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2016 (6) TMI 34 - AT - Income TaxPenalty under section 271(1)(c) - concealment of income - Held that:- There are two components of income assessed, one, income originally assessed and other, addition made in the second assessment order. Now, in the second order penalty under section 271(1)(c) has been initiated, which was not in the original assessment order . Satisfaction of the AO in the second order was with regard to ₹ 35 lakhs only, which was evident from the finding and observation of the AO as reproduced above. It is an undisputed fact in the appellate proceedings the addition of ₹ 35 lakhs was deleted and confirmed from the stage of ITAT and has attained finality. Since the very basis for the initiation of penalty and satisfaction of the AO for the addition of ₹ 35 lakhs got vitiated, therefore, the entire proceedings for levy of penalty does not have any legs to stand. So far as the levy of penalty for the original assessed income of ₹ 3,20,870/- is concerned, there was no initiation at the time of original assessment, therefore, the same cannot be revived in the second assessment order sans any satisfaction or initiation. Thus, on this preliminary ground itself, we are of the opinion that, contention raised by the Ld. Counsel appears to be correct and no penalty under section 271(1)(c) on addition of ₹ 3,20,870/- can be sustained. Accordingly, we direct the AO to delete the penalty of ₹ 73,774/-. Thus, the appeal for the assessment year 2003-04 is allowed. For the assessment year 2002-03 and 2001-02 this case there has been enhancement of contract receipts and estimate of net profit purely on ad-hoc basis without any relevant material on record. Here in this case, the contract receipts has been taken on the basis of entire credit appearing in the bank accounts which cannot be the basis for determining the turnover of contract receipts, at least while levying a penalty under section 271(1)(c), because consideration which arises in the penalty proceedings are separate and distinct from assessment proceedings. Here, in this case now the entire assessment and consequent addition rests upon pure estimation of income, therefore, neither the case of concealment of income nor for furnishing of inaccurate particulars. Thus, penalty levied by the AO and confirmed by the CIT(A) on the premise raised by the authorities below cannot be confirmed. Accordingly, we delete the penalty for both the years. - Decided in favour of assessee.
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