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2018 (12) TMI 1591 - AT - Income TaxPenalty levied u/s 271(1)(c) - Disallowance of legal expenses of ₹ 36,91,125/- relating to Gillette, USA - Disallowance of expenditure for increase in its authorized share capital included in deduction u/s 35D - Held that - We find that in the present case, in the original assessment made u/s 143(3) dated 29.03.2004, the AO has mentioned that the penalty proceedings u/s 271(1)(c) have been initiated separately. Subsequently, the AO has framed the assessment u/s 143(3) r.w.s. 254 dated 12.03.2015 without mentioning the initiation of penalty proceedings. In the penalty order dated 30.04.2014 the AO has held it as a fit case for imposition of penalty stating that the assessee has concealed its income as well as furnished inaccurate particulars of its income. Imposing penalty has to be made only on the ground of which the penalty proceedings has been initiated, and it cannot be on a fresh ground of which the assessee has no notice - See CIT vs. Samson Perincherr 2017 (1) TMI 1292 - BOMBAY HIGH COURT . - Decided in favour of assessee.
Issues:
Appeal against penalty u/s 271(1)(c) of the Income Tax Act for disallowance of legal expenses and increase in authorized share capital. Additional ground filed challenging the penalty imposition without proper application of mind by the AO. Analysis: The appeal challenges the penalty u/s 271(1)(c) of the Income Tax Act for disallowance of legal expenses and increase in authorized share capital. The appellant contests the CIT(A)'s confirmation of the penalty, arguing that the CIT(A) erred in law and on facts. The grounds of appeal highlight the alleged errors made by the CIT(A) in confirming the penalty. The appellant contends that the CIT(A) wrongly concluded that inaccurate particulars were furnished in both disallowances. The appellant emphasizes the independence of penalty and quantum proceedings, arguing that penalty cannot be levied solely based on additions made. The appellant further argues that the disallowances were not malafide, hence penalty should not be levied. The appellant also raises an additional ground challenging the penalty imposition, alleging lack of proper application of mind by the AO. The appellant argues that the initiation of penalty was not specific under section 271(1)(c) and the notice lacked clarity on the grounds for penalty. The appellant relies on legal precedents to support the contention that penalty cannot be imposed on both limbs of section 271(1)(c). The appellant emphasizes the importance of clear charges for penalty imposition. During the proceedings, the appellant's counsel cited relevant legal cases to support the argument against penalty imposition. The counsel highlighted the necessity for a clear direction under section 271(1)(c) for penalty levy and the importance of striking off inappropriate portions in the notice. The counsel also argued against penalty imposition on both limbs of section 271(1)(c), citing legal precedent. In contrast, the DR relied on a different legal case to support penalty imposition. The Tribunal examined the submissions and relevant records. It distinguished the present case from the legal case cited by the DR. The Tribunal noted discrepancies in the penalty initiation process and the lack of clarity in the penalty order. Citing a decision by the Bombay High Court, the Tribunal emphasized that penalty should be imposed based on the specific ground for which penalty proceedings were initiated. Consequently, the Tribunal decided to delete the penalty imposed by the AO. In conclusion, the Tribunal allowed the appeal, pronouncing the order on 27/12/2018.
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