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2017 (8) TMI 1564 - AT - Income TaxPenalty u/s 271(1)(c) - deemed dividend u/s 2(22) (e) - bonafide belief - treating the advances received by the assessee from the company in which the assessee has substantial interest as deemed dividend - HELD THAT:- Advance was refunded by the assessee also during the impugned year. Also all facts material to the said transaction were truly and fully disclosed by the assessee during the quantum proceedings and no incorrect particular or detail was furnished by the assessee. In such circumstances where the true nature of the amount received is not income but is treated to be so only on account of the deeming provisions of section 2(22)(e) of the Act, coupled with the explanation of the assessee that the sum was advanced for business purpose which explanation has not been found to be false and also the fact that the said amount was refunded during the year, the assessee’s belief that it was not in the nature of income appears to be bonafide. The Hon’ble Gujarat High court ,in the case of Sarabhai Chemicals Pvt. Ltd. vs CIT [2002 (2) TMI 44 - GUJARAT HIGH COURT] has held that where the assessee is under a bonafide belief that no income has actually accrued, no penalty is leviable. Assessee should not be visited with the rigors of penalty u/s 271(1)(c) of the Act as the assessee’s contention that no material was suppressed and, therefore, there was no malafide intention on the part of the assessee to evade the tax has sufficient cogency. Accordingly, we direct that the order of the Ld.CIT(Appeals) be set aside and penalty imposed be deleted. - Decided in favour of assessee.
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