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Issues involved: Appeal against penalty u/s 271(1)(c) of the Income Tax Act, 1961 for assessment year 2005-06.
Facts: The appellant, a construction company, filed a return of income declaring &8377;49,150, later revised to &8377;26,19,192 after scrutiny assessment. The Assessing Officer added &8377;8,92,790 on account of sundry creditors, leading to penalty imposition u/s 271(1)(c) of &8377;3,26,695, upheld by CIT(A) and challenged in the appeal. Assessee's Argument: The appellant submitted bills and work details of creditors to the Assessing Officer, disputing the penalty imposition. It was argued that lack of satisfaction with explanation doesn't warrant penalty. Reference was made to a case law suggesting no penalty for additions made under deeming Sections like Section 68 of the Act. Revenue's Argument: The Revenue contended that penalty was rightly imposed as the income particulars were found incorrect u/s 271(1)(c) of the Act. Judgment: The Assessing Officer deemed three creditors' balances as in-genuine due to unsatisfactory explanation by the assessee. For two creditors, lack of substantiation led to addition under Section 68, but no evidence of falsity was found. Thus, penalty on these balances was deemed untenable and directed to be deleted. However, for the third creditor, verification revealed false credit balance, justifying the penalty imposition under Section 271(1)(c) of the Act. The appeal was partly allowed, affirming the penalty on the third creditor while deleting it for the other two. Conclusion: The appeal was partly allowed, with the penalty upheld for one creditor and deleted for the other two.
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