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2023 (4) TMI 745 - AT - Income TaxPenalty u/s 271(1)(c) - whether the assessee has concealed particulars of income or has furnished inaccurate particulars of income during the assessment proceedings? - as contended that at the time of framing assessment the AO has failed to apply his mind by recording valid satisfaction as to which of the limb of section 271(1)(c) i.e. for concealing particulars of income or furnishing inaccurate particulars of such income penalty proceedings are being initiated rather vague and ambiguous satisfaction - HELD THAT:- When we examine the satisfaction recorded by the AO to initiated the penalty proceedings u/s 271(1)(c) of the Act in the light of the settled principle of law that in order to invoke the provisions contained u/s 271(1)(c) of the Act i.e. as to whether the assessee has furnished inaccurate particulars of income or concealed particulars of income need to be invoked specifically but in the instant case the AO has failed to apply his mind at the time of recording his satisfaction at the time of framing assessment to initiate the penalty proceedings under section 271(1)(c) of the Act as to under which limb of section 271(1)(c) penalty proceedings are being initiated, rather vague and ambiguous satisfaction has been recorded as discussed in the preceding paras. This is a mechanical satisfaction recorded by the AO which shows that the AO was himself not aware as to whether the assessee has concealed the particulars of income or furnished inaccurate particulars of such income. Not only this, when we examine penalty levied on account of salary disallowance AO has merely made adhoc addition by way of guess work and the AO has not arrived at a definite decision that the assessee has made wrong claim qua the expenditure on account of salary and wages. It is also settled principle of law that on the basis of any adhoc addition penalty proceedings under section 271(1)(c) of the Act cannot be levied. Disallowance of excess salary this addition has been deleted by the Ld. CIT(A) subject to the verification of the figures by the AO but the AO proceeded to levy the penalty on this amount also which shows that the entire process of initiating penalty proceedings were mechanical, without any application of mind. Appeal of assessee allowed.
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