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2019 (7) TMI 705 - HC - Income TaxPenalty u/s 271(1)(c) - rectification u/s 254 - assessee accepted quantum addition - in penalty proceedings he offer explanation that the jewellery found during search were already offered to tax in the VDIS, 1997 - HELD THAT:- On a perusal of the orders passed by the Tribunal, we find that what weighed in the mind of the Tribunal is primarily because the quantum assessment had attained finality and that the assessee had not challenged the said assessment. This, in our considered view, is an incorrect interpretation because both the quantum assessment as well as the penalty proceedings are independent of each other. Furthermore, the assessee's specific case is that the jewellery, which were recovered during search operations, were the jewellery, which were declared during the VDIS, 1997 and the assessee would explain that the balance amounts were inherited by her, some of which sridhana, etc. The Tribunal considered a similar issue in the case of Shanmugapriya [2016 (7) TMI 1529 - ITAT CHENNAI] and reconciliation was permitted and ultimately, the assessee succeeded before the Tribunal. There is no reason as to why such an indulgence should not be granted to the assessee considering the plea raised by her and more particularly in the affidavit filed in support of the said miscellaneous petition. The explanation offered by the assessee should be tested for its correctness and only if it is found to be palpably false or not acceptable, then the question of imposing the penalty would arise. Hence, the Tribunal could not have applied the decision of the Hon'ble Supreme Court in the case of Mak Data (P) Limited Vs. CIT [2013 (11) TMI 14 - SUPREME COURT] It appears that the decision in the case of Shanmugapriya was not placed before the Tribunal when the impugned order was passed. Nevertheless, this Court does not propose to foreclose the rights of the assessee on the said ground since it is pleaded that the facts are identical and the assessee – Shanmugapriya is also a member of the very same family, which was the subject matter of the same search operations. Therefore, we are of the considered view that one more opportunity should be granted to the assessee to go before the AO to do the reconciliation by offering an explanation, which has been stated in these appeals as well as in the said miscellaneous petition before the Tribunal. The AO shall also take note of the decision in the case of Shanmugapriya and pass fresh orders on merits and in accordance with law uninfluenced by any of his observations made in the earlier order dated 23.9.2014. Consequently, the substantial questions of law are left open.
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