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2022 (12) TMI 173 - AT - Income TaxPenalty u/s 271(1)(c) - addition u/s 36(1)(vii) on the basis that the conditions laid down in section 36(2) are not satisfied - HELD THAT:- We find that in respect of each party, to whom advances/payments were made, the assessee provided its explanation for non-realisation of the amount resulting in its decision of writing off the same during the year under consideration. We find that the AO did not agree with the aforesaid factual explanation and made the addition disallowing the claim under section 36(1)(vii) r/w section 36(2) vide its order passed under section 143(3) - neither the AO nor the learned CIT(A) in the penalty proceedings, found the assessee’s explanation to be incorrect or without any basis. Revenue also did not bring anything on record to controvert the aforesaid submission. There is no dispute on the fact that the assessee has not challenged the addition made vide the assessment order. At the same time, it is well established that quantum proceedings and penalty proceedings are separate in nature. Even if, for any reason, the assessee has not challenged the addition made in quantum proceedings, while deciding the issue of imposition of penalty regard must be had to the reasonable explanation furnished by the assessee. This is not a fit case for the levy of penalty under section 271(1)(c) - Decided in favour of assessee.
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