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Fortune Developers vs. The Income Tax Officer - (Income Tax Appellate Tribunal) (04 Jan 2023)

Merely an addition made during the quantum proceeding will not attract penalty under Section 271(1)(c) of the IT Act


Direct Taxation

Appeal has been filed at the instance of the assessee against the order of the learned Commissioner of Income Tax (Appeals) (CIT(A)), arising in the matter of penalty order passed under Section 271(1)(c) of the Income Tax Act, 1961 relevant to the Assessment Year 2012-13.

The only effective issue raised by the assessee is that, the learned CIT(A) erred in confirming the levy of penalty under Section 271(1)(c) of the IT Act for Rs. 3,46,390 only.

It is trite of law that, the penalty proceedings are different from assessment proceeding. Any addition made under the assessment proceeding will not automatically lead to concealment of income or furnishing inaccurate particular of income. The AO has to reach at independent finding that the assessee has concealed income or furnished inaccurate particular of income.

In instant case, the AO doubted the genuineness of credit of unsecured loan in absence of primary evidences and made addition under Section 68 of the Act. However, the assessee during the penalty proceedings furnished documentary evidences in support of identity, genuineness and credit worthiness of parties by stating that same were not furnished earlier due non-cooperation from the parties. The above explanation of the assessee was not found to be incorrect by the AO. The AO neither made any independent inquiry with regard to fact whether the loan credit indeed represent income of the assessee and the consciously furnished inaccurate particulars of income. The entire basis of the AO treating such credit as unexplained was based on the doubt and human probabilities. There was no cogent material brought on record by the AO that assessee furnished inaccurate particular of income and the explanation furnished by the assessee is not true. Therefore, merely an addition made during the quantum proceeding will not attract penalty under Section 271(1)(c) of the Act.

Thus, in view of the and after considering the facts in totality, present Tribunal is of the opinion that the Revenue authorities failed to bring cogent materials on record to establish that, the assessee has furnished inaccurate particular of income. Therefore, the order of the learned CIT(A) is set aside and AO is directed to delete the penalty imposed under Section 271(1)(c) of the IT Act. The appeal of the assessee is allowed.


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