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2015 (10) TMI 735 - AT - Income TaxPenalty under section 271(1)(c) - disallowance of loss - books of account of the company deliberately not produced before the AO as concluded by CIT(A) - Held that:- This is not a fit case for imposition of penalty u/s 271(1)(c) as in assessment order, no incriminating document is alleged to be discovered as a result of search or has been relied on by AO in assessment order to disallow the loss. There is no finding of the AO alleging any document showing unaccounted sales or purchases or inflation of expenses or any other unaccounted income. Assessee's contention about non service of notice u/s 143(2) till the last date of limitation has not been rebutted. Consequently the impugned assessment stands deemed as abetted. In view thereof there is merit in assessee's plea that notice u/s 153A cannot be issued for an abetted assessment, based on search & seizure operations on 27-08-2008 where no incriminating documents as a result of search are discovered. The scope of the assessment u/s 153A is limited to incriminating documents/evidence found as a result of search. In search and seizure operations admittedly no incriminating material belonging to this assessee was found. It is by now settled law that the scope of the assessment u/s 153A is limited to incriminating documents/evidence found as a result of search. There is no justifiable basis to disbelieve the assessee's contention that the books of accounts could not be produced as they were in the custody of Shri Atul Burman who also replied that he has left the company. Besides ld. CIT(A) in AY 2007-08 has endorsed the fact of disputes between directors and assessee's sufficient cause in not producing the books of accounts. Assessee's contention that in search assessments of other group cases which were in their control, all the documents and books were duly produced is not rebutted. There is no reason to assume as to why assessee will not produce the books of a loss making concern. This also indicate that non production of books was non deliberate. Except non production of books, no reason or basis whatsoever has been assigned by authorities below in disallowing the entire loss. Thus disallowance is based on pure guesswork and not on any cogent reason. Hon'ble Apex Court in Hindustan Steels Ltd. Vs. State of Orissa (1969 (8) TMI 31 - SUPREME Court). has held that Penalty shall not be imposed merely because it is lawful to do so. Even if a minimum penalty is prescribed the authority shall exercise the discretion judicially and on consideration of all the relevant circumstances; the penalty should not be imposed when there is technical or venial breach of the provisions. - Decided in favour of assessee.
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