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2017 (11) TMI 1820 - AT - Income TaxPenalty u/s 271(1)(c) - Deemed dividend addition u/s 2(22) (e) - HELD THAT:- AO has levied penalty on the basis of information gathered during the course of assessment proceedings for the AY 2008-09 which revealed that the assessee has borrowed loan from a company in which he was a beneficial shareholder. The said information has been gathered from the financial statement of the assessee. The assessee has disclosed loan borrowed from the company in his balance-sheet. We further notice that the AO has made addition u/s 2(22)(e) for the assessment year 2009-10 for the first time. No such addition has been made in the preceding financial years. The assessee claims that he was under a bonafide belief that deeming fiction provided u/s 2(22)(e) for the purpose of making addition towards loans and advances borrowed from a company in the hands of the director cannot be extended to penalty provisions provided u/s 271(1)(c) to hold that non disclosure of deeming dividends in the return of income would amount to furnishing of inaccurate particulars of income. We find force in the arguments of the assessee for the reason that deeming fiction provided u/s 2(22)(e) for making addition towards loans and advances from a closely held company in the hands of the directors cannot be considered as furnishing of inaccurate particulars of income; despite the assessee has disclosed borrowings from the company in its balance-sheet. AO has made addition for the first time in the financial year under consideration - explanation offered by the assessee that no penalty can be levied towards addition made by invoking deeming provisions for levying penalty appears to be bonafide. - Decided in favour of assessee.
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