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of <h1>Tribunal overturns penalty for tax deduction disallowance, citing lack of evidence and arbitrary allocation.</h1> <h3>Unique Pharmaceuticals Lab. Ltd. Versus Dy. Commissioner of Income Tax 7(3),</h3> Unique Pharmaceuticals Lab. Ltd. Versus Dy. Commissioner of Income Tax 7(3), - TMI Issues:Penalty under section 271(1)(c) of the Income Tax Act, 1961 for disallowance of deduction under section 80IA.Analysis:1. The appeal pertains to the assessment year 2000-01 where the Assessee, a pharmaceutical manufacturer, contested the penalty of Rs. 1,33,860 imposed by the AO under section 271(1)(c) of the Income Tax Act, 1961.2. The AO disallowed the deduction claimed under section 80IA due to higher job work charges and improper allocation of expenses to the Atenolol division, resulting in a loss. The ld. CIT(A) reversed the decision on job work charges but upheld the expense allocation. Subsequently, a penalty was levied by the AO.3. The Assessee argued that the reduction in deduction was due to additional expenses allocated to the Atenolol division, leading to an increase in taxable income. They contended that the AO's allocation was arbitrary and lacked justification, relying on an ad-hoc 10% estimation without concrete evidence.4. The Tribunal observed that the AO did not establish concealment of income or furnishing inaccurate particulars. It noted similar adjustments made in prior years without penalty imposition. While the principle of res judicata doesn't directly apply, the consistency in AO's actions was considered. Consequently, the penalty under section 271(1)(c) was deemed unjustified, and the appeal was allowed.5. The Tribunal directed the AO to delete the penalty, emphasizing the lack of concrete basis for expense allocation and the absence of evidence supporting income concealment. The decision was based on the specific circumstances of the case and the absence of a valid rationale for the penalty imposition.This detailed analysis outlines the key arguments, findings, and reasoning leading to the Tribunal's decision to set aside the penalty levied under section 271(1)(c) of the Income Tax Act, 1961.
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