2015 (12) TMI 1176

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....T(A) has erred in confirming the penalty u/s. 271(1)(c) levied by the AO. 3. The appellant may be permitted to add, alter or amend any of the foregoing grounds of appeal. 2. The brief facts of the case are that the assessment under section 143(3) of the Income Tax Act, 1961 was completed on 8.12.2006, at an income of Rs. 14,96,270/- against the returned income at NIL (by setting off the b/f business losses). Penalty proceedings u/s. 271(1)(c) were initiated by issuing notice dated 8.12.2006 u/s 274 read with section 271 of the Income Tax Act, 1961 and assessee was asked to show cause as to why the penalty initiated may not be imposed. He observed that assessee did not file any reply. He further observed that it is apparent that ....

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....alty u/s. 271(1)(c) may be quashed. 6. On the other hand, Ld. DR relied upon the order of the authorities below and requested that the Appeal of the Assessee may be dismissed. 7. We have heard both the parties and perused the records, especially the orders of the authorities below. We find that during the penalty proceedings, the AO vide para no. 3 to 4 has observed as under:- "3. Vide notice dated 5.3.2009, the assessee did not file any reply. It is apparent that the assessee has nothing to state in the matter. Therefore, the proceedings are being completed on the basis of material available on the record. 4. The assessee categorized its rental and hiring charges under the head business income and claimed such expen....

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....ot be conclusive of the imposition of penalty. The Hon'ble Calcutta High Court in Durga Kamal Rice Mill vs. CIT (2004) 265 ITR 25 (Cal), has held that quantum proceedings are different from penalty proceedings. The Hon'ble Kerala High Court in CIT vs. P.K. Narayanan (1999) 238 ITR 905 (Ker.), has held that despite the addition being confirmed by the Tribunal in quantum proceedings, the penalty can still be deleted by the Tribunal, if the facts justify. 8.1 We further find that AO observed that assessee furnished inaccurate particulars of its income and is liable for penalty u/s 271(1)(c), which did not establish that how the assessee has furnished inaccurate particulars of its income. In our view, as regards the furnishing of inaccurate ....