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TMI Blog2023 (7) TMI 686X X X X Extracts X X X X X X X X Extracts X X X X ..... he AO on 28.12.2018, determining the total income of Rs. 66,81,067/-, wherein, an addition of Rs. 50,96,573/- was made on account of deemed dividend u/s 2(22)(e). The AO also initiated penalty proceedings u/s 271(1)(c) for furnishing inaccurate particulars of income. Against the said order, the assessee filed an appeal before the Ld.CIT(A) and the Ld.CIT(A) partly allowed the appeal of the assessee vide order dated 15.09.2020, restricting the addition to Rs. 19,99,999/-. Thereafter, the AO issued show cause notice u/s 271(1)(c) dated 28.12.2018 to the assessee asking him to explain as to why penalty u/s 271(1)(c) should not be levied. In response, the assessee submitted his reply on 30.09.2021, which was not accepted by the AO. Subsequently, another show cause notice dated 18.08.2021 was issued to the assessee. However, no compliance was made by the assessee. After due consideration of the facts of the case, the AO concluded that the assessee has furnished inaccurate particulars of income, leading to concealment of income and levied penalty u/s 271(1)(c) of Rs. 6,18,000/- @100% of the tax sought on the amount confirmed by the Ld.CIT(A) of Rs. 19,99,999/-. Aggrieved by the penalty o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penalty. These are concealment of particulars of income and / or furnishing inaccurate particulars of such income. The assessee submitted that penalty cannot be levied u/s 271(1)(c) towards additions made by invoking deemed provisions provided under the Act. The assessee further submitted that he, being a Doctor by profession is not well versed with the provisions of the Income Tax Act. This being the first time in the impugned assessment year and such addition was made on the basis of audit objection raised by IAP from the information submitted by the company during the course of regular assessment, he was under a bonafide belief that deeming fiction provided u/s 2(22)(e) for the purpose of making addition towards loans and advances borrowed from a company in the hands of the director cannot be extended to penalty provisions provided u/s 271(1)(c) to hold that non disclosure of deeming dividends in the return of income would amount to furnishing of inaccurate particulars of income. Hence, submitted that the Ld.CIT(A), NFAC, Delhi is not justified in confirming the penalty levied u/s 271(1)(c) of the IT Act for not reporting deemed dividend u/s 2(22)(e) of the IT , while filing ret ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of Shri P.James Vs. ACIT-12(1), Mumbai in I.T.A.No. 982/Mum/2015 dated 22.11.2017 as under : "4. None appeared for the assessee. We have heard the Ld.DR, perused the material available on record and gone though the orders of authorities below. The AO levied penalty u/s 271(1)(c) towards addition made on account of deemed dividend u/s 2(22)(e) of the Act. According to the AO, the assessee has failed to offer any explanation for not disclosing loans and advances received from a company-in i which he was a beneficial shareholder under the provisions of section 2(22)(e) of the Act. It is the contention of the assessee that penalty cannot be levied u/s 271(1)(c) towards addition made by invoking deeming provisions provided under the Act. The assessee further contended that the AO has made addition u/s 2(22)(e) for the first time in the impugned assessment year and such addition was made on the basis of information gathered during the course of assessment proceedings of AY 2008-09 from the financial statement filed by the assessee. The assessee has disclosed loan borrowed from the company, in his balance-sheet. The assessee further contended that deeming fiction provided under th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsidered as furnishing of inaccurate particulars or income. We further observe that the ITAT, Indore Bench in the case of Sadhná Bros vs ACJT (2011) 46 SOT 1 (Ind)(URO) held that penalty u/s 271(1)(c) in respect of loans received by the assessee from a company in which he was holding beneficial shareholding which was brought to tax by invoking deeming provisions of section 2(22)(e) cannot be a ground for imposing penalty. The relevant portion of the order is extracted below :- "For imposing a penalty under section 271(I)(c) either there should be concealment of income or furnishing of inaccurate particulars of income. In the instant appeal, the assessee company had neither concealed its income nor furnished the inaccurate particulars of income. In so far as the assessee had disclosed all the particulars of transactions with the sister concern in the audited accounts as well as in the return of income, therefore it was not a good case for imposing penalty under section 271(1)(c). In instant case, complete details were disclosed in the balance- sheet and in the schedule annexed to tax audit report, meaning thereby that all material facts were disclosed to the department by t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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