Additions u/s 40A(2)(b) and Penalty u/s 271(1)(c) on ground of inaccurate particular of income

[Kishor Deshpande]

The addition u/s. 40A(2)(b) was made by disallowing 10% of labour charges to relatives on estimated basis. The AO did not have any finding regarding reasonbility of the expenditure covered u/s. 40A(2)(b). In addition on lumpsum basis were made. In addtion to this penalty u/s. 271(1)(c) has been imposed giving reason that inaccurate particular of income provided. So. let me know is there any decision against the penalty imposed?

AI Summary

Dispute over Section 40A(2)(b) additions and Section 271(1)(c) penalties for labor charges paid to relatives. The discussion involves a query about additions under Section 40A(2)(b) and penalties under Section 271(1)(c) of the Income Tax Act, related to disallowance of labor charges paid to relatives. The Assessing Officer imposed a penalty for providing inaccurate income particulars without establishing the reasonableness of the expenditure. A respondent argues that both the addition and penalty are legally incorrect and suggests filing an appeal to have them quashed. Another respondent concurs, noting that penalties require proof of income concealment or inaccurate particulars, which was not demonstrated in this case.