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2015 (5) TMI 815 - AT - Income TaxPenalty u/s 271(1)(c) - Held that:- From the aforesaid observation of the AO, it is clear that whatever was added that was the result of investigation carried out by the Investigation Wing of the Department. However, the AO during the course of regular assessment proceedings u/s 143(3) of the Act was fully satisfied with the explanation of the assessee and no addition was made in spite of the fact that all the information relating to increase in share capital were furnished by the assessee. So, it cannot be said that the assessee concealed any information or particulars from the department. It is well settled that penalty proceeding and assessment proceedings are two different and distinct proceedings. In such type of cases, there can be many reasons for making the surrender but the surrender itself is not a conclusive proof of concealment of income or furnishing of inaccurate particulars of income. In the present case, it is also noticed that the AO levied the penalty u/s 271(1)(c) of the Act. However, for levying the penalty in search cases the Finance Act, 2007 inserted section 271AAA of the Act w.e.f 01.04.2007 which clearly states that no penalty under the provisions of clause (c) of Sub-section (1) of section 271 t shall be imposed upon the assessee in respect of the undisclosed income referred to in Sub-section (1) i.e. the undisclosed income found after the search, the word “shall” used in Sub-section (3) to section 271AAA makes it mandatory, therefore, the penalty u/s 271(1)(c) of the Act was not leviable in the present case. Therefore, it can be said that the AO wrongly invoked the provisions of section 271(1)(c) of the Act and levied the penalty under said section. In the present case, since the search took place on 04.09.2008 i.e. after first day of June 2007, therefore, penalty if any was leviable that was to be levied u/s 271AAA of the Act but not u/s 271(1)(c) of the Act. Thus penalty levied by the AO u/s 271(1)(c) of the Act was not justified and the ld. CIT(A) wrongly upheld the penalty levied by the AO - Decided in favour of assesse.
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