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Issues involved: Assessment of professional expenses, imposition of penalty u/s 271(1)(c) of the Income Tax Act.
Assessment Year 2002-03: The assessee, a film actor, filed a return declaring income and agricultural income. A survey u/s 133A revealed discrepancies in professional expenses claimed. The Assessing Officer concluded that only 50% of the expenses were for professional activities. Penalty u/s 271(1)(c) was imposed, upheld by CIT(A). Tribunal held that penalty was unjustified as it was based solely on statements without concrete evidence. Penalty deleted. Assessment Year 2003-04: Similar to 2002-03, penalty u/s 271(1)(c) was imposed and upheld. Tribunal deleted the penalty as the circumstances were akin to the previous year. Assessment Year 2004-05: Penalty imposed for excess claim of expenditure and bad debts. Tribunal noted that the bad debts issue had been decided in favor of the assessee previously. Penalty for bad debts was not justified as per earlier Tribunal decision. Penalty deleted. The Tribunal found that penalties were imposed based on statements without substantial evidence. Citing legal precedent, it ruled that the mere statement recorded during a survey is not conclusive evidence. Considering the nature of the profession as a film actor, where personal and professional expenses may overlap, the Tribunal concluded that penalty u/s 271(1)(c) was unwarranted. All appeals of the assessee were allowed, and penalties were deleted.
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