The Tax Publishers2020 TaxPub(DT) 2355 (Mum-Trib)

INCOME TAX ACT, 1961

Section 271(1)(c)

Unless the penalty proceedings are specifically initiated in respect of an addition, the penalty cannot be imposed. In instant case, in absence of specific satisfaction recorded by CIT(A) that the penalty was required to be initiated in respect of certain addition, the penalty imposed under section 271(1)(c) was devoid of a legally sustainable foundation and hence, the said penalty was liable to be deleted.

Penalty under section 271(1)(c) - Leviability - Unexplained loans - Absence of specific satisfaction recorded by CIT (A)

As assessee did not allegedly cooperate in scrutiny assessment proceedings, his income from business was assessed on the basis of estimation by AO at Rs. 1,00,00,000. He also initiated penalty proceedings, inter alia, under section 271(1)(c). However, CIT(A) restricted the estimation of business income at Rs. 8,00,000. He further, examined the position with respect to the loans shown by the assessee and treated the loan amount of Rs. 3,41,000 as unexplained and accordingly, the income of the assessee was directed to be enhanced by an amount of Rs. 3,41,000. Accordingly, the AO imposed penalty under section 271(1)(c) in respect of those quantum additions of Rs. 8,00,000 and Rs. 3,41,000. While, the penalty in respect of addition of Rs. 8,00,000 was deleted by CIT(A) but so far as the penalty in respect of addition of Rs. 3,41,000 was concerned, the CIT(A) confirmed the same. Held: It is elementary that unless the penalty proceedings are specifically initiated in respect of an addition, the penalty cannot be imposed. As no such addition was made by the AO, there could not have any occasion to initiate the penalty in respect of the addition of Rs. 3,41,000. Such addition was made by the CIT(A), who himself termed it as 'enhancement', and there was no specific initiation of penalty by the CIT (A). Therefore, in absence of specific satisfaction recorded by the CIT(A) that the penalty was required to be initiated in respect of the related addition of Rs. 3,41,000, the penalty imposed under section 271(1)(c) was devoid of a legally sustainable foundation and hence, the said penalty was deleted.

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2010-11



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