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Issues involved: Initiation of penalty proceedings u/s 271(1)(c) of the Income-tax Act, 1961 without explicit satisfaction recorded in the assessment order and validity of penalty imposition based on deduction claimed for expenditure on borrowed funds for investment in shares.
Initiation of Penalty Proceedings u/s 271(1)(c): The Assessing Officer initiated penalty proceedings u/s 271(1)(c) based on the assessment order, where he observed the need for penalty proceedings but did not explicitly record his satisfaction. Subsequently, a penalty was levied on the assessee. The CIT(A) upheld the penalty citing lack of bona fide explanation for the deduction claimed. However, the Tribunal reversed the decision, emphasizing the necessity of the Assessing Officer's explicit satisfaction in the assessment order for initiating penalty proceedings, citing relevant court precedents. Validity of Penalty Imposition on Deduction Claim: The Tribunal also allowed the appeal on merits, stating that the deduction claimed by the assessee for interest on borrowed funds used for share investment was based on a bona fide belief, and no contumacious conduct was evident. Upon independent examination, the Court found no fault in the Tribunal's decision on the merits. Ultimately, no substantial question of law was found to arise in the case. Separate Judgement: A separate judgment was not delivered by the judges in this case.
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