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Penalty under section 271(1)(c) imposed on the assessee for failure to substantiate a loan received, confirmation of creditor's identity and genuineness of transaction, applicability of Explanation (1) to section 271(1)(c), distinction between quantum proceedings and penalty proceedings. Analysis: The judgment involves the appeal of an assessee against a penalty imposed under section 271(1)(c) by the ITO, confirmed by CIT(A), for failure to substantiate a loan received. The penalty was imposed in relation to a sum of Rs. 15,000 received as a loan from a creditor, which the assessee could not substantiate during assessment proceedings. The Tribunal confirmed the addition in the quantum proceedings. The penalty order was challenged on the grounds that the address initially provided by the assessee was incorrect, but a corrected address was later furnished. However, no further action was taken by the ITO to verify the creditor's identity. The assessee argued that the penalty proceedings should be distinct from quantum proceedings and that the onus had been discharged by providing confirmation of the creditor. The assessee contended that he was engaged in the business of obtaining and giving loans through brokers, without direct contact with lenders. The learned counsel for the assessee argued that the confirmation of the creditor was filed during assessment proceedings, and the failure to issue summons under section 131 by the ITO was highlighted. The counsel emphasized that the penalty proceedings should not automatically follow a quantum addition. Various reported decisions were cited to support the argument, including CIT vs. C.J. Rathnaswamy, Sir Shadilal Sugar and General Mills Ltd. & Anr. vs. CIT, and Jawahar Lal Goyal vs. ITO. On the other hand, the Departmental Representative supported the tax authorities' orders, asserting that the assessee failed to prove the credit's identity, capacity of the creditor, and the genuineness of the transaction. The applicability of Explanation (1) to section 271(1)(c) was emphasized. After considering the submissions, the tribunal found merit in the assessee's arguments. It was noted that although the addition was confirmed in the quantum proceedings, the penalty under section 271(1)(c) was not automatic. The tribunal accepted the assessee's explanation and canceled the penalty, citing the bona fides of the assessee and the lack of conclusive proof for penalty imposition. The decision aligned with previous tribunal decisions and established that the penalty was not warranted in this case. In conclusion, the tribunal allowed the appeal, canceling the penalty imposed under section 271(1)(c) by the CIT(A).
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