalty on account of addition of

Rs.36,500/- on account of 50%of donations claimed as

Advertisement Expenses and addition of Rs.54,500/- on account

of estimated disallowance of Car, Petrol and Telephone

expenses are concerned, we agree with the Ld. Counsel for the

assessee that penalty cannot be levied on account of estimated

addition. The Hon'ble Punjab & Haryana High Court in the

case of CIT Vs. Ajaib Singh and Co reported in 253 ITR 630

has held that penalty cannot be levied on account of addition to

income based on estimate and disallowance of expenditure. The Hon'ble Chattisgarh High court in the case of CIT Vs.

Vijay Kumar Jain reported in 325 ITR 378 has also upheld the 17

decision of the Tribunal where the Tribunal has upheld the

order of the CIT(A) in cancelling the penalty levied on account

of estimated GP addition.

25. In view of above decisions we hold that penalty is not

leviable on account of addition of Rs.36,500/- being 50% of

donations claimed as Advertisement expenses and Rs.54,500/-

on account of estimated disallowance in respect of Car, Petrol

and Telephone expenses.

26. So far as the penalty levied on account of agricultural

income treated as business income is concerned we find similar

addition was made in A.Y. 1998-99 which was upheld by the

CIT(A). However, no penalty was levied by the AO on such

treatment of agricultural income as undisclosed income. The

Pune Bench of the Tribunal in the case of Dynamic Logistics

Pvt. Ltd., (Supra) following the decision of the Coordinate

Bench of the Tribunal in the case of Orient Press Ltd., reported

in 99 TTJ 1091 has held that under identical facts when the AO

had not levied penalty u/s.271(1)(c) of the I.T. Act in the

preceding year, therefore, it is not open to the AO to impose

penalty on the admittedly identical facts for the impugned

assessment year. The relevant observation of the Tribunal at

para 4 to 6 of the order read as under :

"4. We have considered the rival contentions, perused the relevant material on record and duly considered, the factual matrix of the case as also the applicable legal position.

5. We find force in the submission of the learned counsel for the assessee that when the similar notes enclosed with the returns for the assessment years 2000-01, 2002-03, and 2003-04, the Assessing Officer had dropped penalty proceedings, it was not 18

open to the Assessing Officer to impose penalty, on the admittedly identical facts, for this assessment year. A co-ordinate bench of this Tribunal, in the case of Orient Press Ltd. [99 TTJ 1091], has held that if the Assessing Officer has dropped penalty on similar set of facts in the other years, the penalty needs to be dropped on that ground alone. In the said case, the Tribunal has observed as follows :

"4. It is difficult to understand as to how can Revenue defend imposition of penalties for assessment years 1993-94 and 1994- 95, when, on the materially similar set of facts, no penalty is imposed for the assessment year 1995-96. The dropping of penalty proceedings for the assessment year 1995-96 is a conscious act by the AO as evident from the specific order dropping the penalty proceedings for that year. During the course of hearing before us, we did ask the Departmental Representative to explain this contradiction in the stand but he was not able to explain the same and he made a vague statement to the effect that the facts of that year may be different. This is unacceptable. In any case, the material facts as evident from the documents before us, were clearly the same so far as the question of declaration was concerned. On one set of facts, in one year, the penalty is dropped, and for the remaining years, the penalties are imposed, are pointed out, for this reason alone, penalties imposed are not sustainable in law."'

6. We have no reasons to take any other view of the matter than the view so taken by a co ordinate bench. The material facts being identical inasmuch as on similar set of facts, as were before the Assessing Officer in this year, the penalty proceedings have been dropped for other years, we hold that it was not a fit case for imposition of penalty. The CIT(A) ought to have deleted the same. In any event, even on merits, since assessee had disclosed all material facts by way of a note attached to the income tax return, it cannot be said to be a case of concealment of income or furnishing of inaccurate particulars. Bearing in mind these facts, as also entirety of the case, we deem it fit and proper to delete the impugned penalty of Rs.95,39,005. The assessee gets the relief accordingly."

27. Since in the instant case the AO has not levied any

penalty u/s.271(1)(c) of the I.T. Act on account of treatment of

a part of the agricultural income as business income in the

assessment year 1998-99, therefore, facts being similar we find

no reason as to why penalty should be levied for the impugned

assessment year. We further find merit in the submission of the

Ld. Counsel for the assessee that the computation of agricultural

income from rubber plantation was purely on estimate basis 19

which is on the basis of minimum quantity of 6kg/tree.

However, it cannot be said that the production of rubber from a

tree will always be at the minimum of 6kg/tree. It may vary

from tree to tree. Sometimes it may be more and sometimes it

may be less. Therefore, addition may be justified in quantum

proceedings. However, the same in our opinion cannot be the

basis for imposing penalty u/s.271(1)(c) of the I.T. Act. In this

view of the matter we are of the considered opinion that no

penalty is leviable on account of treatment of a part of the

agricultural income amounting to Rs.5,95,866/- as undisclosed

income. We therefore direct the AO to cancel the levy of

penalty on this addition. In view of the above discussion, the

order of Ld.CIT(A) is modified and the AO is directed to

recompute the penalty in the light of the directions given above.

28. In the result, the appeal filed by the assessee is partly

allowed.

Pronounced in the open court on 29-05-2015.

Sd/- Sd/-

(SUSHMA CHOWLA) (R.K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER Pune Dated: 29th May, 2015 Satish

Copy of the order forwarded to :

1. Assessee 2. Department 3. The CIT(A)-I, Pune 4. The CIT-I, Pune 5. The D.R, "A" Pune Bench 6. Guard File By order

// True Copy // Senior Private Secretary ITAT, Pune Benches, Pune