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2016 (8) TMI 654 - ITAT DELHIPenalty under section 271(1)(c) - Held that:- There are no two opinions about the settled position of law that regular assessment proceedings and penalty proceedings are two entirely different subjects which operate in distinct and separate spheres so much so that entirely different parameters are applicable for making quantum addition and for levying penalty under section 271(1)(c) of the Act. There can be no dispute with regard to the position of law that under section 271(1)(c) penalty can be levied only if either the act of "concealment of particulars of income" or "furnishing of inaccurate particulars of income" is found to have been committed by the assessee. These are two different omissions or defaults albeit they refer to deliberate act on the part of the assessee. A mere omission or negligence would not constitute a deliberate act of either suppressio veri or suggestio falsy. By the mere reason of such concealment or of furnishing of inaccurate particulars alone, the assessee does not, ipso facto, become liable to a penalty. Imposition of penalty is not at all automatic. Meaning thereby, any addition in quantum would not lead to automatic levy of penalty and this is also true in respect of furnishing of inaccurate particulars of income. Not only is the levy of penalty discretionary in nature but the discretion has to be exercised keeping the relevant factors in mind and the approach of the taxman must be fair and objective. This subject has been a matt1er of great controversy. We are satisfied that the penalty u/s 271(1)(c) of the Act on the issue of VAT paid to the Sales tax department and disallowed by the AO cannot be imposed and thus explanation of the assessee in this regard cannot be brushed aside at the threshold and action of the AO and impugned order on this issue is not sustainable. On the basis of foregoing discussion, to reach to a logical conclusion that the CIT(A) did not provide due opportunity of being heard to the assessee and passed an order without proper adjudication and she simply upheld the penalty order which is not a proper and justified approach of a first appellate authority. On merits, as per discussion in the earlier part of this order, we are inclined to hold that the penalty imposed by the AO u/s 271(1)(c) of the Act and upheld by the CIT(A) is not sustainable on all the three counts and thus we demolish the same and the AO is directed to delete the entire penalty. - Decided in favour of assessee.
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