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2016 (12) TMI 1290 - AT - Income TaxPenalty under section 271(1)( c ) - addition on basis of loose paper found in search - Held that:- Addition made by the AO on the basis of loose papers was reduced to 10% of the said addition and thus the addition which survived at FAA level was ₹ 21,47,795/-. We further find that the addition was made by the AO on the basis of impounded documents which contains entries which the assessee could not explain and added the entire amount as appearing in the said loose papers which according to the assessee were working and estimates. The assessee used to claim 90 to 95% expenditure. We are of the opinion that the penalty in view of Explanation (1) to section 271(1) of the Act can only be imposed where the assessee failed to offer the explanation or offer an explanation which is found by the AO to be false or the assessee offered explanation which is not able to substantiate and not otherwise. In the present case, both these conditions are not existence and we therefore, are not in agreement with the conclusion drawn by the tax authorities. Accordingly, we delete the penalty. - Decided in favour of assessee
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