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2022 (5) TMI 514 - AT - Income TaxPenalty u/s 271(1)(c) - non-recording of clear satisfaction for levy of penalty - depreciation disallowance and vehicle insurance expense disallowance - scope of word used under section 271(1)(c) of the Act ‘May’ - Assessee challenged that penalty levy on the reasoning that there was no satisfaction/ direction for initiating the penalty recorded by the AO before levying the penalty as provided under the provisions of section 271(1B) - HELD THAT:- The provisions of section 271(1)(c) of the Act authorizes the AO to levy the penalty if a satisfied that the assessee has concealed the particulars of his income or furnished inaccurate particulars of such income, then he may levy the penalty. The word used under section 271(1)(c) of the Act ‘May’ gives an authority to levy or not to the penalty. Since the main purpose of introduction of the penalty sections is to check tax evasion, the provisions of sections 271(1)(b), 271(1)(c), 271 A, 271B, 271BB and 273 are discretionary and a discretion is vested in the authority, by the use of word 'may', to impose or not to impose penalty when there is no loss of revenue and there is only a venial breach of the provisions of law. When the returned income is accepted and neither there is found to be an evasion of tax, nor the revenue is put to any loss, the officer is empowered not to impose any penalty. The use of the word 'may' in these sections also makes the intention of the Legislature clear in this regard. At this juncture, it is also important to note that the penalty was finally levied by the AO in the penalty order for 2 additions namely deemed dividend and interest paid on the housing loan. Thus, there was no penalty finally levied qua the depreciation disallowance and vehicle insurance expense disallowance. There was the need for the AO to record the clear satisfaction with respect to each addition/disallowances made during the assessment proceedings for initiating the penalty. Accordingly, in the absence of necessary satisfaction of the AO, we hold that the penalty order is not sustainable. Thus, we reverse the order of the learned CIT-A and direct the AO to delete the penalty levied by him under the provisions of section 271(1)(c) - Decided in favour of assessee.
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