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2017 (10) TMI 723 - AT - Income TaxPenalty u/s 271(1)(c) - AO did not strike off the inappropriate portion of the notice - Held that:- The initiation of penalty proceedings has happened by recording of satisfaction in the assessment order and the issuance of notice u/s 274 is thus in continuation of recording of such satisfaction and has thus to be read along with the assessment order and not disjoint of the assessment order. It is not a case where the penalty has been initiated for one limb and finally levied in respect of another limb. The AO has been consistent in his approach and his action doesn’t reflect any non-application of mind. We therefore donot feel there is any infirmity in the initiation of penalty proceedings as contended by the ld AR. The additional ground of appeal is thus dismissed. Where the assessee offers an explanation and substantiate the explanation, the question of imposing penalty would not arise. Even in cases where he fails to substantiate the explanation, but if he proves that explanation offered is a bonafide one and all the facts relating to the same and material to the computation of his total income has been disclosed by him, then, in law, a discretion is vested with the authority not to impose penalty. In penalty proceedings, the assessee vide letter dated 21.04.2014 submitted that during the relevant period, the assessee was suffering from serious diseases of mental disturbance and wife of the assessee under such adverse circumstances without having any specific knowledge about the sale of relevant flat situated at Mumbai, filed his return of income on the basis of adhoc and incomplete information. The assessee in support of his contention submitted the affidavits of his wife and Sh. Rajesh Vijay who filed the relevant return of income. Subsequently, during the course of assessment proceedings, all relevant facts relating to the sale of flat and a revised computation of income determining long term capital gains along with details of taxes and interest deposited thereon was filed. The said explanation of the assessee along with the contents of the affidavits have not been found to be false or controverted by the Revenue authorities. Where the assessee was incapacitated to file his return of income due to his ill-health and incomplete return was filed which was subsequently revised by way of filing revised computation of income along with payment of taxes during the course of assessment proceedings, it shows the bonafide of the assessee and accordingly, cannot be made subject to levy of penalty u/s 271(1)(c) of the Act. Assessee’s appeal is allowed.
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