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2015 (3) TMI 713 - HC - Income TaxPenalty u/s 271(1)(c) - no explanation as to how the shares were purchased for over ₹ 23 lakhs in AY 2004-05 - ITAT deleted penalty levy based on reasoning that the AO did not make any effort to discharge the burden placed upon him to investigate and to bring on record some material to dispute the assessee’s contentions with regard to the actual sale being at ₹ 6000/- - Held that:- It is now well established that Section 271(1)(c) of the Act does not compel the Revenue to initiate proceedings imposing penalty in all cases where findings were adverse against the assessee at a given point of time, leading to addition of amounts or disallowance. Possibly, an explanation may have been required from assessee in the given facts of this case as to why it acquired the shares even when the company was facing winding up proceedings but the fact remains that the efforts to rehabilitate the company were undertaken. The lack of proper explanation undoubtedly might have justified the addition. The disallowance was ultimately directed and upheld by the ITAT, however, the reasoning of the ITAT in holding that the penalty proceedings required satisfaction of a higher threshold of proof, which confirmed the basis for it, ultimately cannot be faulted. - Decided against revenue.
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