No Penalty u/s 271(1)(c) merely due to quantum addition without making fresh verification during penalty proceedings
ABCAUS Case Law Citation:
ABCAUS 3299 (2020) (04) ITAT
Important case law relied upon by the parties:
National Textiles Vs. CIT 249 ITR 125.
The issue involved in this case was related to penalty imposed u/s 271(1)(c) of the Income Tax Act, 1961 (the Act).
The appellant assessee had incurred interest expenses in the earning of rental income. The penalty was initiated on account of the disallowance in the quantum proceedings of the interest expenses against the impugned rental income.
During the penalty proceedings, the assessee claimed that the interest was paid on the money borrowed which was invested in the impugned property from where he was getting the rental income.
The assessee had also furnished the details of the parties from whom he has borrowed fund which was utilized for the purpose of the investments.
However the Assessing Officer (AO) without verifying the genuineness of the details furnished by the assessee levied the said penalty merely on the ground that such interest expenses was disallowed during the quantum proceedings.
Aggrieved by the order of the Assessing Officer (AO), the assessee contested it before the CIT(A) who confirmed the penalty
The ITAT stated that as the penalty proceedings are distinct from the assessment proceedings, the addition made during the assessment proceedings does not authorize the AO ipso facto to levy the penalty under section 271(1)(c) of the Act. As such as also held by the jurisdictional High Court the AO is under the obligation to carry out the necessary verification before reaching to the conclusion that the assessee has furnished any inaccurate particular of income or concealed the particulars of income
Accordingly, the Tribunal allowed the ground of appeal and deleted the penalty.
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