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2016 (7) TMI 757 - AT - Income TaxPenalty u/s 271(1)(c) - allowability of claim of bad debts - eligiblility to carry forward loss - Held that:- The levy of penalty and its confirmation has far reaching serious implications upon an assessee, since it may also invite prosecution of the assessee. Thus, matters with regard to ‘levy’ of penalty cannot be taken lightly or casually as it may cause unintended and avoidable hardship to the tax payers. Further, it is well settled law that levy of penalty is not automatic upon the making of disallowance itself by the AO in the assessment order. Any disallowance/addition in the assessment order would not necessarily lead to levy of penalty ‘ipso facto’ as a natural consequence. In our country’s legal and constitutional frame work, the role assigned to the income tax department is to act like a ‘watch dog’ to ensure that tax evasion is checked and legitimate tax collection is augmented, but not to act like a ‘scare crow’. In the facts of the case before us nothing has been brought by the authorities to show that the claim of the assessee was bogus. Nothing has been shown to establish whether there was concealment of income or furnishing of inaccurate particulars of income and how. It has been merely mentioned by the AO in the last para of the penalty order that in case return of the assessee was not selected for scrutiny, then it would have resulted in excess carry forward of the losses to be adjusted against the income of future years. But, here also, Ld. AO went factually wrong, since return of the assessee was filed beyond time limit prescribed u/s 139(1) and therefore, the assessee was not eligible to carry forward loss claimed in the return. Thus, whole premise of the AO was built under misconception of facts and incorrect understanding of law. Above all, Ld. CIT(A) also miserably failed in his duty, by passing a casual order and collapsing the ‘check and balance’ mechanism envisaged by the statute. The levy of penalty was highly unjustified and the same is directed to be deleted. - Decided in favour of assessee.
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