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June 2010

Additions made by AO u/s.40A(2)(b) — Penalty levied — Held : it is not a case of concealment of income or furnishing of inaccurate particulars.

By C. N. Vaze
Shailesh Kamdar
Jagdish T. Punjabi
Bhadresh Doshi
Chartered Accountants
Reading Time 2 mins
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New Page 1

Part
A: Reported Decisions

27 Jhavar Properties (P.) Ltd.
123 ITD 429 (Mum.)
A.Y. 2001-02. Dated : 10-9-2008

 

Additions made by AO u/s.40A(2)(b) — Penalty levied — Held :
it is not a case of concealment of income or furnishing of inaccurate
particulars.

The assessee was engaged in business of real estate
development and construction. During assessment, it was found by the AO that the
assessee has claimed a sum of Rs.63 lakhs as payment made to sister concern for
job work. After examination of details, the AO found that the value of job
entrusted to the sister concern was only Rs.32,09,974 for which the appellant
made a payment of Rs.63,00,000. He thus disallowed a sum of Rs.30,82,026
u/s.40A(2)(b). This was confirmed by the CIT(A). The AO initiated penalty
proceedings and levied penalty.

Held :

Since, no specific disclosure is required to be made in
respect of income subject to scrutiny u/s.40A(2)(b) in Act or in Rules or in the
form of return of income, the assessee cannot be held guilty of non-disclosure
of income. It is not a case of concealment of income or furnishing of inaccurate
particulars. When additions are made on the basis of estimate and not on account
of any concrete evidence of concealment, penalty was not leviable.

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