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TMI Blog2016 (3) TMI 537X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the learned lower authorities are bad in law and bad in facts. 02. The penalty order passed u/s 271(1)(c) of the I. T. Act, 1961 , levying penalty at Rs. 1,88,712/- is ab-initio void, inasmuch as, the explanation of the appellant was not found false by the learned lower authorities which is condition precedent for levy of penalty. 03. The learned lower authorities have grossly erred in levying/ confirming the penalty u/s 271 (1)(c) of the I.T.Act,1961 at Rs. 1,88,712/- merely on the basis of certain disallowances made consequent to change of heads of income, which were of a highly debatable nature and on which assessee's appeal is pending before the Hon'ble Jurisdictional High Court. 04. The learned CIT (A) has grossly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Revenue Authorities. The penalty proceedings u/s. 271 (1)(c) of the Act were initiated. Accordingly, statutory notice u/s. 274 read with section 271(1)(c) was issued on 21.12.2007 and served upon the assessee on 24/12/2007. 3. The assessee submitted its explanation which is as under: "The assessee firm filed its return of income on the same basis and in the same manner as in the past, when no fault was found. The basis of assessment has been altered only for the year under consideration hence it cannot be said that the assessee firm, in any manner, has concealed the particulars of income or furnished inaccurate particulars of such income. Thus invocation of penal provisions for the year under consideration is wholly unwarranted. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 271 (1)(c)." 4. After considering the explanation of the assessee, the AO found the same to be not acceptable and passed order of penalty u/s 271(1)(c) of the Act vide order dated 25.03.2011. 5. Aggrieved by the order of AO, the assessee filed an appeal before the CIT(A). However, the CIT(A) dismissed the appeal filed by the assessee and upheld the order of penalty levied by the AO. 6. Aggrieved by the order of CIT(A), the assessee filed the present appeal on the grounds reproduced here in above. 7. Before us, the ld. Authorised Representative (AR) representing the assessee has relied upon the detailed written submissions made before the CIT(A). Further, Ld. AR filed a copy of the judgment dated 12.03.13 of Hon'ble jurisdictiona ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t since the appeal of the assessee has already been admitted on the substantial question of law before the Hon'ble High Court, therefore, the additions are not free from debate. Therefore, penalty proceedings may be dropped/dismissed. For this preposition, the Ld. AR for assessee relied upon the case of CIT vs. M/s. Nayan Builders & Developers Private Limited. (ITA No. 415/Del/12 and 2379/Mum/2014) Bombay High Court (2014) 89 CCH 0187, Mumbai High Court. On the other hand, DR representing the revenue relied upon the orders passed by the lower authority and prayed for dismissal of appeal. 8. We have heard both the parities and perused the material available on record. We are of the considered opinion that since the appeal of assessee has a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fact of confirmation of disallowance would not per se lead to the imposition of penalty-Since additions, in respect of which penalty has been upheld, have been held by High Court to be involving a substantial question of law, penalty is not exigible under section 271(1)(c) and thus deleted-Revenues' appeal dismissed. 9. Apart from the above submissions, we have also analyzed the orders passed by CIT(A) and our findings on grounds of appeal as are as under: Ground Nos. 1 & 2 10. After hearing the arguments of both the parties on the aforementioned grounds, we have also noticed that on completion of assessment proceedings a notice u/s 274 r.w.s. 271 of I.T.Act, 1961 dated 20.12.2007 was issued. On perusal of the said notice we have o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty of the Explanation is established, no penalty can be imposed. We are of the considered view that the penalty under the aforementioned grounds has been levied merely on the basis of additions by disallowing certain claim/expenses and there is no material or evidence has been brought on record to show constructive concealment on the part of assessee. We found our support from the decision rendered by Hon'ble Supreme Court in the case of CIT vs. Reliance Petroproducts Ltd. wherein it has been categorically mentioned that in order to expose the assessee to the penalty, the case should be strictly covered by the provisions and the penalty provisions cannot be invoked in the routine manner. A mere making of a claim which is not sustainable in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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