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2022 (8) TMI 846 - AT - Income TaxPenalty u/s 271(1)(c) - Disallowance u/s 40(a)(ia) - whether the assessee has concealed the particulars of its income or has furnished inaccurate particulars of income so as to make aware the assessee under which of the limb of section 271(1)(c)? - HELD THAT:- AO at the time of initiating the penalty proceedings during framing assessment order has failed to apply his mind as he was not clear enough as to whether he is initiating the penalty proceedings for furnishing inaccurate particulars of income or for concealing the particulars of income rather invoked both the limbs of section 271(1)(c) of the Act. AO has not applied his mind before initiating the penalty proceedings rather borrowed his satisfaction from the “tax audit report” and proceeded to initiate and levy the penalty which is not sustainable in the eyes of law. When we examine penalty notice issued by the AO u/s 274 read with section 271(1)(c) it is again vague and ambiguous being not specific as to whether the assessee has concealed the particulars of its income or has furnished inaccurate particulars of income so as to make aware the assessee under which of the limb of section 271(1)(c) of the Act it is going to be penalized. Since the AO has not issued a valid notice by framing a specific charge to be initiated against the assessee rather invoked both the limbs of section 271(1)(c) of the Act for furnishing inaccurate particulars of income or for concealing the particulars of income no penalty can be imposed on the basis of the same. Hon’ble Bombay High Court in the case of Mohd. Farhan A. Shaikh [2021 (3) TMI 608 - BOMBAY HIGH COURT] has decided the identical issue as to initiating the penalty proceedings on the basis of invalid notice and held that penalty levied on the basis invalid notice issued under section 274 read with section 271(1)(c) of the Act is not sustainable and is liable to be set aside. As contended for the assessee that when the assessee company has suffered huge losses no penalty under section 271(1)(c) of the Act can be levied and relied upon the order passed by Hon’ble Gujarat High Court and order passed by the co-ordinate Bench of the Tribunal in the cases cited as National Textiles [2000 (10) TMI 19 - GUJARAT HIGH COURT], Qpro Infotech Ltd. [2016 (7) TMI 757 - ITAT MUMBAI] and ACITvs. Manish Organics India Ltd. [2011 (11) TMI 165 - ITAT AHMEDABAD] Ratio of the order passed by co-ordinate Bench of the Tribunal is that when the disallowance made by the AO has not been contested by the assessee as it had incurred huge losses, which were not even available for carrying forward and set off in future years, no motive can be attributed to the assessee to make a bogus or inflated claims while filing the return of income as the entire process is revenue neutral. So in this case also when the assessee company is suffering huge losses no motive can be attributed to it. When there is no intention of the assessee to gain by making inadmissible claim penalty proceedings are not attracted as it appears to be a bonafide mistake. Even otherwise Assessing Officer has not brought on record any evidence if the assessee has claimed bogus, false or ingenuine expenses rather blindly relied upon the “tax audit report” without recording his satisfaction and as such penalty levied by AO is not sustainable. We are of the considered view that penalty levied by AO has been rightly deleted by CIT(A), hence finding no illegality of perversity in the impugned order passed by Ld. CIT(A). Present appeal filed by the Revenue is hereby dismissed.
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