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Issues Involved:
The judgment involves the cancellation of a penalty imposed by the Inspecting Assistant Commissioner under the Income-tax Act, 1961, based on discrepancies in payments made by the assessee and violations of section 40A(3) of the Act. Facts and Decision: The firm, M/s. Kejriwal Iron Stores, had purchases from M/s. Amar Singh Bajaj & Sons, New Delhi, with cash payments exceeding Rs. 2,500, leading to the disallowance of Rs. 16,250 under section 40A(3) of the Act. Additionally, an amount of Rs. 5,092 was added to the total income due to discrepancies in account books. The penalty proceedings initiated by the Income-tax Officer resulted in the imposition of a penalty by the Inspecting Assistant Commissioner. However, the Income-tax Appellate Tribunal set aside the penalty, stating that a new case for penalty could not be made by the Commissioner beyond the grounds initiated by the Income-tax Officer. Legal Analysis: The Inspecting Assistant Commissioner imposed the penalty based on discrepancies in payment dates and unreliable account books, leading to the conclusion of unexplained investments by the assessee. However, the Income-tax Officer's initiation of penalty was solely based on the violation of section 40A(3) and the disallowance of Rs. 16,250. The Tribunal held that the Commissioner could not alter the grounds for penalty beyond what was initiated by the Income-tax Officer. Precedent and Conclusion: Referring to the case of CIT v. Lakhdhir Lalji, it was emphasized that the final conclusion for the levy of penalty must align with the grounds on which the penalty proceedings were initiated. As the penalty in this case was based on different grounds than those initiated by the Income-tax Officer, the Tribunal's decision to cancel the penalty of Rs. 16,250 was upheld. The judgment favored the assessee, and each party was directed to bear their own costs.
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