2018 (9) TMI 221

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....tion. The assessing officer in the assessment order had noted:- "Penalty proceedings u/s 271(1)(c) have been initiated on this issue separately. " The assessing officer, however, did not prosecute the penalty proceedings further. On the other hand, we find from the annexures-'B' to the stay petition noting in his file to the following effect:- "After going through the submissions of the assessee and the case laws, it appears that there has been no concealment of income or inaccurate furnishing of particulars by the assessee. Hence, the penalty proceedings u/s 271(1)(c) have been dropped. " The Commissioner of Income Tax invoked the revisional jurisdiction under Section 263 of the Income Tax Act, 1961 for imposing penalty. In his order, he set aside the decision of the assessing office for dropping the penalty proceedings and the matter relating to passing fresh penalty order was restored to the file of the assessing officer. The assessee's appeal before the Tribunal against the Commissioner's order was allowed. The Tribunal held:- "6. 2. We are in agreement with the argument of the ld. AR that the assessee did not make any concealment of income or inaccurate particulars ....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....case for levy of penalty. We hold that the penalty proceedings are distinct and separate from assessment proceedings. The ld. AO may initiate penalty proceedings on completion of assessment proceedings and issue show cause notice thereon to the assessee. Later on hearing the submissions of the assessee, he has got every right and discretion to go in favour of the assessee and drop the penalty proceedings initiated by him. This is the mandate of the discretionary power provided to him. Otherwise, every addition would automatically result in levy of penalty which is not provided in the scheme of taxation. We find that if the revision order passed u/s. 263 of the Act is upheld in the facts and circumstances of the instant case, then we are afraid that the levy of penalty may almost become automatic and academic for every addition made thereon in the assessment and we would be getting rid of various judicial decisions on the subject. In the instant case the assessee had agreed to the additions to avoid litigation. This action alone cannot trigger the levy of penalty on him. He can still put forth his best foot forward and place his genuine pleadings in the penalty proceedings as they a....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....see, the advance taken by the assessee was purely for a business connection and not with any intention to violate the provisions of section 2(22)(e) of the Act. The Ld. counsel for the assessee before us also argued that the issue is covered by Hon'ble jurisdictional High Court in the case of Dr. Minati Chakraborty in ITA No. 98 of 2009 dated 16. 07. 2010 wherein following question of law was referred: "Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal is correct in deleting penalties of Rs. 15, 05, 548/- and Rs. 3, 33, 802/- imposed under section 271(1) (c) with reference to non-inclusion of the interest free advances of Rs. 27, 50, 162/- and Rs. 11, 00, 000/- received as interest free advances in the period relevant to the assessment years 2001-02 and 2002-03, respectively from Nitrile India Pvt. Ltd. , in which she had substantial interest in terms of provisions of section 2(22)(e) of the Income-tax Act, 1961, to the effect that the amounts would be deemed to be dividend and would be includible in the income of the recipient, in view of the decision of the decision of the Hon'ble Supreme Court in case of Union of India v. Dharmendra....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....ong with the return of income, no other reason was assigned by the tax authorities to dispute the bona fides of the explanation. Under the peculiar facts and circumstances and in the light of decisions cited by the learned counsel for the assessee, we are of the view that the explanation of the assessee is bonafide and hence the case falls outside the ambit of Expln. 1 to s. 271 (1) (c) of the Act. In other words, no case was made out by the tax authorities to levy penalty under s. 271(1) (c) of the Act. We, therefore, set aside the orders of the tax authorities and cancel the penalty levied by the AO. In the result, appeal filed by the assessee is allowed. " From the above, it seems that the issue is squarely covered in favour of the assessee and against the revenue by the jurisdictional High Court decision in the case of Dr. Minati Chakraborty, supra and the decision of Coordinate Bench of Mumbai Tribunal in the case of Sunil Chandra Vohra, supra. Respectfully following all the propositions stated above, we confirm the order of CIT(A) deleting the penalty levied u/s. 271(1) (c) of the Act. Appeal of revenue is dismissed. 6. In the result appeal of revenue is dismissed. 6.....