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Issues involved: The judgment deals with the confirmation of penalty u/s 271(1)(c) of the Income Tax Act, 1961 on ad-hoc disallowances.
Summary: Issue 1: Confirmation of penalty u/s 271(1)(c) on ad-hoc disallowances The assessee, engaged in textile goods business, filed a return at a loss. The Assessing Officer disallowed the loss claimed, resulting in nil income assessment. Penalty proceedings u/s 271(1)(c) were initiated, and the penalty was imposed on various ad-hoc disallowances totaling Rs. 97,16,578. The assessee did not furnish any explanation during the penalty proceedings. Issue 2: Assessee's defense and Commissioner's decision The assessee argued that due to business problems, necessary information couldn't be provided to the Assessing Officer. The penalty was contested on the grounds that all additions were ad-hoc and not challenged, hence penalty for concealment cannot be justified. The Commissioner upheld the penalty based on the presumption that non-filing of details implies incorrect income particulars. Issue 3: Tribunal's decision The Tribunal noted that major disallowances were ad-hoc, and the details were available in audited accounts. As the additions were not found to be bogus and were based on audited evidence, the penalty for concealment of income was deemed unjustified. Citing legal precedents, the Tribunal ruled that making incorrect claims does not equate to furnishing inaccurate particulars. Consequently, the penalty u/s 271(1)(c) was deleted, and the assessee's appeal was allowed. Order pronounced on 25th July 2012 by the Appellate Tribunal ITAT Mumbai.
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